The 101 on Scope 3 in Mexico

This week, we would like to discuss scope 3 emissions, the toughest ones to measure for any company. When it comes to measuring the carbon footprint of an organization, there are three categories, known as scopes. Scope 1 and 2 emissions are direct emissions from an organization’s operations, such as fuel combustion, and indirect emissions from purchased electricity, respectively. However, Scope 3 emissions are indirect emissions that come from an organization’s value chain. These can be emissions from suppliers, customers, or even the use of the organization’s products. Measuring Scope 3 emissions can be a challenge due to their complexity, but it’s an important step towards understanding and reducing a company’s overall carbon footprint.

Here are some steps you can follow to measure your company’s scope 3 emissions:

1. Identify your value chain: The first step is to fully identify the different stages of your organization’s value chain. This is essential, as it will help you identify the sources of emissions and the stakeholders involved in the organization’s carbon footprint.
2. Categorize the emissions: Once the value chain has been identified, the next step is to categorize the emissions. The Greenhouse Gas Protocol provides 15 categories for scope 3 emissions. Categorizing emissions will help you target the most significant sources of emissions and prioritize reduction efforts.
3. Gather data: Gathering data is a crucial step in measuring scope 3 emissions. The organization will need to engage with suppliers and customers to collect information. This can be a challenging process, prone to certain assumptions and educated guesses. Nevertheless, it’s a must if you want to get an accurate picture.
4. Calculate emissions: Once the data has been collected, your company can calculate its scope 3 emissions. The Greenhouse Gas Protocol provides guidelines and tools for calculating emissions for each category in the same unit, so all of them can be added together.
5. Report emissions: Reporting scope 3 emissions is voluntary, but it’s an essential step towards transparency and accountability. You can use this newfound data to set reduction targets, develop sustainability strategies, and communicate your carbon footprint to stakeholders.

There is no regulation requiring companies to disclose scope 3 emissions in most Latin American countries today. However, some have introduced voluntary guidelines for sustainability reporting that encourage the disclosure of these emissions. In Mexico, 59% of the MEXBOL S&P/BMV IPC Index companies report some scope 3 emissions information (even if just broad estimates). You may guess (correctly) that the companies that do so are amongst the largest on the Mexican Stock Exchange.

It is also worth noting that currently 26 Mexican companies are committed to targets that are aligned with the Science Based Targets Initiative (SBTi). 8 of them have approved reduction and/or net zero targets. This is relevant since corporations cannot be considered “net zero” without addressing scope 3 emission reductions within the mix. To see a full list of aligned companies and details, click here.

I hope you found this interesting. As usual, if there is anything we can help you with, or if there is an ESG topic you would like to know more about, please let us know.

Best,

Marimar

CEO, Miranda ESG