Understand Scope 3 Category 8 emissions from upstream leased assets and discover effective strategies to manage and reduce them. Enhance your ESG approach with this guide.

Examine the complexities of managing Scope 3 Category 8 emissions, which arise from the operation of leased assets not included in your company’s Scope 1 or 2 reporting.

This in-depth guide offers actionable insights and strategies to help you minimise emissions from upstream leased assets and strengthen your sustainability efforts. By addressing Category 8 emissions, you can significantly enhance your ESG performance and demonstrate a commitment to environmental responsibility. Turn to ESG Pro for expert advice and tailored solutions to drive meaningful change in your approach to leased asset management.

1. Introduction to Scope 3, Upstream Leased Assets Emissions

Scope 3 emissions from “Upstream Leased Assets” refer to the indirect greenhouse gas (GHG) emissions that are associated with assets leased by the company in its upstream operations. These are assets that the company does not own but uses for its business activities, where the leasing arrangement means that the lessor (the owner of the assets) retains control over the assets. This category is part of a company’s broader Scope 3 emissions, which encompass all indirect emissions not included in Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased energy).

2. Importance of Emissions from Upstream Leased Assets

Emissions from upstream leased assets are important for several reasons:

• Comprehensive Carbon Footprint: Including emissions from leased assets provides a more accurate and complete picture of a company’s overall carbon footprint, especially for companies that rely heavily on leased facilities, vehicles, or equipment in their operations.
• Responsibility and Influence: While the company may not own these assets, it has a degree of responsibility and influence over their emissions. By including these emissions in their Scope 3 inventory, companies can take more comprehensive actions to reduce their environmental impact.
• Sustainability Goals and Reporting: Understanding and managing these emissions is crucial for achieving sustainability goals and for transparent reporting to stakeholders, including investors, customers, and regulatory bodies that are increasingly attentive to comprehensive GHG emissions reporting.
• Risk Management: Identifying and reducing emissions from leased assets can help manage risks associated with regulatory changes, lease costs, and the transition to a low-carbon economy.

3. Strategies for Reducing Emissions

• Energy Efficiency Improvements: Work with lessors to implement energy efficiency measures in leased buildings or to use more efficient leased vehicles and equipment.
• Renewable Energy: Explore opportunities to procure renewable energy for leased assets, such as through green leases that include provisions for renewable energy use or investments.
• Collaboration with Lessors: Engage with lessors to identify and implement emission reduction opportunities. This can include negotiating for upgrades to more energy-efficient systems or practices as part of the leasing agreement.

Managing emissions from upstream leased assets requires collaboration between lessees and lessors and a commitment to improving the sustainability of leased assets. By addressing these emissions, companies can take a more holistic approach to reducing their overall carbon footprint and enhancing their environmental performance.

4. Calculation of Scope 3, Upstream Leased Assets Emissions

Calculating Scope 3 emissions from upstream leased assets involves estimating the greenhouse gas (GHG) emissions associated with the operation of assets that a company leases from another entity. These assets can include office buildings, retail spaces, vehicles, equipment, and any other assets used in the company’s operations but not owned by the company. The focus is on the emissions resulting from the energy used and the activities conducted in these leased assets. Here’s a step-by-step guide to performing these calculations:

Inventory Leased Assets

• Identify Leased Assets: Start by identifying all assets leased by the company that are used in its upstream operations. This may include properties for offices, manufacturing, storage, vehicles, and any equipment.
• Gather Usage Data: Collect data on how these assets are used, focusing on activities that result in GHG emissions. For buildings, this might be energy consumption data (electricity, heating), while for vehicles, it could be fuel consumption.

Collect Energy Consumption and Activity Data

• Energy Data: Obtain energy consumption data for each leased asset. This could come from utility bills, lease agreements (if they include utilities), or estimates based on asset size and type.
• Activity Data: For assets where direct energy consumption data isn’t applicable, gather activity data that can be converted into GHG emissions. For vehicles, this would be kilometres or miles driven.

Apply Emission Factors

• Choose Emission Factors: Use appropriate GHG emission factors for the type of energy consumed or the activities performed. Emission factors are typically available from governmental environmental agencies or international organisations and should correspond to the types of fuel used, electricity grid mix, or specific activities of the leased assets.
• Adjust for Asset Specifics: Consider the specific characteristics of each asset, such as the energy efficiency of buildings or vehicles, to choose the most accurate emission factors.

Calculate Emissions

• Energy-Based Emissions: For each leased asset, multiply the energy consumption by the corresponding emission factor to estimate the GHG emissions.

• Activity-Based Emissions: For assets where activity data is used, apply the relevant emission factors to the activity metric to calculate emissions.

Emissions=Activity×Emission FactorEmissions=Activity×Emission Factor

Aggregate Emissions

• Total Emissions: Sum the emissions from all leased assets to determine the total Scope 3 emissions from upstream leased assets.

Documentation and Continuous Improvement

• Record-Keeping: Maintain detailed records of the methodology, data sources, emission factors, and calculations. This documentation is essential for transparency, verification, and for making improvements over time.
• Review and Update: Regularly review and update the calculations as new data becomes available or as leased assets change. Engaging with lessors to obtain more accurate or detailed data can also improve the accuracy of future calculations.

5. Conclusion

Strategically addressing Scope 3 emissions from upstream leased assets is critical for organisations aiming to fully embrace their environmental responsibilities. By choosing energy-efficient buildings, negotiating green leases, and collaborating with lessors to implement sustainable practices, companies can significantly reduce the carbon footprint associated with their leased assets. These actions not only lessen indirect emissions but also highlight a company’s commitment to sustainability across its operations. Engaging in such practices demonstrates forward-thinking leadership and a comprehensive approach to environmental stewardship, aligning with global sustainability targets and enhancing the organisation’s reputation among stakeholders as a proactive participant in the fight against climate change.

Why ESG Pro Limited is the Ideal Partner for your GHG reporting and Corporate Net Zero Pledge

Expertise in ESG and Science-Based Targets

ESG Pro Limited brings deep expertise in ESG (Environmental, Social, and Governance) practices, with a strong focus on setting and achieving science-based targets. Whether it’s conducting Materiality Assessments or providing detailed GHG carbon emissions reporting, ESG Pro offers tailored support to ensure your Corporate Net Zero Pledge is both credible and impactful.

• In-depth knowledge of ESG and sustainability practices
• Expertise in setting and achieving science-based targets
• Proven success in helping businesses avoid greenwashing risks

Customised Strategies for Achieving Net Zero

At ESG Pro Limited, we recognise that every business is unique, and so is its path to Net Zero. Our consultants work closely with your team to develop customised strategies that align with your specific goals and challenges, ensuring that your Net Zero pledge is both achievable and sustainable.

• Tailored Net Zero strategies based on your business needs
• Support in navigating regulatory requirements and compliance
• Ongoing consultancy to ensure continued progress and transparency

Commitment to Long-Term Sustainability

Our commitment to your success goes beyond helping you make a pledge—we are dedicated to supporting your company throughout its sustainability journey. ESG Pro Limited offers long-term partnerships focused on achieving and maintaining your Corporate Net Zero Pledge, ensuring that your efforts result in lasting, positive change.

• Long-term commitment to environmental stewardship
• Continuous support and consultancy services
• Focus on building a credible, impactful Net Zero strategy