3 sectors share insights on measuring scope 3 emissions

At the 2023 United Nations Climate Change Conference (COP28), one day will be devoted to how trade and trade policy can move towards a decarbonized economy. As trade occurs within global supply chains, measuring the resulting greenhouse gas (GHG) emissions will be crucial for climate action.

Many firms have started to report not only on their direct emissions (scope 1) and indirect emissions from purchased energy (scope 2) but also on emissions from upstream and downstream activities in their value chains (scope 3).

Scope 3 reporting is driven by new expectations from consumers, business partners, regulators, investors, employees and civil society. It is also becoming a requirement in new regulations discussed or implemented in the European Union, Japan and the United States.

The complexity of modern supply chains presents several challenges in emissions measurement. Supply chains cut across multiple sectors, each with unique emission sources and measurement difficulties. Little access to reliable, firm-specific primary data leads to reliance on varying estimates.

Moreover, the landscape of emissions reporting is fragmented, with different methodologies and standards, creating challenges in comparability and benchmarking. Various calculation methods and emissions factors add to the complexity, requiring significant expertise and resources. Reporting requirements may disproportionately burden small and medium-sized enterprises and firms in developing countries.

The report we published with the World Economic Forum and Business at OECD offers insights into practical challenges in three sectors.

The agriculture and food sector accounts for a substantial portion of human-caused emissions and faces unique challenges. As in other sectors, emissions reporting draws on the GHG Protocol and ISO standards. While these standards provide essential guidance, measuring emissions in specific activities entails many choices.

Think about the 600 million farms in the world and how farmers can account for their emissions that vary according to soils, climate and weather conditions. And think about how this information can be shared with firms downstream and verified. Firms downstream might prefer to rely on modelled estimates or emissions factors when confronted with fragmented data that are different across suppliers.

The mining industry is essential for transitioning to clean energy but struggles with scope 3 emissions reporting. Scope 3 emissions are mostly downstream in industries with their own measurement methods and over which mining firms have little control.

As in agriculture and food, there is a concern about a proliferation of reporting standards with the risk of different jurisdictions adopting different requirements when reporting becomes mandatory. Some convergence is underway and is necessary.

Steel is a downstream industry for the mining sector, highlighting the challenge of interoperability across measurement methods for sectors that belong to the same global supply chain.

As a significant carbon emitter, the steel industry’s diverse production methods and environmental impacts make standardization of emission measurements particularly challenging. Yet, it is crucial to achieve convergence so that firms can focus on decarbonizing supply chains.

Emissions measurement in supply chains is critical and necessary, requiring coordinated efforts from various stakeholders, including businesses, governments, international organizations and standard-setting bodies. The challenges and opportunities for driving meaningful climate action through improved transparency and accountability in supply chains are significant. We see some convergence and it is time for policymakers to take a closer look at what they can do together with businesses.

To develop methodologies across sectors that ensure comparability and effective management of emissions, measurement systems should have the following features:

How emissions are measured and reported can have significant implications for trade policies. Inaccurate or inconsistent measurements could lead to trade barriers or undermine the credibility of emissions reporting.

Therefore, policymakers must navigate this complex landscape carefully, ensuring emissions measurement becomes a tool for climate action rather than a trade barrier.