"Why should companies in Australia measure their Scope 3 emissions?" This question arises as climate change leaders and policymakers accelerate the push towards net-zero emissions. Companies can anticipate increasing scrutiny and regulation of their carbon footprint.
Scope 3 emissions account for almost 85% of an enterprise’s emissions*. It is therefore critical for businesses seeking to decarbonise to accurately measure their Scope 3 emissions.
Scope 3 emissions are outside a company’s direct control and are typically spread out across its value chain. Most of a company’s Scope 3 emissions stem from their primary suppliers. Enterprises with large value chains may encounter a long tail of emissions beyond their primary suppliers, making it complex to track these emissions.
The Greenhouse Gas (GHG) Protocol allows companies to use industry averages, proxies, and other sources to calculate emissions. However, the carbon measurement and management process can be complex, time-consuming, and unreliable, if companies don’t have the right resources and tools.
Companies must pay attention to their Scope 3 emissions for several reasons.
According to the Carbon Disclosure Project (CDP), Scope 3 emissions can make up more than 75% or more of a company's greenhouse gas (GHG) emissions, and can reach close to 100% for certain industries such as financial services.
Tracking Scope 3 emissions will enable companies to identify vulnerabilities in their value chain to changing regulations, such as mandatory disclosures and carbon pricing and taxation.
Reducing Scope 3 emissions can help companies significantly cut their carbon footprint and gain the trust of consumers.
Investors are setting their own reduction targets and increasingly looking at an enterprise’s sustainability practices before making an investment.
Disclosure of Scope 3 emissions is mandatory under regulations such as the Task Force on Climate-related Financial Disclosures (TCFD). In Australia, the National Greenhouse and Energy Reporting (NGER) Act 2007 requires affected companies to report their Scope 1 and Scope 2 GHG emissions, energy consumption and production, as well as other relevant information. Both private and public companies are subject to this regulation, and must calculate their GHG emissions in adherence with the NGER (Measurement) Determination 2008.
The Australian Government has also committed to introduce a mandatory climate-related financial reporting regime. This would be more stringent than the existing financial reporting regime, in which Australian businesses are only recommended to report their climate-related performance in alignment with the Taskforce on Climate-related Financial Disclosure (TCFD). The proposed mandatory climate-related financial reporting regulation may require Australian companies to disclose their Scope 1, 2 and 3 emissions and other climate-related risks and opportunities in accordance with the newly-released International Sustainability Standards Board (ISSB) standards.
Measurement inaccuracy is one of the biggest challenges in carbon management and accounting today. According to a report from the Boston Consulting Group (BCG), less than 10% of companies accurately and comprehensively measure their Scope 3 emissions. (Source: https://www.bcg.com)
One of the main reasons for this is poor data quality. Companies must rely on data shared by their supply chain partners or third-party data (such as industry averages, statistics released by governments, or regulatory disclosures) to make estimations.
Some of the significant challenges in understanding and quantifying Scope 3 emissions entail collecting accurate data from multiple suppliers across the supply chain.
Carbon measurement technology can play a critical role in helping companies decarbonise.
By using technology platforms such as Terrascope, companies can:
Terrascope enables organisations to track and measure emissions across their value chain and all GHG categories. The SaaS-based platform helps large enterprises make data-driven decisions, set realistic reduction goals, and start the journey to net zero with confidence. Get in touch with our emissions measurement expert now.