Professional Documents
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emissions reporting
Streamline Scope 3 reporting
with ESG reporting software
Contents
01 02 03 04
Executive summary What are Scope 3 Why organizations The challenges
emissions? are disclosing their associated with Scope 3
Scope 3 emissions emissions accounting
05 06 07
Aligning your Scope 3 How to calculate Simplify Scope 3
accounting approach with Scope 3 emissions accounting with IBM
your business objectives
01 Guidance on how to calculate Scope 3 emissions has been around for many
years, but the recent inclusion of Scope 3 reporting requirements and
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
3
accounting business objectives
02 As defined by the voluntary Greenhouse
Gas Protocol standard:
Scope 2 encompasses “indirect” emissions
associated with the generation of energy
As per Scope 1, organizations have control
over their direct emissions and as such, can
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
4
accounting business objectives
03 Some organizations report Scope 3 emissions under the guidance
of reporting frameworks that they follow, some report according to
Why organizations requirements of the third-party initiatives with those they choose to
affiliate, and still others report consistent with their own commitment
Scope 3 emissions Several ESG reporting and guidance frameworks call for Scope 3 disclosure.
It may be of particular relevance to organizations that report to the Carbon
Disclosure Project (CDP), have committed to the Science Based Targets
initiative (SBTi), report using the Global Reporting Initiative (GRI) or the
Task Force on Climate-related Financial Disclosures (TCFD) frameworks,
are seeking to meet requirements under the Corporative Sustainability
Reporting Directive (CSRD) regulations required by the EU or wish to
report in line with the International Sustainability Standards set out by
the International Sustainability Standards Board (ISSB).
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
5
accounting business objectives
04 Creating a Scope 3 emissions inventory can
be challenging. These challenges can impact
Companies should be aware of these
challenges as they make assumptions, set
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
6
accounting business objectives
05 Motivations behind understanding and
reporting Scope 3 emissions of organizations
Other organizations may focus on understanding
hot spots of emissions across a value chain to
product level within their most material
spend categories if applicable.
Increasing
data granularity
and volumes
Data Primarily spend data Significant use of spend Use of spend data for
sources data, but captured at country, non—material areas of
Optionally some activity division or team level. emissions footprint
data where available
For areas of material Widespread use of more accurate
emissions, increasing use GHG calculation methodologies,
of activity data in conjunction including supplier—specific
with more accurate GHG calculations using product
calculation methods carbon footprint data
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
7
accounting business objectives
06 ESG reporting software, such as the IBM® Envizi ESG Suite, can help
organizations calculate and report Scope 3 emissions and simplify what
How to calculate may seem a daunting task. With over a decade of experience supporting
sustainability leaders to streamline the calculation and report on all three
Scope 3 emissions GHG emissions scopes, we recommend a systematic approach which has
been tried and tested by our clients.
Map out categories of Determine the Source and capture transparently by Identify emissions
Scope 3 emissions in vour appropriate method data and appropriate including boundaries hotspots and work
value chain and how they and suitable data for emissions factors. and assumptions used with suppliers to drive
intersect your business. calculating Scope 3 Conduct calculations. in the calculations. down emissions.
emissions of categories
of interest.
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
8
accounting business objectives
Step 1
Determine Scope 3 categories to report against. Scope 3 categories
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
9
accounting business objectives
The volume of emissions attributable to each The average breakdown of Scope 3 emissions by industry
category differs considerably by industry sector.
Companies can use sectorial information to Purchased goods and services
assess relevance and determine where to
Capital goods
focus their efforts.
Fuel- and energy-related activities
In addition to sector guidance, the GHG Protocol Downstream transportation and distribution
suggests organizations consider their ability to Coal sector Construction sector Electric utilities Financial services Processing of sold products
influence emissions reductions and how much sector sector
Investments
Food and beverage Metals and mining sector Oil and gas sector Paper and forestry
and tobacco sector sector
Other upstream categories
Scope 1
Scope 2
Real estate sector Steel sector Transport OEMS sector Transport services
sector
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
10
accounting business objectives
Step 2 1. Spend-based Category 1: Purchased goods and services
Select calculation methodologies. 2. Hybrid
3. Average-data Based on screening, Is data available on Can the Tier 1 supplier
does the purchased the physical quantity provide product-level
When calculating emissions, organizations 4. Distance-based
good or service of the purchased cradle-to-gate GHG
need to deliver results as accurately as 5. Waste-type specific contribute significantly good or service? data (of sufficient Use the supplier-
Yes Yes Yes specific method
possible. In the case of Scope 1 and 2 6. Fuel-based to Scope 3 emissions, or quality to meet the
is supplier engagement business goals) for
emissions, calculations typically involve 7. Indirect emissions otherwise relevant to the purchased good
applying primary source data, for example, 8. Asset-specific the business goals? or service?
