Category 5 Waste Generated in Operations – Comprehensive guidance for a best read

Category 5 Waste Generated in Operations

Category description – Category 5 Waste Generated in Operations includes emissions from third-party disposal and treatment of waste generated in the reporting company’s owned or controlled operations in the reporting year. This category includes emissions from disposal of both solid waste and wastewater.

Only waste treatment in facilities owned or operated by third parties is included in scope 3. Waste treatment at facilities owned or controlled by the reporting company is accounted for in scope 1 and scope 2. Treatment of waste generated in operations is categorized as an upstream scope 3 category because waste management services are purchased by the reporting company.

This category includes all future emissions that result from waste generated in the reporting year. (See chapter 5.4 of the Scope 3 Standard for more information on the time boundary of scope 3 categories.)

Waste treatment activities may include:

  • Disposal in a landfill
  • Disposal in a landfill with landfill-gas-to-energy (LFGTE) – that is, combustion of landfill gas to generate electricity
  • Recovery for recycling
  • Incineration
  • Composting
  • Waste-to-energy (WTE) or energy-from-waste (EfW) – that is, combustion of municipal solid waste (MSW) to generate electricity
  • Wastewater treatment.

A reporting company’s scope 3 emissions from waste generated in operations derive from the scope 1 and scope 2 emissions of solid waste and wastewater management companies. Companies may optionally include emissions from transportation of waste in vehicles operated by a third party.

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Category 4 Upstream Transportation and Distribution – Best accredited read

Category 4 Upstream Transportation and Distribution

Category description – Category 4 Upstream Transportation and Distribution includes emissions from:

  • Transportation and distribution of products purchased in the reporting year, between a company’s tier 1 suppliers1 and its own operations in vehicles not owned or operated by the reporting company (including multi-modal shipping where multiple carriers are involved in the delivery of a product, but excluding fuel and energy products)   – link to figure 7.3 in the Scope 3 Standard
  • Third-party transportation and distribution services purchased by the reporting company in the reporting year (either directly or through an intermediary), including inbound logistics, outbound logistics (e.g., of sold products), and third-party transportation and distribution between a company’s own facilities.

Emissions may arise from the following transportation and distribution activities throughout the value chain:

  • Air transport
  • Rail transport
  • Road transport
  • Marine transport
  • Storage of purchased products in warehouses, distribution centers, and retail facilities.

Outbound logistics services purchased by the reporting company are categorized as upstream because they are a purchased service. Emissions from transportation and distribution of purchased products upstream of the reporting company’s tier 1 suppliers (e.g., transportation between a company’s tier 2 and tier 1 suppliers) are accounted for in scope 3, category 1 (Purchased goods and services). Table 4.1 shows the scope and category of emissions where each type of transportation and distribution activity should be accounted for.

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1 Best read how to calculate Category 2 Capital Goods Scope 3 emissions

Calculating Scope 3 Emissions GHG Category 2 Capital Goods

Category description – This category includes all upstream (i.e., cradle-to-gate) emissions from the production of capital goods purchased or acquired by the reporting company in the reporting year. Emissions from the use of capital goods by the reporting company are accounted for in either scope 1 (e.g., for fuel use) or scope 2 (e.g., for electricity use), rather than in scope 3.

Capital goods are final products that have an extended life and are used by the company to manufacture a product; provide a service; or sell, store, and deliver merchandise. In financial accounting, capital goods are treated as fixed assets or as plant, property, and equipment (PP&E). Examples of capital goods include equipment, machinery, buildings, facilities, and vehicles.

In certain cases, there may be ambiguity over whether a particular purchased product is a capital good (to be reported in category 2) or a purchased good (to be reported in category 1). Companies should follow their own financial accounting procedures to determine whether to account for a purchased product as a capital good in this category or as a purchased good or service in category 1. Companies should not double count emissions between category 1 and category 2. See box 2.1 for accounting for emissions from capital goods.

