Tackling Scope 3 for Science Based Targets

[Updated] Organisation completing science-based targets (SBTs) often experience challenges throughout the target setting process. Carbon Credentials has helped numerous clients satisfy the requirements set by the Science-Based Target initiative (SBTi) as many find the Scope 3 emissions assessment can often be the most troublesome requirement.

So what are Scope 3 emissions?

The Greenhouse Gas Protocol (GHG Protocol) is the most widely used accounting standard for GHG emissions. In another blog, my colleague Kyna wrote about the use of emission scopes for allocating emissions for investor reporting. The same methodology is also drawn upon by the SBTi to provide the basis for long-term target setting.

This GHG Protocol categorises an organisation’s emissions into three “scopes”.

  • Scope 1 emissions (direct emissions) are defined as emissions from sources that are owned or controlled by the organisation. This might include, for example, natural gas combusted in a boiler at a company’s head office.
  • Scope 2 emissions (indirect emissions) are emissions from purchased electricity, heat, steam or cooling consumed by the company, but generated elsewhere.
  • Scope 3 emissions (other indirect emissions) are emissions that occur as a consequence of the operations of the organisation but are not directly owned or controlled by that organisation. For example, emissions from waste generated by a company are defined as Scope 3 emissions.

The GHG Protocol Scope 3 guidance outlines the 15 different Scope 3 categories and each should be assessed in terms of their materiality in order to understand what an organisation should report on. A summary of the three scopes of emissions and their definitions can be seen in the infographic below.

Figure 1 A breakdown of how different emissions are categorised into Scope 1, 2, or 3.

Scope 3 emissions are especially important for organisations because they often make up the largest portion of the overall footprint. The challenge organisations face in quantifying Scope 3 lies in the degree of control they have over these activities and the collection of data associated with them. Paradoxically, the most significant emission reductions can be made by targeting Scope 3 activities. By calculating Scope 1, 2 and 3 emissions, an organisation can understand its full climate change impact and prioritise efforts to reduce emissions.

What does the Science-Based Targets initiative require for Scope 3?

Previously, the SBTi only recommended that companies submitting targets undertake a Scope 3 screening, but this is now a requirement of the process. This means that organisations must look at all relevant Scope 3 categories and determine their significance.

The SBTi requires that if Scope 3 emissions make up over 40% of total Scope 1, 2, and 3 emissions then the majority of Scope 3 emissions must be included in the target. The “majority” is defined as the top 3 categories or 2/3 of total scope 3 emissions.

In terms of ambition, it is not a requirement that Scope 3 targets are in line with a 2 degrees scenario, but that the targets are challenging and robust. The organisation must demonstrate that their Scope 3 targets are addressing the main sources of GHG emissions within their value chain in line with current best practice.

So how do I begin with setting a target on my Scope 3 emissions?

So far, most organisations have focussed on Scope 1 and 2 emissions and many are not yet even measuring Scope 3. The graph below demonstrates that over twice as many UK CDP respondents are setting Scope 1 & 2 targets versus those companies that are setting Scope 3 targets.

[image] Figure 2 A comparison of the number of UK companies setting Scope 1 and 2 versus Scope 3 targets as reported in CDP 2016.

Figure 2 A comparison of the number of UK companies setting Scope 1 and 2 versus Scope 3 targets as reported in CDP 2016.

It can be difficult to set a target when there is no baseline data to compare against. Subsequently, there is a lot of uncertainty about how to get started on the journey. The process diagram below gives a high-level understanding of the steps to evaluating an organisation’s value chain impacts:

[image] Figure 3 A high-level process diagram demonstrating the steps for understanding Scope 3 emissions.

Figure 3 A high-level process diagram demonstrating the steps for understanding Scope 3 emissions.

The first step in the process is to perform an initial Scope 3 gap analysis. The gap analysis is where organisations can assess current reporting against the 15 Scope 3 emissions categories to determine whether all relevant emission sources are covered. This analysis will allow you to either move on to set your targets or demonstrate that more work must be done in this area.

