The corporate world is finally making moves to cut down greenhouse gas (GHG) emissions. The possible destruction of human civilisation is not a scenario that bodes well for the balance sheets of large companies. To stop their own contribution to the climate crisis, large corporations have vowed to reach net zero emissions -- producing only as much GHGs as they can effectively 'take out.'

In order to do so, one of the first things for companies is to understand how much GHGs they are emitting.

How are emissions mapped?

Carbon and other GHG emissions are measured by companies in three categories depending on their source. Scope 1 emissions are those that are directly produced by a company during the course of operations. For example, the GHGs produced by an automotive manufacturer's factory during the production of its vehicles.

Scope 2 emissions are the emissions released into the atmosphere to meet the energy, heat, cooling and fuel demands of a company. For example, the amount of GHG emissions released for the operation of the vehicle factories as well as all the offices.

A company effectively reaches net zero emissions only if it accurately measures the emissions produced by them.

The US Securities and Exchange Commission (SEC) is also planning to compel companies to disclose their Scope 1 and 2 emissions to the public as investors become increasingly concerned with the environmental impact of companies.

But there is one source of emissions that is often overlooked for the simple reason that it is much harder to measure.

Scope 3 emissions are those emissions that are produced by other companies in a company's value chain process. For example, the emissions released from the vehicles manufactured when they are running on fossil fuels. These emissions are much harder to track since they are occurring away from the operations of the company.

Why ‘Scope 3’ is so tricky?

Large companies like Amazon, Walmart, Apple and others would have to calculate the emissions produced by their logistics providers, advertising partners; emissions from business travel; procurement of high carbon footprint raw materials; and all the other companies involved in the extended supply chain emit. The complicated calculation criterion does not make it easy for companies to estimate their Scope 3 emissions. However, some companies have begun to include them in their emission reports.

According to the Carbon Trust findings, Scope 3 emissions make up 65-95 percent of a company's emission impact. If companies ignore Scope 3 emissions in their race to net zero, their efforts will be minimal since the majority of the emissions were not tracked in the first place.

Are corporates up to challenge?

Companies can reduce their carbon impact in a big way with key strategic steps, considering that a large proportion of emissions are in the Scope 3 category. They can help smaller partners and other companies involved in the value chain addition process to shift to lower emissions by providing incentives and various partnership programmes.

Also read: As climate change concerns mount, companies struggle with carbon targets and data

Changing various aspects of business like reducing unnecessary business travel, reducing commute times of employees, improving end of life treatment for old products are also key initiatives that companies can take to reduce Scope 3 emissions.

"They are not ready for this. It is frustrating and surprising. If companies are not reporting Scope 3 they are missing a huge part," said Angel Hsu, assistant professor of public policy and the Environment, Ecology and Energy Program at the University of North Carolina and Founder of Data-Driven EnviroLab.

The issue relies on the fact that in order to tackle Scope 3 emissions, companies would need to look at their entire supply chain and value addition processes.

"It does involve emissions outside of the control of a company in the supply chain and does require engagement with suppliers," said Steven Clarke, Director of Corporate Clean Energy Leadership at Ceres.

"And we do know suppliers, particularly small and medium-sized ones, are overwhelmed by requests from bigger partners," added Clarke.

As urgent as it gets

But the threat of a potential collapse of society and the world remains a strong motivation. Companies are increasingly coming together to form industry alliances and groups like the Sustainable Apparel Coalition to measure, track and maybe even reduce Scope 3 emissions throughout the supply chain.

"We are getting good ambitious commitments, but the reality is Scope 3 is a challenging area to measure and that puts people off. What Scope 3 really means as far as a main effort is the gap between pledges and calculation. Once it is measured, we're only at the starting line of action," said Tom Cumberlege, who leads Carbon Trust's work on value chains.

"Retailers say they desperately need to figure out science-based targets, that customers are demanding it," Cumberlege said.

Also read: China wants to limit steel production to achieve net-zero goal; is it possible?

(Edited by : Shoma Bhattacharjee)