Box [2.1] Accounting for emissions from capital goods

In financial accounting, capital goods (sometimes called “capital assets”) are typically depreciated or amortized over the life of the asset. For purposes of accounting for scope 3 emissions, companies should not depreciate, discount, or amortize the emissions from the production of capital goods over time. Instead companies should account for the total cradle-to-gate emissions of purchased capital goods in the year of acquisition, the same way the company accounts for emissions from other purchased products in category 1. If major capital purchases occur only once every few years, scope 3 emissions from capital goods may fluctuate significantly from year to year. Companies should provide appropriate context in the public report (e.g., by highlighting exceptional or non-recurring capital investments).

Source: Box 5.4 from the Scope 3 Standard

Calculating emissions from Category 2 Capital Goods

Companies may use the following methods to calculate scope 3 emissions from capital goods:

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Category 3 Fuel and Energy Related Activities – 1 Best read

Category 3 Fuel and Energy Related Activities Not Included in Scope 1 or Scope 2

Category description – This category includes emissions related to the production of fuels and energy purchased and consumed by the reporting company in the reporting year that are not included in scope 1 or scope 2.

Category 3 excludes emissions from the combustion of fuels or electricity consumed by the reporting company because they are already included in scope 1 or scope 2. Scope 1 includes emissions from the combustion of fuels by sources owned or controlled by the reporting company. Scope 2 includes the emissions from the combustion of fuels to generate electricity, steam, heating, and cooling purchased and consumed by the reporting company.

This category includes emissions from four activities (see table 3.1).

Fuel and energy related emissions not included in scope 1 or scope 2

Table 3.2 explains how each company accounts for GHG emissions. In this example, the emission factor of the electricity sold by Company B is 1 tonne (t) CO2e/MWh. All numbers are illustrative only.

Table [3.2] Accounting for emissions across an electricity value chain

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Category 1 Purchased Goods and Services – 1 Best read

Calculating Scope 3 Emissions GHG Category 1 Purchased Goods and Services

Category description – This category includes all upstream (i.e., cradle-to-gate) emissions from the production of products purchased or acquired by the reporting company in the reporting year. Products include both goods (tangible products) and services (intangible products).

Category 1 includes emissions from all purchased goods and services not otherwise included in the other categories of upstream scope 3 emissions (i.e., category 2 through category 8). Specific categories of upstream emissions are separately reported in category 2 through category 8 to enhance the transparency and consistency of scope 3 reports.

Emissions from the transportation of purchased products from a tier one (direct) supplier to the reporting company (in vehicles not owned or controlled by the reporting company) are accounted for in category 4 (Upstream transportation and distribution).

Companies may find it useful to differentiate between purchases of production-related products (e.g., materials, components, and parts) and non-production-related products (e.g., office furniture, office supplies, and IT support). This distinction may be aligned with procurement practices and therefore may be a useful way to more efficiently organize and collect data (see box 5.2 of the Scope 3 Standard).

Summary of methods for calculating emissions from purchased goods and services

Companies may use the methods listed below to calculate scope 3 emissions from purchased goods and services. The first two methods – supplier-specific and hybrid – require the reporting company to collect data from the suppliers, whereas the second two methods – average-data and spend-based – use secondary data (i.e. industry average data). These methods are listed in order of how specific ( See Box 1.1 for further explanation of the data specificity and data accuracy) the calculation is to the individual supplier of a good or service. However, companies need not always use the most specific method as a first preference (see figure 1.1 and box 1.1).

  • Supplier-specific method – collects product-level cradle-to-gate GHG inventory data from goods or services suppliers.
  • Hybrid method – uses a combination of supplier-specific activity data (where available) and secondary data to fill the gaps. This method involves:
    • collecting allocated scope 1 and scope 2 emission data directly from suppliers;
    • calculating upstream emissions of goods and services from suppliers’ activity data on the amount of materials, fuel, electricity, used, distance transported, and waste generated from the production of goods and services and applying appropriate emission factors; and
    • using secondary data to calculate upstream emissions wherever supplier-specific data is not available.
  • Average-data method – estimates emissions for goods and services by collecting data on the mass (e.g., kilograms or pounds), or other relevant units of goods or services purchased and multiplying by the relevant secondary (e.g., industry average) emission factors (e.g., average emissions per unit of good or service).
  • Spend-based method – estimates emissions for goods and services by collecting data on the economic value of goods and services purchased and multiplying it by relevant secondary (e.g., industry average) emission factors (e.g., average emissions per monetary value of goods).