What should I do next?

If the results of the gap analysis show you haven’t quite analysed everything you need to, firming up the Scope 3 reporting boundary will be of huge benefit and move you along the SBT process. Remember, a central requirement of the SBTi is to demonstrate that you have considered the relevance of emission categories included and can provide a justification for excluding the others.

By evaluating Scope 3 emissions against the GHG Protocol Value Chain criteria, a company can identify which emission sources are truly relevant to their organisation and should, therefore, be included within the target. My colleague Scarlett Benson will describe this process in more detail in the second part of this Scope 3 SBT blog series.

If you would like help understanding your Scope 3 emissions or developing a science-based target, please get in touch with one of our experts here.

Emma Watson, Consultant

[Updated March 2018. Originally posted July 31st 2017]

Understanding the 2016 ISO 50001 certification trends

Earlier this week, the International Organisation for Standardisation (ISO) published their 2016 Survey results detailing the total number of ISO 50001 Certificates in the world as of 31st December 2016. The results show that there were just under 19,000 ISO 50001 certificates worldwide, which represents a 60% increase compared to the previous year.

Figure 1: ISO 50001 Certificates By Year

Delving into the survey results the greatest share of the ISO 50001 certificates is held within Europe, which accounts for 90% of the total and seven out of the ‘Top 10’ countries for number of ISO 50001 certificates.

Figure 2: Top 10 countries in 2016 by the nubmer of ISO 50001 certificates

In 2015 the UK saw the total number of certifications increase significantly. While this boost coincided with the compliance deadline for ESOS Phase 1, the Environment Agency released data stating that only 20% of certificates issued in 2015 were in connection with ESOS compliance, meaning that ESOS cannot be credited as the main driver for this growth. This proposition, that ISO 50001 Certification in the UK is being driven by reasons other compliance, is reinforced again in the new statistics, which show a 92% increase from 2015 to 2016 without any coinciding compliance event, such as ESOS phase 1’s deadline.

Figure 3: ISO 50001 certificates in the UK

So why are more UK organisations using ISO 50001 certification?

  • Governance – As a globally recognised standard, ISO 50001 certification demonstrates the strongest commitment to energy performance improvement to both internal and external business stakeholders.
  • Embedding continual improvement – Businesses want a system that will embed continual improvement, ensuring energy saving opportunities are not just identified (as often seen with ESOS energy audits) put acted upon.
  • Best practice compliance – ISO 50001 provides a best practice framework for identifying and complying with all legal and other requirements related to energy use, reducing risk of non-compliance from the corporate through to site specific level.
  • Contractual and bid requirements – ISO 50001 is fast becoming a key component of contractual and franchise requirements and is recognised as a key driver for improving tender and bid applications. Businesses are implementing ISO 50001 either in response to these current requirements or in anticipation of future requirements.

Want to find out more?

Analysis of this survey data in this blog is just the start. Join us on Thursday 16th November for our event Decoding ISO 50001; Understanding the value, addressing the challenge to learn more.

If you would like to find out more about how we could support your ISO 50001 journey, please also contact our performance team here.


Oliver Smallman,

Senior Environmental Auditor

Understanding the relevance of Scope 3 emissions for science-based target setting

Last week my colleague Emma Watson published the first of a series of blogs on Scope 3 emissions and science-based target setting.

Emma provided an overview of Scope 3 emissions and the Science Based Target initiative (SBTi) requirements for Scope 3; one of which is the requirement that companies demonstrate that they have considered the relevance of each of the 15 Scope 3 emission categories and can provide a justification for any exclusions.

My blog here focuses on how companies should assess whether a Scope 3 emissions category is relevant or not, and therefore whether or not it needs to be included within the Scope 3 target

Back to the basic principles of GHG accounting

The GHG Protocol sets out the GHG accounting principles of relevance, completeness, accuracy, consistency, and transparency. These are intended to underpin and guide GHG accounting and reporting to ensure that the reported information represents a faithful, true, and fair account of a company’s GHG emissions.

