Our Net Zero journey: The challenge of Scope 3 reporting

7 February 2024

With the clock ticking on delivering the UK’s ambitious carbon reduction targets by 2030, we caught up with our climate expert, Dave Allen, to gain his insight into why getting to grips with Scope 3 emissions is proving the biggest challenge of all.

Reporting Scope 3 greenhouse gas (GHG) emissions presents a multifaceted challenge for organisations aiming to comprehensively address their environmental impact. Unlike Scopes 1 and 2, which directly originate from an organisation’s activities or energy consumption, Scope 3 encompass a broader range of indirect emissions throughout the value chain, making their measurement and reporting considerably complex.

One of the primary challenges of Scope 3 reporting revolves around data collection and categorisation. These emissions stem from a wide array of sources, including purchased goods and services, upstream transportation and distribution, employee commuting, product use, and disposal. As a result, compiling accurate data across these diverse sources demands extensive collaboration with suppliers, stakeholders, and partners, often involving varying reporting methodologies and standards. The challenge lies in not only gathering this disparate data but also in categorising and allocating emissions accurately to specific scopes and activities.

Moreover, data accuracy and reliability pose significant hurdles. Often, the data acquired for Scope 3 reporting are estimates or extrapolations rather than precise measurements. Reliance on supplier-provided data, which might lack consistency or transparency, further complicates the accuracy of reported figures. Verifying the credibility of this data, ensuring its consistency over time, and managing inconsistencies among different reporting entities becomes a persistent challenge.

Another critical aspect is the scope and boundary setting for emissions. Determining the appropriate boundaries within the value chain to measure and report emissions can be subjective and complex. Organisations often grapple with deciding which emissions sources to include and exclude, especially when dealing with indirect suppliers or considering the end-use of products.

Engagement and collaboration with suppliers and partners are essential for comprehensive Scope 3 reporting. Convincing and aligning these stakeholders to disclose emission-related data and invest in emission reduction strategies can be a significant challenge. Suppliers may have varying capabilities or levels of commitment to sustainability, making it challenging to ensure consistent and reliable reporting across the supply chain.

Furthermore, there’s a lack of universally accepted standards and reporting frameworks for Scope 3 emissions. While initiatives like the GHG Protocol provide guidelines, there’s no one-size-fits-all approach. This absence of standardised methodologies and metrics makes it difficult for companies to benchmark their performance or compare their emissions against industry peers accurately.

Waterman provides consultancy services throughout the complete lifecycle of built environment assets from initial surveys and concept planning through to design, delivery, project management, supervision, and on-going maintenance. However, we do not directly undertake construction ourselves nor do we manufacture any products. As a result, our GHG boundary is essentially the direct emissions from our company offices and company vehicles, purchased electricity for powering our offices, and upstream emissions relating to our supply chain, including the business travel of our staff. However, even with this relatively simple footprint, the main challenge for an organisation like Waterman – and where the most significantly material contribution comes from – is Scope 3, particularly purchased goods and services.

As part of our response to the Scope 3 reporting challenge, Waterman is looking at increasing the proportion of supplier-specific data rather than spend-based data in calculating our Scope 3. However, this in itself presents its own challenges.

Data Availability and Quality: Acquiring detailed supplier-specific data on emissions can be challenging. Not all suppliers might track or report their emissions. Additionally, the quality and accuracy of the data can vary significantly among suppliers.

Complexity and Variability: Different suppliers might use different methodologies or tools to calculate their emissions, leading to inconsistencies and complexities in aggregating this data. Industries also have varying emission calculation methodologies, further complicating data aggregation.

Supplier Engagement and Cooperation: Convincing and engaging suppliers to share detailed emission data can be difficult. Some suppliers might be hesitant due to concerns about disclosing sensitive information or the additional effort required to track and report emissions accurately.

Data Standardisation and Harmonisation: There might not be standardised formats or protocols for reporting emissions across industries or regions. Harmonising disparate data from various suppliers into a cohesive and comparable format is a significant challenge.

Resource Intensiveness: Collecting, validating, and aggregating supplier-specific data demands substantial resources in terms of time, personnel, and technology. This can be particularly daunting for companies with extensive and diverse supplier networks.

Confidentiality Concerns: Suppliers might be unwilling to share certain proprietary or sensitive data, which could hinder the completeness of the emissions data set.

Scope Expansion and Depth: Relying on supplier-specific data might not capture the entire scope of emissions associated with the supply chain. Emissions from indirect suppliers or those further down the supply chain may be difficult to track accurately.

Verification and Assurance: Ensuring the accuracy and reliability of supplier-reported data requires verification and assurance processes. This involves additional efforts and costs to validate the data.

Continuous Monitoring and Updates: Emission data from suppliers needs to be continually monitored and updated to reflect changes in their operations or methodologies, adding a layer of complexity to data management.

Dave Allen

In overcoming these challenges, collaboration among stakeholders, standardisation of reporting frameworks, technological advancements for data collection and analysis, and fostering stronger relationships with suppliers are all crucial steps for effectively utilising supplier-specific data for Scope 3 emissions management.

If you’d like to learn more about tackling the challenges of Scope 3 emissions reporting, or to find out how we can support you throughout your own Net Zero journey, contact Dave Allen.