Greenhouse gas emissions reporting: Scope 3 Group 3 - research

Requiring organisations to report at least 95% of total required (i.e. excluding emissions that are optional to report) Scope 3 emissions

If the future reporting guidance for Scottish public bodies is to fully align with the GHG Protocol, then it would probably not be appropriate to define minimum reporting requirements for Scope 3 based on whether emissions are in Groups 1, 2 or 3. Instead, public bodies would have to estimate all emissions and report at least 95% of the total.

This would represent a high impact change for Scope 3 Group 3 reporting recommendations because it introduces a defined completeness threshold, where organisations must demonstrate that only a small, clearly evidenced residual proportion of required Scope 3 emissions remains unquantified. This would significantly increase expectations around data completeness, methodological transparency and assurance. Notably, interview findings indicate that most public bodies have not yet undertaken structured screening or materiality assessments to determine which emission sources fall within the 95% coverage threshold and which are within the residual 5% exclusion boundary.

Changes to how circular economy activities are defined and relevant guidance in the Standard

Through discussion with the GHG Protocol Scope 3 manager and the Aether project team, it is understood that some of the forthcoming changes are intended to improve the way that circular economy activities are currently handled.

The Technical Working Group for the GHG Protocol Phase 2 updates^[64] are considering recommendations to:

• Establish or revise relevant circular economy definitions;

• Strengthen waste-to-energy allocation rules, and;

• Identify and establish circular economy accounting rules and recommendations for non-virgin material inflows, by-products, repurposing activities, non-virgin material outflows.

Notably, stakeholder feedback highlights Scope 3 rules and requirements tend to disincentivise the use of recycled materials. For example, for organisations that perform recycling in-house and sell recycled feedstock, it is currently unclear whether emissions should be deducted from Category 1, accounted for in Category 5, or accounted for as a sold product (Category 10, 11, 12). The updates will seek to provide circular economy accounting examples, facilitating greater clarity for public bodies.

For Group 3 emissions, the recommendations outlined above could have a knock-on effect on how the DESNZ Conversion Factors for waste and materials are calculated, as the boundaries of those factors are intended to align with the GHG Protocol. Potentially, this might make it easier to report emissions from Category 12 as there may be different conversion factors available that provide more relevant insight for the purpose of climate action planning and decision-making.

Recognising that the final updates and timescales are uncertain, given the difficulty in collecting data on Category 12 emissions at present and the limitations of the current waste-related conversion factors, it may make more sense to wait to report Category 12 emissions once Phase 2 update recommendations are finalised and more information is available.

Inclusion of an optional new Scope 3 Category 16 ‘Other value chain activities’ for GHG-emitting activities facilitated by the reporting organisation.

The new Category 16 is expected to have limited direct impact, as it would be voluntary to report. However, a number of activities that have been explored in this work and are relevant to public bodies may fall under this new category, so this may affect public bodies’ reporting depending on organisational consolidation approaches.

The proposed removal of equity-share as a consolidation approach for the organisational boundary

Relevance of Scope 3 Group 3 emissions activities were considered in this study in the context of financial and operational control approaches only.

Proposed revisions to the ‘relevance’ principle make explicit the link to ‘materiality’.

In terms of relevance, public bodies are encouraged to assess whether emissions are significant enough to influence decision-making, rather than simply focusing on whether emissions occur within a public body’s value chain. The GHG Protocol is therefore aligning more closely with international sustainability and financial reporting frameworks, exemplifying a drive to produce more complete and transparent Scope 3 disclosures, where possible.