Applying these principles can be more challenging for Scope 3 emissions reporting as companies generally have less visibility and control over these emissions. It is therefore important that the principles of completeness and accuracy are appropriately balanced with the principle of relevance so that Scope 3 categories can be excluded from the inventory if they are deemed not to be relevant.

Figure 1: List of Scope 3 categories as defined by the GHG Protocol. Source: Corporate Value Chain (Scope 3) Accounting and Reporting Standard

Is this category applicable to your organisation?

A simple, first step should be to understand if any of the 15 Scope 3 categories are simply “not applicable” to your organisation. For example, depending on your consolidation approach to the organisational boundary, emissions from upstream leased assets may already be included within Scopes 1 and 2. Therefore “Category 8: Upstream Leased Assets” would not be applicable.

Or, for example, your organisation may not have any franchise arrangements, and therefore emissions from “Category 14: Franchises” would also not be applicable. We recommend, in line with the principle of transparency, that companies demonstrate what actions were taken to understand whether these emission sources are applicable or not, document this within an evidence pack, and provide a clear justification for exclusion within their public reports.

Is this category relevant to your organisation?

When considering relevance, a useful starting place can be to have a look at what other companies in your sector are doing. The graph below shows how 14 UK Real Estate companies have reported on relevance of each of the 15 Scope 3 categories within their 2016 CDP submissions. From this we can see that emissions from 5 categories are frequently reported as relevant:

  • Category 1: Purchased Goods & Services;
  • Category 3: Fuel-and-Energy Related Activities (not included in Scopes 1 and 2);
  • Category 5: Waste Generated in Operations;
  • Category 6: Business Travel; and
  • Category 13: Downstream Leased Assets.

Figure 2: UK real estate CDP respondent companies’ 2016 assessment of scope 3 criteria relevance

While looking at what others are doing is a useful starting place and can inform your understanding of Scope 3, every organisation is different, and you should, therefore, carry out company-specific relevance tests as shown below:

  1. Can you influence emissions from this category in any way?
  2. Do emissions from this category contribute to your risk exposure?
  3. Are emissions from this source deemed critical by key stakeholders?
  4. Are emissions from this source outsourced activities that are typically performed in-house by other companies in your sector?
  5. Have emissions from this source been identified as significant by your peers or by sector-specific guidance?
  6. Do emissions from this category contribute significantly to your total anticipated Scope 3 emissions?

It is relatively simple to assess each of the 15 categories against the first five of the relevance criteria listed above by engaging with key internal and external stakeholders. However, the 6th criteria above presents us with a chicken and egg situation; in order to determine whether or not we need to quantify the emissions, we have to quantify them to establish their size and therefore relevance!

Fortunately, as part of this relevance test, we are able to use less specific, secondary data to establish the size of GHG emissions in each of the 15 categories. This avoids overly burdensome primary data collation for categories that turn out to be not relevant.

Secondary data includes industry-average data (for example, from published databases or literature studies), financial data, or proxy data (i.e. where you use specific data from one activity in the value chain to estimate emissions for another activity in the value chain).

The secondary data that you use to model your Scope 3 emissions will depend on your countries of operation, your sector, and a number of other company-specific factors. To find out more about different modelling techniques for estimating Scope 3 emissions, please contact our GHG accountancy experts here.

Prioritising emissions based on relevance

Once each applicable category has been estimated in this way, the emissions categories can be prioritised based on relevance. High priority emissions categories will then likely require refinement of emission estimates using more specific data, particularly if you are looking to set a quantitative target.

As Emma mentioned in her blog, from a science-based target setting perspective, if your Scope 3 emissions are more than 40% of your total emissions then you must set a Scope 3 target, the boundary of which must include either the top 3 of the 15 Scope 3 categories or two-thirds of total Scope 3 emissions.

The next, and final, blog in the series will focus on how to set a Scope 3 target in alignment with the Science-Based Target initiative criteria, and will provide some useful examples of how different companies have tackled this.


