Scope 3 emissions in the automotive industry

author: FutureCar Staff    

Scope 3 Greenhouse Gas (GHG) emissions encompass emissions that occur outside of an organization's own operations, spanning supply chains and product lifecycles. These emissions are becoming increasingly crucial for businesses to address in their decarbonization efforts, as they often have a significant impact on the overall GHG footprint.

Within the GHG Protocol, there are 15 different categories of scope 3 emissions. Three of these categories offer significant opportunities for automotive companies to take meaningful action in decarbonizing their operations:

Category 1: Purchased goods and services

Category 11: Use of sold products

Category 12: End-of-life treatment of sold products

Procuring more sustainable goods and services can make a notable contribution to reducing scope 3 emissions for companies, which can also have a positive effect on their bottom line. For instance, the new EU Carbon Border Adjustment Mechanism (CBAM) will impose a substantial carbon price on the embodied emissions of many purchased products starting in 2026. By ensuring compliance, businesses can benefit from lower costs for purchases with better emissions credentials.

To achieve this, companies must be honest with themselves and analyze their current purchasing practices, including the products they buy, their suppliers, and the associated carbon footprint. Additionally, companies need to consider how their procurement decisions align with internal policies. For example, are they purchasing virgin steel or recycled steel? Investing in infrastructure for recycled products can incentivize more sustainable procurement practices.

Investing in circularity can also contribute to decarbonizing the end-of-life treatment of sold products, particularly vehicles sold by automotive companies. This can help reduce the environmental impacts of material decomposition and disposal, which fall under Scope 3 Category 12 emissions. The case for circularity investment is expected to grow stronger as authorities introduce additional regulatory incentives to use materials from end-of-life vehicles in the production of new vehicles, such as the EU end-of-life vehicles regulation.

A robust and effective end-of-life strategy not only yields positive decarbonization results for a company's reporting but also reduces exposure to future carbon pricing. It also improves prospects for compliance with emerging end-of-life and product composition regulations. Some Original Equipment Manufacturers (OEMs) have already taken the lead in this area by establishing dedicated business units for reclaiming materials from end-of-life vehicles, inspiring other manufacturers to explore similar possibilities.

In addition to investing in end-of-life vehicle infrastructure, OEMs can further promote circularity by considering the design of the vehicles they introduce to the market. Modular setups and standardization across vehicles can support the delivery of priorities such as vehicle electrification, contributing to the decarbonization of Scope 3 Category 11 emissions. These sold products often go to customers, including fleet operators, who are increasingly seeking vehicles with a lower carbon footprint in both production and operation.

By supporting the electrification agenda, OEMs not only reduce their own scope 3 emissions through the vehicles they sell but also assist their customers in decarbonizing their scope 1 emissions. This collaborative effort supports the economy-wide transition to net zero emissions.

An essential aspect underlying all of these considerations is measurement. Without effective carbon footprint measurement, businesses cannot hold themselves accountable for their actions. Many companies currently use a "spend-based" approach to calculate their scope 3 emissions for purchased products and services, relying on benchmarks and procurement data. However, as companies modify their procurement operations, they need to find ways to understand the actual impacts of their decisions and incorporate this into their GHG accounting. Shifting towards methods that utilize specific data rather than averages, such as supplier-specific data for Scope 3 Category 1 emissions, could be crucial in understanding and capitalizing on supply chain decarbonization.

FutureCar Staff