6.6 Addressing Double Counting of Scope 3 Emissions | DART

Scope 3 Standard, Chapter 9, “Setting a GHG Reduction Target and Tracking Emissions Over Time,” Page 108

9.6 Addressing Double Counting of Scope 3 Reductions Among Multiple Entities in a Value Chain . . .

Double counting within scope 3 occurs when two entities in the same value chain account for the scope 3 emissions from a single emissions source — for example, if a manufacturer and a retailer both account for the scope 3 emissions resulting from the third-party transportation of goods between them . . . . This type of double counting is an inherent part of scope 3 accounting. Each entity in the value chain has some degree of influence over emissions and reductions. Scope 3 accounting facilitates the simultaneous action of multiple entities to reduce emissions throughout society. Because of this type of double counting, scope 3 emissions should not be aggregated across companies to determine total emissions in a given region. Note that while a single emission may be accounted for by more than one company as scope 3, in certain cases the emission is accounted for by each company in a different scope 3 category.

Companies may find double counting within scope 3 to be acceptable for purposes of reporting scope 3 emissions to stakeholders, driving reductions in value chain emissions, and tracking progress toward a scope 3 reduction target. To ensure transparency and avoid misinterpretation of data, companies should acknowledge any potential double counting of reductions or credits when making claims about scope 3 reductions. For example, a company may claim that it is working jointly with partners to reduce emissions, rather than taking exclusive credit for scope 3 reductions.

If GHG reductions take on a monetary value or receive credit in a GHG reduction program, companies should avoid double counting of credits from such reductions. To avoid double crediting, companies should specify exclusive ownership of reductions through contractual agreements.

Double counting of GHG emissions (also referred to as double claiming with respect to credits or reductions) occurs when two or more reporting companies in the same value chain report the same GHG emissions in the same scope. The inherent risk of double counting emissions is most prevalent for Scope 3 emissions, since the Corporate Standard defines Scope 1 and Scope 2 emissions in such a way as to ensure that (1) GHG emissions are reported in Scope 1 only by the company that directly generated them and (2) GHG emissions resulting from the generation of energy in the form of electricity, heating, cooling, or steam are reported in Scope 2 only by the company that consumed that energy. In contrast to Scope 1 and Scope 2 classifications, the classification of a given set of GHG emissions within Scope 3 is not exclusive to one company in the value chain (i.e., the same GHG emissions would necessarily be reported in Scope 3 by multiple companies in the value chain). GHG emissions classified by one reporting company within Scope 1 or Scope 2 would be classified within Scope 3 by other reporting companies in the value chain.

Example 6-10

Company A, a clothing manufacturer, sells its goods to Company B, a clothing retailer. Company B pays Company C, a third-party transportation company, to move the clothing from A’s manufacturing facility to B’s retail facility.

The three companies account for the GHG emissions related to C’s transportation of the clothing from A’s manufacturing facility to B’s retail facility as follows:

Company A accounts for the emissions in Scope 3, Category 9 (downstream transportation and distribution).
Company B accounts for the emissions in Scope 3, Category 4 (upstream transportation and distribution).
Company C accounts for the emissions in Scopes 1 and 2.

Double counting of Scope 3 emissions is an inherent part of Scope 3 reporting, since each company in a given value chain has some degree of influence over the same GHG emissions. In light of this, it is important for companies to consider the following:

The Scope 3 Standard warns against aggregating Scope 3 emissions across companies to determine total GHG emissions in a given value chain.
As noted in the Scope 3 Standard, “[c]ompanies may find double counting within scope 3 to be acceptable for purposes of reporting scope 3 emissions to stakeholders, driving reductions in value chain emissions, and tracking progress toward a scope 3 reduction target.” This is because the reporting of Scope 3 emissions in a value chain reflects the belief that companies may be able to influence the decisions made and emissions generated upstream and downstream of their operations through engagement with suppliers, customers, and other stakeholders. However, the Scope 3 Standard advises companies to disclose in their GHG reports any potential double counting when claiming Scope 3 emission reductions “[t]o ensure transparency and avoid misinterpretation of data.” In addition, when such emission reductions have monetary value or are worth credits in a GHG reduction program, the Scope 3 Standard recommends that a single company take exclusive ownership of the reductions by contractual agreement to avoid double counting.