Scarlett Benson, Senior Sustainability Consultant

Whose Carbon is it?

Companies are increasingly asked by their investors to report on their greenhouse gas emissions either in their mainstream financial reports, or through sustainability reporting frameworks such as CDP and GRESB.

The GRESB Real Estate Assessment requires that funds report on their energy, waste and water data as well as their “Scope 1, 2 and 3” greenhouse gas (GHG) emissions within the Performance Indicators Aspect, which is worth a quarter of the overall GRESB score. The significant weighting of this Aspect reflects the importance that GRESB and its investor members place on the availability, accuracy and transparency of sustainability performance data.

In the context of real estate, there is often confusion about whether the landlord or the tenant should report on emissions associated with the leased asset – i.e. uncertainty in whose carbon it is. In this blog, we aim to provide clarity on how landlords and tenants should allocate responsibility for emissions by exploring the concept of “Organisational Boundaries” and “GHG Scopes”.

   1. Organisational Boundaries – what is in and what is out?

First published in 2001, The Greenhouse Gas Protocol (GHG Protocol) is the most widely used international accounting tool for businesses to understand their greenhouse gas emissions.

The GHG Protocol requires companies to draw their boundary for GHG reporting according to either the ‘equity share’, ‘operational control’ or ‘financial control’ approach.

Under the equity share approach, a company accounts for emissions from its operations according to the share of its equity in the operation and is typically aligned to the company’s percentage ownership of the operation.  In the context of GRESB, the two funds which have a joint venture (JV) in a certain asset will report GHG emissions from that asset apportioned according to their percentage ownership. However, GRESB only requires participants to report on sustainability data from JVs where they have more than, or equal to 25% ownership.

Under the operational control approach, a company reports on the operations on which it has the authority to introduce and implement its operating policies. In reality, in most instances, only one company would have operational control over an asset. However, for the purpose of GRESB, where two funds have more than, or equal to 25% holding in a JV, they will both report 100% of emissions from energy, water and waste use for that asset. While this will lead to double counting of emissions, the purpose of GRESB is to drive sustainability performance improvement, and GRESB considers that JV partners with a stake of 25% or higher have significant influence over operational initiatives and can therefore drive implementation of sustainability initiatives and performance.

Under the financial control approach the organisation should include the operations over which it is able to direct the financial and operating policies with a view to gaining economic benefits from its activities. If a company chooses the financial control approach, emissions from JVs where partners have joint financial control are accounted for based on the equity share approach described above.

   2. GHG Scopes – direct and indirect emissions

The concept of GHG “Scopes” was developed by the GHG Protocol help to delineate direct and indirect emissions sources. The delineation of emissions into scopes helps to ensure that two or more companies will not account for the same emissions within the same scope i.e. to avoid double counting and helping us clarify “Whose carbon is it?”

Scope 1 emissions, also known as direct emissions, are defined as emissions from sources that are owned or controlled by the organisation. This might include, for example, natural gas combusted in a boiler at a company’s head office. Scope 1 emissions physically occur in assets owned or controlled by the reporting company.

Scope 2 emissions, also known as indirect emissions, are emissions from purchased electricity, heat, steam or cooling consumed by the company, but generated elsewhere. Conversely to Scope 1 emissions, where the emissions occur at the asset controlled or owned by the reporting company, Scope 2 emissions are released at the facility where the electricity is generated (i.e. the power plant). The power plant would report these emissions as Scope 1, but the organisation purchasing and consuming the electricity would report these as Scope 2. Since 2015, organisations have been encouraged to “dual report” their Scope 2 emissions using the location-based and market-based methodologies which utilise grid-specific or supplier-specific emission factors respectively.

Scope 3 emissions, or other indirect emissions, are emissions that occur as a consequence of the operations of the organisation, but are not directly owned or controlled by that organisation. For example emissions from waste generated by a company’s operations are defined as Scope 3 emissions. It is optional for organisations to report on Scope 3 emissions to GRESB.