activity-specific, to data-specific emissions 9. Site-specific
factors—such as electricity consumption in 10. Direct emissions No No No
kWh to a location-specific emissions factor. 11. Franchise-specific
This approach relies on organizations having 12. Investment-specific allocation Is data available on the Can the supplier provide allocated Scope 1 and 2 data Use the hybrid
access to primary source data, and emissions 13. Supplier-specific physical quantity of the (of sufficient quality to meet the business goals) relating method
Yes
factors at granular levels. purchased good or to the purchased good or service?
service?
The GHG protocol sets out decision trees to
Compared with Scope 1 and 2 calculation help users select calculation methodologies No Yes No No
processes, the calculation of Scope 3 for each Scope 3 category. Figure 6 shows
emissions is significantly more complex. At an example involving Category 1: purchased
the outset, organizations often do not have goods and services. Use the average-
data method
access to primary source data or emissions
factors at a granular level. Recognizing this IBM Envizi can support all 15 Use the spend-based method
challenge, the GHG Protocol describes thirteen Scope 3 categories and their related
methods that organizations can choose from calculation methods.
Figure 6: Example of the GHG Protocol’s decision tree for selecting Scope 3 calculation methodology
to calculate Scope 3 emissions:
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
11
accounting business objectives
Step 3 Calculation methodologies: purchased goods and services and capital goods
Build a data foundation
and calculate emissions.
Spend based Hybrid Average data Supplier specific
The data required for Scope 3 emissions
accounting is determined by categories and
Value of
the emissions calculation methods selected. EEIO
purchased Emission factor based on
Description emissions x goods and x supplier-specific activity
And this data can be significantly more factor
services
extensive than that required for Scope 1 and
2 emissions. It often includes unstructured
data held in third party or siloed systems.
Data types may cover the amount spent on Inputs
Emission factor Supplier Supplier Supplier Supplier Product/service Mass/unit of
products or product types and services (spend per unit of x Scope 1 & + material + transport + waste emission factor x product/service
x Volume
economic value Scope 2 inputs of goods output purchased
data), supplier Scope 1 and 2 data, volumes
of goods purchased, and types of services
received. Along with this activity data, Source
From secondary
From ERP
From From From From From secondary
From ERP
From
From ERP
source supplier supplier supplier supplier source supplier
organizations must also source and capture
emissions factors.
From secondary source
(if supplier-specific data is unavailable)
Each calculation method requires the data and
emissions factors that the method is designed
for. The diagram below shows an example of
the different data types and sources required Secondary data sources include: Secondary data sources include: Secondary data sources include:
– Environmentally-extended – Life cycle databases – Process life cycle databases
by the different calculation methods input-output (EEIO) databases – Industry associations – Industry associations
applicable to the categories of purchased – Industry associations – Government agencies
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
12
accounting business objectives
Given that data used to calculate Scope 3 As data capture and management is time-
emissions is sourced across very different consuming and error-prone, and spend data
locations and entities, you need a data is extensive and needs to be categorized to
capture strategy that considers where the align with emissions factor categories,
data will be found, and how it will be captured automation can help organizations to avoid
and organized efficiently into a suitable time consuming manual processes. In this
hierarchy for easy retrieval. Additionally, data scenario, the latest advances in AI technology
analysts should be able to review data quality can play an essential role.
and completeness before the data is used to
inform reporting. The challenges associated with data volume
and sourcing, and the complexity of emissions
Some tips on data sources: factor selection and application make it very
challenging to conduct Scope 3 emissions
– It is possible to obtain emissions calculations using spreadsheets alone.
information reported by suppliers from
databases that the supplier discloses or Specialist software such as IBM Envizi ESG
directly from suppliers using survey tools. Suite can streamline the emissions calculation
– Spend data can be captured from the process. IBM Envizi automates data collection,
organization’s enterprise resource storage and management to create a single,
platform (ERP) or accounting systems. auditable data source. IBM Envizi has the
– Emissions factors can be obtained from capability to support all 15 Scope 3 categories
publicly available emissions sources and available calculation methodologies,
like government agencies, industry drawing from emission factor libraries
associations, or custom libraries such embedded in the software and leveraging AI
as supplier-specific databases. technology to support data categorization.
