I’ve been spending much of the past few days reviewing the CDP6 responses that include Scope 3 “indirect” emissions. As a brief backgrounder, the Scope 1, 2, and 3 terminology was adopted by the Greenhouse Gas Protocol‘s Corporate Standard, and revised as “direct” and “indirect” emissions in the ISO 14064 documents. The emissions caused by facilities owned and operated by a company are classified as Scope 1, purchased electricity and steam as Scope 2, and emissions related to a company’s activities but not taking place at owned or operated facilities are Scope 3. You could therefore refer to the Scope 3 inventory as the emissions due to a company’s supply chain, both upstream and downstream.

So since the GHG Protocol designated Scope 3 inventorization as optional, not all companies that report to the Carbon Disclosure Project provide those numbers – hence the reason for developing new Scope 3 guidelines. However, some companies have taken these matters into their own hands and ventured into the scary wilderness of value chain accounting. So while more than 1,700 companies worldwide are currently reporting to CDP, only about 200 are disclosing Scope 3 emissions other than the conventionals (i.e., business travel, employee commuting).

You’d expect oil & gas companies as well as vehicle manufacturers to post heavy Scope 3 figures since their products’ downstream impacts fall within the Scope 3 zone. If you produce oil, and it is refined into gasoline and then combusted, all the emissions released by those processes would be included in your Scope 3. Now tell me what you think the magnitude of a single company’s reach is?

Coal Power Plant

How about 3.1% of total global fossil CO2 emissions? Don’t overlook the word ‘fossil,’ because land use, land use change and forestry (LULUCF) emissions may amount to about 1/3 of non-LULUCF emissions, meaning 3.1 would drop with that inclusion. Since the absolute number they provide is 743 mega-tonnes of CO2, which is far under 3.1% of 28 GtCO2 (not CO2e), as per 2005, it seems as if they’re doing themselves a disservice. To help put this in context, CAIT shows that South America’s 2005 CO2 emissions were only about 3% of the global total – but this is all wrapped up in one company’s supply chain.

So what comes next? Well, GHG management, reduction targets, and supply chain cooperation hopefully. The beauty of the Scope 3 inventory framework is in emphasizing a company’s sphere of influence over its supply chain partners. While you’ll have more sway with your immediate neighbors, those who directly supply to you or who directly distribute your goods, if you’re large enough to make waves then all neighbors will follow. Such has been the strategy of Wal-Mart who’s launched an aggressive supply chain examination to determine where the greatest GHG reduction opportunities exist. This is no simple task – imagine having to go through 65,000+ suppliers. Well, all in a day’s work to “rollback the prices.” I hope that their program is successful in “rolling back” the emissions as well.