In the context of corporate sustainability and emissions accounting, understanding Scope 3 emissions is essential. Among these, Category 9 specifically addresses downstream transportation and distribution. This category encompasses emissions resulting from the transportation and distribution of sold products in vehicles and facilities not owned or controlled by the reporting company.
What Are Upstream and Downstream Emissions?
Upstream Emissions:
Upstream emissions refer to greenhouse gas emissions produced in the supply chain before a product reaches the reporting company. This includes emissions from raw material extraction, production, and transportation to the company’s facilities.
Downstream Emissions:
Conversely, downstream emissions occur after the product has been sold. This includes transportation, distribution, retail, and even customer travel to purchase the product. Understanding this distinction is crucial for accurate emissions accounting and management.
Scope 3 Category 9 Emissions Explained
Scope 3 Category 9 emissions arise from the transportation and distribution of products sold by a company after they leave its control. Examples include:
Warehousing emissions: Emissions from goods stored in third-party warehouses.
Retail emissions: Emissions generated when customers travel to retail locations.
Transport modes: This category considers various transport methods such as air, rail, road, and marine transport.
For instance, if a furniture manufacturer sells timber to a retailer, the emissions incurred during the transport of that timber from the manufacturer to the retailer's distribution center fall under Category 9. The calculation would include factors such as distance traveled and vehicle type used during transportation.
Key Industries Affected by Scope 3 Category 9 Emissions
Scope 3 Category 9 emissions, which pertain to the downstream transportation and distribution of products sold by a company, significantly impact various industries. These emissions arise from activities such as third-party transport, warehousing, and retail operations. Understanding which industries are most affected can help stakeholders prioritize their sustainability efforts and make informed decisions regarding emissions reduction strategies.
Retail and Consumer Goods
The retail sector faces substantial Scope 3 emissions as a result of the complex logistics involved in transporting goods from warehouses to retail locations and ultimately to end consumers. This sector also experiences high emissions from customer travel, as a majority of us drive to stores or use either quick commerce or delivery services.
Consider a supermarket chain which sources food products from multiple suppliers. It must account for the emissions incurred while transporting food items from suppliers to each of its distribution centers and then to each individual stores. For instance, if fresh produce is transported over long distances using refrigerated trucks, the carbon footprint can be significant from the fuel consumption of these vehicles. Additionally, the supermarket needs to consider the emissions from each of its customers who travel to the store. If a store attracts a thousand customers daily, each making trips in personal vehicles, the cumulative emissions are going to be substantial. This highlights the importance of understanding consumer behavior, and offering incentives while promoting sustainable shopping practices.
Automotive
The automotive supply chain is intricate, consisting of multiple tiers of suppliers, manufacturers, distributors, and service providers. A typical vehicle can contain between 15,000 to 30,000 components, each sourced from various suppliers around the globe. This complexity makes the supply chain vulnerable to disruptions that can significantly impact emissions levels.
For an automotive manufacturer producing electric vehicles (EVs), its Scope 3 Category 9 emissions would primarily arise from activities related to the logistics of getting finished vehicles to customers. Ideally, post-production of the cars, the manufacturer would transport them from its factory to the dealership, and some go to the warehouse. Once at the warehouse, some of these cars will be stored before sale. Upon booking, the car will be transported from the warehouse to the dealership. Finally, when you travel to dealerships to purchase the car, those trips will also contribute to Scope 3 Category 9 emissions of the manufacturer.
Food & Beverages
The food and beverage industry experiences high Scope 3 emissions due to the extensive logistics involved in transporting raw materials, processing products, packaging them, and distributing finished goods to consumers. The complexity of this sector's supply chain makes it crucial for companies to understand their downstream emissions.
Consider a beverage company that produces bottled juices sourced from various fruits. Here’s how its Scope 3 Category 9 emissions might manifest throughout its downward distribution supply chain: After production, the beverages are transported from manufacturing plants to distribution centers and then to retail outlets. If the product requires refrigerated trucks for distribution—necessary for maintaining quality—the fuel consumption during this process can lead to higher carbon emissions compared to non-refrigerated transport. When you purchase beverages at stores or restaurants, your travel contributes additional Scope 3 emissions.
Scope 3 Category 9 emissions present significant challenges across various industries, particularly in retail and consumer goods, automotive manufacturing, and food and beverage production. By understanding the specific implications of these emissions and analyzing relevant data points, companies can develop targeted strategies for reducing their carbon footprints while enhancing sustainability efforts throughout their supply chains. This proactive approach not only helps in compliance with emerging regulations but also fosters stronger relationships with stakeholders who prioritize environmental responsibility.