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
13
accounting business objectives
Step 4 Here is where software can help. In addition
Report and disclose. to supporting data collection and conducting
GRI EU CSRD
Scope 3 emissions calculations, IBM Envizi
Voluntary framework allowing EU Directive, requiring in-scope entities
Several ESG reporting frameworks and Suite can help streamline Scope 3 data
organizations to report to report Scope 3 emissions, if material,
standards allow for, or require, the setting of submissions to various reporting frameworks,
– Procurement policies along with supplementary disclosures
Scope 3 emissions targets and disclosure of with prebuilt templates aligned to framework
– Disclosure 305-2 Other indirect for the 15 categories, if significant.
performance. For example, these include ISSB, questionaries, and a detailed dashboard that
(Scope 3) GHG emissions
SBTi Net Zero standard, CDP, GRI, GRESB, allows users to visualize the results in a
– Disclosure 305-4 GHG Targets required for Scope, 1, 2 and 3 in
ENERGY STAR and CSRD. single view.
emissions intensity accordance with limiting global warming
– Disclosure 305-5 Reduction to 1.5°C
Some examples of the data requirements The software further supports an organization’s
of GHG emissions
are shown in Figure 8. disclosure efforts with strong data health check
– Products and Services—use phase TCFD tools and functionality to support audits,
Voluntary framework including trace-to-source capabilities.
CDP – Supply chain risks and impacts
Voluntary platform allowing – Reduce supplier GIG emissions
organizations to report – Carbon Neutrality Goals
– Climate Change and Supply
Chain Modules—Scope 3
• Weights across all 15
categories individually
• Targets
Figure 8: Many mainstream frameworks, guidance and regulations require Scope 3 information
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
14
accounting business objectives
Step 5 As Scope 3 emissions are outside an
Engage suppliers and drive organization’s direct control, decarbonizing
performance improvement. the supply chain requires engagement and
influence rather than direct action from the
Improving sustainability performance in the organization. Supplier engagement,
value chain stretches well beyond tracking procurement policy, and choices of products
and reporting Scope 3 emissions. Along with and services are levers that can be pulled to
emission performance, organizations are help reduce emissions of value chains.
increasingly working to track and drive Technology can streamline this process by
improved performance on a multitude of helping to drive accountability, communication
other ESG metrics across their value chain, and collaboration with supply chain members.
particularly within their supply chain.
IBM Envizi’s ESG suite can support organizations
In this regard, organizations often start using in their efforts from data collection through
high-level Scope 3 emissions inventory to emissions calculation and reporting, from
identify emissions hotspots. However, to identifying emissions hot spots to facilitating
drive emissions reductions in those hotspots, supplier engagement and collaboration.
organizations need actionable, granular
data, moving beyond spend-based data and
calculation methods to activity-specific
or supplier-specific data inputs and more
accurate calculation methods (see Figure
3 for more detail). This more granular
performance data can be used to inform
supplier-level emissions reduction activities
to help organizations forecast, plan and
track progress toward achievement.
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
15
accounting business objectives
07 The IBM Envizi ESG Suite supports the complex accounting process for
Scope 3 emissions across all 15 categories and their associated calculation
Useful links:
Scoping out: Tracking nature across the supply
accounting with IBM reporting tools to deliver insights and streamline disclosures, and offers
embedded Scope 3 emissions factor libraries to make calculations less
Corporate Value Chain (Scope 3) Standard,
GHG Protocol.
time consuming.
Category 1: Purchased Goods and Services,
IBM Envizi has the functionality to support organizations wherever they are Technical Guidance for Calculating Scope 3
in their Scope 3 journey, from those who are just starting out, all the way Emissions, GHG Protocol.
through to organizations looking to proactively drive Scope 3 emissions
reductions. Learn more about how IBM can support you to achieve your The Greenhouse Gas Protocol: A Corporate
Scope 3 emissions reporting goals. Accounting and Reporting Standard.
01 Executive 02 What are 03 Why organizations 04 The challenges 05 Aligning your 06 How to calculate 07 Simplify Scope 3
summary Scope 3 are disclosing their associated with Scope 3 accounting Scope 3 emissions accounting with IBM
emissions? Scope 3 emissions Scope 3 emissions approach with your
16
accounting business objectives
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