VALUE CHAIN (SCOPE 3) INTERVENTIONS –

GREENHOUSE GAS
ACCOUNTING &
REPORTING GUIDANCE

Version 1.1
MAY 2021
VALUE CHAIN (SCOPE 3) INTERVENTIONS – GREENHOUSE GAS ACCOUNTING & REPORTING GUIDANCE

Supporting ambitious corporate scope 3 climate

commitments with technical guidance on credible
greenhouse gas (GHG) accounting for value chain
interventions

Table of Contents
KEY TERMS AND DEFINITIONS __________________________________________ 3

PARTNERS AND ACKNOWLEDGEMENTS ___________________________________ 6

INTRODUCTION ______________________________________________________ 7

OVERVIEW OF GUIDANCE ______________________________________________ 9

WHO SHOULD USE THIS GUIDANCE ______________________________________ 9

HOW IT WORKS _____________________________________________________ 11

ACCOUNTING PRINCIPLES ____________________________________________ 14

DATA QUALITY ______________________________________________________ 15

PART 1 – HOW TO ACCOUNT FOR AN INTERVENTION _______________________ 17

PART 2 – HOW TO INCLUDE AN INTERVENTION IN THE SCOPE 3 INVENTORY ____ 34

PART 3 – HOW TO COMMUNICATE ABOUT INTERVENTIONS __________________ 40

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KEY TERMS AND DEFINITIONS

The terms and definitions applied in this Guidance generally refer to and align with the
Greenhouse Gas Protocol ‘Corporate Value Chain (Scope 3) Accounting & Reporting
Standard’ 1 (henceforth ‘Scope 3 Standard’). In addition, reference is made to the
Greenhouse Gas Protocol ‘Technical Guidance for Calculating Scope 3 Emissions’ 2
(henceforth ‘Scope 3 Technical Guidance’) and the Greenhouse Gas Protocol Project
Protocol (henceforth ‘Project Protocol’).

The following key terms are highlighted as adjusted and/or additional terms applied
within this Guidance. Some are also provided for ease of reference (marked as ‘from
(for e.g.) Scope 3 Standard).

Companies should be aware that the Greenhouse Gas Protocol is, at the time
of writing, developing standards and guidance for accounting for land-based
emissions and removals. These new approaches are likely to include further
requirements and clarification concerning several key aspects, including the
terms and definitions of this guidance.

Causality: Demonstration that an investment (or other equivalent action) of a

company or group of companies acting collectively to take advantage of supply shed
(see below) is what caused the Intervention to happen. Causality does not guarantee
rights to be able to issue or retire carbon credits for other purposes from an
intervention. This depends on the requirements of the issuing body, which may not
necessarily align directly with this definition.

Emissions Factor (from Scope 3 Standard): A factor that converts activity data
into GHG emissions data (e.g., kg CO2e emitted per litre of fuel consumed, kg CO2e
emitted per kilometer traveled, etc.).

Impact Factor: The relative improvement in emissions caused by an Intervention’s

impact on a targeted Scope 3 Activity, based on the assessment of ex-ante and ex-

1
https://ghgprotocol.org/sites/default/files/standards/Corporate-Value-Chain-Accounting-Reporing-
Standard_041613_2.pdf

2
https://ghgprotocol.org/scope-3-technical-calculation-guidance

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post emissions. Depending on the nature of the activities in the Intervention it may be
possible to use the Impact Factor to more efficiently assess the benefits of a larger
scale intervention without repeating the quantification exercise each time. The
credibility of this approach may depend on the homogeneity of activity and its
expected results and is likely to require further safeguarding where Interventions and
results are influenced by physical and spatial inputs, such as climate and water.

Intervention: An umbrella term for any action that introduces a change to a Scope 3
Activity (see below). This could include a new technology, practice or supply change
(for example, to a different product input or sourcing location) to reduce or remove
emissions. An Intervention may include changes to several Activities that reduce or
sequester emissions in different ways and that may or may not be included within the
Scope 3 Inventory.

Market: The pool of potential suppliers for equivalent purchased goods targeted by
an intervention. A geographical definition is typically applied, for example the pool of
potential suppliers in a given ‘sourcing area’ such as a catchment, landscape, country
or area for like goods and services. In some cases a market may be further defined by
specific market rules, such as those used by cooperatives.

Purchased Goods & Services (from Scope 3 Standard): Extraction, production,

and transportation of goods and services purchased or acquired by the reporting
company in the reporting. This Guidance primarily focuses on Interventions associated
with the activities involved in the Purchased Goods & Services category. Some of the
concepts may be applicable to other Scope 3 categories as defined by the ‘Scope 3
Technical Guidance’.

Removals: Carbon removals may be biogenic or engineered. This guidance focuses

on biogenic removals, noting that further guidance on the role of engineered solutions
is pending. [Excerpt from Scope 3 Standard3]: :”Scope 1, scope 2, and scope 3
inventories include only emissions, not removals. Any removals (e.g., biological GHG
sequestration) may be reported separately from the scopes.” This position is being

3
It is noted that the Greenhouse Gas Protocol is in the process of developing standards for the accounting of
removals. Hence this Guidance is primarily focused on interventions that target emissions reduction, though some of
the concepts may apply also to removals. This Guidance is intended for further update to include removals upon
completion of the Greenhouse Gas Protocol development.
https://ghgprotocol.org/blog/new-greenhouse-gas-protocol-standardsguidance-carbon-removals-and-land-use

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updated at the time of writing and it is expected that removals will form a more direct
input to company accounting and reporting (See footnote 3, below.)”

Scope 3 Activity (from Scope 3 Standard): An individual source of emissions

included in a scope 3 category. [Added for the purposes of this Guidance]: An
individual activity, representing a source of emissions that, when summed with other
sources of emissions define the overall Emissions Factor.

Scope 3 Inventory (from Scope 3 Standard): A quantified list of an organisation’s

GHG emissions and sources [outside of scope 1 and scope 2 emissions].

Supply Shed: A group of suppliers in a specifically defined geography and/or market

(e.g., at a national or sub-national level) providing similar goods and services that can
be demonstrated to be associated with the company's value chain. It may not be
feasible to demonstrate which specific suppliers provide the goods and services, but it
should be demonstrable that they are in the group that do, for example by
demonstrating that these suppliers provide material to the company’s direct suppliers.
The concept of Supply Shed is introduced to cater for situations where a reporting
company may not be able to directly trace sourcing to a specific supplier in the
upstream supply chain, but it is known that sourcing comes from that group of
suppliers.

Value Chain (from Scope 3 Standard): All upstream and downstream activities
associated with the operations of the reporting company, including the use of sold
products by consumers and the end-of-life treatment of sold products after consumer
use.

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PARTNERS AND ACKNOWLEDGEMENTS

The following organisations were involved in the founding and initiation, design and
development of this Guidance: Climate KIC, CDP, Danone, Mars, Livelihoods Fund,
WWF, and WRI.

The following contributors provided their expertise towards the development of this
document or previous versions. Their input is gratefully acknowledged, recognising
that doing so does not imply endorsement by individuals or organisations:

⎯ WRI – Cynthia Cummis

⎯ CDP – Pedro Faria, Alberto Carillo Pineda

⎯ WWF – Fernando Rangel Villasana, Tim Juliani

⎯ Mars – Ashley Allen, Kevin Rabinovitch, Cyril Hetzel

⎯ Danone – Eric Soubeiran, Flore Auge, Lucas Urbano, Marie-Pierre Bousquet-

Lecomte

⎯ Livelihoods Fund – Jean-Pierre Renaud

⎯ Climate KIC – Riyong Bakkegaard, Konstantinos Karagkounis, Ben Honan

⎯ Gold Standard – Owen Hewlett, Abhishek Goyal, Sarah Leugers, Giancarlo Raschio,
Vikash Talyan

⎯ SustainCERT: Sandra Genee, Richard Iliffe, Thomas Blackburn, Marion Verles,

Meinrad Bürer, Francesca Palamidessi

⎯ Quantis – Jon Dettling, Pierre Bloch

⎯ Gold Standard Technical Advisory Committee Members – Jacqueline Gehrig-Fasel

(TREES), Matt Spannagle

Gold Standard also gratefully acknowledges the inputs, ideas and experiences shared
by the Value Change participants.