How to Calculate Scope 3, Category 9: Downstream Transportation and Distribution Emissions
Calculating Scope 3 Category 9 emissions involves several steps:
Data Collection: Gather data on the mass of goods sold, transportation distances, and modes of transport.
Choose a Calculation Method:
Fuel-based method: Calculate based on fuel consumption.
Distance-based method: Use known distances traveled by transport modes.
Spend-based method: Estimate based on expenditure on transportation services.
Use Emission Factors: Apply appropriate emission factors for each mode of transport to convert activity data into CO2e (carbon dioxide equivalent) emissions.
What does calculating Scope 3 Category 9 Emissions Help With:
Understanding Emission Sources:
By analyzing data on transportation modes, distances traveled, and the volume of goods sold, you can identify which aspects of your distribution processes contribute most significantly to their overall emissions and create targeted interventions.
Identifying Reduction Opportunities:
Detailed emissions data can highlight inefficiencies in logistics and supply chain management, based on which you can implement strategies that reduce emissions. For example, optimizing transportation routes or switching to more sustainable transport modes can significantly lower your carbon footprint.
Driving Innovation:
Insights gained from emissions data can inspire innovation in product design, packaging, and distribution methods. You can explore alternative materials or more efficient logistics solutions that not only reduce emissions but also cut costs.
Regulatory Compliance:
As regulatory frameworks around GHG emissions tighten globally, having accurate data on Scope 3 emissions ensures compliance with reporting requirements. This is particularly relevant with frameworks like the BRSR (Business Responsibility and Sustainability Report) in India, which emphasizes transparency in sustainability practices.
Calculating Scope 3 Category 9 emissions is not merely a compliance exercise; it is a strategic imperative that enables you to understand your environmental impact comprehensively. The insights gained from this data can help make informed decisions that drive efficiency, foster innovation, enhance stakeholder trust, and contribute meaningfully toward global sustainability goals.
As businesses increasingly recognize the importance of holistic emissions management, leveraging technology and software to understand and address sustainability disclosures like the BRSR, it’s crucial to also understand the role that ESG software like StepChange can play in making this process easier.
StepChange for your Supply Chain:
StepChange offers a robust platform designed to help businesses effectively manage and improve their value chain sustainability. By providing tools for data collection, supplier assessment, risk identification, and goal setting, StepChange empowers organizations to make informed decisions and drive positive change throughout their supply chains.
Data Collection and Supplier Assessment
Standardized Questionnaires: Create and distribute standardized questionnaires to gather accurate and consistent emissions data from suppliers on a monthly basis.
Data Integrity: Ensure data quality and completeness through data validation and verification processes.
Key Metric Tracking: Monitor critical metrics related to material sourcing, such as water usage for cotton production or deforestation risks for paper products.
Identifying Opportunities and Trends
Collaboration for Efficiency: Work closely with suppliers to identify opportunities for resource efficiency and waste reduction, leading to potential cost savings.
Trend Analysis: Track progress towards sustainability goals, identify emerging trends, and collaborate with suppliers on reduction efforts.
Resource Consumption Monitoring: Monitor the use of raw materials, energy, and water across the value chain to pinpoint areas for improvement.
Risk Assessment and Mitigation
Emissions Hotspots and Attribution: Identify high-emitting areas in the supply chain and conduct emissions attribution analysis to pinpoint the sources of emissions.
Supplier Engagement: Collaborate with suppliers to adopt sustainable practices aligned with your supply chain goals.
Vendor Engagement Criteria: Integrate supplier ESG performance assessment into your procurement process using supplier scorecards to prioritize those with strong sustainability practices.
Upstream and Downstream Optimization: Analyze and improve environmental and social performance throughout the entire value chain, from raw material sourcing to product disposal.
Goal Setting and ESG Reporting
Ambitious Goal Setting: Define clear sustainability targets that are science-based, and aligned with your overall ESG strategy and track progress towards reduction.
Risk Identification and Mitigation: Identify potential disruptions in your supply chain due to unsustainable practices and develop strategies to mitigate risks.
Regional Reporting Tools: Access tools specific to your location to ensure compliance with regulations such as GRI, CBAM, BRSR, and others.
Automated Reporting: Generate reports automatically for regulatory compliance and internal decision-making.
By leveraging StepChange's comprehensive platform, businesses can gain valuable insights into their supply chain's sustainability performance, identify areas for improvement, and take proactive steps to reduce their environmental and social footprint.