Leaders in scope 3 reduction. Scope 2: Indirect Emissions from Energy. To tackle the Scope 3 disclosure challenge, we developed a model to estimate these emissions across each of the 15 categories using a combination of revenue estimates and production data. Scope 3 emissions cover upstream and downstream emissions indirectly generated by a reporting organization throughout its value chain. Businesses that set bold emissions targets are more likely to make more headway against them, adds McKinsey. Discover more about S&P Globals offerings. The GHG Protocol also provides the following scope 3 resources: EPA has developed the following scope 3 resources: Depending on the source, scope 3 emissions can be quantified using either primary data specific to the activity within a companys value chain, or by using secondary data such as industry averages, proxy data, or other generic data. Translating Scope 3 emissions for the Chemical sector. from local regulations, industry frameworks or publications from the local grid administrator. Although SBTI recently released its draft FLAG guidance, there isas of yetno fully agreed upon standard for measuring Scope 3 emissions. Its a big effort, assessing energy use across your operations: offices, factories, warehouses and fleets. You need accurate Scope 3 emissions data for everything you purchase, and youre ultimately hoping to reduce the carbon footprint of those goods. These sources include: An organization may first define the GHG generating activity for each relevant source category, and then apply the appropriate factors for stationary combustion, mobile combustion, fugitive emissions, electricity, heat or steam from the GHG Emission Factors Hub. By looking at the roughly 12,000 companies in our master climate-risk dataset, we were able to calculate a de-duplication multiplier of approximately 0.205. Some miners have made an argument, such as. This indicates that despite the investment until a viable low carbon technology such as hydrogen-powered blast furnaces are fully mature, the use of metallurgical coke in blast furnaces will remain the norm. The state of Scope 3 reporting is poor. EPA has developed the following scope 3 resources: Guidance for calculating scope 3 emissions resulting from events (e.g., sporting events, concerts) and conferences (e.g., business meetings, exhibits, conventions). Globally, the industry sector was most important with scope 2 . Taking climate action in Scope 3 is a commitment, but is 100% necessary.". Scope 3 emissions -- created when customers such as Chinese steel mills use commodities dug up by miners like BHP -- are a big issue for miners as they seek to reassure investors that they can become greener. Select your topics and use cases to stay current with our award winning research, industry events, and latest products. Plant operating costs and CAPEX combined would increase by 40%, or 150 per metric ton of steel. founder of Dutch activist shareholder group Follow This, has argued that these companies must be pressured by investors to adopt these green business models earlier to take advantage of shifts in consumer behaviour, such as an increased demand for low-emissions products and services thathich could see the worlds largest companies realise over $2.1tn in value. DRI-based EAF plants emit approx . Notes: Applied CO 2 Emission Factors were obtained from EPA or derived from API calculations; where applicable emission factors for specific fuel products were applied. However, BHPs new goals have drawn immediate. the importance of reducing its scope 3 emissions. Scope 3 Carbon Emissions: Seeing the Full Picture. Direct emissions generated by assets owned or operated by the company (scope 1) Indirect emissions are generated from the purchase of energy; e.g. Source: MSCI ESG Research LLC. Every ton of steel produced in 2018 emitted on average 1.85 tons of carbon dioxide, equating to about 8 percent of global carbon dioxide emissions. Cutting emissions is existential for the steel industry, but its also a huge concern for some of the top miners who make much of their profits from iron ore, the key steelmaking ingredient. How do we most cost-effectively decarbonize Scope 3 emissions? 1. The scope 3 emissions for one organization are the scope 1 and 2 emissions of another organization. Corporate reporting on Scope 3 emissions remains sparse, incomplete and at times highly volatile, posing challenges for institutional investors who aim to consider broader value-chain climate risks in their climate-related risk management and portfolio-construction practices. Elizabeth Gaines says the company is transitioning from an iron ore producer to a green renewables and resources company. A company's Scope 3 carbon emissions include everything beyond its direct operations and electricity use, including supply-chain operations and end-product usage by customers. The organisation has projected a 30% reduction in total Scope 3 emissions by 2035. For most mining operations, scope 3 relates to steel and energy consumption. is another example of a miner taking the initiative on scope 3. SE, 2018) and industry actors (API, 2016; BHP, 2019),9 as well as commercial data providers (Busch et al, 2018). Scope 3 emissions, also referred to