Scope 3 Emissions of the Tech Industry: A Complex Puzzle

Topics: IT Trends IT sustainability

The image features a background of an industrial landscape with smokestacks emitting smoke and text overlayed that reads,

The tech industry has been very vocal about sustainability, but its targeting of Scope 3 emissions tells a different story. Climate experts have abundantly clarified that the global net-zero 2050 goal can’t be achieved without addressing these indirect emissions.

According to a 2023 report by Accenture, the high-tech industry’s Scope 3 emissions are 24 times more than Scope 1 and 13 times more than Scope 2. Clearly, the tech players, big and small, need to up the ante and do more.

This article examines Scope 3 emissions, as per the Greenhouse Gas (GHG) Protocol, in the tech industry. We’ll discuss the challenges and share findings on how to improve accounting and mitigate these emissions.

What Are Scope 3 Emissions?

The GHG Protocol, an emissions accounting standard used globally, divided emissions into three scopes. Scope 1 represents a business's direct emissions, Scope 2 comprises emissions from purchased energy, and Scope 3 comprises indirect emissions.

Scope 3 emissions include emissions from assets and activities that a company doesn’t own or control. These typically spring from the supply chain or, more accurately, the value chain. That’s why scope 3 emissions are also called value chain emissions.

Indirect emissions can be upstream or downstream.

Upstream emissions are indirect emissions that occur before a company sells a product or service. Basically, these are supply chain emissions. On the other hand, downstream emissions occur after the sale of a product or purchase. Investment-related emissions are also considered downstream.

Scope 3 Emission Categories

To make things easier, the GHG Protocol divides Scope 3 emissions into 15 categories:

Category	Description	Downstream/Upstream
Purchased goods and services	Emissions from the production of goods a company buys, such as raw materials or parts	Upstream
Capital goods	Emissions from the production of equipment, machinery, etc., that the company acquired	Upstream
Fuel and energy-related activities	Any indirect emissions from fuel and energy-related activities not covered in Scope 1 and 2 emissions	Upstream
Upstream transportation and distribution	Emission from the transportation of goods to the company	Upstream
Waste generated in operations	Waste from the company’s activities	Upstream
Business travel	Emissions from business-related trips, for example, flights to a conference	Upstream
Employee commuting	Emissions from employees’ travel to and from work	Upstream
Upstream leased assets	Emissions from any assets leased to the company, such as trucks or office space.	Upstream
Downstream transportation and distribution	Emissions from the transportation of goods/services to the consumer.	Downstream
Processing of sold products	Emissions from processing of any sold products, for example, crude oil or gravel	Downstream
Use of sold goods	Emissions from the use of the sold product, such as an air conditioning unit or a car.	Downstream
End-of-life treatment of sold products	Emissions from the disposal of sold products, for example, electronics or food waste	Downstream
Downstream leased assets	Emissions from assets leased by the company to others.	Downstream
Franchises	Emissions from a franchise of the company in the same country or abroad	Downstream
Investments	Emissions related to a company’s investments	Downstream

Tech Industry’s Scope 3 Emissions

The tech industry, with its hardware and software powering virtually all industries, has a big stake in mitigating Scope 3 emissions. That’s because it’s also responsible for them in some ways.

While not all GHG Scope 3 emissions categories may be relevant to tech companies, some are. Enterprises that produce products may have a relatively higher contribution to Scope 3 emissions.

The image lists four points about Scope 3 emissions with icons, highlighting that most emissions come from Tier 2+ suppliers, vary by tier, are harder to track in global supply chains, and are impacted by supplier location, with the PivIT logo in the top right corner.

Consider a company that produces computers. Its indirect emissions will include emissions from:

Purchase of raw materials or parts to construct the computer
Purchase of equipment to assemble the computer
Business and employee travel
Power consumed by the computer once sold
Emissions from when the computer is disposed of

Although the Scope 3 emissions of other industries that are infamously polluting come under the radar frequently, the tech industry also has a sizable footprint. According to Statista, big tech companies like Samsung, Intel, and Microsoft had indirect emissions in millions of metric tons of CO2 equivalents in 2022. While Samsung (124 million) is leaps ahead of second-place holder Intel (22 million), it’s clear from the numbers that the Scope 3 emissions are a problem.

A big problem is that some companies aren’t even including Scope 3 emissions in their decarbonization targets. For instance, the Accenture report found that only 32 percent of high-tech companies include indirect emissions in their net-zero goals.