The GHG Protocol Scope 3 guidance outlines the 15 different Scope 3 categories and the graph below shows the Scope 3 categories reported to CDP by UK Real Estate companies in 2016.

The GHG Protocol Scope 3 guidance encourages companies to report only on Scope 3 categories which are relevant to their organisations. It is therefore important to consider the following three questions:

  • How does each category contribute to the overall emissions?
  • What influence does the organisation have over those emissions?
  • To what extent do the emissions contribute to the organisation’s risk exposure?

Understanding which Scope 3 emissions are relevant to your organisation is particularly important for organisations that are setting science-based targets as they are required to conduct a “Scope 3 Screening” exercise.

   3. How to allocate tenant emissions?

There is often confusion about how landlords should report on emissions from tenant space; whether you categorise these emissions as Scope 1, 2 or 3 depends on which of three organisational boundary options you have chosen as well as the type of lease in place.

The first step is to understand the type of lease in place, whether it is a finance/capital lease or an operating lease. A finance/capital lease enables the lessee to operate an asset and gives them the full risks and rewards of owning the asset. As such, these assets are considered to be wholly owned assets in financial accounting (i.e. it would be recorded on their balance sheet). Operating leases, on the other hand, enable the lessee to operate the asset, but do not give them the risk or reward of owning that asset.

Depending on the type of lease and the organisational boundary chosen, landlords should report on emissions from leased assets in different GHG Scopes as shown in the table below.

Appropriate categorisation of emissions from leased assets by landlords and tenants ensures that GHG emissions are not double-counted. Therefore, if your tenant is reporting the emissions from the use of purchased electricity as Scope 2, the landlord should categorise the same emissions as Scope 3, and vice versa.

Improved accuracy and consistent application of boundaries and scopes will lead to more comparable, better quality data. In order to ensure that you have a good understanding of whose carbon is being reported, it is suggested that:

  • The boundary approach is appropriate and well understood
  • The asset-level lease types between the tenant and landlord are carefully considered

Remember, allocation of emissions to scopes is executed in view of both the boundary and the lease arrangements!


Kyna Huysmans, Senior Analyst

This blog post was first published by GRESB on May 23rd.

3 Things the CDP can tell us about Greenhouse Gas Verification

Greenhouse gas reporting has had a trust problem. As reporting developed over the past two decades, many systems and processes for managing data have had flaws and inaccuracies. As this information has become more important for risk management for investors, or operational improvements for the businesses themselves, greenhouse gas emissions verification has played an important role in ensuring systems are sound and data is accurate.

There are three major points of insight from last years’ CDP reporting which can help us better understand verification and how to go about it.

1. Verification is now the norm

Greenhouse gas emissions verification has continued to increase in adoption as it is actively incentivised through CDP scores. In 2016, two thirds of respondents reported having third party verification of their emissions, up 5% from from 2014 and 2015.

2. Understanding Verification Schemes

There are several different ways of verifying emissions. ISO 14064-3 is a specific greenhouse gas emissions verification scheme. AA1000 is designed to assure a wider range of sustainability or CSR data, which includes emissions. Similarly, ISAE3000 is a framework to verify sustainability in an annual report, but is typically conducted by accountants as a part of an overall annual reporting assurance process.

The interpretation of what is actual third party verification appears misunderstood by many organisations, as a significant number of companies in the CDP responded with schemes which were not actually verification schemes. Compliance or reporting frameworks such as the CRC or ESOS might include some aspect of audit of emissions, but Carbon Credentials recommends verification to a specific scheme such as ISO 14064-3, AA1000 or ISAE3000.

3. What Level of Assurance is Most Appropriate?

The confidence in the verification project is indicated by the Level of Assurance. Typically, two levels of assurance are considered:

  • “Reasonable Assurance” statements are positively asserted based on the data & information provided by the organisation. The person verifying concludes the reported data are materially correct and calculated in accordance with the stated methodology.
  • The more common “Limited Assurance” is worded negatively; meaning that there is no evidence to suggest that the reported data are not materially correct and have not been calculated in accordance with the stated methodology as far as the verifier can ascertain.

