GHG Protocol Scope 3 Standard

GHG Protocol Scope 3 Standard
Name	GHG Protocol Scope 3 Standard
Publisher	World Resources Institute; World Business Council for Sustainable Development
First published	2011
Subject	Corporate greenhouse gas accounting; emissions reporting

GHG Protocol Scope 3 Standard

The GHG Protocol Scope 3 Standard is an accounting framework for corporate value chain emissions developed by the World Resources Institute and the World Business Council for Sustainable Development. It complements the Greenhouse Gas Protocol corporate standards and aims to harmonize disclosure across industries, markets such as the European Union Emissions Trading System, and investors like BlackRock. Major stakeholders include multinational corporations, nongovernmental organizations such as WWF, standard-setters like ISO, and financial institutions such as Goldman Sachs.

Overview

The Standard defines methods to quantify indirect greenhouse gas emissions occurring in a company's supply chain and use of sold products that are not captured in direct operations, addressing interactions with entities including Apple Inc., Unilever, Toyota Motor Corporation, Nestlé, and Walmart. It links to accounting practices used by regulators including the Securities and Exchange Commission and voluntary frameworks such as the Task Force on Climate-related Financial Disclosures and the Carbon Disclosure Project. The Standard’s publication followed consultations with organizations like the United Nations Environment Programme and academic partners including Stanford University and Massachusetts Institute of Technology.

Scope and Applicability

Applicability spans sectors from oil and gas companies such as ExxonMobil to technology firms like Microsoft and retailers like IKEA. It applies to entities preparing corporate greenhouse gas inventories under the broader GHG Protocol Corporate Standard and interacts with national policies such as the UK Climate Change Act and regional initiatives like California Cap-and-Trade Program. The Standard is used by multinational supply chains involving suppliers such as Foxconn and logistics providers such as DHL, and informs investor analyses at firms like Vanguard and State Street Global Advisors.

Classification of Scope 3 Categories

The Standard organizes value chain emissions into discrete categories covering upstream and downstream activities relevant to companies including BP, General Motors, Samsung, Procter & Gamble, and Coca-Cola Company. Categories include purchased goods and services, capital goods, fuel- and energy-related activities, transportation and distribution involving carriers such as Maersk, waste generated in operations, business travel with carriers like Delta Air Lines, employee commuting, leased assets, processing of sold products, use of sold products, end-of-life treatment of sold products, franchising, and investments involving institutions such as BlackRock. Each category aligns with sectoral reporting practices promoted by bodies such as the International Finance Corporation and CDP.

Measurement Methodology and Calculation Approaches

The Standard prescribes a hierarchy of measurement approaches from primary data collection to spend-based and average-data emission factors, used by companies like Siemens and Johnson & Johnson. It references life cycle assessment methods developed at institutions such as University of Michigan and ETH Zurich and aligns with protocols from ISO 14064 and PAS 2050. Emissions factors are drawn from databases including EPA inventories, IPCC Guidelines, and national inventories like those from Australia and Japan. Methods include activity data collection, supplier engagement, process-based life cycle assessment, hybrid approaches, and allocation rules applied in complex product chains handled by companies like Samsung Electronics and General Electric.

Reporting Requirements and Guidance

Reporting guidance in the Standard requires transparent documentation of organizational boundaries, chosen calculation methods, data sources, and uncertainty, following practices endorsed by entities including the International Organization for Standardization and the Global Reporting Initiative. The Standard complements disclosure regimes used by London Stock Exchange Group listed firms and guidance from the OECD for multinational enterprises. It instructs companies to report disaggregated category data to facilitate comparison by investors such as CalPERS and rating agencies like MSCI ESG Research.

Implementation Challenges and Criticisms

Practitioners and academics at institutions such as Harvard Business School and Imperial College London note challenges including data availability from suppliers like Hon Hai Precision Industry (Foxconn), double counting across reporting entities such as Volkswagen and parts suppliers, methodological complexity, and resource intensity for small and medium enterprises. Critics from think tanks such as Carbon Tracker and advocacy groups like Friends of the Earth highlight risks of greenwashing and inconsistent application across jurisdictions such as China and India. Businesses also cite difficulties reconciling Scope 3 inventories with financial accounting standards used by International Accounting Standards Board.

Relationship to Other Standards and Initiatives

The Standard interoperates with the Greenhouse Gas Protocol Corporate Standard, ISO 14064-1, Science Based Targets initiative, Task Force on Climate-related Financial Disclosures, Corporate Sustainability Reporting Directive, and sector-specific protocols such as the Oil and Gas Methane Partnership. It is used alongside life cycle assessment tools promoted by SETAC and reporting platforms such as CDP and GRESB, and informs policy discussions at forums like the United Nations Framework Convention on Climate Change and the G20.

Category:Environmental accounting standards