as value chain emissions, often represent the majority of an organizations total GHG emissions. Scope 3 Emissions which are associated with the extraction, preparation and transport of ores and the subsequent production and transport of ferro-alloys including the electricity needed for these processes. Investment Consultant This is primarily because Scope 3 emissions are more difficult to accurately measure, report, and benchmark . Scope 1 emissions are direct emissions from owned or controlled sources, such as the combustion of diesel in mining vehicles. Findings by the Responsible Mining Initiative, which analysed 38 of the worlds biggest listed mining firms, found that most were highlighting or overstating their positive SDG contributions in their annual reporting. Scope 3 is one of three emissions streams defined by the Greenhouse Gas Protocol (GHGP). The goal of the work is thus to capture the potential agency different sectors have over supply chain emissions, rather allocating emissions between production and consumption. Vale is one of the companies that has recognised the importance of reducing its scope 3 emissions. Kloeckner's emissions under Scope 1 and 2 totaled 100,000 mt of CO2/year. Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly impacts in its value chain. H2 Green Steel, founded in 2020, aims for large-scale fossil-free steel production in northern Sweden by 2024 with a production target of 5 million mt/year of fossil-free steel by 2030. A business that chooses to consider and resolve its indirect emissions will not only mitigate risk within its value chain and address stakeholder concerns, but will also open itself up to innovation and collaboration with suppliers, business partners, customers and other . | How can we accelerate Scope 3 activities to more quickly meet our decarbonization targets? Scope 3 emissions include all sources not within an organizations scope 1 and 2 boundary. Weighted average carbon intensity (WACI) of the MSCI ACWI Investable Market Index (IMI), as of July 10, 2020. Kloeckner signed a distribution deal with Swedish fossil-free steel venture H2 Green Steel in October this year to distribute up to 250,000 mt/year of green steel from 2025. Investors concerned about climate change have traditionally focused on Scope 1 and Scope 2 emissions e.g., the direct emissions from an oil- and gas-refining operation (Scope 1) and the emissions from the electricity utility needed to run the refinery (Scope 2). In both cases, its all about being able to accurately measure and report on emissions to understand where you (and they) are starting. e from 2018, equal to Chiles emissions from energy consumption in the same year. Scope 2 emissions are indirect emissions from purchased or acquired electricity, steam, heat, or cooling. Despite the significant challenges, according to Vining, this raises the possibility of the iron and steel value chain going that step further to produce green steel. Material Scope 3 impacts will vary by industry and business model, but for many companies, a large amount of emissions occur upstream via suppliers and raw materials. ESG Food waste emissions are large: one-quarter of emissions (3.3 billion tonnes of CO 2 eq) from food production ends up as wastage either from supply chain losses or consumers. Non-fuels products are not combusted by the end-user and therefore are not included in these Scope 3 estimates. Company vehicles. How does our Scope 3 strategy enable us to meet our decarbonization goals and maintain and grow the business? For buildings, scope 3 emissions of 7 Pg were twice as high as direct emissions. Miners including, Despite the difficulties, Glencore and Vale have set precise scope three goals. Calculating Scope 3 emissions requires using purchasing volumes, not based on financial data, but physical attributes such as weight, size, number of pieces, etc. Glencore is another example of a miner taking the initiative on scope 3. If, for example, youre a financial services firm, category 15 will be key. While miners have plans to reduce scope 1 and 2 emissions, scope 3 targets are lacking. Your customers want verified carbon footprint data for each of your products. Are we accurately measuring employee-related activities? The ability of companies to reach net zero Scope 1 and 2 emissions are individual, but in order to achieve net zero Scope 3 emissions, the solutions and path to get there cannot be borne alone. "We are already doing this in aluminum and now, through this partnership, we will be doing it in the steel industry." Scope 3 emissions in mining will be a key session at the Energy and Mines Australia Summit 2020 - to get involved contacts adrienne.baker@energyandmines.com . This rises to 28% of global emissions however when accounting for scope 3, according to January estimates from McKinsey & Co. However, Julian Kettle, vice-chairman of metals and mining at consultancy WOOD MACKENZIE, said that Rios new emission reduction targets were a step in the right direction, but more was needed. Below is a list of emission sources and the location of the factors in the GHG Emission Factors Hub.. On the downstream side are emissions from the logistics, use and disposal of your products. But as they fall out of the