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Scope 3 Emissions Reporting
Scope 3 Emissions Reporting

An overview of HowGood's Scope 3 Reporting offering, and how CPGs can use it to account for upstream Scope 3 emissions.

Jemima Snow avatar
Written by Jemima Snow
Updated over a week ago

HowGood’s Carbon Life Cycle Module has been designed specifically for CPGs, according to the GHG Protocol Product Life Cycle Accounting and Reporting Standard (referred to as the Product Standard) guidance for GHG emissions measurement and reduction. It measures carbon emissions of an individual product across its full life cycle, from farm through processing, transport, manufacturing, product use and disposal.

HowGood’s Carbon Life Cycle module is powered by the world's largest database of ingredients and leveraged against a company's basic product data. This complies with one of the GHG Protocol’s four methods for reporting Scope 3 Purchased Goods and Services - the average data method. While Scope 3 emissions tend to be the most difficult for companies to measure and control, the HowGood platform streamlines the process. CPGs are able to easily consolidate the ingredient-level GHG emissions data required to report on upstream Scope 3 emissions.

HowGood’s Scope 3 Report accounts for the two categories that make up the majority of a company’s total emissions:

  • Category 1: Purchased Goods and Services

  • Category 4: Upstream Transportation and Distribution

These two categories are the only categories that the CDP recommends companies in the food and beverage sector report on.

Why should CPGs report on Scope 3 emissions?

The GHG Protocol defines Scopes 1-3 as the standard framework for understanding how a company can set the boundaries of its carbon reduction efforts:

  • Scope 1 refers to direct emissions from sources a company owns or controls, including electricity generation, physical or chemical processing, transportation of materials, products, waste and employees, and fugitive emissions.

  • Scope 2 refers to indirect emissions associated with purchased energy that is consumed in a company’s owned or controlled equipment or operations.

  • Scope 3 refers to indirect emissions associated with sources that are not owned or controlled by a company, including extraction and production of purchased materials and fuels; transportation of purchased materials, goods, fuels, employees, sold products and waste; leased assets, franchises and outsourced activities; use of sold products and services, and waste disposal.

While Scopes 1-2 are expected in the United States for ESG disclosures, a full reporting of Scope 3 emissions are becoming more of a priority. Investors and NGOs are increasingly looking to CPGs to report on Scope 3 emissions because they are estimated to make up 50-70% percent of CPG companies’ total emissions. They are also the most challenging to report as the data lies largely outside of a company’s purview and control.

There has been increasing pressure to report Scope 3 emissions, with the U.S. Securities and Exchange Commission (SEC) having recently released a proposed rule, The Enhancement and Standardization of Climate-Related Disclosures for Investors. The rule would require companies to disclose a wide variety of climate-related information, including information about climate-related risks that are reasonably likely to have material impacts on its business and/or its consolidated financial statements, and greenhouse gas (GHG) emissions metrics that could help investors assess those risks. The rule would require disclosure of Scope 3 emissions if the emissions are material, or if the company has set a GHG emissions reduction target or goal that includes its Scope 3 emissions.

What is the official guidance for reporting on Scope 3 emissions?

Through the development of the Product Standard, the GHG Protocol has responded to the demand for an internationally accepted method to enable GHG management of companies’ goods and services. The GHG Protocol’s Technical Guidance for Calculating Scope 3 Emissions outlines four methods of Scope 3 emissions reporting, requiring varying levels of commitment and resources for a CPG company to undertake.2 While many CPGs cannot source supplier-specific reporting methods, the average data method which calculates cradle-to-gate emissions per unit of product is a viable method of reporting for CPG companies who can pair basic product data with HowGood’s vast database of 33,000 ingredients, chemicals and materials.

How does HowGood provide Scope 3 reporting?

The farm to farm gate, ingredient processing and transportation stages of HowGood’s Carbon Life Cycle module provide the ingredient-level GHG emissions data required to fulfill GHG Protocol Scope 3 reporting requirements:

What are the sources of data used and assumptions made to calculate emissions?

For Category 1 (Purchased goods & services), data is calculated per ingredient used in the product. For farm to farm gate emissions and processing energies, individual LCAs (taking into account the location where the crop is grown or processing occurred) are consulted. The HowGood research team consults LCAs which are peer reviewed and follow the ISO 14000 standards.

For Category 4 (Upstream transportation and distribution), the distance for transportation from where the individual goods are processed to where the product is manufactured is estimated using the location of both facilities, inclusion of each ingredient in a final product, and a likely mode of transportation. Emissions due to modes of transportation are obtained from the GLEC framework.

The Carbon Life Cycle and Scope 3 Carbon Reporting Modules are available by contract - contact your Customer Success Manager to find out more.

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