Impact pathways: the hidden challenges of Scope 3 emissions measurement and management

Reducing greenhouse gas emissions from European manufacturing companies is crucial for achieving the EU 2050 net-zero emissions target.

Indirect Scope 1 emissions are currently the focus of European climate policy; however, many companies have the majority of their carbon impact linked to Scope 3 emissions. Those emissions derive from various activities that are part of companies' value chains, such as materials purchasing, employee commuting, waste disposal, and product usage. Companies' ability to reduce these emissions varies according to their source and sector. For this reason, companies with large amounts of Scope 3 emissions are under pressure from the market and civil society to set reduction targets for those indirect emissions. To make those targets significant, companies need to be able to measure Scope 3 emissions and adopt practices that can help them achieve proposed targets. However, challenges exist in measuring and managing those emissions, which can threaten decarbonisation efforts and stimulate greenwashing.

To deepen our understanding of Scope 3 emissions measurement and management, we analysed self-reported and tertiary data from 33 manufacturing European companies considered leaders in climate action. Additionally, interviews were conducted with four experts who work to elaborate decarbonisation strategies in large companies that are part of global value chains. Indirect Scope 3 emissions represented an average of 89% of those companies' total carbon emissions. This analysis allowed us to elaborate on three main challenges requiring attention from practice and academia.

The first challenge relates to the need to increase companies' value chain transparency. Companies often have a limited knowledge of their value chains and are still making significant efforts to map and assess the impact of their first-tier suppliers or customers. When value chains are unknown, building an inventory of GHG emissions involves many estimations and using tacit knowledge, which can be susceptible to bias. More clarity on how GHG emissions are linked to the structure of value chains would also assist in understanding to what extent unregulated emissions are currently prevalent in value chains. The presence of actors not subjected to climate policy in value chains and their level of centrality would also better justify the need for focal companies engaging in Scope 3 emissions management.

The second challenge regards reliability issues with Scope 3 emissions data. Scope 3 inventories are broadly estimated and violate basic data quality principles that put into question their reliability. Critical evaluation when using Scope 3 data is necessary, and more debate on the role of those inventories in climate disclosure and mitigation is needed. Instead of using scope 3 emissions as a performance indicator, those approximate inventories can be better suited for identifying exclusive opportunities to mitigate climate change.

The final challenge is how companies can manage indirect emissions shared with value chain actors. It is essential to understand if a focal firm can influence value chain members to reduce emissions, in what settings it occurs, and if negative externalities are present. It is unclear whether companies support value chain actors in reducing their Scope 1 emissions, take advantage of improvements achieved by others, or act on their mutually exclusive opportunities. Untangling these aspects is crucial to evaluate the impact of Scope 3 management on reducing absolute emissions and the link of Scope 3 targets to greenwashing.

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Authors at the Department of Management

Leticia Canal Vieira – Assistant Professor

Academic disciplines: Management Engineering

Teaching areas: Sustainability Transition Management

Research fields:  Decarbonisation strategies, sustainability measurement, and disclosure.

Assistant Professor in the Department of Management, University of Bologna. My research interest lies in how manufacturing industries address the low-carbon transition and climate change action and how instruments like decarbonisation strategies and sustainability reports can create organisational change. 

Mariolina Longo – Associate Professor

Academic disciplines: Management Engineering

Teaching areas: Business Administration

Research fields: Sustainability measurement, industrial transition.

Mariolina Longo is an Associate Professor in the Department of Management at the University of Bologna. Her research focuses mainly on the topics of Performance Measurement of Corporate Sustainability and Industrial Transition. She has been responsible for national and international research projects.

 Matteo Mura – Associate Professor

Academic disciplines: Management Engineering

Teaching areas: Management Control Systems

Research fields: Design and implementation of business performance measurement and management systems.

Matteo Mura, PhD, is an Associate Professor in the Department of Management at the University of Bologna and Director of the Centre for Sustainability and Climate Change at Bologna Business School. He is a Visiting Fellow at the Centre for Business Performance at Cranfield School of Management.