Scope 3 Emissions Challenges
Reprinted with kind permission from Digital Energy Journal in the September Issue of SubTel Forum Magazine
By Ian Thomas
September 23, 2022
“Scope Three” emissions are the emissions associated with the value chain – this includes supply chain provision of goods and services to the disposal of the products a company sells.
In the energy industry such services may include the hire of supply boats, drilling rigs and other equipment. It may include the use of energy products, such as oil and gas.
Less obvious may be the emissions associated with the generation of renewable sources of energy such as biofuels, electricity and hydrogen.
The challenges associated with quantification of Scope Three emissions are considerable.
They start with a requirement to identify those emissions which are considered material to the organisation from a list of 15 categories.
Industry standard methodologies must be used to ensure figures reported are true, verifiable and free of material errors.
From an oil and gas perspective, the 2020 IPIECA guidelines on Scope Three emission reporting focussed on downstream consumption based upon the final product created.
But they left gaps around the upstream supply chain responsibility that is now very much central to the latest GHG Protocol responsibilities for Scope Three.
Measured carefully and reported accurately, Scope Three has the potential to drive innovation sector-wide, improve links and relations with individual groups, and reduce costs through enhanced efficiency.
All of these are fundamental to developing the sustainable future we are striving for.
Scope Three management is an evolving beast.
In the US, the Securities and Exchange Commission (SEC) looks set to bring in a mandate for Scope Three emissions to be disclosed for most companies.
In the UK, the North Sea Transition Authority, which is overseeing the North Sea Transition Deal, sets out best practice in environmental management within the oil and gas lifecycle.
It does this through a series of stewardship ‘expectations’ with the latest additions (11 and 12) solely focusing on net zero and the supply chain. These outline the considerations for reducing greenhouse gas emissions on both the physical environment and society.
Expectation 12 references the close collaboration that exists within the energy supply chain, and drawing on this resource to outline transition projects such as CCUS and electrification, amongst others, illustrating further areas for cooperation.
There are signs that offsetting itself has had its day. A major US energy company, NextEra Energy, has coined the phrase ‘real zero’ – achieving zero climate pollution without the use of offsetting by 2045.
Broadly speaking, the move has been welcomed, albeit with some caveats, and reveals that if accelerating the energy transition is to happen at the pace we need it to, adapting existing processes will be fundamental.
Offsetting can be seen as a method for wealthy countries and companies to greenwash their figures rather than tackle the true global environmental impact of their emissions.
An accounting process for real offsetting, such as permanent CO2 sequestration, remains a work in progress.
There has been some use of the term “Scope Four emissions” to pertain to so-called avoided emission. Scope Four is not a recognised term, and it is already being identified as a means of greenwashing.
One example of avoided emissions with which we are all familiar is video conferencing, as this has removed (i.e., avoided) the emissions that would have arisen from attendee transport and using a meeting room with equipment and lighting.
Another example is to use remote inspections of equipment. This can be used to avoid the need to bring in multiple specialists which would result in travel emissions.
Whilst it is legitimate to calculate the emissions avoided by a certain course of action, the fact remains that to do this, Scope One, Two and Three emissions for all options must be assessed.
Credibility of data
It is critical that emissions data is of verifiable quality. Faulty or misleading data, improperly gathered, or secured, can have a significant negative impact on the credibility of reported data or disclosures.
Equally concerning is the scenario where business investment decisions are made on the basis of poor data.
Greenwashing is a term everyone will have come across. An example from 2020 led to the withdrawal of an entire advertising campaign by one multinational oil and gas operator, following complaints to the UK regulator as to the credibility of certain claims in the advertising.
It goes to prove how such messages must always be substantiated by clear evidence and data.
Need for collaboration
Just as we have a shared responsibility to bring down our emissions, we have a shared responsibility to share learning and collaborate together to embed new knowledge and processes into our methods.
As the importance of sustainable reporting and information disclosure continues to expand, there will need to be a closer connection between operators, regulators, investors, joint venture partners and other stakeholders.
Need for specialists
The people responsible for ensuring figures are true, secure and free of material errors should have demonstrable competencies within the industry sector and in the data assurance process.
Organisations that have direct heritage in data verification and assurance, and who have a long history within the oil and gas sector, are more than qualified to understand the challenges and to offer solutions.
Given the acknowledged challenges, it goes without saying that those preparing the figures need to be qualified practitioners and experienced in the industry sector.
That is to say, a specialist in one field such as manufacturing may not be competent to identify emission sources in a completely unrelated industry such as upstream oil and gas or a downstream refinery.
Verifying the vast data streams through an independent and competent third-party adds to the credibility of any statements released to the media or elsewhere, building trust with investors, shareholders and the public.
Also, it reduces the risk of accusations of greenwashing. This is particularly important in a time when there are increasing claims of greenwashing in the media.
Such specialist organisations have ‘real world’ experience and know how to apply the principles embodied in AA1000 AS or ISAE3000 standards to support operators with net-zero obligations.
Vysus Group became an AccountAbility AA1000AS licensed provider earlier this year, enabling us to offer independent verification of non-financial disclosures and emission statements to our clients within the energy sector.
Combined with our expertise from other technical areas within the industry, we are now in the position where we can cover the full energy value chain, and the various emission levels at specific points.
About the Author
Ian Thomas is Senior Principal Consultant at Vysus Group (Formerly Lloyd’s Register Consulting – Energy Ltd), an engineering and technical consultancy, offering specialist asset performance, risk management and project management expertise across complex industrial assets, energy assets (oil and gas, nuclear, renewables), energy transition projects and rail infrastructure.