Will Scope 3 Emissions Reporting Requirements Affect Your Business?

New regulations will require many companies to account for the environmental impact of their value chains. Here’s how that could affect converters.

The first international agreements to limit greenhouse gas (GHG) emissions were introduced in the mid-1990s. Today, the U.N.’s 2015 Paris Agreement binds the U.S., Canada, and 194 other parties to a goal of limiting global warming to 1.5 C above pre-industrial levels by reducing overall GHG emissions.

Happening in parallel has been the growing adoption of the GHG protocol. Developed as a joint initiative of the World Resources Institute and the World Business Council for Sustainable Development, the GHG Protocol “provide(s) a framework for businesses, governments, and other entities to measure and report their greenhouse gas emissions in ways that support their missions and goals.”

The GHG Protocol borrows methods from financial accounting, including relevance, completeness, consistency, transparency, and accuracy. As noted in its guide for corporations, “what gets measured, gets managed.”

Scope 1

Emissions from sources owned by a company, including those from combustion (boilers, furnaces, vehicles, etc.) and emissions from chemical processes.

Scope 2

Indirect emissions from purchased electricity.

Scope 3

Other indirect emissions that occur throughout the value chain in which a company is linked. This includes emissions in 15 categories, ranging from purchased goods and services to the processing, use, and endof-life treatment of sold products. Scope 3 is obviously a very broad category and one that can be challenging to quantify.

A fourth scope has more recently been introduced. This includes “avoided emissions” resulting from the creation of more environmentally friendly product

The GHG protocol and your business

Starting in 2025, companies doing business in the EU (including those based outside of Europe) will need to report their scope 1, 2, and 3 emissions. The state of California, meanwhile, has adopted a law that will require companies with over $1 billion in revenue to disclose Scope 1, 2 and 3 emissions beginning in 2026. Other states could develop and implement similar laws in the coming years. A proposed rule by the Securities and Exchange Commission (SEC) would require public companies to disclose climate information in their 10-K statements. Although the proposal initially included Scope 3 emissions, that requirement was removed from the proposed rule in early 2024.

It might be tempting to dismiss these regulations as affecting only the largest companies. But look again at Scope 3. Tracking these emissions will require involvement from companies all along the value chains of consumers’ favorite products. This includes emissions from many label and packaging converters.

In other words, some of the brands you work with may expect more when it comes to your business’s carbon emissions — how they’re tracked, reported, and managed. As noted in a recent article by the consultancy PwC, “When it comes to Scope 3, you have to think about both your role as a supplier to your customers and your role as a customer to your suppliers. In both cases, it’s all about being able to accurately measure and report on emissions to understand where you (and they) are starting. From there, you’ll look at opportunities to reduce those emissions together.”

We’re in this together

Resource-rich major brands may provide some support and guidance to the businesses they rely on to be successful. Consider reaching out to both your customers and suppliers sooner rather than later to discuss ways you can work together on measuring and managing Scope 3.

Avery Dennison offers resources, such as our Carbon Footprint tool, to help converters calculate their Scope 3 emissions. The tool is free to use and was developed in partnership with Carbon Trust to help our customers quantify the carbon impact of Avery Dennison products. Reach out to your Avery Dennison sales representative to learn more.