Gearing up for Scope 3 emissions measurement, reporting and cuts

Scope 3 greenhouse gas (GHG) emissions form a significant part of an organisation’s total emissions inventory. It ranges from 60 to 95 percent of total emissions and is the most difficult and complex to measure compared to scope 1 and scope 2, as these emissions are outside the direct control of the organisation.

IFRS S2 (Climate-related Disclosures) provides transition relief for organisations in their first annual period of applying the standard, allowing them to exclude disclosing scope 3 GHG emissions. 

However, organisations will be required to disclose scope 3 emissions from the subsequent year. Therefore, organisations must begin to measure their scope 3 emissions in preparation for when their reporting becomes mandatory.

Organisations must approach their scope 3 inventory measurement process carefully to ensure tangible benefits are delivered to the organisation.

Reducing Scope 3 emissions is critical to limiting global warming and mitigating the adverse effects of climate change on society.

Tackling scope 3 emissions through the 15 categories of the value chain (upstream and downstream activities) will help organisations reimagine their business model and innovate for competitive advantage. Organisations should consider the following when solving their scope 3 emissions measurement and reporting.

Organisations must map out their specific scope 3 value chain activities to calculate their emissions. The measurement process relies heavily on data sharing across the value chain, including support and collaboration.

Organisations must assess their reporting framework requirements for scope 3 emissions and have in place processes and policies that ensure accuracy and transparency.

In addition, organisations should apply an overarching principle rooted in collaboration, recognising the collective effort required to solve the climate challenge. Organisations must articulate the business imperative for reducing scope 3, such as the opportunities for transformation and growth it provides for the organisation.

Organisations must define clear decarbonisation roadmaps that support long-term value creation and enable their business growth.

This roadmap will help organisations identify opportunities for collaboration across their value chain towards achieving their set climate goals. Organisations must also consider opportunities to redefine their relationships with stakeholders across their value chain, such as suppliers, including the business benefits of their business model revamp.

Organisations should welcome scope 3 emissions reporting as an opportunity to transform their business for the future rather than as a compliance burden.

Akinyemi Awodumila is an author who writes and speaks widely on corporate reporting topics.