companys direct control, many companies avoid making direct statements on their reduction. | 2017 - Thu Nov 03 23:31:04 UTC 2022 PwC. EMEAI Please see www.pwc.com/structure for further details. The organization may also be able to influence its suppliers or choose which vendors to contract with based on their practices. But as they fall out of the companys direct control, many companies avoid making direct statements on their reduction. With businesses, governments and investors increasingly focused on a net-zero transition, Scope 3 investment risks are mounting. Given its far-reaching impact, every area of the business could be affected, from supply chain and product development to reporting and tax, to marketing and, of course, sustainability. You exceeded the limit of bookmarked content(only 15 bookmarks are allowed).Please remove one of the bookmarks. Downstream emissions also cover those from activities like investing and franchising. These are emissions that organizations don't directly control but happen as a result of their operations. A lock (LockA locked padlock) or https:// means youve safely connected to the .gov website. that Rios new emission reduction targets were a step in the right direction, but more was needed. He said steel would be able to replace other materials to achieve a greener supply chain and that the company is working on this with one customer. In the first half of 2021, Chinese steel mills churned out nearly 12% more crude steel compared to the same period in 2020. Vale is one of the companies that has recognised the importance of reducing its scope 3 emissions. Various processes and sources are divided into 3 scopes, simply named Scope 1, Scope 2, and Scope 3 of carbon emissions. This data will typically come from your accounting team, who can export it from your company's accounting system. In the first half of 2021, Chinese steel mills churned out nearly 12% more crude steel compared to the same period in 2020. stations, or processing our iron ore to steel). Sep 17, 2020 Overview of GHG Protocol scopes and emissions across the value chain. E in the 12 months to 30 June, with iron ore making up an estimated 205.6 to 322.6 million tonnes contribution to that total. The company plans to reach 496MTCO2e in 2035, down 90MTCO2e from 2018, equal to Chiles emissions from energy consumption in the same year. Adding 18 billion of value to the UK economy, the Chemical industry is fundamental to modern society, underpinning global manufacturing supply chains, providing materials and products into a range of sectors from aerospace to pharmaceuticals, construction to consumer goods. This goal extends across scope 1 emissions (direct emissions from sources owned or controlled by Yale, including emissions from our fleet of vehicles and our power plants) and scope 2 emissions . Regulators are increasingly focusing on Scope 3. Some miners have made an argument, such as Fortescue Metals Group, which recently announced intentions to reduce scope 3 emissions, that they resisted until they had a concrete plan that could help its customers decarbonise. Many companies have begun to set specific targets on Scope 3, with the more advanced companies setting science-based ones. How can we improve the quality of our data to better manage our emissions? 2022 by S&P Global Inc. All rights reserved. The steel industry generates about 7% of all man-made emissions -it is the largest emitting manufacturing sector. Why Scope 3 is critical to reducing your business' carbon footprint If you've been following the conversation around sustainability within the supply chain industry (and likely even if you haven't), you've probably heard phrases like "Scope 3 emissions" getting thrown around with increasing regularity. | For companies selling an inherently polluting product, scope 3 emissions are unavoidable. The GHG Emission Factors Hub currently contains factors applicable to five scope 3 categories. Insurance Anglo-American, BHP, and Rio Tinto are all big producers of iron ore, with Rio Tinto alone. Developing a Scope 3 strategy starts with understanding the implications for your specific business. The auto industry is expected to see some easing of the semiconductor shortage in 2022 as well, Kerkhoff said. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. In the IPIECA "Estimating petroleum industry value chain (scope 3) greenhouse gas emissions" the Shell case study provides a high-level example of how Scope 3 emissions can be calculated; multiplying a company's spend with each supplier as a share of the supplier's revenue by an estimate of the total annual GHG emissions of that supplier. Like so many companies, youre likely working hard to reduce greenhouse gas (GhG) emissions while also reporting your progress. | | BHP has also signalled goals to lower its indirect carbon footprint by requiring other participants in its value chain to achieve net zero. Referencing 2018 as its baseline year, Vale registered 586MTCO2e from their value chain. The Melbourne-based miners scope 3 emissions were 402.5MTCO. Scope 3 emissions are not currently included in the Streamlined Energy and Carbon . But they are very much in the minority of miners, especially those invested in iron and steel production.