The U.S. Environmental Protection Program (EPA) breaks carbon emissions into three different “scopes”: direct use of fuels (Scope 1), fuel use for generating electricity (Scope 2), and more indirect upstream and downstream emissions (Scope 3). Scope 3 emissions result from activities that are not done by the reporting organization but may be done by its suppliers or vendors, such as emissions from employees commuting or emissions from purchased goods or services.
Source: World Resources Institute and World Business Council for Sustainable Development. 2011. Corporate Value Chain (Scope 3) Accounting and Reporting Standard. Available at: https://ghgprotocol.org/sites/default/files/standards/Corporate-Value-Chain-Accounting-Reporing-Standard_041613_2.pdf
For most companies, Scope 3 accounts for more than 70 percent of their carbon footprint and therefore represents a large opportunity to reduce its overall emissions. Estimating the scale of Scope 3 emissions, however, is difficult, time-consuming, and resource intensive. These challenges often lead to poor or nonexistent reporting, partially [ES1] because businesses typically require data from many different suppliers to calculate their Scope 3 emissions. In lieu of robust and complete data, Scope 3 emissions can be estimated using computer models, although the results may not be detailed enough to provide good company-specific results. The complexities of Scope 3 reporting may have to be resolved soon, as there is increasing pressure from regulatory agencies such as the International Sustainability Standards Board (ISSB) and the U.S. Securities and Exchange Commission (SEC) to require Scope 3 disclosures.
