Value chain emissions (Scope 3) are some of the largest and most complex that any organization has.  Not surprisingly, emerging trends in carbon accounting have focused in this area.  This note cuts through the complexity of Scope 3 emissions, and provides two key recommendations for sustainability professionals.

Accounting Standards

Greenhouse Gas Protocol (GHG Protocol) provides standards that enable companies and other parties to measure and manage their greenhouse gas emissions. To address the specific requirements of supply chains, GHG Protocol released the Corporate Value Chain / Scope 3 Accounting and Reporting Standard (“Scope 3 Standard”) and the Technical Guidance for Calculating Scope 3 Emissions (“Technical Guidance”).

As part of their continuous improvement process, GHG Protocol solicited feedback on the Scope 3 Standard and the Technical Guidance between November 2022 and March 2023.  The results were reported in June 2024 (“Survey”)(1), and included useful planning information for sustainability teams.

Regarding spend based Scope 3 accounting, the majority of respondents to the Survey felt this method was inaccurate and not a good measure of emissions for multiple reasons.  In light of this, they recommended that GHG Protocol remove it, phase it out or limit its use in the next revision of the Scope 3 Standard.  Some went further in advocating that GHG Protocol require the use of primary value chain data from suppliers.

While we can’t predict the precise requirements in the next version of the Scope 3 Standard, its highly likely they will change consistent with the Survey results. For that reason, we recommend that sustainability teams move away from using spend based Scope 3 accounting methods, and solicit primary emissions data from suppliers.  Further, teams should consider how to implement product level accounting in the future. 

Vendor Management

A crucial factor in measuring and reporting an organization’s Scope 3 emissions data is the performance of its vendors, both as to the timeliness and accuracy of the data submitted.  This has been an issue since the early days of voluntary emissions reporting.  The recent expansion of global climate reporting mandates, especially in the US and Australia, has made this issue critically important.

In response, the largest companies began imposing rules on vendor emissions data collection and submission some years ago, with Microsoft issuing a notable example of a robust “vendor code of conduct.”  This trend is accelerating, and our recent review of Refinitiv data shows that 25% of US public companies currently require environmental commitments from their suppliers(2). 

To best position themselves, we recommend that all organizations impose rules on their suppliers to ensure they will receive accurate and granular primary emissions data from those suppliers.  This will help ensure compliance with the next version of the Scope 3 Standard, and increase the accuracy of data reported under climate disclosure mandates.

Interested in deepening your understanding of sustainability topics? Explore our library of resources.

--Chip Horton, Tellus Markets Corp.

(1) Detailed Summary of Stakeholder Survey Responses, GHG Protocol, June 2024,  (2) Tellus Markets’ analysis of Refinitiv data