The recently released Carbon Disclosure Project’s 2010 Global 500 Report (pdf), which provides an annual summary of climate reporting by the world's 500 largest companies, offers some important insights on corporations' reporting about climate change and their supply chains according to BSR, a global business network and consultancy focused on sustainability.
One of the most compelling findings for 2010? As noted by BSR in a recent article on the subject, the number of companies reporting on GHG emmissions from their supply chains continues to steadily grow.
As Ryan Schuchard, manager of research and innovation at BSR, observes “Two years ago, only about a quarter of the world's top 500 companies reported on "Scope 3" greenhouse gas (GHG) emissions. Last year, the reporting share climbed to 42 percent, and this year it grew to nearly half.
“That's a steep change compared to reporting overall, which rose only a few percentage points this year to 82 percent,” notes Schuchard.
But what exactly are “Scope 3” emissions? As BSR describes it, “Scope 3” emissions result from activities that companies have influence over, but are beyond direct ownership or control, such as in supply chains.
More specifically, BSR offers the following “primer” on scope 1, 2, and 3 emissions:
Greenhouse gas emissions are typically divided into three "Scopes" for the purpose of organizational and project management.
The first, Scope 1 emissions, refers to combustion (e.g. from fuels, chemicals, or other materials) that leads to GHG emissions on a company's site or other operations under ownership or control. Scope 2 emissions refer to purchased electricity at a company's site or other operations under ownership or control. Together, Scope 1 and 2 usually can be called "internal" or "operational" emissions.
"Scope 3 emissions" refers to greenhouse gas (GHG) emissions that a company has influence over, yet which are outside its direct control. Supply chain emissions are one component of this, and there are several others, as described below.
These definitions have been popularized by the GHG Protocol, which is the standard for the business management of GHG emissions. The GHG Protocol is currently revamping its original definition to provide more comprehensive guidance. The results are due in early 2011.
Currently, a good working definition is CDP's, which now has 17 categories of Scope 3 emissions:
2010 – "Scope 3" emissions -- proposed categories (17 categories)
- S1: purchased goods and services – direct/tier 1 supplier emissions
- AS: Purchased goods and services – emissions of all upstream suppliers – tier 1 and beyond
- USP: Use of sold goods and services
- DSP Disposal of sold products at the end of their life
- Wa: Waste generated in operations
- Tr: Business travel
- EC: Employee commuting and teleworking
- TSP: Transportation and distribution of sold products including warehousing and retail
- Oth: Other
- Eq: Capital Equipment
- Fr: Frachises (scope 1 emissions of the franchisor)
- Lr: Leased assets (scope 1 emissions of the lessor)
- In: Investment (scope 1 emissions of the company receiving investment)
- Fe: Franchises (scope 1 emissions of the franchisee)
- Le: Leased assets (scope 1 emissions of the lessee)
- EA: Energy-related activities not included in scope 2
- TI: Transportation and distribution of inputs (goods and services) and waste generated in own operations
What’s perhaps most worth noting here is that in addition to more detailed scope 3 emissions reporting guidelines for suppliers, proposed definitions for scope 3 emissions reporting relate to a number of product-specific categories, as well – including: emissions occurring during the product use phase, emissions resulting from disposal of products at end of life, and emissions occurring during transportation and distribution of sold products.
Related to this, the WRI/WBCSD (World Resources Institute/World Business Council on Sustainable Development) GHG Protocol Initiative is currently engaged in developing two new standards that relate specifically to scope 3 emissions and emissions associated with individual products, both due for release in early 2011, as noted above:
- Product Life Cycle Accounting and Reporting Standard
- Corporate Value Chain (Scope 3) Accounting and Reporting Standards
According to GHG Protocol organizers, these new standards are intended to provide a standardized method to inventory the emissions associated with individual products across their full life cycles and of corporate value chains, taking into account impacts both upstream and downstream of the company’s operations. By taking a comprehensive approach to GHG measurement and management, it is hoped that businesses and policymakers can focus attention on the greatest opportunities to reduce emissions within the full value chain, leading to more sustainable decisions about the products we buy, sell, and produce.
On November 2, 2010 , WRI and WBCSD released the second drafts of these two new GHG Protocol standards for public comment. WRI and WBCSD welcome feedback from all interested organizations on these draft standards. To be considered, feedback forms must be completed by Friday, December 3. To learn more, see The Greenhouse Gas Protocol Initiative – Product and Supply Chain Standard.
It’s all part of next-generation product design, a topic that is explored in greater detail in the related research study, “Sustainability and the Product Lifecycle: A Report on the Opportunities, Challenges and Best Practices for Sustainable Product Design and Manufacturing.” So, stay tuned. We’ll be providing updates and an opportunity to participate in the research in the weeks and months ahead.
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