Scope 3 emissions in the automotive industry

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

There are 15 different categories of scope 3 emissions defined by the GHG Protocol, and three of these categories present specific opportunities for automotive firms 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

By procuring more sustainable goods and services, companies can make a significant contribution to reducing their scope 3 emissions, which will also have a positive impact on their bottom line. Policies like the new EU Carbon Border Adjustment Mechanism (CBAM) will put a carbon price on embodied emissions in purchased products, incentivizing businesses to make purchases with better emissions credentials.

However, in order to take advantage of these opportunities, companies need to be honest with themselves and analyze their current purchasing practices and associated carbon footprints. They should consider what products they are buying, who they are buying them from, and whether there are more sustainable alternatives available.

Investing in circularity can also help automotive companies decarbonize the end-of-life treatment of sold products, particularly vehicles. This can reduce the impacts of material decomposition and disposal, which fall under Scope 3 Category 12 emissions. Authorities are also starting to introduce regulatory incentives to use materials from end-of-life vehicles in the production of new vehicles, further emphasizing the case for circularity investment.

One OEM has already set up a dedicated business unit for reclaiming materials from end-of-life vehicles, and other manufacturers are exploring similar possibilities. OEMs can also contribute to circularity by designing vehicles with modular setups and standardization, which can support vehicle electrification and help decarbonize the use of sold products (Scope 3 Category 11 emissions).

When OEMs support the electrification agenda, they not only reduce their own scope 3 emissions but also help their customers, such as fleet operators, to decarbonize their operations. This supports the economy-wide transition to net zero emissions.

A crucial aspect of addressing scope 3 emissions is measurement. Businesses need to effectively measure their carbon footprint to hold themselves accountable. 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 change their procurement practices, they need to find ways to understand the actual impacts of their decisions and reflect this in their GHG accounting. Using specific data, such as supplier-specific data for Scope 3 Category 1 emissions, can be key to understanding and capitalizing on decarbonization opportunities in the supply chain.