Engaging in the Food Supply Chain: Scope 1, 2, and 3 emissions in greenhouse gas accounting

The food system accounts for one-third of global greenhouse gas (GHG) emissions. From cradle to landfill, about 70% of these emissions originate directly from farms. Downstream companies that ship, process, package, or store these products add another 15%, and ultimately consumers who cook and dispose of waste, add the remainder. To determine who is responsible for generating various emissions—and track improvement over time—we use GHG accounting standards, a set of guidelines that outline which emissions sources to include, the necessary data for these calculations, and the methodologies to be employed.

One critical concept from these standards is emissions “scopes.” A company’s Scope 1 emissions originate from its own operations, while its Scope 2 emissions originate from its purchased electricity and heat, and its Scope 3 emissions (which often account for 90% or more of its total emissions) originate from upstream and downstream activities, such as the production of purchased materials, transportation of purchased products, and the use of sold products and services. Thus, a company in the middle of the supply chain must account for—and help mitigate--the emissions of the inputs it procures (Scope 3), its own Scope 1 and 2 emissions, and the emissions other companies and consumers add to it after they sell it (Scope 3 again).

Each step from farm to table adds to a product's carbon footprint. This embedded carbon creates a liability not just for the initial producer, but also for each company along the chain. However, because most emissions arise on farms, it can be challenging for downstream companies that buy from aggregators, traders, or slaughterhouses to get a clear picture of what those embedded emissions are, especially if those intermediaries limit their reporting to Scopes 1 and 2 following, for example, the SEC rule that excluded Scope 3 reporting. Companies may also struggle to track where their products go and how they get there. For example, did a byproduct end up being used for human or pet food? Without a clear picture of their emissions across the entire supply chain, companies risk falling short of their environmental commitments and facing increased scrutiny from investors and consumers alike.

Determining which processes disproportionately contribute to a company’s carbon footprint can help that company identify where along the supply chain to focus their mitigation efforts. In some cases, this might be an entire production stage--e.g., the stage of palm oil production in which mills produce a huge amount of methane from their wastewater. In other cases, it might be a sub-set of suppliers with a particular characteristic--e.g., farms engaged in deforestation, which can generate 10 to 100 times more emissions than all the other steps in the supply chain.

Taking ownership of the emissions along the entire supply chain is crucial to credible and efficient mitigation. Otherwise, it is too easy to spend all your monitoring and mitigation effort on only 10% of the problem – and be in for an unpleasant surprise when increased regulatory, consumer, and financial scrutiny reveals the lack of progress.

Emily Moberg is Director of Scope 3 Carbon Measurement and Mitigation, on the Markets team at WWF.