Understanding Scope 3 categorisation: How to correctly report cloud emissions within the GHG Protocol
Given the exponential growth of global cloud use, understanding how to categorise cloud emissions within the GHG Protocol's Scope 3 framework is a complex, yet vital, facet of environmental reporting.
In today's digital age, understanding and accounting for Scope 3 emissions is a critical consideration for sustainably minded companies.
Meta attributes 99% of its total emissions to Scope 3, while Microsoft claims a similar figure of 97%.
That’s a lot of carbon emissions, but many businesses are not completely sure how to report them accurately.
This article will look at the definition of Scope 3 emissions within the Greenhouse Gas (GHG) Protocol, why this relates to cloud emissions, and how businesses can compliantly report cloud emissions within this framework.
What are cloud emissions?
Cloud emissions refer to the greenhouse gas (GHG) emissions associated with the operation and use of cloud computing services. Cloud computing relies on data centres and various physical infrastructures to provide on-demand access to computing resources, storage, and software applications over the internet. These data centres and supporting infrastructures consume an enormous amount of electricity to function, and the energy used to power them often comes from electricity grids run on fossil fuels.
Cloud computing is estimated to emit more carbon than the entire aviation industry.
These cloud emissions are part of an organisation's broader carbon footprint, and they fall under the category of Scope 3 emissions as per the Greenhouse Gas (GHG) Protocol (more on this below).
As cloud computing becomes increasingly prevalent and integral to businesses and daily life, understanding and mitigating cloud emissions have become important goals for organisations working towards sustainability goals.
Greenpixie helps companies to accurately report their cloud computing emissions within the GHG Protocol, by providing industry-leading cloud sustainability data.
What are Scope 3 emissions?
Scope 3 emissions are indirect emissions occurring within a company's value chain. These are distinct from Scope 1 emissions – which are direct GHG emissions from sources that are owned or controlled by an organisation itself – and Scope 2 emissions – GHG emissions that are associated with the consumption of purchased electricity, heat, or steam by the organisation.
The GHG Protocol broadly classifies Scope 3 emissions into fifteen categories:
Upstream scope 3 emissions
1. Purchased goods and services 2. Capital goods 3. Fuel- and energy-related activities (not included in scope 1 or scope 2) 4. Upstream transportation and distribution 5. Waste generated in operations 6. Business travel 7. Employee commuting 8. Upstream leased assets
Downstream scope 3 emissions
9. Downstream transportation and distribution 10. Processing of sold products 11. Use of sold products 12. End-of-life treatment of sold products 13. Downstream leased assets 14. Franchises 15. Investments
Categorising cloud emissions as Scope 3
In order to report cloud emissions as Scope 3 emissions, in line with the GHG Protocol reporting standards, cloud users must understand the category their specific use-case falls under. This means correctly selecting which category definition best matches your cloud activity.
There are, of course, many ways companies use the cloud. Most use-cases will fall into one of the four categories below, however, for full definitions of the 15 categories, please see the GHG Protocol itself.
Category 1: Purchased goods and services
When your company procures a software service, such as an online customer management tool, the emissions associated with the production, delivery, and operation of this software on the cloud provider's infrastructure are included in both the vendor's Scope 3 emissions and your company's supply chain emissions. This encompasses the energy consumed in software development and the construction of the hardware that supports it.
So if you are using a third party software such as HubSpot, you would report these emissions under Purchased Good and Services.
Category 8: Upstream leased assets
If your company utilizes dedicated hardware or equipment at a cloud provider's facility, like an Amazon EC2 Dedicated instance, the emissions generated by these machines, including the energy required for their operation and maintenance, contribute to your company's Scope 3 emissions. This is particularly relevant when a company has significant control over the cloud-based machines they use.
Category 11: Use of sold products and services
Your company employs cloud services, such as online storage or computing, provided by a company like Amazon Web Services, Microsoft Azure, or Google Cloud for its daily operations. The energy consumed by the machines that run these services, including electricity for power and cooling, contributes to your company's Scope 3 emissions. The proportion of these emissions attributed to your company depends on the extent of the cloud services you utilise.
Category 13: Downstream leased assets
Your company provides online services, like a web application or SaaS, to customers using hardware it leases from a cloud provider. Your company manages these machines, including overseeing the setup and maintenance of the services. The emissions generated by these machines, including the energy required for operation and cooling, are included in your company's Scope 3 emissions.
Appropriate categorisation and accurate reporting require granular cloud data to distinguish between these use cases. For more information on how Greenpixie empowers customers to categorise their cloud emissions and comply with upcoming Scope 3 regulation, speak to a member of our team.
In certain instances, like the first example mentioned, obtaining data on your cloud emissions from a supplier can pose challenges.
For example, if the company providing the online customer management tool you've purchased does not measure their own cloud carbon footprint, they won't be able to calculate your portion of these emissions.
It is therefore crucial to proactively engage with businesses in your supply chain and request them to measure and disclose their cloud-related emissions to ensure accurate reporting and a comprehensive understanding of your environmental impact.
As cloud computing continues to revolutionise the digital landscape, the awareness and accurate reporting of Scope 3 emissions have become vital aspects for sustainability-minded companies. The GHG Protocol's categorisation of Scope 3 emissions provides a comprehensive framework for organisations to assess their indirect environmental impact, including the significant contribution of cloud emissions.
By recognising the carbon intensity associated with cloud computing, companies can make informed decisions and prioritize green initiatives to align with their sustainability goals.
While it may take some getting used, understanding and reporting cloud emissions within the GHG Protocol's Scope 3 framework allows companies to take significant steps towards reducing their environmental impact.
For help taking action on all of the above, get in touch with a member of the Greenpixie team.