Are industry residual mix estimates needed to use a market-based scope 3 framework?
Short Answer
Residual Mix is a concept primarily applied to Scope 2 market-based accounting under the GHG Protocol (i.e., to reflect the grid’s energy mix after contractual instruments like RECs are accounted for).
No Formal Requirement exists for a “Scope 3 residual mix.” The Scope 3 Standard does not prescribe a market-based vs. location-based dual accounting approach analogous to Scope 2.
Supplier-Specific or Average Factors typically suffice for Scope 3. While some companies unofficially use market-based logic for upstream electricity emissions (e.g., their suppliers’ renewable PPAs or RECs), there is no GHG Protocol mandate to apply an “industry residual mix” for Scope 3.
Below is more context on why residual mix is not strictly required—or even formally defined—for Scope 3 market-based reporting.
1. Residual Mix: A Scope 2 Concept
Under the Scope 2 Guidance from the GHG Protocol, companies are instructed to report emissions in two ways:
Location-Based: Using grid-average emission factors.
Market-Based: Reflecting contractual instruments (RECs, GOs, PPAs).
Residual mix factors come into play when you’re doing market-based accounting but lack reliable contractual instruments for certain consumption. They represent the leftover grid emissions after subtracting out renewables that have been claimed by someone else (e.g., via RECs).
2. Why Scope 3 Doesn’t Have a Formal “Residual Mix” Requirement
The GHG Protocol Scope 3 Standard does not define a parallel “market-based vs. location-based” approach for upstream/downstream indirect emissions. Instead, it provides recommended calculation methods for each of the 15 Scope 3 categories and encourages:
Supplier-Specific Emission Factors (primary data) whenever possible.
Industry Averages or life-cycle databases (secondary data) when supplier-specific info is unavailable.
There is no standardized requirement to use a “residual mix” for Scope 3 because:
Scope 3 is Extremely Broad: It covers purchased goods and services, upstream transportation, waste, end-of-life, etc. Each category has unique data challenges and varying levels of control.
No Official Market-Based Mechanism: The GHG Protocol never formalized an equivalent “market-based” method for Scope 3. There’s no official parallel to the Scope 2 Guidance’s “residual mix” concept.
Focus on Actual Supply-Chain Data: For the electricity portion of your suppliers’ operations, the Protocol recommends supplier-specific data reflecting real energy use and its associated emissions. If the supplier is using renewable electricity, the idea is to capture that in a lower emission factor for that supplier’s goods—rather than defaulting to a “residual mix.”
3. “Market-Based Scope 3” Remains Informal
Many large companies do talk about “market-based” approaches in their supply chain—particularly for upstream electricity use (e.g., Apple, Walmart). In practice, that means:
Encouraging Suppliers to Procure Renewables: Companies push or incentivize suppliers to sign PPAs or buy RECs.
Adopting Supplier-Specific Factors: If a supplier can prove they used renewable energy (with valid certificates), then the purchasing company adopts a lower emissions factor for that supplier’s portion of Scope 3.
This is effectively a “market-based” logic, but not an official, GHG Protocol–mandated residual mix system. The company does not need to gather or apply any “industry residual mix” for the entire sector—only to ensure they aren’t double-counting the same certificates.
4. Are Residual Mix Estimates Ever Used in Scope 3?
While there’s no GHG Protocol requirement, some companies might attempt to approximate a “residual mix” for their suppliers’ electricity usage if:
Supplier Data is Lacking: If suppliers do not provide specific data or certificates, a company might default to some grid-average or “residual-type” factor.
Industry Initiatives: A few industries (e.g., steel, aluminum) have begun creating standardized “low-carbon” vs. “average” emission factors to reflect production variations. But these are not formal “residual mix” constructs akin to Scope 2.
In short: If you want to approximate the grid emission factor after certain renewables are claimed by others, you can do so—but it’s not mandated by the Scope 3 Standard nor widely standardized.
5. Conclusion
No, industry residual mix estimates are not needed to use a “market-based” Scope 3 approach—principally because there is no official market-based vs. location-based dual reporting for Scope 3 in the GHG Protocol. The concept of “residual mix” is specifically defined for Scope 2. In Scope 3, you’re generally free to use supplier-specific data or other average factors. If suppliers have valid renewable energy instruments, you can claim the corresponding lower emissions factor. You do not need an industry “residual mix” baseline in order to do so.
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