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INTRODUCTION

This Guidance aims to enable and incentivise value chain Interventions by providing
an approach to recognise and include their impact in reporting towards quantitative
GHG reduction performance targets, even in cases where direct knowledge and
measurement of specific value chain participants is challenging.

Applying this guidance a will help companies to:

1. Identify characteristics of value chain Interventions that are subject to this

Guidance and design and select appropriate measurement and monitoring,
reporting and verification (MRV) approaches
2. Account for the net emissions changes associated with a given Intervention
3. Credibly include that accounting in the company’s Scope 3 Inventory and
reporting, where appropriate
4. Make narrative claims that describe and tell the story of the company’s role in
the Intervention and the impacts arising from it

Many companies are motivated to set value chain GHG emissions targets and report
on their progress, using protocols and standards such as the Greenhouse Gas Protocol
(henceforth GHGP) ‘Scope 3 Standard’ and the Science Based Targets Initiative
(henceforth SBTi). The setting and reporting of performance targets is typically based
on an emissions inventory approach.

Value chains are often deep and complex. With variable data quality, and traceability,
it may be impractical to investigate in detail and/or to act on directly with suppliers.
However, there is a growing recognition of the potential for value chain emissions to
contribute to averting the climate emergency and an expectation that companies
should be managing emissions in their value chain through setting ambitious targets
and engaging with suppliers and customers to achieve them.

As part of their reduction strategies, companies may employ '’Interventions': projects,

programmes and business decisions that drive sustainability and reduce emissions in
key areas of their value chain.

For many companies, large emissions sources may be far upstream in the supply
chain where influence and information availability is limited and supply is highly
dynamic. Therefore, implementing sustainability projects and programmes is not yet
practical. While in some cases the effects of supply chain Interventions are directly

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measurable, the structure of value chains can make it challenging to directly measure
these effects, for example, because specific supplier locations, identities, and/or
activities—especially those at the grower or producer level—may be unknown or
difficult to access.

Nevertheless, companies are well-advised to focus their reduction efforts on their

largest emissions sources and there is therefore a desire to find approaches to
investing in reduction efforts regardless of these access barriers. Where value chain
Interventions do not have such data and access barriers, application of the Scope 3
Standard may already be sufficient to demonstrate the reductions achieved.

This Guidance is intended to offer supplementary recommendations and advice in

cases where knowledge about an Intervention is available but there is a gap to be
resolved to link this intervention to a company’s specific supply. It is also intended to
address cases where the supply affected by an Intervention is unlikely to be exactly
that received by an intervening company, but is from the same production market or
sourcing area as where that company sources (referred to here as a “Supply Shed”),
for example, where upstream suppliers may be difficult to trace.

The guiding principles, approach and set of recommended practices are therefore
provided to enable the accounting of Interventions, include them in emissions
reporting to a credible amount, and account for and communicate about them
appropriately.

This approach is supplementary to and to be used in conjunction with the accounting

approaches provided in the GHGP Scope 3 Calculation Guidance. This Guidance may
also be applied in other reporting protocols and programs, where approved.

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OVERVIEW OF GUIDANCE
The Guidance is set out in 3 parts:

⎯ Part 1 – How to quantify and account for an Intervention: This section

provides a recommended approach for how to design, quantify and account for the
net emissions changes before and after an Intervention.

⎯ Part 2 – How to report an Intervention within a company's Scope 3

Inventory: This section provides a recommended approach for taking the
information developed under Part 1 and incorporating it into a Scope 3 inventory.

⎯ Part 3 – How to communicate about Interventions: This section provides

recommendations for how to make narrative claims associated with the
Intervention, for example, in communications, marketing and social responsibility
materials. It also covers the relationship between Scope 3 Interventions and
carbon markets.

Accounting and reporting of emissions that are 'in scope' in accordance with the Scope
3 Standard should follow both the Accounting Principles set out in that Standard and
in this document (where inconsistencies exist the Scope 3 should be assumed to take
priority). Impact claims about the overall Intervention are for narrative purposes and
may not strictly align with the Scope 3 Standard, which does not necessarily cover all
aspects that an intervention may Include (for example narrative claims concerning co-
benefits such as water or livelihoods).

WHO SHOULD USE THIS GUIDANCE

There are many stakeholders involved in realising an intervention, ranging from
producers and suppliers to the companies reporting the results. Other actors include
practitioners and proponents who are expert in the design and implementation of
Interventions, such as project developers and NGOs, or auditors that verify impacts
for reporting. The role of independent protocols that are designed to quantify impact,
such as tools and methodologies is also acknowledged. This guidance is not written
with a specific group in mind but rather should be used to inform the actions of each,
relevant to their roles.

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This Guidance is therefore primarily written through the lens of companies with Scope
3 GHG targets that seek to account for targeted Interventions in their value chain that
may impact the associated net emissions.

The Guidance is primarily aimed at Interventions that affect purchased goods and
services4 but some aspects of the approach could be extrapolated to other categories
of Scope 3 emissions, as detailed in the Scope 3 Standard. The Guidance henceforth
refers to supply chain for this reason. The Guidance is intended to be applied on a
voluntary basis by companies. Where an Intervention is mandated or imposed upon a
company, for example through regional or national policy, then the Guidance may still
be applied but the company should make this transparent in any communications
described under Part 3 of this Guidance.

Companies might use this approach to address 'hot spots' in their supply chain, to
target strategic improvements in key areas that can deliver rapid change, as an
element of their overall Scope 3 strategy. Figure 1 provides further direction on when
this could be applied:

Figure 1 – Decision making flow chart

4
Extracted from Scope 3Calculation Guidance (p7): 'Extraction, production, and transportation of goods and services
purchased or acquired by the reporting company in the reporting year'

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HOW IT WORKS
This Guidance assumes that the company already reports emissions inventory
reporting, for example through CDP and SBTi. Figure 2 sets out the steps towards
quantifying and accounting for the Intervention (Part 1 of this document) then
incorporating that data into the overall inventory reporting (Part 2) and finally making
credible narrative claims (Part 3) to promote it.

Step 3 – Step 5 – make

Step 2 – define Step 4 –
Step 1 – select and Monitoring, credible claims
intervention incorporate into
define intervention Reporting & concerning
baseline inventory reporting
Verification (MRV) intervention

Part 1 of Guidance Part 2 of Guidance Part 3 of Guidance

Figure 2 - Overview of process to apply this Guidance

The exact timing of the implementation of the Intervention is not strictly defined. This
Guidance could be applied to an intended Intervention (hence the Intervention may
commence after Step 2 above) or one that is already underway, in which case the
steps are applied retrospectively. Where applying retrospectively, users should take
steps to ensure an equivalent level of rigour is applied, for example, where it is not
possible to go back to collect data where conditions have changed.

The accounting approach for purchased goods and services in the Scope 3 Guidance
takes a life-cycle approach in that all direct and relevant upstream emissions
associated with producing a purchased good or service should be accounted for. The
Intervention-based accounting suggested here is complementary but allows for
adjusting accounting only for the changes caused by the Intervention, provided that
there is no reason to presume these changes affect emissions happening elsewhere in
that supply chain. This Guidance may also be applicable to indirect emissions where
relevant, material and accounted for.

The Scope 3 Calculation Guidance defines several approaches for accounting for
supply chain emissions, as outlined in Figure 3.

