Introduced about ten years ago, the Scope 3 Evaluator tool has often been the go-to first resource for estimating Scope 3 emissions of organizations, and has remained a key resource for many into 2022 GHG reporting. However, with this discontinuation, it is now necessary for organizations that have historically relied on this tool to begin rethinking how to calculate emissions. This presents an opportunity for organizations to develop and refine calculation methodologies to be more accurate and complete.
The Scope 3 Evaluator tool was best used to help organizations benchmark their Scope 3 emissions and had many limitations when organizations wanted to increase the accuracy of its emissions. Some of the limitations are at a high level. For example, the tool is not subject to regular updates of emission factors. It is noted in the tool’s FAQ that "The EFs are primarily the originals from the tool's creation in 2014." This presents a limitation in accuracy as many emission factor sources (e.g. EPA, IEA, DEFRA) are updated on an annual basis. There are also limitations in the completeness of some emission factors. For example, the WRI emission factors that are used in the tool only account for CO2, and the WIOD factors only account for CO2, CH4, and N2O. Per GHG Protocol requirements, organizations should be reporting on all Kyoto Protocol GHGs.
Within the individual categories, there are further limitations related to location of facilities, total number of employees, employee commuting habits, company product portfolio, and supply chain.
Let's look a little closer at some examples within a few categories:
- Category 1 - Purchased Goods and Services
Many of the Scope 3 categories calculated by the tool, including Category 1, are calculated using expenditures and environmental input-output datasets. The tool allows for price adjustments between 2000-2015, however, there are no price adjustments available after 2015. Therefore, the tool does not take inflation into account. This can result in material misstatements given that inflation between December 2015-July 2023 is 29%.
- Category 7 - Employee Commuting
The tool calculates commuting emissions based on employee headcount only, and the tool's calculations have a cap of 10,001 employees. This means that, regardless of if an organization has 10,001 employees or 100,000 employees, the Category 7 emissions per the tool will be 20,400 mtCO2e. Additionally, commuting habits, such as distance traveled and modal splits are based on US habits. Therefore, true emissions can be higher or lower than what the tool calculates, depending on if employees are primarily in more or less car dependent countries.
- Category 8 - Upstream Leased Assets
For leased facility emissions, the tool takes into account facility type. However, the facility type is linked to fuel and electricity demand statistics for the United States. Further, electricity emissions are estimated with an average-emission country proxy. Therefore, organizations that have global real estate portfolios are not taking into account country specific energy demand statistics or emission factors.
- Category 11 - Use of Sold Products
For use of sold products, the tool only considers the emissions associated with energy use by sold products, excluding products that contain or form GHGs in use like HVAC systems. Therefore, any direct emissions as a result of product use will not be accounted for. Depending on the industry and products that an organization produces, this could be a material portion of Category 11 emissions.
From the examples above, it is evident that there are many opportunities for organizations to increase the completeness and accuracy of their Scope 3 emissions calculations.
Let's walk through a few best practices and ways to overcome limitations of the Scope 3 Evaluator tool.
- Use of high quality and appropriate emission factors
As noted above, the emission factors utilized in the tool are largely not up to date and are US-centric. Organizations should consider utilizing the most recent emission factors available, and implement regular updates each year. Organizations should also strive to use country or region specific emission factors where possible. In the case of Category 8, for example, organizations could map emission factors specific to the country or region in which their leased assets are located. These factors can be updated year over year to also account for yearly changes in grid mixes.
- Accounting for inflation
Regular updates to EEIO emission factors may not always be available, and therefore adjustments by the reporting organization may be necessary. In the case of Category 1, for example, when using the spend-based method with EEIO emission factors, organizations should account for and adjust their spend or emission factors for inflation when current year EEIO factors are not available.
- Estimations and assumptions
Organizations should always use primary activity data where feasible. However, in the absence of primary data, it is acceptable to implement estimations and assumptions. Though, when developing these estimations and assumptions, organizations should consider implementing organization-specific attributes and practices where possible. In the case of Category 7 for example, organizations could conduct employee surveys to understand commuting habits, or leverage studies conducted on commuting habits in the countries in which they operate.
- Assess and account for completeness
Organizations should conduct a materiality assessment, using the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard, or another acceptable Scope 3 standard, as a guide to determine the categories which apply and are material. Organizations should use the relevant standard as a guide to ensure they are reporting the minimum requirements of each category. In the case of Category 11, for example, organizations could also consider conducting life cycle assessments of their product portfolios to gain an understanding of the full direct and indirect use phase emissions of their product use.
In recent years, there has been more focus on organizations' Scope 3 emissions. This is largely due to increased pressure by internal and external stakeholders, expectations set by markets, and disclosure of climate impacts due to regulatory requirements. Additionally, an increasing number of organizations are setting science-based targets, and a key part of this is setting a baseline and target for Scope 3 emissions.
It is now more important than ever for organizations to rethink their Scope 3 emissions calculation methodologies and improve the accuracy and completeness of these calculations to demonstrate progress.
Please get in touch if you'd like more information on how we can help with your Scope 1,2 and 3 emissions reporting assurance.