In the realm of greenhouse gas (GHG) reporting, Scope 3 emissions have become a central focus for companies aiming to improve their sustainability practices. Within Scope 3, the subcategories of Scope 3.4 (Upstream Transportation and Distribution)Â and Scope 3.9 (Downstream Transportation and Distribution)Â often cause confusion due to their nuanced differences. This blog unpacks these complexities, provides practical examples, and equips you with actionable strategies to streamline your emissions reporting.
What Are Scope 3.4 and Scope 3.9 Emissions?
Scope 3 emissions represent the indirect emissions generated throughout a company’s value chain. These emissions are categorized into various sub-scopes, with Scope 3.4 and Scope 3.9 addressing transportation emissions:
Scope 3.4: Upstream Transportation and DistributionThis sub-scope includes emissions from transportation and distribution paid for by the reporting company. It applies to inbound logistics (e.g., raw materials to manufacturing facilities) and outbound logistics (e.g., transporting finished goods to distribution centers).
Scope 3.9: Downstream Transportation and DistributionThis sub-scope covers emissions from transportation when customers or retailers are responsible for paying the freight costs. It primarily applies to the distribution of sold products.
Key Differences Between Scope 3.4 and Scope 3.9
The critical distinction lies in who pays for the transportation:
If your company pays, the emissions are categorized under Scope 3.4.
If the customer or retailer pays, the emissions fall under Scope 3.9.
Examples:
Scope 3.4
A company purchases raw materials and pays for their transportation to its factory.
The same company hires a logistics provider to deliver finished products to a distribution center.
Scope 3.9
A customer purchases a product and arranges for its delivery, bearing the transport costs.
A retailer pays for shipping goods to its store locations.
Understanding this distinction ensures emissions are assigned to the appropriate sub-scope, a crucial step in creating transparent and accurate sustainability reports.
Why Is Accurate Reporting Critical?
Regulatory ComplianceUpcoming regulations like the Corporate Sustainability Reporting Directive (CSRD)Â require large EU companies to report detailed Scope 3 emissions starting in 2025 for FY2024. Scope 3.4 and Scope 3.9 are significant contributors to overall emissions, making accurate reporting essential.
Avoiding Double CountingMisclassification can lead to double counting, where multiple parties report the same emissions. This undermines data integrity and compliance efforts.
Strategic SustainabilityCorrectly categorizing emissions provides insights into emission hotspots and areas for targeted reduction, aligning sustainability goals with operational efficiency.
Practical Tips for Streamlining Scope 3.4 and Scope 3.9 Reporting
1. Collaborate Across Your Supply Chain
Engage with suppliers, customers, and logistics partners to gather precise emissions data. Transparency fosters better collaboration and ensures accurate categorization.
Gryn Tip #1:Â Build strong relationships with logistics providers to access high-quality emissions data.
2. Use Incoterms for Clarity
Incoterms define responsibilities between buyers and sellers in international trade. By determining who pays for transportation, Incoterms help allocate emissions to the correct sub-scope.
Gryn Tip #2:Â Familiarize yourself with Incoterms like EXW (Ex Works) and CFR (Cost and Freight) to simplify emissions allocation.
3. Leverage Technology
Adopt advanced tools to automate data collection and analysis. Platforms like Gryn’s Sustainability Visibility Platform enable real-time tracking, simplifying Scope 3 reporting.
Gryn Tip #3:Â Use platforms to consolidate data from multiple sources and ensure compliance with frameworks like the GHG Protocol.
4. Mitigate Transportation Emissions
Optimize routes to reduce fuel consumption.
Shift from high-emission transport modes (e.g., air freight) to more sustainable options like rail or sea freight.
Gryn Tip #4:Â Consider carbon insetting projects to reduce emissions within your supply chain.
Preparing for the Future
The regulatory and market focus on transportation emissions is only growing. Companies that proactively address Scope 3.4 and Scope 3.9 will not only comply with standards but also position themselves as sustainability leaders.
Accurate reporting lays the foundation for actionable insights, enabling companies to identify emission hotspots and implement effective reduction strategies.
Final Thoughts
Understanding Scope 3.4 and Scope 3.9 reporting is vital for modern businesses committed to sustainability. By distinguishing between upstream and downstream emissions, leveraging tools like Incoterms, and utilizing advanced platforms such as Gryn, companies can simplify their reporting processes and make meaningful progress toward reducing their carbon footprint.
Watch our recent Webinar: "Clearing the Confusion Around 3.4 / 3.9 Reporting".
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