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Figure 3 (excerpt from p21 Scope 3 Standard) - different data types used for different calculation
methods

The Interventions most appropriate for this Guidance will generally fall between the
‘Hybrid’ method and ‘Average-data’ method, with a combination of supplier-specific
data and average data, for example, based on generalised assessments of
commodities at country- or global-levels. For companies far down the value chain (i.e.
closer to the end consumer), the life cycle often also includes several tiers of
suppliers. The life cycle stage closest to the “farm” or production level offering the
opportunity for field-specific data and unique data challenges.

Example: Company purchases milk products, wheat and cacao. The company's
Inventory for the three products is the sum of the total emissions for each. This, in
line with the Scope 3 Guidance is calculated using the product Emissions Factor (the
emissions intensity per unit of goods produced) multiplied by the quantity or volume
of each good purchased in a given year. This is illustrated in Figure 4.

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Source or sinks targeted by intervention

e.g. feedstock

Source of emissions not targeted

Emissions Factor for goods Volume of Milk Products

Source of emissions not targeted
purchased, e.g. Milk Products purchased

Source of emissions not targeted

Source of emissions not targeted

Company
footprint for
purchased
goods
Emissions Factor for goods Volume of Cacao purchased
purchased e.g Cacao

Emissions Factor for goods

Volume of Wheat purchased
purchased e.g Wheat

Figure 4: Illustrative company inventory model for purchases of milk products, wheat and cacao

In this example the Emissions Factor for Milk Products could be set using average data
sets available (for example, a default factor, such as those published by IPCC). The
company then carries out an Intervention that reduces emissions related to feedstock
(highlighted in orange, above) and captures this impact using supplier specific data, in
line with this Guidance to demonstrate the improvement. The remainder of the
Emissions Factor may be completed using supplier-specific information or still be built
using average data or supplier specific data, as best fits the needs of the reporting
company.

Users of this Guidance should keep in mind that the purpose is to account for changes
in emissions caused by the Intervention. It is therefore important to actively ensure
that there are real improvements in emissions with Causality (i.e. the result of an
Intervention), as opposed to a perceived improvement that is based only on
improving the accuracy of the calculation method.

Further Guidance is provided in Part Two of this document.

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ACCOUNTING PRINCIPLES
Users of this Guidance should adhere to the Accounting & Reporting Principles of the
Scope 3 Standard and other relevant GHGP documentation when making decisions
concerning their Intervention reporting. The principles are repeated as follows for
ease of reference, along with specific interpretation for Interventions:

Accounting Principle Applicability for Interventions

(excerpt from Scope 3 Standard)
Relevance: Ensure the GHG inventory The Intervention should be relevant to
appropriately reflects the GHG the purchased goods and services
emissions of the company and serves included within the Scope 3 inventory
the decision-making needs of users – of the reporting company.
both internal and external to the
company. A company may include the results of
an Intervention in their accounting as
appropriate and as they arise.
Activities that are in the Intervention
boundary but outside the inventory
boundary should be reported
separately.
Completeness: Account for and The reporting company should include
report on all GHG emission sources and all emissions related to the purchased
activities within the inventory goods and services targeted in their
boundary. Disclose and justify any inventory, not only the sources that
specific exclusions. are targeted for improvement.

Sources of emissions that fall outside

the impact of the Intervention may be
estimated using other methods, such
as the average data and supplier-
specific methods.
Consistency: Use consistent The approach used should be
methodologies to allow for meaningful consistently applied to the Intervention
performance tracking of emissions over over time. Approaches should be as
time. Transparently document any consistent as possible across multiple
changes to the data, inventory Interventions within the same supply
boundary, methods, or any other chain or scope.
relevant factors in the time series.
Where a baseline Intervention scenario
is applied, the same quantification
method and assumptions should be
used for both. This is covered in Part 2
of this document.

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Transparency: Address all relevant Companies should disclose uncertainty

issues in a factual and coherent and any relevant assumptions and
manner, based on a clear audit trail. limitations and make appropriate
Disclose any relevant assumptions and references to the accounting and
make appropriate references to the calculation methodologies and data
accounting and calculation sources used to measure the net GHG
methodologies and data sources used. emissions change from a supply chain
Intervention.
Accuracy: Ensure that the To continuously improve Intervention-
quantification of GHG emissions is level accuracy, baseline measurements
systematically neither over nor under should be updated when: 1) incorrect
actual emissions, as far as can be assumptions or inaccuracies in existing
judged, and that uncertainties are baseline measurements are
reduced as far as practicable. Achieve discovered; and 2) new or better data
sufficient accuracy to enable users to or methodologies become available.
make decisions with reasonable
confidence as to the integrity of the Uncertainty of Intervention results
reported information. should be disclosed and ideally reduced
over time. It is especially important to
calculate uncertainty for Interventions
that include a high degree of variability
or are impacted by physical factors
such as rainfall. For other
Interventions this may be less relevant
and can be dealt with at the overall
accounting level. The scale at which to
calculate uncertainty, for example if
averaging over a larger area should
also be disclosed.

Table 1 - Applicability of Scope 3 Standard Accounting & Reporting Principles

DATA QUALITY
Companies should refer to the Scope 3 Standard and Scope 3 Calculation Guidance for
requirements and recommendations on data quality to be used in the approach set
out in this Guidance.

This Guidance provides the general approaches for accounting and reporting but
cannot assess and recommend specific quantification and MRV approaches for every
combination of goods and Interventions. There are many sources of methodologies
and quantification approaches, tools and models. It is generally recommended that

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credible, third party quantification approaches are employed and that uncertainty,
limitations and assumptions are transparently disclosed.

Quantification methods should be appropriate to the Intervention context and

activities and should be peer reviewed and/or approved under recognised standards,
such as those found in carbon markets (which may require some conversion for this
purpose) or third party proprietary tools for specific sectors or producers.

Where model-based approaches are applied these should be checked against ‘ground-
truth’ on site as required and informed by the potential variability caused by, for
example, climate, water and other physical inputs. Model-based results should be
directionally true (i.e. if a positive improvement is reported there should be no
possibility of there being a negative result on site) and accurate/precise.

Companies should assess approaches against the above principles and their own
tolerance for risk, while further good practice guidance including recommended levels
of precision are under development at the time of writing.

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PART 1 – HOW TO ACCOUNT FOR AN INTERVENTION

This section recommends an approach for quantifying and accounting emissions
before and after an Intervention takes place. It covers topics associated with
recommended Intervention types, scope and boundary, baseline, accounting
methodologies, leakage, monitoring, reporting, and verification (MRV) and sustainable
development.

Emissions associated with purchased goods and services are calculated in the Scope 3
Standard by multiplying the volume of purchased goods by an emissions factor (EF).
As per the Scope 3 Guidance, the EF boundary should include all upstream (cradle-to-
gate) emissions of purchased goods and services, as in Equation 1:

Ey = Volume of Goods or Services Purchased * EF

Where:

Ey = Emissions in a given year associated with the purchase of goods and services

EF = Emissions Factor (an emissions intensity per unit of goods produced, tCO2e /
volume of product / year)

This Guidance seeks to enable the accounting and reporting of an improvement

caused by an Intervention without presuming the need for a full supplier-specific
approach to be developed for activities not targeted.

Depending on the level of granularity in the reported EF, it may be possible to

substitute new emissions results for a specific source of emissions in the EF at the
facility level, post-intervention in the reporting year and account for the reduction in
Scope 3 inventory. Alternatively, for example, where the EF is not broken down into
sufficient detail, the relative changes to specific sources of emissions and activities
caused by an Intervention can be reported using a substitution method, described in
Part 2 of this Guidance.

