Scope 3 reporting in the mining industry: challenges and solutions
UnsplashUnsplashUnsplash
· 10 min read
Established in 1998 by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the Greenhouse Gas Protocol categorizes a company's emissions into Scope 1, 2, and 3.1
Scope 1 emissions cover emissions generated from a company’s operations, while Scope 2 emissions refer to emissions from purchased energy, such as electricity.
Scope 3 emissions, on the other hand, encompass emissions from suppliers, customers, and the entire product life cycle, and exclude emissions from direct operations and purchased energy. Common examples in the mining industry include emissions from the production of purchased chemicals for processing, manufacturing of heavy mining equipment, business travel, and the manufacturing and use of steel.
The Greenhouse Gas Protocol further divides Scope 3 emissions into downstream and upstream emissions across fifteen categories. Upstream emissions in the metals and mining industry refer to emissions from the production of goods and services used in operations. In contrast, downstream emissions occur after mining operations and include emissions from the transportation of processed ore to refineries, and the production of final products such as steel and gold bars.
Scope 3 emissions account for over 75% of total emissions of metals and mining companies in most cases, and around 28% of global greenhouse gas emissions. Therefore, measuring and reducing these emissions are critical to achieving net-zero targets within designated timelines.
Scope 3 emissions fall outside a company’s operations, meaning metals and mining companies must rely on suppliers and customers to play a part in accounting for these emissions. Despite this challenge, several of the world’s largest metals and mining companies have set Scope 3 emissions targets, with most aiming for net zero emissions by 2040 or 2050.
According to a 2021 report by Mining Technology, most of the top 20 metals and mining companies in the world have set net-zero emissions goals for 2050, but many of these commitments lack a clear path or strategies for reducing Scope 3 emissions. The report further notes that, because steel manufacturing often occurs overseas, major iron producers like Rio Tinto and BHP are focusing on energy efficiency and technological advancements since they are unable to influence actions that would lead to emission reductions.
Scope 1, 2, and 3 emission reduction targets of some of the world’s largest metals and mining companies;
• Anglo America – scope 1 and 2 carbon neutrality by 2040 and 50% for scope 3 emissions by 2040, and NetZero by 2050
• Barrick Gold – 30% reduction in scope 1 and 2 emissions against a 2018 baseline and NetZero by 2050
• BHP – 30% reduction in scope 1 and 2 emissions by 2030 from a 2020 baseline, and NetZero scope 3 emissions by 2050
• China Shenhua Energy – carbon neutrality by 2060
• Freeport McMoran – Four 2030 targets for scope 1 and 2 emissions. The first and second targets aim to reduce GHG emissions from America's copper operations by 15% and PT-FI Grasberg mine by 30%. The third and fourth targets aim to reduce GHG emissions of Atlantic Copper Smelter and refinery by 50% and primary molybdenum sites by 35%
• Glencore – 50 % reduction in scope 1, 2, and 3 in industrial emissions by 2035 and NetZero by 2050
• Rio Tinto – 50% reduction in scope 1 and 2 emissions by 2050 from a 2018 baseline and NetZero by 2050
• Vale S.A. – 33% reduction in scope 1 and 2 emissions by 2030 from a 2017 baseline, a 15% reduction in scope 3 emissions by 2035 from a 2018 baseline, and net-zero scope 1 and 2 emissions by 2050
The following challenges and solutions are drawn from multiple reports, including the ICMM guidance on Scope 3 emissions accounting and reporting. This article applies cross-sector insights to the Scope 3 landscape in the mining industry, given the similarly long and complex value chains of sectors like heavy manufacturing and oil and gas.
1. Limited availability of quality data from the supply chain and customers
Data necessary for assessing Scope 3 emissions include both upstream and downstream emissions data. To ensure comprehensive Scope 3 emissions measurement and reporting, metals and mining companies must rely on data from value chain partners. This presents a challenge because companies have limited control over their partners’ activities.
In many cases, obtaining a comprehensive Scope 3 emissions report involves calculating the carbon footprint of both operations and the product life cycle, which is a time-consuming process.
2. Engaging stakeholders
Stakeholder engagement in obtaining reliable information on Scope 3 emissions is often hindered by knowledge gaps, confidentiality concerns, or reputational risks.2
Awareness of emissions accounting varies widely across sectors and countries, which results in low supplier and customer data availability. Smaller companies often lack understanding of accounting and reporting mechanisms, while some suppliers with emissions data may be reluctant to share it due to legal concerns.
