Until recently, most companies on the path to net zero by 2050 focused largely on measuring emissions from their own operations and electricity consumption using the Greenhouse Gas (GHG) Protocol’s Scope 1 and Scope 2 frameworks. With mounting pressure from investors, regulators, and the supply chain to prioritize decarbonization, an increasing number of organizations are now turning their sights to Scope 3 emissions as well.

But while Scope 3 emissions account for the highest proportion of total emissions for many organizations—and are a critical decision-making input for many investors and customers—they’re also typically the most extensive and challenging category of an organization’s GHG emissions to measure and manage. That’s because they encompass a wide range of complex activities throughout a company’s value chain, including its suppliers, customers, and end users.

Scope 3 emissions are associated with a company’s activities but occur from sources not owned or controlled by that company. Grouped into 15 categories by the GHG Protocol, they range from transportation and distribution (upstream and downstream) to purchased goods and services, business travel and leased assets. They include all emissions not within Scope 1 (direct emissions from sources that the reporting organization owns or controls) and Scope 2 (indirect emissions that come from facilities that produce electricity, steam, heating, or cooling purchased by the reporting organization).

For example, Scope 3 emissions for a construction and engineering company building a new structure could include the embodied carbon associated with building materials, which represent on average 50% of total life cycle carbon in new buildings, according to research published in the Buildings and Cities journal.

Across industries, addressing Scope 3 emissions is essential for companies that are seeking to comprehensively reduce their environmental impact and meet sustainability goals. A lot of the impetus for change is coming from the supply chain: In a recent survey of 100 executives across EHS, ESG and operations roles in the construction materials sector, 62% of organizations cited supply chain pressure as either the “most significant” or a “very significant” driver of decarbonization. The survey, which was commissioned by Trinity Consultants, was conducted by independent research firm Verdantix.

How Scope 3 emissions are currently being estimated:

How organizations quantify Scope 3 emissions depends on several factors, including the completeness and accuracy of available data and, to a lesser extent, the source of the emissions. Established methodologies, such as those detailed in the GHG Protocol’s Scope 3 standard, provide guidance for each of the 15 categories of Scope 3 emissions. Under the GHG Protocol, organizations include or exclude certain Scope 3 categories based on company-specific materiality and can choose to report on specific categories that are most relevant to their operations, goals, and stakeholders.

Yet accurate quantification remains a pain point. Findings from the Verdantix survey suggest a lack of primary data for Scope 3 calculations, with just over half of Scope 3 data in the construction materials industry coming from spend-based estimates. Having a robust supplier engagement process to collect primary data and inform Scope 3 estimates will be critical for ensuring accuracy in measurement, benchmarking, and reporting.

How organizations are addressing Scope 3 emissions:

Because Scope 3 emissions are indirect, involving complex, far-reaching supplier networks, organizations have a limited number of ways to address them. However, the Verdantix survey found that a few tactics are common across the construction materials industry:

• Enhanced supplier management: 76% of businesses surveyed by Verdantix are addressing Scope 3 emissions by enhancing supplier management, which involves factoring environmental criteria—such as emissions intensity and renewable energy use—into procurement processes.
• Reducing waste from operations: 75% of leaders surveyed are tacking this category as a Scope 3 priority. This often involves conducting process optimization analysis and implementing measures to reduce material losses during production.
• Coordinating with end users to improve product circularity and end of life management: Just over half (52%) of sustainability leaders say they plan to drive Scope 3 emissions improvements over the next two years by designing products with their end of life in mind to reduce waste.
• Performing a life cycle assessment (LCA): Another common tactic to analyze an organization’s environmental impact, the LCA is used to evaluate the potential impacts of products and production processes from start to finish. Organizations are most likely to turn to professional services for risk and impact analyses and LCAs, the Verdantix survey found.

As we look to the future, it’s clear that addressing Scope 3 emissions is not just an environmental responsibility; rather, it’s a business imperative. In the pursuit of decarbonization and a sustainable future, these complex emissions, which encompass a broad spectrum of activities within a company’s value chain, have become a central focus for investors, regulators, and the supply chain. While they present challenges in measurement and management, acknowledging their impact is pivotal, as they constitute a substantial portion of an organization’s carbon footprint in many industries.

While measuring and mitigating these emissions can be challenging, business leaders are not alone in this journey. Collaborative efforts, robust supplier engagement, and innovative strategies are paving the way toward a sustainable, decarbonized tomorrow for companies across sectors.

For more in-depth discussion on decarbonization strategies, join our complimentary on-demand webinar, From Ambition to Action: Overcoming Decarbonization Hurdles in Construction Materials, as our panel of experts provides a deep dive perspective on Trinity’s latest commissioned research on sustainable decarbonization outcomes and challenges when implementing decarbonization strategies.