Note that the change in the post-Intervention EF can be determined by evaluating

only the portion of the supply chain acted on, provided the intervention cannot
reasonably be expected to cause changes elsewhere in the supply chain, in which case

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those changes should also be accounted for. This is also described further in Part 2,
under ‘substitution accounting’.

STEP 1 – SELECT AND DEFINE AN INTERVENTION AND SUPPLY SHED.

1.1 This Guidance is applicable to any Intervention that reduces (or potentially
removes5) emissions that will lead to a lower EF for the targeted goods and services.
Relevant Interventions may include new equipment and technology or changes in
behaviour or practice. Note that although changes within only a portion of the supply
chain might be evaluated in determining the new EF, all expected changes in the
supply chain emissions caused by the intervention should be accounted for.

This section does not presume the specific roles taken by companies, suppliers and
Intervention developers. This arrangement will be dependent on context and
preference of those involved. Where references to companies are made, users should
keep in mind to extrapolate and adjust for the roles and responsibilities they hold in
the intervention (in other words, the use of the word ‘company’ is intended to be a
catch all term in this Guidance).

1.2 The company should identify the purchased goods or services that are to be
targeted, the geographic and economic market area covered and the suppliers to be
included in the Intervention, insofar as feasible. Only Interventions that affect (i.e. are
in the value chain of) goods and services that are included within the inventory under
the Scope 3 Standard should apply this approach, though Interventions may include
aspects that are not part of the Scope 3 inventory (and accordingly should be
reported separately and do not count towards, for example, SBTi reporting).

Companies may define the scale of their Intervention a number of ways. For example,
an Intervention may help a number of producers improve yields with the same
emissions, which could be reported as a lower EF (with any excess being outside the
company’s Scope 3 boundary). Conversely, companies may also establish the yield
needed specifically and only for their inventory volumes and enroll producers or areas
to match. This can help to make the Intervention more targeted/accurate for a

5
The guideline is for interventions that impact biological sequestration only, for example soil organic carbon or in
woody biomass and not for activities involving Carbon Capture & Storage. Attention is drawn to the Greenhouse Gas
Protocol development of standards for accounting of removals that may result in significant updates to accounting
guidance and requirements in future.

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specific company’s needs but it should be noted that where yield is variable, for
example due to weather and natural variations, then company’s may wish to take care
to include provisions for production shortfalls.

If the actual goods and services purchased are not fully traceable, the same approach
may be applied to 'like' goods and services in what is called a 'Supply Shed'. A Supply
Shed is a group of suppliers in a specifically defined geography and/or market (e.g.,
at a national or sub-national level) providing similar goods and services that can be
demonstrated to be associated with the company's supply chain.

The boundaries of a Supply Shed may be defined economically, for example a group
of suppliers providing equivalent goods and services that can be demonstrated to be
within the company's supply chain and physically, for example a group of
suppliers/interventions in a specific catchment area. The appropriateness of each may
depend on the nature of the intervention.

It may not be feasible to demonstrate which specific suppliers provide the goods and
services but it should be demonstrable that they are in the group that do, for
example, by demonstrating that these suppliers provide material to the company’s
direct suppliers. The concept of Supply Shed is intended primarily to cater to
situations where a reporting company may not be able to directly trace sourcing to a
specific supplier in the upstream supply chain, but it is known that sourcing comes
from that group of suppliers.

Companies should consider the following two questions:

1. Is it demonstrably possible that the tier two or above supplier (for example,
farm) provides products to the tier one supplier (for example, mill)? If the
answer is No, the farm is not in the Supply Shed.
2. Does the Intervention impact, at least in part, the emissions and/or removals
processes of the tier two or above supplier? If No, the Intervention outcomes
cannot be included in Scope 3 reporting.
Furthermore, corporates should consider spatial effects where appropriate.
Interventions may result in physically and spatially dependent benefits, for example,
those influenced by localised conditions such as climate, soil type, or water as
opposed to those whose results are more comparable wherever they are applied, such
as switch to renewable energy. In such cases, the company should consider restricting
the definition of Supply Shed or to explore the possibility of larger scale averaging of

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results, if possible. This may be highly dependent on the nature of the purchased
goods and on local conditions, with sector or crop specific tools and guidance likely to
emerge.

The Supply Shed concept recognises that it may not always be feasible to
demonstrate which specific upstream suppliers or producers (e.g., farmers) provide
the goods and services, but it should be demonstrable that they are in the group that
do. This approach caters to situations where a Company may not be able to directly
trace sourcing to a specific upstream supplier but it is known (i.e. can be
demonstrated) that sourcing comes from a group of suppliers within a geographical
area (the “market”) from which Company sources. It also allows some flexibility for
the coming and going of individual suppliers within that market, while maintaining
overall integrity of accounting.

Example 1: A company produces apparel for sale in the US and Europe. It uses
natural materials from various sources, but the company can trace to regions of
smallholder farmers without being able to specify further. The company works with
smallholders to improve processes that sequester carbon in the soil and reduce
energy process emissions. It reports these benefits in accordance with the VCI
Guidance, applying a Supply Shed model to overcome the inherent traceability issues.

Company A purchases wool and textiles for sportswear from a group of facilities,
group ‘1’, but is not able to trace the wool, cotton and other inputs back to specific
ranches that supply group 1 because the products are consolidated at the facility level
before being distributed further down the supply chain. It is also a highly dynamic
product, changing seasonally the mix of textiles involved.

If it is possible to demonstrate that the ranches where Company A introduces

Interventions provide products to, a direct supplier of the Company, i.e. group 1
facilities from which Company A sources, these ranches can be included in Company’s
Supply Shed. Company A should take care to review the equivalence of goods
reported, for example by tracking specifically year on year on and applying a factor to
ensure accuracy of annual results, or reporting averages over a longer period if this
can be achieved transparently and credibly.

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Example 2: Company B purchases dairy products from farms participating in a

cooperative. The participating farms sell through an aggregator or wholesaler and
have agreed that prices and supply that consolidates that supply. It is neither
physically possible (due to mixing) nor socially possible (due to cooperative
agreement) for Company B to trace supply to specific farms in the region. If it is
possible to demonstrate that the farms included in the intervention participate in the
co-operative, Supply Shed can apply.

The Supply Shed concept potentially introduces a risk of double counting, involving
the scenario where:

⎯ Company A, the proponent (investor) of an Intervention with a group of upstream

suppliers in their Supply Shed, reports the beneficial greenhouse gas (GHG) result
of the intervention but do not know which supplier(s) in the group produce the
exact goods they purchase.

⎯ Company B, who are not involved in the causality of the Intervention, are
physically purchasing some or all of the goods targeted by the Intervention. If they
become aware of and report the beneficial impacts of the Intervention on GHG
emissions and/or removals, both Company A and Company B might report the
same improvement.

In this example, Company B should not report the Intervention benefits in the above
example as this may result in double counting and cannot demonstrate Causality. In
practice, this is challenging to prevent due to the lack of transparent tracking and
allocation of benefits to date. Solutions to protect against double counting may vary
from case to case, but may include transparent declaration of use and usage
restrictions, agreement with producers/suppliers on allocation or the creation of
tracking systems in future. This Guidance is not prescriptive due to the varying nature
of supply chains. Rather, companies should adhere to the letter and spirit of GHGP
and avoid harmful double counting and minimise the risk of others double counting.

It is noted that this form of double counting between two company inventories is a
different issue to double claiming between one company’s inventory and carbon
credits used for offsetting. This issue is further explored in Part 3 of this Guidance.

While the Supply Shed concept is primarily intended to overcome genuine traceability
issues, rather than to maximise reporting benefit by aggregating an intervention on a

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specific or group of specific suppliers, there may be cases where its application may
overcome other barriers to investment. For example, investment or support to
suppliers that provide small volumes of specialist goods to a wide range of customers
may be limited due to there being no single or groups of customers large enough to
have the incentive to act. Application of the Supply Shed concept to such examples
may be reasonable and credible but users should take care to consider whether other
forms of support or cooperative action are feasible as well as whether an aggregation
approach may negatively impact incentives for others to take action in the same
supply chain.

