According to the Carbon Disclosure Project (CDP), there are three types of GHG emissions businesses have to account for:
Scope 1 emissions. These are direct emissions from sources owned or controlled by the reporting organisation.
Scope 2 emissions. These are emissions that physically occur outside the organisation’s reporting boundary and are therefore ‘indirect’ emissions. Examples include electricity, heat, cooling or steam production.
Scope 3 emissions. An organisation’s indirect emissions other than those covered in Scope 2. They are from sources that are not owned or controlled by an organisation, but which occur as a result of its activities. Emissions considered by the CDP Supply Chain Information Request are produced by business travel, distribution and logistics, use and disposal of a company’s products, and other supply chain emissions.
For many companies working in food supply chains, Scope 3 activities are normally the largest component of their carbon footprint. For example, Wal-Mart estimates that their Scope 3 emissions are at least 100 times greater than their total Scope 1 and 2 emissions (Wal-Mart Stores, 2009); Woolworths estimates that about 96.5% of its annual emissions are created by their suppliers (PricewaterhouseCoopers, 2009).
This is further illustrated in the following bubble chart, which shows the relationship between 2009 annual revenues (in US$ billion), the sum of Scope 1 + 2 emissions, and Scope 3 emissions of 15 companies involved in food manufacturing/ marketing/ transport. The size of the bubble represents the magnitude of Scope 3 emissions. . The cumulative annual carbon footprint of the 13 food retailers and manufacturers represented in this sample -that is, excluding Maersk numbers- was 245 Mt CO2-e, of which Scope 3 emissions represent 86% of this total. In six of these companies, Scope 3 emissions outweigh Scope 1+2 emissions. If we take Unilever as an example, Scope 3 emissions are forty times larger than the sum of 1 & 2 emissions.
The problem is: not many companies know the magnitude of their Scope 3 emissions. Only 18 from a sample of 36 companies involved in food supply chains declared Scope 3 emissions in the CDP report of 2009. Further, some disclosures indicate significant gaps of information in their declaration of Scope 3 emissions. For instance, Wal-Mart did not disclose the contribution of distribution and logistics undertaken by 3PLs.
A key difference between Scope 1, 2 and 3 data is that the latter information relies on suppliers (e.g. raw materials, transport, packaging) sharing data with their buyers. Remember our previous papers and posts discussing the importance of transparency in the supply chain? The disclosure of Scope 3 activities is considered sensitive information, as data disclosed can be converted into financial indicators, just in the same way that financial values can be converted into GHG emissions, through a financial hybrid lifecycle analysis. Therefore, trust and transparency between food supply chain players are essential to assess Scope 3 emissions in an accurate manner.