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Carbon dioxide equivalent defined – 1 Best read

Carbon dioxide equivalent defined

In study material each GHG described has a different global warming potential (GWP). The GWP of a given GHG indicates how much energy one unit of the GHG absorbs (i.e., the ability of that gas to trap heat in the atmosphere) compared to one unit of carbon dioxide, generally over a 100-year period.

The larger the GWP, the more that the GHG warms the earth compared to carbon dioxide over the stated time period. For example, PFCs and HFCs often absorb thousands of times more energy than carbon dioxide. The GWP of each GHG is published as a factor and used to translate GHGs, other than carbon dioxide, into carbon dioxide equivalent (C02e) units.

The GHG Protocol considers C02e to be the universal unit of measurement for GHGs since it expresses the GWP of each GHG in terms of the GWP of one unit of carbon dioxide. C02e and individual GHGs are often expressed in metric tons, which is the equivalent of 1,000 kilograms (or approximately 2,204 pounds).

The purpose of this measure is to enable a reporting entity, users and other stakeholders to compare the potency of the overall emissions from a reporting entity, both across entities and over time, even when the composition of the GHG emissions changes.

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Emissions over Time – The 1 Best read

Emissions over Time

The GHG Protocol is designed to enable reporting entities to track and report consistent and comparable emissions data over time. The first step to tracking emissions over time is the establishment of a base year. A base year is a benchmark against which subsequent emissions can be compared to create meaningful comparisons over time and may be used for setting GHG reduction targets.

To comply with the GHG Protocol principles of relevance and consistency, a reporting entity is required to establish and report a base year for its Scope 1 and Scope 2 GHG emissions. A base year is only required for Scope 3 emissions when Scope 3 performance is tracked or a Scope 3 reduction target has been set. That is the case whether the entity is reporting under the Corporate Standard or the Scope 3 Standard (see below How to apply the Corporate Standard, Scope 2 Guidance and Scope 3 Standard?).

How to apply the Corporate Standard, Scope 2 Guidance and Scope 3 Standard?

An entity reporting under the Corporate Standard is not required to disclose Scope 3 emissions. As a result, there are three options under the GHG Protocol for reporting Scope 3 emissions, as described in the following table, which is based on Table 1.1 in the Scope 3 Standard:

Option

Description

Applicable GHG criteria

1

A reporting entity reports its Scope 1 and Scope 2 GHG emissions and either (1) no Scope 3 emissions or (2) Scope 3 emissions from activities that are not aligned with any of the prescribed Scope 3 categories (the latter is very rare).

  • Corporate Standard

  • Scope 2 Guidance

2

A reporting entity reports its Scope 1 and Scope 2 GHG emissions and some, but not all, relevant and material Scope 3 GHG emissions in accordance with the Scope 3 calculation guidance but not with the Scope 3 Standard.

  • Corporate Standard

  • Scope 2 Guidance

  • Scope 3 Guidance

3

A reporting entity reports its Scope 1 and Scope 2 GHG emissions and all relevant and material categories of Scope 3 GHG emissions

Consider this!

The GHG Protocol encourages reporting entities to begin reporting GHG emissions information and improve the completeness and precision of that information over time.

While the GHG Protocol requires a company to establish and report a base year for its Scope 1 and Scope 2 emissions, a reporting entity that recently started to report GHG emissions information and has not established an emissions reduction target may choose not to set a base year until the precision and completeness of their emissions inventory have improved.

In this situation, the reporting entity should disclose that a base year has not yet been established and the reason for not establishing a base year.

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Scope 1 emissions – Best read

Scope 1 emissions

Scope 1 emissions are emissions from sources owned or controlled by a reporting entity. For example, emissions from equipment, a vehicle or production processes that are owned or controlled by the reporting entity are considered Scope 1 emissions. These emissions include all direct emissions within the entity’s inventory boundary.