The supplier market approach to defining Supply Sheds could also be used in broader
sense to include those upstream suppliers within Supply Shed that supply to direct
suppliers of Company. This allows suppliers, where an Intervention takes place and
are not supplying goods to actual tier 1 supplier of the Company but to ‘potential’
suppliers (i.e. those that are in the same Supply Shed that potentially can supply the
same goods to the purchaser), to be included in Supply Shed.

Options are provided below in decreasing order of preference to justify upstream

suppliers as part of Supply Shed. Please note that first preference in any case is the
scenario where upstream suppliers providing similar goods and services can be
demonstrated as supplying goods and services to actual direct suppliers of the
Company. Generally speaking, companies should keep equivalency in mind when
defining their Supply Sheds and markets, including both economically and physically
where appropriate.

1. Option 1 - It should be demonstrated that there is a pre-defined market for

the type and quality of specific good, and the Company purchases that
specific good from that market. Examples could include regulated areas or
areas covered by industry associations.

2. Option 2 - the same type of specific good purchased by a company are

physically transported in the market (for example, cooperatives) where
a Company buys from.

In some circumstances, where it is impossible to both link the goods a company buys
to a specific market and link the goods brought to that market to specific producers
and suppliers, the following option could be considered as interim accounting options
until better data is available. Note that at the country level or other similarly larger

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scale definitions, it may be challenging to demonstrate equivalence, particularly where

Interventions are more spatially/physically influenced. See also 1.7, below, for
commentary regarding market-based approaches at larger scales.

3. Option 3 - the same type of specific good purchased by a company are

produced in same Country (or potentially larger region, noting that
physical/financial connectedness may become less and less straightforward to
demonstrate credibly) where the company buys from.

Example

In row-crop agriculture, a specific field can grow a rotating selection of crops in

different growing seasons or years. If a company causes an Intervention on a
specific field that grows a commodity purchased by the Company in year 1, a
different crop that the Company does not purchase may be grown on the field in
year 2. As outlined in the Value Chain Interventions Guidance, that field has the
‘potential’ to supply the original crop to the Company in the future and hence can
be considered within the company’s Supply Shed.

Oat Intervention Example

If only oats are grown commercially on the Intervention farms, all of the resulting emission
reductions can be attributed to the volume of oats grown. If more than oats are grown
commercially on the farms, the company should apply an allocation adjustment – either
mass or economic – to the reduced emissions attributed to the oats. This example assumes
only oats are grown.

• 5,000,000 kg of oats are sourced from a predetermined Supply Shed (e.g., USDA
Land Resource Region – Northern Great Plains Spring Wheat Region, Saskatchewan
and Manitoba)

• Standard oat emissions factor is 0.357 kgCO2e/kg oats for the Supply Shed

• Average farm emissions within the Supply Shed are 500 kgCO2e/farm acre

• An Intervention is made within the Supply Shed on 1,000 acres, reducing the
average farm emissions to 375 kgCO2e/farm acre

• The average oat yield for the Supply Shed is 1400 kg/acre

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• Company is able to demonstrate that the Intervention farms in the Supply Shed
grow or have grown oats

Pre-Intervention emissions

Emissions from oats prior to Intervention = 5,000,000 kg x 0.357 kgCO2e/kg oats =

1,785,000 kgCO2e

Impact Factor

375 kgCO2e/farm acre after Intervention / 500 kgCO2e/farm acre before Intervention =
0.75

Mass of oats from ‘potential’ oat growing farm land in the Supply Shed
improved:

1000 acres x 1400 kg/acre = 1,400,000 kg oats linked to intervention acres

Emissions from oats:

{(5,000,000 kg – 1,400,000 kg) x 0.357 kgCO2e/kg oats} + {1,400,000kg x 0.357

kgCO2e/kg oats x .75}

=1,285,200 kgCO2e + 374,800 kgCO2e = 1,660,000 kgCO2e

The company’s Supply Shed intervention resulted in a 1,785,000 – 1,660,000 =

125,000 kgCO2e improvement in emissions.

1.3 Interventions that target a change in technology or practice should be within the
Supply Shed of the company (see above). Interventions covering multiple Supply
Sheds should report each separately. It is recommended that categorisation mirrors
the company's overall inventory.

1.4 The Intervention boundary should be defined. It is recommended that this is done
using the definitions and guidance in the GHGP Scope 3 Standard and Guidance. It
may also be helpful to consider the GHGP Project Protocol, though care should be
taken over including aspects that are not within the Scope 3 boundary but may be
within a project boundary. An Intervention may target the improvement of one or
more activities within a value chain and one or more specific processes within that.

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The EF boundary should include all of the emissions associated with production, even
though the calculation of results and, if desirable, creation of an Impact Factor may
focus on only those activities and processes affected by the Intervention. For
practicality purposes, a company may be able to review the underlying average EF
assumptions already used and determine if they are reflective of the conditions in the
Intervention. This can be further supplemented with Intervention-specific data should
these assumptions require further substantiation.

1.5 One Intervention may include several changes to activities and processes, for
example introducing new technologies and changing several practices under one
Intervention programme. Some of these activities may fall partly or entirely outside
the boundary of the Scope 3 inventory, either because the results are surplus to the
volume of goods purchased by the company or because the activities are not part of
the Scope 3 boundary, per GHGP definitions, and reporting should reflect this
accordingly. Part three of this document explores options for these elements in further
detail.

For example, a company that procures nut products for use in cosmetics may
introduce a range of activities under one Intervention that could include:

⎯ Improvements to farming practices to reduce emissions and to sequester soil

carbon

⎯ Introduction of efficient technologies for smallholders to improve the processing of

nut products, for example improved cookstoves that are also used domestically

In the latter activity, the emissions may be partly covered within the Scope 3
boundary and partly outside. For example, if the users of the stoves process the nuts
using the stoves then this would be within the Scope 3 boundary, while if the stoves
are also used for domestic purposes then, while still very valuable, these emission
reductions would fall outside the Scope 3 boundary. Therefore, they should not be
included within the inventory accounting, but may be calculated for another purpose,
such as communicating about the broader Intervention benefits, see Part 3 of this
document).

Companies should therefore separately report on what is included within the Scope 3
boundary from what is considered outside. There are several resources that provide
guidance on this topic, for example:

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⎯ The Scope 3 Standard and Scope 3 Guidance provides requirements and

recommendations for what can and cannot be included within the Scope 3
boundary and should be the first point of reference. Other guidance may include:

⎯ ISO 14040 and14044 are used extensively in establishing Life Cycle

Assessment (LCA) boundaries for products whilst ISO 14064 for projects may
also provide useful definitions and requirements. The definitions of what is
and is not included within a system boundary can act as a guide to establish
what should be included in a Scope 3 boundary.

⎯ Quantis World Food LCA Database includes useful illustrations of system

boundaries for agricultural products.

For the purposes of overall claims concerning an Intervention (see Part 3 of this
document) the sum total of all activities may be included. For the purposes of GHG
inventory accounting, only those that are within the Scope 3 boundary should be
included. By separating these out in table form the user can make informed decisions
based on their accounting for what to include and what to say about it.

1.6 An assessment of the volume of goods impacted by the Intervention should be

made, such that a robust estimate of the amount of goods and services produced per
year by suppliers within the boundary of the Intervention can be presented. Likewise,
companies should ensure that the activities resulting improved EFs are continued after
the Intervention is implemented. This may involve ongoing MRV to ascertain that the
beneficial activities have not reverted to pre-implementation practices.