The report cites tech companies' positioning in the value chain cycle as a reason for their large share in Scope 3 emissions. As these companies lie way down in the downstream chain, their indirect supply chain emissions are significant and often complex.

According to Accenture, most of tech’s Scope 3 emissions emerge from Tier 2+ suppliers, which can be difficult to track and account for. These emissions can also vary based on the supplier’s location. Suppliers in China and the Middle East tend to have a larger carbon footprint compared to, say, Europe or Oceania.

How to Measure Scope 3 Emissions: Methods and Challenges

Normally, there are three ways to measure Scope 3 emissions:

Spend-based method: This estimates emissions based on the financial value of purchased goods and services multiplied by an emission factor (e.g., average emissions per dollar spent). It's easy but least accurate.
Activity-based method: This uses data on specific activities (e.g., material weight, travel distance) multiplied by emission factors for those activities. It's more accurate but requires more data collection.
Supplier-specific method: This involves collecting detailed emissions data directly from suppliers. It's the most accurate but requires significant supplier engagement.

Companies often use a hybrid approach, combining elements of these methods depending on data availability and resources.

Frankly, the tech companies don’t deserve the entire blame because the truth is that measuring and targeting Scope 3 emissions is quite challenging. Because of the extreme globalization of the supply chain, determining upstream emissions is costly and, in some instances, downright impossible.

The servers hosting applications in the data center or the switches connecting devices to the network in an office are made of parts and materials sourced from dozens of different countries. Not all suppliers may report (or be required to report), which makes collecting data on their emissions difficult. That’s why many companies resort to estimates, which are basically industry averages on materials and activities. And estimates don’t give an accurate picture.

How Can the Tech Industry Target Scope 3 Emissions

By the year 2040, the Information and Communication Technology (ICT) industry is expected to make up 14% of global emissions. Companies in this sector, including data center operators, hardware manufacturers, and service providers, need to begin accounting for their upstream and downstream emissions.

So far, many companies have made significant advancements in reducing their Scope 1 and 2 emissions with green technologies, which is great. However, as it’s generally accepted, nearly 70 percent of a company's total emissions are indirect. In other words, any responsible company would up its game in identifying, calculating, and mitigating its value chain emissions.

Here are some ways that can happen:

Visibility in Supply Chain

The biggest challenge is that companies often don’t know their suppliers (Tier 2 and so on). The solution to this problem is increasing visibility by mapping out suppliers to the very last one in the chain.

The image shows a four-layered pyramid diagram explaining supply chain tiers, with "Final Product" at the top, followed by "Tier 1: Direct suppliers," "Tier 2: Suppliers to Tier 1," and "Tier 3: Suppliers to Tier 2," with the PivIT logo in the top right corner.

More visibility can lead to more supplier engagement and better accountability. Of course, companies may not be in business with those Tier 2+ suppliers directly but can pressure them to collect and report data by targeting direct suppliers.

This way, companies can identify suppliers with high emissions and work with them to reduce them or choose another.

Standardized Data Across Business Networks

Various emissions data reporting frameworks are used worldwide, which can complicate calculations and result in data gaps or errors. It’s best to employ standardized data reporting across business networks, encouraging and requiring business partners and suppliers to report data using the same standard.

In addition, technology can be used to refine and bridge gaps in reporting. Data management systems exclusively designed for sustainability data or ESG reporting solutions can streamline data collection and reporting regardless of the size and complexity of the supply chain.

Doing Your Part

Tech enterprises have a big role to play in combatting climate change. But that fight cannot be won by targeting direct emissions alone. The problem is clearly indirect, Scope 3 emissions.

There’s good news, though. With increasing regulations and stakeholder awareness about emissions, companies are finally tackling their value chain’s carbon footprint.

If you represent the leadership in tech, it’s high time you paid attention to these emissions and made them a primary target in your sustainability strategy.

Learn how PivIT embraces sustainability in tech!

FAQs

What are Scope 3 emission examples?

A company makes smartphones. Using that smartphone, i.e., energy consumption, would qualify as a Scope 3 emission. When the smartphone has died, the emissions from its disposal are also Scope 3 emissions.

How big are Scope 3 emissions?

According to some estimates, Scope 3 emissions make up 70 percent of a company's carbon footprint. So, for most industries, indirect emissions are the major part of their carbon footprint.

What is the Scope 3 standard?

The Scope 3 Standard, developed by the GHG Protocol, is a globally recognized framework for measuring and reporting GHG emissions from a company's entire value chain. It’s the only standard available for corporations to categorize and target their value chain emissions (both upstream and downstream).