Does a GHGP market-based Scope 3 framework exist?

Short Answer

Strictly speaking, the Greenhouse Gas (GHG) Protocol only defines “location-based” vs. “market-based” accounting methods for Scope 2 emissions (i.e., electricity consumption). The Protocol does not formally prescribe a “market-based” methodology for Scope 3. However, several large corporations have begun adapting market-based principles to certain categories of Scope 3—particularly purchased goods and services or supply chain electricity use—by encouraging their suppliers to use renewable energy certificates (RECs), power purchase agreements (PPAs), or other market instruments. Notable examples include Apple, Walmart, and Microsoft, each of which works with suppliers to procure clean energy, thereby effectively applying a market-based mindset to reduce or report on upstream Scope 3 emissions.

Below is a deeper dive into how this works and some illustrative corporate examples.


1. Clarifying “Market-Based” vs. “Location-Based” Approaches

Under the GHG Protocol, the distinction between location-based and market-based accounting is officially defined for Scope 2 (electricity consumption) only:

  • Location-Based: Emissions are calculated using grid-average emission factors based on where the energy is consumed (e.g., the regional or national grid mix).

  • Market-Based: Emissions are calculated using contractual instruments such as RECs, guarantees of origin (GOs), or PPAs. Companies that purchase renewable energy can claim lower Scope 2 emissions if they hold credible certificates.

Scope 3, on the other hand, covers a wide range of indirect emissions across the value chain. The GHG Protocol Scope 3 Standard provides various calculation methods for each of the 15 Scope 3 categories, but it does not define a “market-based” approach for Scope 3 in the same way it does for Scope 2. Nonetheless, corporations that drive their suppliers to adopt renewable energy (and track it via contractual instruments) are applying a market-based logic to certain Scope 3 categories (e.g., purchased goods and services, transportation, distribution, etc.).


2. Examples of Corporations Applying Market-Based Logic to Scope 3

Apple

  • Supplier Clean Energy Program: Apple’s well-known Supplier Clean Energy Program requires or incentivizes suppliers to purchase renewable energy for Apple’s manufacturing processes.

  • Impact on Scope 3: By having suppliers enter PPAs or procure RECs, Apple is effectively lowering the carbon footprint attributed to manufacturing their products (which is part of Apple’s Scope 3).

  • Reporting: Although Apple’s official carbon disclosures don’t use the phrase “market-based Scope 3” explicitly, the underlying mechanism is akin to a market-based approach: Apple claims reduced supplier emissions once the supplier has purchased verified zero-carbon electricity instruments.

Walmart

  • Project Gigaton: Through Project Gigaton, Walmart encourages its global suppliers to reduce or eliminate a gigaton of CO₂e from their collective operations by 2030.

  • Renewable Energy Initiatives: Walmart provides frameworks or guidance for suppliers to enter RECs or PPAs, thereby reducing Scope 3 emissions from purchased goods and services (Walmart’s upstream Scope 3).

  • Reporting Approach: In Walmart’s ESG reports, they highlight supplier-level renewable energy adoption. Although not labeled as “market-based Scope 3,” the end result is effectively the same: Walmart’s reported supply chain emissions can drop when those suppliers use lower-emission electricity.

Microsoft

  • Supply Chain Decarbonization: Microsoft’s Climate Pledge includes reducing Scope 3 by pushing suppliers to adopt renewable electricity and/or energy efficiency measures. (Wall Street Journal article)

  • Offsets and PPAs: Microsoft signs PPAs and also invests in offsetting projects, offering frameworks that some suppliers can leverage. While offsetting is not the same as “market-based accounting,” the direct purchase of renewable energy for supply chain operations can be considered a form of market-based Scope 3 decarbonization.

  • Reporting: Microsoft’s sustainability reports detail how they measure and verify supplier-based emissions reductions. Although the GHG Protocol does not mandate a separate “market-based” figure for Scope 3, Microsoft still applies the underlying principle of contractual instruments to their supply chain electricity.

IKEA

  • IWAY Standard & Supplier Energy Projects: IKEA’s supplier code of conduct (IWAY) includes stipulations that encourage renewable energy purchases or installation.

  • Scope 3 Reductions: By co-investing in solar or wind projects, IKEA effectively lowers the carbon intensity of materials and goods in its supply chain. While not branded “market-based Scope 3” in their public reports, the mechanics mirror a market-based approach for upstream emissions.

META

Kicked off an RFI process for value chain decarbonization projects to reduce their scope 3 emissions.


3. Why “Market-Based Scope 3” Is Not an Official GHG Protocol Term

  1. Scope 2 vs. Scope 3: The GHG Protocol only formalizes the location-based vs. market-based dual reporting requirement for Scope 2 electricity. It does not extend that framework to Scope 3 because Scope 3 covers a broad array of indirect emissions, each with different data requirements and accounting complexities.

  2. Multiple Categories: Scope 3 is split into 15 distinct categories (Purchased Goods and Services, Business Travel, Waste, etc.), each with recommended calculation methods that rely on average emission factors, primary supplier data, or economic input-output models. There isn’t a single prescriptive “market-based” category for them.

  3. Supplier-Specific Emissions vs. Certificates: Where market-based logic does appear is in using supplier-specific emissions factors, often lowered by that supplier’s renewable energy certificates or PPAs. This is effectively a market-based approach, even if not formally labeled that way.


4. Practical Tips for Implementing Market-Based Logic in Scope 3

  1. Request Supplier Emissions Data: Encourage or require suppliers to track and report their emissions using credible instruments (RECs, GOs, PPAs).

  2. Encourage Renewable Energy Adoption: Offer supplier financing or partnership programs (like Apple’s Supplier Clean Energy Program).

  3. Use Supplier-Specific Factors: When calculating Scope 3, use data from suppliers that have properly documented renewable energy usage. This ensures you don’t default to industry-average emission factors.

  4. Disclose Methodologies Transparently: While the GHG Protocol doesn’t label it “market-based Scope 3,” you can still describe how supplier RECs or PPAs reduce your reported Scope 3 footprint.


5. Summary

Although the GHG Protocol does not formally recognize a “market-based method for Scope 3,” several large corporations—Apple, Walmart, Microsoft, and IKEA, among others—are applying market-based principles within their upstream supply chains. They do this by encouraging or requiring suppliers to adopt renewable energy through contractual mechanisms. In practice, this lowers the “supplier-specific emission factors” that roll up into the reporting company’s Scope 3 footprint.

As corporate value chain emissions reduction efforts mature, we can expect more transparent supplier-specific reporting and the unofficial extension of market-based methodologies into Scope 3. For now, the best reference remains each company’s sustainability or ESG report, where you can see how they describe the role of renewable energy in driving down their indirect (Scope 3) emissions.

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