1.7 It is recommended that companies incorporate sustainable development

approaches within the Intervention, particularly for those Interventions that impact
social or environmental issues. These should include:

⎯ Stakeholder inclusivity – Identifying interested and affected stakeholders and

ensuring their views are incorporated into the design and that there is an ongoing
feedback and grievance mechanism in place. Engagement should ideally take place
prior to the Intervention to gather feedback from stakeholders that can shape the
Intervention and deliver greater benefits and buy-in overall.

⎯ Mitigating risks and safeguards – Identifying and addressing potential negative

impacts and providing mitigation for them, including for any stakeholder rights that
may be affected.

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⎯ Contributions to sustainable development – Identifying opportunities to contribute

wider positive impacts to sustainable development relevant to the targeted goods
and services.

It is beyond the scope of this Guidance to provide specific information on these points.
Instead it is recommended to follow guidance such as UNDP Social and Environmental
Standards or best practice approaches such as Gold Standard for the Global Goals.
This is particularly important for Interventions in value chains in developing countries
or in vulnerable communities.

1.8 The Supply Shed concept implies the potential to create market-led or market-
based approaches to scaling Scope 3 action. As noted earlier in this section, as the
definition of Supply Shed is widened, for example to country scale, it may also
become challenging to credibly report benefits that are physically and spatially
defined, for example by input such as climate, soil type, water etc.

The GHGP accounting approach is generally based on ‘physical’ accounting and

reporting, meaning that the processes reported are those physically associated with
the reporting company.

It is often not possible to report on the exact goods purchased by a company to

maintain this physical connection. In doing so it may become impractical to carry out
an Intervention, due to the dynamics of procurement and supply chains over time. To
provide a solution to these issues, market-based approaches or mechanisms have
been proposed by some proponents. Markets have the potential to scale action by
allowing transactional, simplified access to benefits through collective action. It may
be possible to overcome the issues posed by scale and spatial effect, whilst
maintaining a credible level of physical connectivity to the goods purchased. This
requires further consideration and careful development in future.

It is therefore concluded that this Guidance neither promotes nor precludes the use of
market-based approaches or mechanisms towards Scope 3. It is expected that further
development in this area will progress in the coming years.

STEP 1 OUTPUTS.

At the end of Step 1 a company should be able to report:

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⎯ The Supply Shed of goods and services targeted for improvement by the Intervention, as
related to their overall company inventory

⎯ The nature of the Intervention proposed, how it relates to the EF of the targeted goods
and services and how it will reduce or remove emissions inside and outside the Scope 3
boundary

⎯ Where appropriate, a design and implementation plan for the Intervention that addresses
issues of sustainable development

⎯ For each Supply Shed:

⎯ The total volume of commodity affected by the Intervention

⎯ An assessment of the number and tier of suppliers included

It is recommended that these outputs are independently verified (as recommended in the
Scope 3 Standard) and ideally certified under a quality standard such as Gold Standard.

STEP 2 – DEFINE INTERVENTION BASELINE

1.9 Establishing a baseline scenario for the Intervention allows for greater flexibility in
accounting (see Part 2) and helps to demonstrate that the Intervention has genuinely
improved emissions. To demonstrate the improvements caused by the Intervention, it
is important to clearly define and measure the emissions of the impacted goods and
services prior to the Intervention. The baseline EF (or factor for the specific processes
targeted) should represent the relevant goods or services supply chain immediately
prior, or within a reasonable timeframe (i.e., where data is available and where the
situation can be accurately verified) to the implementation of the Intervention.

The baseline should account for the condition as close to reality and as consistent with
the accounting for the post-Intervention state as is feasible. Collection of baseline
data may be undertaken from a period of time prior to Implementation as long as any
changes during that period are incorporated, to the extent feasible. Many project
accounting methodologies provide detailed guidance for how this can be achieved and
may provide useful guidance.

Companies reporting against performance targets should assess and record baselines
within 2 to 3 years before the Intervention. This ensures that benefits for
Interventions already in place and claimed by others are not double counted.

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It is noted that this is a recommended maximum period and not a target – many
companies establish baseline at the inception of an Intervention and hence may
capture data at year 0 of the Intervention. It may also be possible that a general
baseline could be developed that accounts for variation in specific baselines at
production unit level, across a larger region. The aim of this recommendation is to
ensure accurate data and hence this approach would be acceptable. Companies should
consider the optimal and most efficient baseline data collection. For example, it may
be feasible to collect at the same time as implementing the Intervention or to use
nearby control/comparison sites with similar conditions.

If it is not feasible nor cost-effective to assess the baseline 2 to 3 years prior, a longer
time frame is possible but the company should take care to ensure data used is
credible. It is possible to apply pre-existing data for those baseline EFs that are not
targeted by the Intervention, see 1.7. If no baseline data is available or is only
partially available then the company may apply other sources of data, such as default
factors, though as noted above many project accounting methodologies provide
alternatives to assist with developing baseline scenarios. In these cases, care should
be taken to ensure that these include sufficient granularity as compared to the data
proposed to be included in the Intervention and that the scopes (i.e. sources of
emissions) are comparable.

Overall, care should be taken to avoid inconsistency of accounting between baseline

and Intervention scenarios as doing so may result in over-estimation of benefits.

1.10 The Intervention baseline emissions are defined as:

⎯ The annual emissions associated with the baseline status of the EF (or targeted
processes) prior to the Intervention, in line with 1.9, above

⎯ For sequestration – the storage and rate of sequestration in relevant sinks prior to
the Intervention, in line with 1.9, above. Note that this definition may further
evolve subject to the GHGP pending development on land-use emissions and
removals.

1.11 The baseline EF is defined as:

Equation 2:

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EFby = EAPby / Pby

Where:

⎯ EF by = the Emissions Factor for the targeted process in the baseline year

⎯ EAPby = the total net emissions or sequestration associated with the targeted
supply chain Intervention in the baseline year

⎯ Pby = the total production of the good or service associated with the Intervention
(and in Supply Shed) in the base year

1.12 Companies should assess the different characteristics of the areas and practices
targeted by the Intervention and stratify accordingly. Examples might include
suppliers in different climatic areas or with specific environmental characteristics that
are different from other areas the Intervention is applied. A baseline should be
created for the targeted commodity supply chain in each case where the resultant
improvement may differ due to context specific conditions.

1.13 For collecting and calculating baseline emissions, it is recommended to focus on

primary data for the emissions affected by the Intervention and to be transparent
about any assumptions and uncertainty in the data collected.

Specific guidance for different EF may exist that could also be applied. In addition,
project-level methodologies, such as those used by the Clean Development
Mechanism and Gold Standard, could be adapted for this purpose (see also Part 3 for
guidance on relationship to carbon credit issuance). For the latter, the baseline and
boundary definitions would need to be adjusted in accordance with Step 1 of this
Guidance. The GHGP Project Protocol may also provide useful guidance and
approaches.

For consistency, it is important that the same approach or an approach to ensure

consistency and equivalence is applied to both the baseline and post-Intervention
calculations.

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1.14 It is recommended that the baseline is independently verified by a competent

third party. As it is ultimately the change or improvement that is of interest, the same
verifier should also in the Scope 3 Standard (Chapter 10, Assurance).

STEP 2 OUTPUTS.

At the end of Step 2, a company should be able to clearly define the baseline status of the
proposed Intervention, the total volume of goods and services affected, and report total
baseline disaggregated sinks and sources of emissions and EF for the targeted goods or
services. This should be done for each Supply Shed identified in Step 1.

The company should also be able to justify the approach to quantifying the Intervention
baseline and identify any assumptions. For verifiable assertions, the company should also
document the justification, along with any other pertinent assumptions and calculations.