3. Resource constraints
The financial and human resources required to measure and disclose Scope 3 emissions deter many companies from making the effort.3 Comprehensive measurement requires investment in databases, analytics tools, and expertise. Small and medium-sized enterprises in the supply chain often lack the technical expertise, making it difficult for them to obtain accurate and consistent data.
4. Lack of standardisation in accounting and emission allocation methods
While the ICMM has introduced guidance for Scope 3 accounting and reporting, there is no universal alignment among major suppliers and customers of mining companies.4
The absence of standardisation means different measurement and reporting mechanisms, which makes it more challenging when processing occurs overseas.5 Companies, therefore, resort to spend-based models or industry-average factors which can reduce data accuracy and credibility.
5. Insufficient third-party databases
Data from ESG or life-cycle assessment platforms may be incomplete due to limited disclosures, transparency issues, or regulatory restrictions. Using multiple sources to fill gaps can create inconsistencies because of differing methodologies and formats.
Collaboration between metals and mining companies and their upstream and downstream partners facilitates alignment on accounting and measuring approaches to ensure accuracy and consistency in emissions data.
BHP, Rio Tinto and Vase have introduced engagement programs with suppliers and customers to improve accuracy and consistency in scope 3 emissions measurement and reporting.
BHP partnered with ESG data platform provider DNV Veracity to digitize and authenticate greenhouse gas emissions data from its shipping operations into standardized and auditable data sheets. In addition, it has engaged with its top 50 high-emitting suppliers to align on GHG disclosures and sustainability targets.6
Rio Tinto developed a START “nutrition-label” ESG platform, which uses blockchain-based traceability to provide suppliers and customers with transparent and consistent data covering 14 ESG metrics.7
Vale Metals - launched a voluntary disclosure program with its key suppliers, which has achieved 84% participation to foster alignment on emissions reporting.8
With the energy transition and the rapid advancement of AI in clear focus, mining is poised to play a more critical role by supplying critical and rare earth minerals. Producers of these minerals must collaborate with their customers to develop standardised strategies that will align data measurement and reporting mechanisms to enhance downstream emissions reporting.
Raising awareness among suppliers and customers through training programmes and education must precede alignment of accounting and reporting mechanisms to achieve consistency and accuracy in measuring and reporting.9 Suppliers and customers must understand the importance of measuring and reporting emissions, most especially scope 3 emissions. It is only after foundational awareness is established that training programmes on how to measure and interpret emissions data, as well as the sharing of tools for measurement and reporting, can be effective.
Challenges faced by metals and mining companies in obtaining Scope 3 emissions data are similar, which presents an opportunity for sector-wide collaboration.
Metals and mining companies can share knowledge and ideas on navigating the challenges of obtaining Scope 3 emissions data from suppliers and customers, thereby accelerating progress toward a consistent and transparent emissions reporting across the industry.
Government agencies have a significant role in standardizing accounting and reporting standards. As mentioned earlier, obtaining data from steel manufacturers has been difficult due to the refining of processed minerals occurring overseas. China, as the world’s largest producer of steel, imports about 70% of the world’s seaborne iron ore.10 Producers of these iron ores find it difficult to obtain emissions data due to inconsistencies in China’s national-level GHG accounting protocols and international standards for measuring and reporting emissions.11
Further hurdles are regional standards, which prevent interoperability in terms of data reporting and comparability. Although the IFRS S1 and S2, developed by the International Sustainability Standards Board (ISSB), aim to establish a single global baseline for emissions reporting, their qualitative rather than quantitative approach makes it more challenging for companies that lack adequate resources to rely on regional or voluntary standards and frameworks.12
Governments and regional bodies, therefore, need to collaborate with global standard-setting bodies such as the ISSB or the International Accounting Standards Board (IASB) to align on reporting standards. This will ensure interoperability in emission accounting and reporting systems and simplify the disclosure process.
Achieving comprehensive Scope 3 emissions measurement and reporting in the mining industry depends on cross-sector alignment and collaboration. This will create a more standardised approach to accounting and reporting methodologies and improve data consistency and accuracy.
The metals and mining industry plays a critical role in the energy transition through the supply of critical minerals, therefore, it is important to measure and report scope 3 emissions, and implement strategies to reduce them.
Given the mining industry’s critical role in the energy transition, it is essential that Scope 3 emissions are accurately measured and addressed. The metals and mining industry must ensure it is driving progress toward net zero, not holding it back.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
See how the companies in your sector perform on sustainability. On illuminem’s Data Hub™, access emissions data, ESG performance, and climate commitments for thousands of industrial players across the globe.
