The need to understand your greenhouse gas emissions is of increasing importance for even the smallest of businesses.

By measuring your carbon footprint, you will not only better understand the impact of your business on the climate but also identify opportunities to improve efficiency and put yourself in an excellent position to win future work.

1. The three scopes of your carbon footprint

An organisation’s total carbon footprint can be split into three scopes:

Scope 1: The greenhouse gas emissions from sources you own and control and are therefore directly responsible for.
Scope 2: The emissions you indirectly produce through the energy or electricity you purchase.
Scope 3: All other emissions you are indirectly responsible for from sources outside your direct control.

The carbon footprints reported by most businesses traditionally cover Scopes 1 and 2. This is because these are the emissions you have the most control over, and they can generally be calculated using easily obtainable data.

As a business measuring your carbon footprint for the first time, Scopes 1 and 2 will provide a good overview of your direct climate impact.

Things get more complex when it comes to Scope 3, as the diagram below shows, as it accounts for your full value chain.

A manufacturing firm, for example, would include the entire lifecycle of the product – from the extraction, production, and transportation of raw materials to the finished product’s transportation to the customer, its use, and its disposal.

For other sectors, this will require analysis up and down your supply chain – upstream – the products and services that you buy, and downstream – the products and services that you sell and their onward lifecycle. It also includes other indirect emissions you’re responsible for, such as business travel and commuting.

Put simply, your Scope 3 emissions consist of the Scope 1 and 2 emissions of all the other organisations and individuals in your wider value chain.

2. Why bother with Scope 3?

Understandably, many of these sources are incredibly difficult to identify, let alone measure, especially for smaller businesses. So why attempt to measure your Scope 3 at all?

For starters, those emissions stack up. It’s likely that your total Scope 3 footprint is actually larger than your Scope 1 and 2 footprints combined. In fact, the carbon footprint of the average supply chain is understood to be more than 11 times higher than a buyer’s direct operations. Manufacturers generate a lot of indirect emissions from the raw materials they use and the lifecycle of their products, while office-based businesses tend to have high emissions from business travel and commuting relative to their own operations.

With that in mind, Scope 3 has become a big focus point for large businesses that are under the most pressure to reduce their impact on the climate. For many companies, Scope 1 and 2 alone are no longer enough to satisfy stakeholders. Under the UN definition, a net zero target must cover Scope 3 emissions “where material to total emissions and where data availability allows”.

In addition, the more you know about your Scope 3 emissions, the better your understanding of your upstream and downstream activities. For example, it may help you identify and manage an unseen risk in your supply chain or reveal that your waste generation is actually a much bigger priority than you may have thought.

3. Breaking it down

In total, there are 15 (8 upstream and 7 downstream) Scope 3 emissions sources laid out under the Greenhouse Gas Protocol, the internationally recognised standard for carbon footprinting. These include:

The goods and services you purchase
The extraction, production and transportation of the fuels and energy you purchase (e.g., the extraction/transportation of diesel for your vehicles or gas for your heating and the transmission/distribution of electricity through the grid to your site)
Upstream and downstream transportation and distribution (e.g., between your direct suppliers and your own operations in vehicles you do not own, any logistics you purchase and other transportation/distribution of your products to the end customer)
The disposal and treatment of your waste and wastewater after it leaves your site
Business travel in vehicles you do not own (e.g., public transport, air travel or use of employees’ own vehicles for business purposes)
The commuting of employees in their own vehicles or on public transport
The operation of any assets you lease (e.g., vehicles you rent) and of any assets you lease out to others
The downstream processing, use and end-of-life treatment/disposal of your products, including the energy they consume or greenhouse gases they may emit over their lifetime
The operation of any franchises or of any investments you finance (this is only applicable to investors and financial services)

Some of the above will be more relevant to your business than others. But even so, it’s still quite a lot to take in. The good news is you don’t need to take on all of Scope 3 in one jump. That’s a difficult piece of work for even the largest of organisations. SMEs can generally focus on a smaller subset tailored to the data they have available and/or the activities that represent the most significant or controllable proportion of their emissions.

4. How to get started

The first step is to collect the data. Some examples of core Scope 3 sources that can be measured (or at least approximated) relatively easily in-house are as follows:

Business travel: You can calculate emissions from business travel by recording the mode of transport used and the approximate distance for each journey made in the reporting year. You can then take the total distance travelled and apply the specific emissions factor for each mode of transport to calculate the corresponding greenhouse gas emissions
Employee commuting: You can follow the same approach for commuting. Gather data from your employees on the distance they travel to work and what mode of transport they use, multiply this by the days worked in the reporting year and apply the relevant emissions factor as above. Transport for Greater Manchester has a useful toolkit to help you do this
Disposal and treatment of waste: You can estimate the greenhouse gas emissions associated with your waste by recording the annual tonnage of waste produced, along with the specific treatment method used by your waste management provider for each waste type (e.g., landfilled, recycled or incinerated). This may be identifiable on your waste transfer notes or waste bill, or you can request the information from your provider. You can then multiply the tonnage of each waste type by the emissions factor for the relevant treatment method
Water and wastewater treatment: Emissions from water supplied and wastewater treatment can similarly be calculated using the cubic metreage data from your water bill and the relevant emissions factors
Well-to-tank (WTT) emissions for fuel and electricity: There are specific emissions factors for capturing the emissions associated with the extraction, production and transportation of the fuels and electricity you use. You will need the consumption data from your electricity bill and fuel consumption (or miles travelled) of vehicles used
Key raw materials and packaging: Several emissions factors are available for estimating upstream emissions from the extraction/processing, manufacture and transportation of key raw materials and packaging. This includes construction materials, metals, plastics, paper and cardboard, among others. The tonnage consumed can be multiplied by the relevant emissions factors to produce an estimate of their contribution to your carbon footprint
Transmission and distribution (T&D) losses from electricity use: There is also a specific emissions factor for the energy consumed (i.e., ‘lost’) by the grid during the process of distributing electricity to your site. To calculate this, you just need your electricity consumption data (which you need to calculate your Scope 2 emissions anyway)

While far from exhaustive, calculating the above is a great start to understanding your Scope 3 emissions. Business travel is often the key category that is mandatory for many standards and formal commitments. The UK’s SME Climate Commitment, which allows SMEs to become signatories to the globally recognised UN Race to Zero initiative, requires that you measure your Scope 1 and 2 emissions plus the business travel element of Scope 3 as a minimum.

If you’re ready to make a start, you can read more detail about each of the fifteen Scope 3 categories – including the specific data you need to collect – in the GHG Protocol’s Scope 3 guidance.

Help is here!

Green Economy provides support to help you on your carbon reduction journey. Our specialist advisors can audit your business, provide advice and support on data collection, and guide you through your carbon footprint calculation.

Enquire today