STEP 3 – POST-INTERVENTION QUANTIFICATION, MONITORING,

.REPORTING & VERIFICATION (MRV)

1.15 The approach to quantify emissions and EF post-Intervention is defined as

follows:

Equation 3:

EFyn = EAPyn / Pyn

Where:

⎯ EFyn = the Emissions Factor for the targeted process in year n (i.e. any given year
post Intervention)

⎯ EAPyn = the total net emissions associated with the targeted process in year n

⎯ Piyn = the total Volume of production associated with the Intervention in year n

1.16 For carbon removals, the change between the cumulative rate of removal
compared to the baseline should be used to calculate for reporting separately to
emissions, noting that accounting for land-based emissions and removals is currently
under development by GHGP and these definitions may further evolve.

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1.16 Similarly to baseline definition, it is recommended to focus on primary data for

the emissions affected by the Intervention and to be transparent about any
assumptions and uncertainty in the data collected.

Specific guidance for different EF may exist that could also be applied. In addition,
project-level methodologies, such as those used by the Clean Development
Mechanism and Gold Standard, could be adapted for this purpose (see also Part 3 for
guidance on relationship to carbon credit issuance). For the latter, the baseline and
boundary definitions would need to be adjusted in accordance with Step 1 of this
Guidance. The GHGP Project Protocol may also provide useful guidance and
approaches.

For consistency, it is important that the same approach or an approach to ensure

consistency and equivalence is applied to both the baseline and post-Intervention
calculations.

1.17 Monitoring should be conducted at a frequency commensurate with data

accuracy needs, practicality and risk unless otherwise specified in the chosen
quantification methodology. Typically, a company implementing an Intervention would
conduct ongoing monitoring at a frequency of between 1 and 5 years. Reporting is
recommended at an annual frequency in line with corporate accounting.

1.18 Monitoring of intervention results should be continued until the results can be
considered to be a permanent change of practice and/or equilibrium is reached (in the
case of sequestration) unless otherwise specified in the chosen quantification
methodology. A period between 5-20 years would be a typical range of post-
Intervention monitoring, though the exact duration should be determined based on
the needs and relevance to the reporting company.

The reporting company should then maintain a monitoring regime if it is to continue to

report on the net emissions improvements for credible claims. For practicality, this
could focus on whether the practices or technologies are still employed or, in the case
of sequestration, that no major loss or reversal has taken place. GHGP are currently
developing land-based emissions and removals accounting approaches, of which

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permanence is likely to be a key feature. Further development is expected in this

area.

1.19 Monitoring and reporting should be independently verified by a competent third

party, see 1.14.

1.20 Company should be transparent in all cases concerning any assumptions and the
level of uncertainty involved in their MRV calculations and reporting. Uncertainty can
be assessed using the GHGP tools and guidance.

STEP 3 OUTPUTS.

Step 3 is effectively repeated for a number of years post-Intervention. For each given year, a
company should be able to report on total volume of goods and services impacted and
purchased, as well as total emissions or emissions sequestered, associated with the targeted
production activities.

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PART 2 – HOW TO INCLUDE AN INTERVENTION IN

THE SCOPE 3 INVENTORY
This section provides a recommended approach to taking the outputs generated in
Part 1 and incorporating them into a company’s scope 3 inventory.

STEP 4 – INCORPORATE INTO THE COMPANY'S SCOPE 3 INVENTORY.

2.1 Emissions Factor

The emissions associated with an Intervention should be used to either create or

update an Emissions Factor, as described in Part 1, above. Companies should clearly
state the rationale for the option selected and be able to demonstrate that emissions
have been reduced (and not only been reported more accurately) by comparison with
baseline.

There are 3 main accounting approaches defined in the GHG-P Scope 3 Technical
Guidance:

1. Supplier specific - All data used to calculate emission factor is specific to the
supplier from whom goods and services are purchased.
2. Average Data - All data is based on secondary process data, for example,
default factors.
3. Hybrid - A mix of supplier-specific and average data. This is the accounting
approach proposed in the Value Chain Interventions Guidance and further
options for accounting using this approach are defined below.

In many cases the reporting company will apply an activity that impacts a limited
number of processes that contribute to the overall Emissions Factor of a given
purchased good or service. For example, Company A may seek to reduce the overall
emissions intensity of cotton production and target activities such as tillage but not
other factors such as fertiliser. Therefore, it may not make sense to take detailed on
site measurements for those processes that are not targeted by an Intervention.
Hence, an accounting method that allows only certain processes to be targeted and
updated is required.

To allow for this the following options are provided.

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Option 1 – Facility Substitution Method

This method could be used where multiple Intervention activities (i.e., affecting
multiple processes) are applied at a supplier’s facility. New emissions factor (EF) from
supplier-specific data is created for the entire facility. This new EF can substitute the
prior EF. The prior EF should be based on facility specific data, or in absence of facility
data, average data could be used.

Example

Company A purchases cotton from a group of farmers. It implements three

Interventions targeting processes ‘X’ (tillage), ‘Y’ (fertilisers) and ‘Z’ (burning
residues) that are sources and sinks of emissions by implementing new technology
and practice types. Two other processes (‘A’ and ‘B’, irrigation and transport) are
left untouched by the Interventions. The Interventions impact an annual production
of 10,000,000 tonnes of coffee per annum.

⎯ Intervention Emissions for targeted process ‘X’ = 2,000,000 tco2e per annum

⎯ Intervention Emissions for targeted process ‘Y’ = 1,000,000 tco2e per annum

⎯ Intervention Emissions for targeted process ‘Z’ = 3,000,000 tco2e per annum

Emissions for non-targeted processes ‘A’ and ‘B’ are 500,000 and 2,500,000 tco2e
per annum respectively.

Facility Substitution Method

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• Company A’s Emissions Factor prior to interventions = 1.0 for cotton, which includes
all the five processes. This can be supplier specific or based on average data

• Sum of Emissions of targeted and non-targeted processes after intervention =

2,000,000+1,000,000+3,000,000+500,000+2,500,000 tco2e per annum

• New Emissions Factor =

(2,000,000+1,000,000+3,000,000+500,000+2,500,000)/10,000,000 = 0.9 tCO2e
/Tonne of cotton / year

• Company A substitutes the facility’s original emission factor of 1.0 with 0.9 tCO2e
/Tonne of cotton / year

Option 2 – Process Substitution Method

This method could be used where there are multiple processes that affect the
emission factor of the facility but only one or two processes are targeted with value
chain Interventions. Two other scenarios could be applicable here:

Scenario 1 - Where the EF for the facility prior to Intervention is broken down into
granular detail on specific processes within the facility and supplier is measuring post-
Intervention EF for targeted process(es) and relying on other sources/average data
for the rest. In this case the Intervention baseline EF for targeted process (supplier
specific or average data) can be substituted with post-intervention EF for targeted
process.

Scenario 2 – Where the EF for the facility prior to Intervention is not broken down into
granular detail on specific processes within the facility but supplier is measuring post-
Intervention EF for targeted process(es). In this case the Intervention baseline EF for

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targeted process (supplier specific only) can be substituted with post-intervention EF

for targeted process.

Companies should work with suppliers to build capacity and agree approaches to
minimise double claiming with other reporting companies in this scenario.

Example

Company A purchases coffee from a group of farmers. It implements an

Intervention targeting Process ‘X’, that reduces emissions by implementing a new
technology type. All other processes are left untouched by the Intervention. The
Intervention impacts an annual production of 10,000,000 tonnes of coffee per year.