1. Deloitte. The Scope 3 challenge: Solutions across the materials value chain. https://www.mckinsey.com/industries/metals-and-mining/our-insights/the-scope-three-challenge-solutions-across-the-materials-value-chain
2. Deloitte. Challenges and solutions in measuring and reporting Scope 3 emissions. https://www.deloitte.com/nl/en/issues/climate/challenges-and-solutions-scope-3-emissions.html / https://www.deloitte.com/content/dam/assets-zone2/nl/en/docs/services/risk-advisory/2024/deloitte-nl-sustainability-challenges-in-measuring-and-reporting-scope-3-emissions.pdf
3. International Council on Mining and Metals (ICMM). Scope 3 Emissions Target Setting Guidance. https://www.icmm.com/website/publications/pdfs/environmental-stewardship/2023/guidance_scope-3-target-setting.pdf?cb=70059 / https://www.icmm.com/scope-3-target-setting
4. MDPI. Are Sustainable Supply Chains Managing Scope 3 Emissions? A Systematic Literature Review. https://www.mdpi.com/2071-1050/17/13/6066
5. Glencore. Sustainability Report 2023. https://www.glencore.com/.rest/api/v1/documents/static/be5b0554-2c1d-415d-8072-be6a30d91d79/GLEN-2023-Sustainability-Report.pdf
6. BHP. Sustainability Report 2023. https://www.bhp.com/-/media/documents/investors/annual-reports/2023/230822_bhpannualreport2023.pdf
7. DNV. DNV and Veracity become key enablers in BHP’s Scope 3 maritime emissions strategy. https://www.dnv.com/news/2022/dnv-and-veracity-become-key-enablers-in-bhp-s-scope-3-maritime-emissions-strategy-222417/
8. Greenhouse Gas Protocol. Corporate Value Chain (Scope 3) Standard. https://ghgprotocol.org/corporate-value-chain-scope-3-standard
9. Mining Technology. How scope 3 emissions pose the biggest threat to net-zero ambitions. https://www.mining-technology.com/features/cop26-scope3-net-zero/?cf-view
10. Carbon Direct. Supplier engagement strategies to meet scope 3 targets. https://www.carbon-direct.com/insights/supplier-engagement-strategies-to-meet-scope-3-targets
11. Rio Tinto. Rio Tinto launches START: the first sustainability label for aluminium using blockchain technology. https://www.riotinto.com/news/releases/2021/Rio-Tinto-launches-START-the-first-sustainability-label-for-aluminium-using-blockchain-technology
12. Vale. Vale sets partnership to engage suppliers to measure and report carbon emissions. https://vale.com/in/w/vale-sets-partnership-to-engage-suppliers-to-measure-and-report-carbon-emissions
13. World Steel Association. World Steel in Figures. https://worldsteel.org/data/world-steel-in-figures/world-steel-in-figures-2025/
14. Mining.com. Column: China’s iron ore imports rise even as steel struggles. https://www.mining.com/web/column-chinas-iron-ore-imports-rise-even-as-steel-struggles/
15. Daniil Filipenco. Top 10 iron ore-producing countries in the world. https://www.developmentaid.org/news-stream/post/196162/top-iron-ore-producing-countries-in-the-world
16. Wood Mackenzie. How are diversified miners tackling scope 3 emissions? Assessing corporate approaches to setting targets and addressing indirect emissions in the value chain https://www.woodmac.com/news/opinion/how-are-diversified-miners-tackling-scope-3-emissions/
17. Network for Greening the Financial System Information. Improving Greenhouse Gas Emissions Data. https://www.ngfs.net/system/files/import/ngfs/medias/documents/ngfs_information_note_on_improving_ghg_emission_data.pdf
18. World Bank Blogs. Getting the fundamentals right: Measuring, reporting, and verifying carbon emissions at the city level in China. https://blogs.worldbank.org/en/sustainablecities/getting-fundamentals-right-measuring-reporting-and-verifying-carbon-emissions
19. Top 10 Chinese Importers of Iron Ore – Australian Miners Should Know About. https://camaltd.com/chinese-iron-ore/#:~:text=China's%20demand%20for%20iron%20ore,Initiative%2C%20and%20strong%20manufacturing%20growth.
Sandeep Pai
Energy Transition · Corporate Sustainability
illuminem briefings
Corporate Sustainability · Net Zero
Luca Miggiano
Public Governance · Corporate Sustainability
Mexico Business
Corporate Sustainability · Net Zero
HEATMAP
Corporate Sustainability · Net Zero
The Independent
Net Zero · Corporate Governance