The Path Towards Primary Emissions Data

August 29, 2024
8 Minutes
Oscar Sloane

In our journey towards Net Zero, there are three unavoidable truths:

  • You can’t reduce scope 3 emissions without data from your value chain - no SBTi or Net Zero target will actually be reached.
  • Your scope 3 emissions won't reflect your actual value chain emissions unless you engage with your suppliers and replace averages with actuals.
  • You can't make procurement or investment decisions considering the impact of carbon without reliable data from your value chain.

In essence, without primary emissions data from suppliers, businesses will have to rely on industry averages that aren’t indicative of their actual scope 3 emissions or reflective of the decarbonisation progress from their suppliers. So, how do we move forward?

Firstly, what is “Primary Emissions Data” or a "Supplier-Specific Emissions Factor"?

Imagine, for every product and service out there, there's an associated carbon footprint e.g. For every litre of milk we purchase from this supplier, Milky Way Ltd, we know there's 2kg CO2e of carbon footprint associated with it. That's the "Primary-Data Emissions Factor", aka “Supplier-Specific Emissions Factor”.

🧮 For example, this is what the maths would look like: 

A smartphone manufacturer has done their carbon accounting and calculated each phone manufactured has 60kg of carbon emissions equivalent (CO2-e) associated with the goods.

You are a customer that has just purchased 1,000 smartphones from this supplier. As part of preparing your carbon accounting and assessing the emissions associated with purchasing 1,000 smartphones from this supplier, you’ll calculate it as:

1,000 smartphones x 60kg [the supplier’s primary emissions factor for each phone] = 60,000kg of CO2-e

These emission factors are here to convey the emissions associated with goods and services traded between businesses, and allow businesses to incorporate a more accurate number that represents the emissions associated with what they’ve actually purchased into their greenhouse gas (GHG) inventory.

This is the North Star ⭐

According to the GHG Protocol, the carbon accounting guidance underpinning the majority of global standards, the most accurate way to calculate carbon emissions is using the supplier-specific method which involves the collection of primary data from suppliers. The highest quality data involves obtaining product-level cradle-to-gate GHG inventory data (e.g. the 2kgs of CO2e per Litre of Milk from Milky Way Ltd) to use the Supplier-Specific method to calculate emissions.

The GHG Protocol has provided a decision tree to illustrate the preference in calculation methods, ranking supplier-specific method as the most preferred and spend-based method as the last resort when there are data limitations.

Source: Page 23, Technical Guidance for Calculating Scope 3 Emissions

What approaches are businesses using in their GHG inventory currently?

Most currently use industry average emission factors that come from studies or economic analysis published by reputable sources like governments, international organisations, universities, or peer reviewed journal articles to produce a very high level average for the carbon associated with the goods and services they’re purchasing.

This may seem extremely uncertain (it is), but because businesses don’t have emissions data from suppliers, this is their only choice right now… but we are all here to change that!

Where to collect primary emissions data from?

Check publicly disclosed reports

Some suppliers may have already publicly reported their emissions per dollar of revenue or per unit of goods and services, or disclosed a breakdown of their Scope 1, 2, and 3 emissions, either in a sustainability report, climate report, or through organisations like the CDP. This is a helpful starting point to check where your suppliers are at on their carbon accounting journey and if they are able to provide the data. 

Start engaging with your suppliers

The CDP (Carbon Disclosure Project)’s June 2024 Scope 3 research report “Big Challenges, Simple Remedies”, found supplier engagement as one of the 3 statistically significant factors that mattered in managing Scope 3 and driving climate action.

Rather than sending yet another survey and requesting suppliers' to share their activity and revenue data to calculate their emissions on your own, why not empower them with the skills to calculate their primary emission factors according to industry standards?

It’s not as scary as it may seem… To get to the north star ⭐ every business on the planet needs to be carbon accounting

We all manage to get this done with financial accounting, so let's make carbon an extension of existing reporting processes. Start with upskilling your finance, sustainability and procurement teams - the ones who hold the key to empower suppliers to join the journey! It’s easier than you think!

To learn more, check out our quick 6-minute explainer video or dive into our best practice guide here.

I’ve upskilled my teams, I’ve engaged my suppliers, I’ve received some data, now what?

Depending on your suppliers' maturity, size, and resources, the data you receive may vary widely. Some may provide comprehensive primary emissions factors, while others might only offer Scope 1 and 2 data, or perhaps they are just starting on their carbon accounting journey. Let’s take a look at what you should consider based on the data received from suppliers.

My supplier has provided their specific emission factor for the goods and services I purchase

If they have provided the kgs of CO2e per unit of product / service, great! This is the north star ⭐

This should mean the supplier has measured their Scope 1, 2, and Upstream Scope 3 emissions (from Cradle-to-gate i.e. from raw materials until point of sale) and allocated the emissions to each product or service or they have performed a Life Cycle Assessment to understand the carbon impact of the product. 

🧮 For example, this is what the maths would look like: 
You have purchased Dell Precision 3510 laptops
100 units x 331kg CO2e = 33,100kg CO2e

Dell provides the Product Carbon Footprint assessments of their laptops, desktops, monitors etc The estimated carbon footprint for a Dell Precision 3510 laptop is 331kg CO2e based on their LCA, which has included the emissions impact from manufacturing, transportation, use of product, and end of life treatment of the product. 