Assurance processes may be similar, but the reasonable assurance level will be more detailed and more comprehensive, with more emphasis on detailed testing of data and other information being assured. This includes a site visit and include larger sample size or more detailed data drill down. To contrast, limited assurance is typically a desk-based exercise with a greater focus on procedures.

Over two thirds of CDP respondents with verification have limited assurance

Carbon Credentials’ Verification Services

Carbon Credentials has conducted close to 50 verifications at  ISO 14064-3 standard for a range of clients, many with global operations. Our experience with data and data workflows translates into a targeted approach to assurance, and one which provides good insight into where improvements can be made.

Ultimately, why is this important? Without confidence in data systems, the insight they can provide is undermined. This third party review can help to improve systems, boost confidence and ensure that the data within these systems can be used more effectively. Without verification, we don’t know how much we can really say about these emissions – and this can matter about what we do to reduce them.

Global Goals, Local Action: Carbon Credentials at the EAUC annual conference 2017

At the end of March, four of us from Carbon Credentials spent two fascinating days at the 21st Annual Conference of EAUC (Environmental Association of Universities and Colleges)

Our decision to commit to being the headline sponsor for the 4th year in a row was an easy one given the conference focus: “Global Goals, Local Action”. This aligns very well with Carbon Credentials stated purpose of “Enabling a Global Low Carbon Economy.”

The EAUC sits at the intersection of the social and environmental pillars of sustainability, which are areas that many of us at Carbon Credentials feel strongly about. This year’s event recognised the critical role universities and colleges play in finding and implementing a solution to climate change and realising the Sustainable Development Goals on a local level within their communities.

I particularly enjoyed the discussions about how our work links so tightly with the 17 Sustainable Development Goals, focusing on the 17th goal: “Partnerships for the Goals”.  Our intention to “Enable” is all about partnerships. Partnerships with clients, with colleagues, and with organisations such as the EAUC.

The CAPP (Collaborative Asset Performance Programme) work we are doing across the UK also speaks to the need for partnerships. The four of us who travelled to the event – Will, Joe, Steve and I all enjoyed the debate around the best ways for Higher Education to enable performance improvement towards the SDGs.

In the welcome presentation, I spoke about the impressive progress HEIs have made in the last six years. Through the data visualisation utilising our data platform, ADAPt, I explained this progress in absolute terms and relative to the growth of staff, students, floor area, and income.

In the last six years the average total emissions from HEIs has dropped by 11.1%. This is a 20% drop of energy emissions when compared to gross internal area, and a 32.4% drop when compared to the total income of the HEI.

I shared our view that savings can be made on a large scale even as growth happens. One of the key perceived challenges has always been that “forcing” sustainability on large organisations would negatively affect growth, but this data weaves a different story.

We then explored how best to continue this journey to 2020 and beyond and the importance of working in collaboration with the core priorities of the universities, and the Vice Chancellors priorities.  I received some great feedback which encouraged us to add a 9th Vice Chancellor Priority.

Later at the conference, Will Jenkins and Joe Pigott delivered a masterclass on “The Data Revolution”. This session went into the details of how energy usage data can revolutionise how organisations interact with their buildings and allow those significant data driven performance opportunities to become a reality.  Will and Joe did a great job in showing how this can be achieved using live client-based case studies, and will be presenting a fuller version of their session at Data Revolution for Higher Education on the 1st June in London.

Thanks to all our Higher Education clients, and the EAUC for helping us make the choice to continue to collaborate to help make the Global Goals a reality, one campus at a time.   We look forward to seeing you there next year to continue the work needed to enable a global low-carbon economy.

Paul Lewis
Chief Operating Officer,
Carbon Credentials.


To download a copy of Paul’s plenary slide deck please fill in your details below.