As the UK considers the mandatory disclosure of Scope 3 emissions, Stephen Roscoe, Compliance Director at Grundon Waste Management, asks if the time, money and challenges required to do so will outweigh the benefits.
It’s been 24 years since we published our first Corporate Environmental Report 2000, quantifying the greenhouse gas (GHG) emissions associated with the business, establishing the appropriate metrics and setting reduction targets.
Over that period, we have taken concerted action to significantly reduce both absolute and intensity-based GHG emissions, while also ensuring our reporting procedures evolved in line with best practice and standardised reporting protocols.
This combined approach culminated in us commissioning two independent reports to quantify our 2022 Scope 1, 2 and 3 emissions, giving us an insight into how things had changed for the better over the preceding two-plus decades.
While the 2000 emission values are not directly comparable to the latest numbers in the 2022 reports, it is possible to make the following assessment of our progress in reducing GHG emissions.
A 77% reduction in total (absolute) Scope 1 & 2 emissions compared to 2000 and an 83.5% reduction in Scope 1 & 2 emissions per tonne of waste handled, compared to 2000.
The Grundon business managed 60% more waste in 2022 than in 2000, but is emitting less than a quarter of the 2000 CO2 eq total. In 2022, the carbon emissions per tonne of waste were 95 kg CO2 eq, compared to a figure of 579 kg in 2000.
Grundon has a robust database of our Scope 1 & 2 emissions, with monitoring and reporting embedded into all parts of the diverse business. We are confident in the quality of this data and therefore confident about plotting our future direction and establishing credible commitments to achieve further reductions.
We have already implemented the “simple” carbon reduction opportunities and are now at the point where further reductions will require significant capital investment – for example, adding to our existing fleet of electric collection vehicles; further investment in renewable energy generation; adopting novel landfill gas management technology.
So far, so good. However, the 2022 evaluation included Scope 3 emissions for the first time. We expected this to be a time-consuming and difficult process, and we were not disappointed! We have arrived at a number, albeit subject to a considerable number of caveats and data uncertainty. We have further work to obtain better quality data – in some cases, we have yet to obtain any data and doing so appears to be a lengthy task.
The road ahead of us in compiling credible Scope 3 emission data is enormous. At the risk of appearing a climate luddite, it begs the question – does this represent good value for the time and money required? Does it serve a useful purpose? Three examples exhibit the problems:
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Downstream processing of materials
One component of the Scope 3 assessment is category 10 “processing of sold products”. In our case, like virtually every other waste management business in the UK, this is largely the export of recovered materials (paper, plastics etc.) for processing and recycling overseas. Obtaining good quality data on the emissions associated with this activity will be very difficult.
Once obtained, what purpose does this serve? There is no alternative to export, with the current lack of UK processing capacity. It is hard to see that Grundon can exert any influence on the actors in this chain – shipping companies will respond to international regulation; Chinese and Indian reprocessors will be influenced by their respective national climate policies.
Grundon visits the reprocessors accepting our materials and conducts a duty of care audit. We select the reprocessors based on a basket of indices – environmental, health & safety, working conditions, commercial, etc. How to rank emissions against, for example, health & safety? Which takes precedence? Who decides?
Or do we exercise one of options available to us in the Scope 3 guidance – we simply “disclose and justify the exclusion of downstream emissions from category 10”?
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Emissions from investment businesses
Grundon owns 50% of the Lakeside Energy-from-Waste (EfW) facility that recovers energy from 400,000 tonnes of non-recyclable waste per annum. Accordingly, the 2022 report allocated Grundon 50% of the Scope 1 & 2 emissions associated with Lakeside.
The number is larger than the entire Scope 1 & 2 emissions for Grundon, but the question then arises – how to commit to reducing emissions from a facility whose purpose is to incinerate waste?
The only way to reduce emissions – apart from not processing waste – is to retrofit carbon capture on the stack emissions.
Given Lakeside is not within one of the government’s designated Hubs that receive funding for such equipment (which would also include the need for an associated carbon transport and storage infrastructure), it seems unlikely that – unless new technologies emerge – Lakeside will commit to any such installation in the near future.
However, unless Grundon makes a commitment to annual reductions in Scope 3 emissions, we are ineligible for registration to most of the recognised carbon reduction standards.
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Business growth
Grundon is currently investing in a new state-of-the-art facility which will complement our existing Colnbrook operations. As well as providing a three-fold increase in processing capacity across a wider range of waste streams, it will employ the latest technologies and deliver greater carbon efficiencies.
However, the absolute increase in processing capacity will inevitably increase our Scope 1 emissions, thereby eliminating any prospect of the annual reductions in these emissions so beloved of the recognised carbon standards.
We anticipate processing a lot of waste currently exported to Europe under the Transfrontier Shipment arrangements. This will result in a reduction in the Scope 3 emissions for the producers of these wastes – reduced transport distances, more efficient process technology, etc. This will benefit the waste producers and help them achieve their carbon reduction targets.
There is no associated carbon benefit for Grundon – we cannot access any part of the conservatively estimated 500 tonnes per annum of our customers’ Scope 3 carbon savings associated with not exporting the waste.
We are not alone in seeking clarity on Scope 3
FTSE Russell is a London Stock Exchange Group business and a leading global provider of index and benchmark solutions. Their recent report “Scope for improvement – Solving the Scope 3 conundrum” states “Scope 3 emissions present one of the most vexing problems in climate finance.”
They elaborate on the problem – “….practical integration in portfolio analysis and investment decisions is often hobbled by the complexity of Scope 3 accounting, low disclosure rates, variable data quality, high volatility, and poor comparability.”
The Institutional Investors Group on Climate Change explains why it’s important: “Without recognizing the Scope 3 emissions of a company, it isn’t possible to fully understand and assess its contribution to climate change”. The Group added there are numerous “practical challenges” to properly report and calculate Scope 3 numbers.
Mandatory disclosure of Scope 3 emissions is mooted in the UK and elsewhere. A wave of client, investor and public scrutiny of greenhouse gas emissions is starting to influence behaviour in the resource management sector. Our concern is that, whilst data on Scope 1 & 2 emissions is reasonably easy to obtain and should be accurate, data on Scope 3 is much more complex with an element of subjectivity.
FTSE Russell has the same opinion: “Given their complex and heterogenous nature, estimating them does not follow a straightforward, highly standardised procedure as is seen for Scope 2 emissions.
“Instead, current standards still give Scope 3 reporters leeway over key aspects of the data estimation and curation process. This allows for significant discretion in determining what emissions should be reported, how they are classified across the different Scope 3 categories, and what methods and data sources are being used to estimate the emissions.”
FTSE Russell argues for a simplified approach to reporting Scope 3 emissions to “increase the quality and comparability of both reported and estimated Scope 3 data”.
Accurately accounting for Scope 3 in large, complex organisations is very difficult. Despite best efforts, data quality is likely to include an element of uncertainty and discretion. Reporting of Scope 3 is therefore challenging and means great care is required if using Scope 3 for any meaningful reporting.
Responsible businesses will want to portray – as far as is possible – an accurate picture but they risk being disadvantaged compared to businesses with what we might call a more “flexible” approach to reporting the details.
Those parties making assessments of emissions reporting by a business, and therefore judging businesses on the same, need to take a wider perspective than simply tracking the Scope 1, 2 & 3 numbers.
A business that has actively reduced emissions over many years is in a very different position to companies at the start of their carbon journey. Commitments are easy if you still have “low hanging fruit” to pluck but less easy if the focus is on the remaining fruit out of reach at the top of the tree.
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