Source: Dell Precision 3520 Carbon Footprint

 

My supplier has provided their specific emission factor based on per dollar of their sales

Often, the starting point for most businesses is to calculate their emissions intensity based on operating revenue i.e. kg of CO2e per dollar of sales.

This should mean the supplier has measured their Scope 1, 2, and Upstream Scope 3 emissions, and divided that total by their total revenue. 

🧮 For example, this is what the maths would look like: 
(100kg CO2e in Scope 1 + 50 kg CO2e in Scope 2 + 1,000 kg CO2e in Scope 3) / $10k AUD in revenue = 0.115 kg of CO2e per dollar of AUD sold by this supplier.
You would then multiply 0.115kg CO2e for every dollar you have purchased from this supplier.

While this is a solid starting point, working towards product-level emissions data (the north star ⭐) is the next step for greater accuracy. You can dive deeper into this in Chapter 17 of our Introduction to Carbon Accounting course in the Sumday Academy

My supplier has provided Scope 1 + Scope 2 emissions only

When your supplier provides only their Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased electricity) data, you can still calculate the emissions associated with the goods and services you purchase by using the Hybrid method under the GHG Protocol. This approach combines supplier-specific data with industry averages to estimate the upstream Scope 3 emissions (indirect emissions that occur in the supply chain), involving:

  • Using allocated Scope 1 and Scope 2 emissions from suppliers
  • Calculating the upstream Scope 3 emissions associated with the value chain by collecting the relevant Scope 3 activity data and applying appropriate emission factors.
  • Using secondary data/industry averages to calculate upstream Scope 3 activities where supplier specific data is not available.
🧮 For example, this is what the maths would look like:

Your supplier provides details of 100kg CO2e in Scope 1 + 50 kg CO2e in Scope 2 related to the goods or services purchased by you, no data is provided on Scope 3 emissions.

To estimate the upstream Scope 3 emissions associated with the goods or services we will need to find the industry average emission factor for the associated goods and services that excludes Scope 1 and 2 emissions from the number.

Say in our example we are purchasing t-shirts - the emission factor excluding Scope 1 and 2 is 5.6kg CO2e per t-shirt and we have purchased 1,000 t-shirts from this supplier. The estimated Scope 3 emissions associated with the 1,000 t-shirts purchased is 5.6kg CO2e x 1,000 = 5,600kg CO2e.

The total emissions would be calculated as 100kg CO2e (Scope 1) + 50kg CO2e (Scope 2) + 5,600kg CO2e (Scope 3) = 5,750kg CO2e associated with the 1,000 t-shirts purchased from this supplier.

The last step before incorporating this data into your GHG inventory

Source: Page 22, Technical Guidance for Calculating Scope 3 Emissions

With all of this, there is still a professional judgement call that needs to be made by your team. Is this data collected from suppliers of high enough quality to be incorporated into our GHG inventory? Or is an industry average more reflective of the GHG emissions associated with the goods and services purchased?

Chapter 7.3-7.5 of GHG Protocol’s Corporate Value Chain (Scope 3) Accounting and Reporting Standard specifically speaks to the data collection from suppliers and evaluating the data quality received. The guidance states:

“Companies should collect data of sufficient quality to ensure that the inventory appropriately reflects the GHG emissions of the company, supports the company’s goals, and serves the decision making needs of users, both internal and external to the company.” 
“Companies should select data that are the most representative in terms of technology, time, and geography; most complete; and most reliable.”

Table [7.6] Data Quality Indicators and Box [7.2] Example of criteria to evaluate the data quality indicators, provides guidance on what to consider when assessing the data received form suppliers, as well as when assessing the quality of data used for your business’ emission assessment. 

Source: Page 76, GHG Protocol’s Corporate Value Chain (Scope 3) Accounting and Reporting Standard
Source: Page 77, GHG Protocol’s Corporate Value Chain (Scope 3) Accounting and Reporting Standard

To help make the professional judgement call, it’s important to ask for and understand the disclosure notes around the Basis of Preparation or Carbon Accounting methodology provided by your supplier. This will help you assess how the emissions data was calculated and whether it is of high enough quality to be reflective of the emissions associated with the goods and service purchased. If it’s not, using industry-average data may be better in this instance. Some key questions to consider are:

  • Which year does the emission assessment relate to? 
  • Which standard was used for the emissions assessment?
  • What emissions boundary was applied during the assessment? How complete is the assessment?
  • What level of uncertainty is associated with the emissions data? Did they incorporate their suppliers' primary emissions data?
  • Are suppliers able to provide supporting documentation to explain their methodology and sources and quality of data used?

Sumday’s supplier engagement helps you to ask the questions you need to know in order to make that judgement call. If you’re ever unsure, our Accounting Help Desk is there to support your team through making that judgement call as well.

💡 The GHG Protocol did acknowledge more guidance is needed, check out out thoughts on the feedback from stakeholders and what the direction of travel is looking like with our series: Unpacking GHG Protocol’s Scope 3 Feedback.

Continuous Improvement and the Path Forward

Remember, every journey towards more accurate carbon accounting starts with a single step. As you continue to engage with your suppliers and refine your data collection methods, the quality and accuracy of your emissions data will only improve over time. It's a process of continuous improvement, and it's okay to start with what you have now - knowing that each year, you’ll be building a stronger foundation.

Whether you're just beginning this journey or looking to enhance your current practices, keep pushing forward. We're all learning and evolving together in this space, and every effort counts towards.

If you have questions or want to discuss how to take your carbon accounting to the next level, we’re here to help. Feel free to reach out - we’d love to chat!