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GHG reporting now extended to Scope 3

As Europe is struggling with heat waves and forest fires, achieving carbon neutrality remains one of our best chances in the fight against global warming. But this balance, so essential to avoid exceeding the 2°C mark, can only be achieved with a drastic reduction in greenhouse gas (GHG) emissions.

Faced with this responsibility and a growing collective awareness on the part of consumers, many companies are required to implement a transition plan to reduce their emissions and to carry out a GHG assessment. This obligation has just been reinforced and extended to scope 3 following decree no. 2022-982 signed on 1 July by the Minister for Energy Transition. But what is scope 3? Who are the entities concerned?

As defined by the French Environment and Energy Management Agency (ADEME), a GHG balance sheet is the measurement of the quantity of greenhouse gases emitted by an organisation (company, local authority, territory, etc.) over one year. Depending on their origin, the emissions are organised into different categories called "sources". This breakdown makes it easier to identify the most significant emission sources and thus where reduction efforts should be directed.

Scope 1 encompasses the direct GHG emissions generated by the activity of an organisation or territory. They may, for example, be linked to the manufacture of a product if this requires the use of fuels or to a company's car fleet due to the consumption of fossil fuels. Scope 2 includes indirect emissions related to the consumption of electricity and heat. Finally, scope 3 refers to all the remaining emissions not directly related to the manufacture of the product but to other stages of the life cycle. This may include supply, transport or end of life. This scope also includes the purchase of goods and services, i.e. the entire subcontracting chain of the company.

( Ademe)

From a regulatory perspective, as stipulated by article 75 of the Grenelle law, only certain organisations are required to carry out this GHG assessment:

  • Legal entities under private law employing more than 500 employees in metropolitan France (250 in the DROMs);

  • Legal entities under public law with more than 250 employees;

  • Local authorities with more than 50,000 inhabitants;

  • State services.

Companies must renew their assessment every 4 years and every 3 years for the rest of the parties concerned listed above. The reports must then be transmitted and published via the electronic platform for emissions reports administered by Ademe. In the event of non-compliance, the entity at fault will be fined €10,000, or €20,000 in the event of a repeat violation. This amount has been increased from the initial €1,500 due to the low number of organisations that have followed the regulation so far.

But this fine is not the only thing that has changed. In accordance with decree no. 2022-982 of 1 July 2022, the scope of the reports has also been revised. Where previously only scopes 1 and 2 were mandatory, from 1 January 2023, companies with more than 500 employees subject to the extra-financial performance declaration (EFPD) will have to include scope 3 in their assessment. For other organisations that are also subject to the BEGES but not to this criterion, this scope remains optional but highly recommended.

Why is there such an emphasis on indirect emissions? Because of their weight. According to ADEME, indirect emissions often represent nearly 75% of a company's emissions, or even more depending on its activity. Limiting one' s study to scopes 1 and 2 makes it possible to focus on the means of production and use reliable and easily accessible data, but this implies missing the real problem and implementing only superficial measures. Taking all the emissions into account gives a global view of the organisation's activity and enables it to adopt a long-term strategy that includes drastically reducing its carbon footprint and offsetting the residual emissions. Actions that are in line with the ERC environmental strategy, previously described by Carbonapp.

However, although this decree is a real step forward in the environmental responsibility of companies, it is still incomplete. Only companies subject to the EFPD are affected by this expansion of the scopes, which leaves a large number of organisations such as SMEs and VSEs free to ignore a large part of their carbon emissions. This is a significant omission when one considers the weight of Small and Medium Enterprises and Very Small Enterprises in the climate footprint. According to a report published in 2018 by the Economic, Social and Environmental Council, the emissions of VSEs and SMEs represented 12 to 14% of French companies if only scopes 1 and 2 and two scope 3 emissions were taken into account. These values are therefore highly underestimated and illustrate the need to open up the regulations to other organisations.

Since December 2021, companies with more than 50 employees that have received financial support under the recovery plan must publish a simplified GHG assessment, scopes 1 and 2, before 31 December 2021. This assessment is a start in making SMEs more environmentally responsible, but once again it excludes VSEs and the consideration of scope 3. It is therefore up to the will and ecological awareness of small businesses to carry out their carbon assessment, and on their entire activity. Just as Carbonapp did in May 2022.

Article written by Axelle Rimpot


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