Scope 3: the emissions elephant in the room for supply chains

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A battle has been raging this year over the grand challenge of Scope 3, or supply chain emissions – the single largest contribution most companies make.

Scope 3 is not only the most onerous, at around 80% of a firm’s carbon contribution on average – over 97% for carmakers Ford and Tesla – but is also the most challenging on which to report; so much so that it has become a job for company accounting departments.

It does not escape the notice of environmentalists that European economies outsource their production to economies in Asia such as China, Taiwan, and Vietnam. If the UK, France, and Germany, beneficiaries of imported goods from China, India, and elsewhere, were compelled to own their outsourced emissions via Scope 3 reporting, it could double their nationally reported carbon emissions.

Scope 3 has become a political tug-of-war in the US. States like New York, Washington, and Colorado seek to join California in introducing Scope 3 reporting requirements; but President Trump is hacking away at them at federal level with Executive Order 14260, ‘Protecting American Energy From State Overreach’.

 Across the Atlantic, the EU was due to bring in Scope 3 reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) this year for companies with more than 500 employees, but could be raising this limit to 1,000.

A recent study of Scope 3 emissions for UK FTSE100 companies showed that estimates made using the industry-standard Environmentally Extended Input Output (EEIO) model were off track by around 2,480% compared with verified Scope 3 emissions.

That Scope 3 emissions reporting is at once vast, difficult, and extremely unpopular should come as no surprise to freight forwarders, cargo handlers, and other stakeholders in the transit of goods falling within the Scope 3 umbrella.

This week, a start-up called Carboninsets introduced a matchmaker service for freight forwarders and cargo owners with carriers and fuel suppliers, offering Environmental Attribute Certificates (EACs) to support freight forwarders’ Scope 3 decarbonisation aims.

Carriers such as Hapag-Lloyd and ONE have introduced green insetting methodologies specific to shipping, wherein customers can pay a premium to have a share of green biofuel proportional to their shipment.

But, Carboninsets is proposing to help freight forwarders and their customers with insetting across modes, be it sea, air, road, rail, and river transport. The service incorporates biofuels HVO, SAF, bio-LNG, bio-methanol, as well as electrification and wind propulsion.

Supply chain emissions are a big challenge, making up around 80% for carbon footprints for many companies, Carboninsets said. Future phases will expand Carboninsets’ activity to cover green steel, hydrogen, and more.

It said: “Carboninsets is designed to connect companies looking to reduce their Scope 3 emissions with high-integrity EACs to unlock tangible emissions reductions at scale. By enabling organisations to support real decarbonisation projects within their supply chains, we’re bridging the gap between ambition and impact.

“At a time when integrity and transparency are paramount, Carboninsets offers an easy and practical way for companies to realise tangible reductions to their Scope 3 emissions.”