Understanding Scope 3 and 4 Emissions
A Guide for Utilities and Sustainability Professionals
The path to achieving meaningful decarbonization is intricate and multi-layered, especially for sectors like utilities that have high emissions and complex supply chains. While Scope 1 and 2 emissions serve as critical starting points, the conversation in sustainability is rapidly expanding to encompass Scope 3 and, more recently, Scope 4 emissions. These two concepts, often misunderstood or overlooked, are pivotal in shaping a holistic decarbonization strategy.
This guide will provide an in-depth look at Scope 3 and 4 emissions, their challenges, and opportunities. We’ll also explore practical examples, such as PG&E’s sustainability initiatives and NPUC’s role in helping utilities decarbonize, to illustrate how organizations can integrate these concepts into their sustainability efforts.
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Scope 1 and 2 Recap: Setting the Context
Before we explore Scope 3 and 4, it’s essential to briefly revisit Scope 1 and 2 emissions to set the stage:
- Scope 1 emissions are direct emissions from company-owned or controlled resources, such as emissions from vehicles and facilities.
- Scope 2 emissions cover indirect emissions from the consumption of purchased energy (electricity, heating, cooling).
For utilities, addressing Scope 1 and 2 emissions is relatively straightforward as these emissions are within their operational control, making them easier to measure and manage. However, once we move beyond these scopes, the challenges grow exponentially.
Diving Deep into Scope 3 Emissions
What Are Scope 3 Emissions?
Scope 3 emissions represent all other indirect emissions within a company’s value chain. These emissions are not directly produced by the company but arise from upstream or downstream activities. The Greenhouse Gas Protocol categorizes Scope 3 emissions into 15 categories, including:
- Purchased goods and services: Items bought from suppliers.
- Business travel and employee commute: Transportation emissions.
- Waste disposal: End-of-life treatment of sold products.
- Upstream and downstream transportation: Movement of goods across the supply chain.
For the utility sector, purchased goods and logistical emissions are often significant contributors.
The Challenges of Scope 3
Scope 3 emissions are notoriously difficult to measure due to their complexity and the sheer volume of data required. For instance:
- Supplier collaboration issues: Collecting consistent data from suppliers, especially small and medium-sized enterprises (SMEs), is a significant barrier.
- Data variability: Tracking emissions across different categories and suppliers without standardization creates inconsistencies.
- Lack of visibility: Many suppliers, particularly those in developing markets, may have limited resources or environmental expertise.
Scope 3 in Practice at PG&E
PG&E stands out within the utility industry for its robust approach to managing Scope 3 emissions. Paul Quickert, PG&E’s Program Manager for Supply Chain Responsibility, shared valuable insights during a recent webinar hosted by the National Public Utilities Council (NPUC). Here are some highlights:
- Supplier Training Programs: PG&E has developed a series of training tools to assist suppliers with measuring and reporting emissions, especially for small and medium-sized vendors who lack internal environmental teams.
- Phased Reporting Goals: With a goal of achieving 100% supplier reporting by 2025, PG&E has designed a step-by-step approach to onboard suppliers and meet reporting benchmarks.
- Support for Small Suppliers: Recognizing the resource gaps in smaller companies, PG&E provides one-on-one coaching and environmental management system training to help them get started on their sustainability journeys.
By investing in supplier collaboration and adopting a phased approach, PG&E is setting an example for how utilities can overcome the challenges of Scope 3 emissions.
Exploring Scope 4 Emissions
What Are Scope 4 Emissions?
Scope 4 emissions, though less widely understood, represent avoided emissions. These are emissions prevented by offering low-carbon products or services. For utilities, this could include:
- Transitioning customers to renewable energy sources.
- Retiring coal plants in favor of sustainable alternatives.
- Promoting energy efficiency programs that reduce customer emissions.
Compared to Scope 3, Scope 4 offers an exciting opportunity to measure positive impacts rather than just reductions.
Benefits and Opportunities of Scope 4
- Amplifies Impact: Scope 4 focuses on the broader systemic benefits emissions reductions can have across industries or geographies.
- Showcases Innovation: By transitioning to greener product portfolios, companies can position themselves as leaders in sustainability.
- Strengthens Stakeholder Relations: Demonstrating avoided emissions helps attract socially conscious investors and environmentally aware customers.
For utilities, Scope 4 represents a growing opportunity to lead in enabling decarbonization within their customer base.
PG&E’s Bold Net Zero Goal
PG&E has set ambitious decarbonization goals, aspiring to achieve net-zero greenhouse gas emissions by 2040. Achieving this decades-long target requires a multi-faceted approach:
- Supplier Engagement and Training: PG&E is actively empowering its supply base with the knowledge and tools to measure and reduce emissions.
- Technology Investments: From retiring high-emission coal plants to exploring innovative materials such as low-carbon concrete, PG&E is betting on technological solutions.
- Phased Implementation: By 2025, PG&E will make supplier data reporting mandatory, allowing incremental progress over time.
PG&E’s strategic alignment of technology, partnerships, and data-driven decision-making serves as a blueprint for other utilities seeking net-zero ambitions.
Key Takeaways for Your Decarbonization Strategy
Understanding and tackling Scope 3 and 4 emissions is not an overnight task. It requires collaboration, innovation, and long-term commitment. Here’s what utilities and sustainability managers can take away from this discussion:
- Start with Scope 1 and 2 emissions to establish foundational emission reduction structures.
- Engage your suppliers early, offering training and resources to support Scope 3 reporting.
- Explore Scope 4 opportunities by adopting low-carbon solutions and emphasizing avoided emissions.
- Leverage collaboration platforms like NPUC for benchmarking, tools, and strategic guidance.
- Set phased goals, as seen with PG&E, to ensure steady progress without overwhelming your internal teams or suppliers.
The path to net zero may be daunting, but with the right tools and strategies, it’s entirely achievable.
The Role of NPUC in Decarbonization
The National Public Utilities Council (NPUC) has proven to be a valuable ally for utility companies on their decarbonization journeys. Here’s how NPUC supports its members:
- Collaborative Insights: By benchmarking utility performances, NPUC fosters a culture of shared learning and innovation. For example, their annual decarbonization report is an indispensable resource.
- Tiered Membership Services: Utilities can benefit from NPUC’s flexible services, such as scenario planning tools (Gold Tier) or advanced visualization dashboards (Silver Tier).
- Practical Support: From environmental management training to emission reduction strategies, NPUC ensures utilities are equipped to succeed.
If your utility is looking for resources or strategic guidance, becoming an NPUC member might be the next step forward.
Tackling Scope 3 emissions requires more than measurement—it demands strategy, collaboration, and industry insight.
As a trusted resource for utility companies, the NPUC equips members to address these complex emission categories through benchmarking, advanced tools, and tailored support.
