Issue link: https://resources.tangoanalytics.com/i/1508311
It is easier to measure and allocate industrial emissions, which occur in relatively concentrated steps through factories, compared with those from personal travel, energy use in buildings, and other fragmented production steps taking place downstream within supply chains. Although, the majority of emissions in most supply chains are released in the initial stages of production, between the extraction and processing of raw materials and fuels, the majority of businesses undergoing carbon accounting are not these raw materials providers. This complicates the accounting process as companies are finding it easier to engage in greenwashing behavior by avoiding the impacts of their upstream counterparts and suppliers since they are not directly associated with their own onsite processes. Additionally, while companies may be diligent with the disclosure of their own direct emissions at the asset and corporate level, the information regarding the carbon content of a product as it travels down the supply chain is even more difficult to track. It is no wonder that the complexity of accounting practices exceeds most current in-house capabilities, leading to the need for outsourcing of help and additional costs. The GHG protocol method is widely embedded in many global climate agreements, yet many argue that the protocol falls short when it comes to its scope 3 standard, requiring a company to estimate the scope 1 emissions of all direct and indirect suppliers and customers. This method is subject to possible double counting flaws, not to mention the difficulty companies face in extracting accurate data from their suppliers. Gathering accurate data from multiple suppliers and downstream customers is an enormous task. The protocol also allows the use of industry average data as opposed to primary data leading to rampant miscounting and data inaccuracy. Currently, most companies skip line item accounting of scope 3 emissions, which may be an informed decision, if scope 3 is the deterrent for undergoing all levels of carbon accounting in the first place. Corporates new to GHG accounting should begin with reliable scope 1 and 2 data and integrate scope 3 later on when better accounting standards are introduced or supply chain valuation data becomes available to you. Do not rely on opportunistic and unreliable scope 3 reporting based on inaccurate industry average data. New legislation on climate related disclosures from the SEC even provide fail safe loopholes for scope 3 accounting, essentially acknowledging that these disclosures may be unreliable. Concerns with Calculating Emissions: Sustainability & Energy Management Simplified