The combination of organizational and operational boundaries make up a reporting entity’s inventory boundary, which is also called the reporting boundary. Refer to Organizational boundaries for information on organizational boundaries and Operational boundaries for information on operational boundaries.

The GHG Protocol is designed to avoid double counting GHG emissions. That is, two or more reporting entities should never account for the same emissions as Scope 1 emissions. For example, emissions from the generation of heat, electricity or stream that is sold to another entity are not subtracted from Scope 1 emissions but are reported as Scope 2 emissions by the entity that purchases the related energy.

Theoretically, if every entity and individual throughout the world reported their GHG emissions using the same organizational boundary (e.g., equity share, financial control or operational control approach), the total of all Scope 1 emissions would equal the total GHGs emitted throughout the world.

Types of Scope 1 emissions

The GHG Protocol describes four types of Scope 1 emissions: stationary combustion, mobile combustion, process emissions and fugitive emissions. The type of emissions that are included in Scope 1 will vary based on the industry and business model of the reporting entity.

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Metrics in use for ESG Reporting- 1 Best and complete read

Metrics in use for ESG Reporting

Here is a list of Metrics in use for ESG Reporting that companies can use to start communicating on the ESG issues. The metrics have been divided into four categories:

Each category contains recommended disclosure metrics (both qualitative and quantitative) that have been marked either as minimum disclosures (relevant to all companies) or additional disclosures (that might not be relevant to all companies).

The selection of recommended disclosure metrics has been informed by relevant regulatory initiatives i.e. the CSRD and the ESRS as well as the Warsaw Stock Exchange corporate governance code. Moreover, to address increasing investors’ data needs, they have been also aligned with the mandatory PAI indicators for corporate investments required by the SFDR (see mapping in the Appendix – Relevance of the Guidelines to investors). References have been added below each section to other frameworks and resources that companies may also consider (Appendix – Alignment with EU regulations and other frameworks).

It should be emphasized that the Guidelines do not provide an exhaustive list of indicators and topics. Rather they aim to offer less advanced companies a minimum set of carefully selected disclosure metrics that will help them to prepare for the upcoming requirements stemming from the CSRD and the ESRS and better respond to investors’ ESG data needs. Companies in scope of the CSRD should use the ESRS to prepare their disclosures on material sustainability topics.

Metrics in use for ESG Reporting – General information

General information metrics provide essential context to understand the company business activities and value creation model, it’s material ESG impacts, risks and opportunities, and how it is managing them.

General information

What should be disclosed:

I

M 1

Business model

  • Short description of the company business model and value chain.
  • Whether the company is active in the following sectors: fossil fuel (coal, oil and gas), controversial weapons along with related revenues.

Companies may consider including the following characteristics when describing their business model: economic activities; products and services offered; markets of operation, company size (in terms of workforce, business locations, revenue, etc.)

I

M 2

Sustainability integration

  • Whether and how sustainability matters are integrated in the company strategy and business model.
  • Resilience of the company strategy and business model(s) to material sustainability risks.
  • Policies and actions adopted to manage material sustainability matters.
  • Targets related to management of sustainability matters.

I

M 3

Sustainability governance

  • Governance bodies roles and responsibilities with regard to sustainability matters (e.g. in relation to risk management, target setting, sustainability disclosure).
  • Whether governance bodies are informed about sustainability matters, and how they are addressed by administrative and/or management bodies.
  • Whether incentive schemes are offered to members of governance bodies that are linked to sustainability matters.

I

M 4

Material impacts, Risk and Opportunities

  • The processes used to identify material impacts, risks and opportunities.
  • Sustainability due diligence process.
  • Outcome of the materiality assessment (identified material impacts, risks and opportunities).
  • How material impacts, risks and opportunities interact with the company strategy and business model.

I

M 5

Stakeholder engagement

  • Description of the company main stakeholders, and how the company engages with them.
  • How the interests and views of stakeholders are taken into account by the undertaking’s strategy and business model.

Metrics in use for ESG Reporting- Environmental disclosures

Environmental metrics cover issues that arise from or impact the natural environment.

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