⎯ Intervention Baseline Emissions Intensity for targeted process = 1,000,000

tco2e per annum / 10,000,000 tonnes coffee yield per annum = EF of 0.1

⎯ Intervention Emissions Intensity for targeted process = 500,000 tco2e per

annum / 10,000,000 tonnes coffee yield per annum = EF of 0.05

Comparison

Substitution Method (scenario 1) Substitution Method (scenario 2)

• Company A’s original EF = 1.0 for • Company A’s original EF = 1.0 is not
Coffee, which includes for targeted broken down into process
process
• Net EF calculated by deducting
• EF of targeted process = 0.1 intervention targeted process minus
baseline targeted process (=0.05-0.1
= -0.05)

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• Company A substitutes out the 0.1 • Original EF 1.0+(-0.05) = New EF of

(leaving 0.9) and adds back in the 0.95
Intervention process factor of 0.05

• New EF of 0.95

Example

Company A purchases coffee from a group of farmers. It implements three

Interventions targeting processes ‘X’, ‘Y’ and ‘Z’ that reduce emissions by
implementing new technology types. Two other processes (‘A’ and ‘B’) are left
untouched by the Interventions. The Interventions impacts an annual production
of 10,000,000 tonnes of coffee per year

⎯ Intervention Emissions Intensity for targeted process ‘X’ = 2,000,000 tco2e per
annum / 10,000,000 tonnes coffee yield per annum = EF of 0.2

⎯ Intervention Emissions Intensity for targeted process ‘Y’ = 1,000,000 tco2e per
annum / 10,000,000 tonnes coffee yield per annum = EF of 0.1

⎯ Intervention Emissions Intensity for targeted process ‘Z’ = 3,000,000 tco2e per
annum / 10,000,000 tonnes coffee yield per annum = EF of 0.3

Emissions Intensity for non-targeted processes ‘A’ and ‘B’ is 0.05 and 0.25
respectively

Substitution Method (scenario 1)

• Company A’s EF prior to interventions = 1.0 for Coffee, which includes for all the five
processes. This can be supplier specific or based on average data

• Sum Emissions Factor of targeted and non-targeted processes after intervention =

0.2+0.1+0.3+0.05+0.25

• New EF of 0.9 tCO2e /Tonne of coffee / year

Company A substitutes the facility’s original emission factor of 1.0 with 0.9

2.2 Assessing amount of goods and services to report

Companies should report in their Scope 3 inventory footprint only the portion of the
affected good or service that is purchased (noting that the concept of Supply Shed

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may be taken into account). Two broad approaches are possible, depending on
whether the company is directly intervening/supporting change or indirectly
influencing the Intervention outcome, for example through a contractual relationship
with a supplier.

Method 1 - Direct Intervention: Where a company is the direct proponent of an

Intervention (i.e. can demonstrate causality, per Part 3 of this Guidance), all
production impacted by the Intervention can potentially be reported, up to the total
amount of goods and services actually purchased from the group of suppliers, so long
as they are within the Supply Shed. This allows companies that directly support
change to report the benefit of their Intervention regardless of whether they take
physical receipt of the affected goods.

Only one company or consortium of companies working together (and clearly

allocating amongst themselves) should apply the Direct Intervention Method in order
to minimise risk of double counting.

Method 2 - Indirect influence: In cases where a company is not intervening

directly, but are either working broadly across the supply base (for example, through
industry-wide efforts), indirectly influencing an initiative or conducting a supply switch
approach then physical tracing should be applied. In this case the company should
demonstrate that the goods and services accounted for were those actually
purchased.

Section 4.2 describes how more extensive 'narrative' claims could be made for goods
and services impacted by the Intervention, beyond the scope of what is being
purchased.

Companies should present an assessment of the amount of goods and services

purchased, including both traceable and untraceable elements, and any assumptions
made to reach a total. Particular attention should be given to ensuring that the total
amount of improved goods reported as purchased does not exceed the total
production capacity impacted by the Intervention (as these would represent false
emissions claims).

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A company should include in their report the volume of goods purchased (as
estimated in above), multiplied by the post-Intervention EF. For all other purchased
goods and services of the same type not covered by the intervention, these should
not be reported using the post-Intervention EF.

PART 3 – HOW TO COMMUNICATE ABOUT

INTERVENTIONS
This section provides guidance as to the claims that can be made associated with the
interventions created. Generally, the claims outlined in this Section are for voluntary
purposes rather than legal, regulatory or compliance claims, though companies should
be aware that many such mechanisms may overlap with inventory accounting at the
activity level.

Companies should ensure that where they are required to report for such purposes,
for example, for national policy reasons (carbon taxation, corporate social
responsibility requirements) that their accounting, reporting and narrative are in line
with any such legal requirement. Applying this guidance does not guarantee this due
to the variety of regulated approaches where an Intervention may occur or overlap.

This Guidance is launched at a time of change within carbon markets, especially

voluntary applications of carbon markets, such as offsetting. Generally, the Guidance
adheres to the principle that use of markets to facilitate change beyond the company
boundary should not disrupt or detract from inventory-focused efforts. The Guidance
also recognises that carbon markets have a range of applications, including those that
require a unique claim to a benefit (for example, offsetting) and those that do not (for
example, results-based financial contributions).

This section therefore considers two broad applications of mitigation that is not
captured within the company inventory and that may be used in the context of
voluntary carbon markets or financial contributions:

1. For offsetting claims – wherein a company claims that their emissions have
been compensated such that the atmosphere is ‘no worse off’ overall than it
would have been if the company had not emitted. This claim requires the credit
used for offsetting to be uniquely owned and not captured either in national or
other company inventories.

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2. For finance claims – wherein a company claims to have financed an

Intervention through the purchase of credits or other results-based finance
mechanism. In this instance the claim is not compensatory and hence is not
reliant on unique ownership, particularly if the claim concerns supporting a host
country or area of supply chain. It is always good practice to disclose the
nature of double claiming for transparency.

While the first claim, offsetting, is well established it is expected that the second claim
will increase in popularity over time as an appropriate mechanism to support action in
the era of the Paris Agreement whilst not precluding others from benefitting in their
inventory or national reporting (as would be the case for offsetting, see below).

In general, the above is included because offsetting, wherein an entity compensates

for an emission by purchasing and retiring a carbon credit (and to make claims such
as carbon neutrality) requires a uniquely claimed carbon credit.

Without this provision it cannot be said with certainty that other claimants have not
inadvertently negated the compensation by their behaviours caused by the benefit.
For example, a company may adjust progress elsewhere in their inventory due to the
signal from interventions financed by carbon offset markets, in a similar way to
leakage. Not all carbon credits are used for offsetting, with other finance claims
emerging that are not undermined in the same way by double claiming. Further
development is expected in the coming years on this point. In general however,
companies should take responsibility for the integrity of mechanisms they participate
in or effect and not assume that double claiming is acceptable when interacting with
carbon markets.

3.1 The amount of goods and services that can be included in company inventory
reporting is defined in Part 2. Companies should include as appropriate and allowed
within their given reporting protocol and within the scope of these sections. In
general, companies should transparently disclose all the benefits of interventions and
their status as either inside or outside a company inventory boundary and why.

3.2 As well as reporting the goods and services purchased or estimated to have been
purchased from the suppliers, this section explains how the company may also:

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⎯ Issue carbon credits 6 for surplus emission reductions or removals (either for impact
on goods beyond the purchase volume of the company or for activities that do not
fall within the Scope 3 boundary) under a reputable scheme, such as Gold
Standard. To avoid integrity issues associated with double claiming (see above),
the issuance of carbon credits for use in offsetting or other uniquely claimed
benefits should be limited to the emissions reductions and removals related to the
balance of goods and services not reported in the Scope 3 Inventory unless an
inventory adjustment is made (i.e. the Scope 3 inventory is revised to exclude the
benefits of sold credits). In other words, it is not possible to issue carbon
credits from emissions reductions that are also reported in the corporate
inventory. Purchasing or making claims concerning carbon credits that have been
reported in another company’s inventory is not recommended. Note that the rules
of the relevant carbon credit issuer may not fully align with and/or include
elements not covered in this Guidance.

⎯ It is noted that the above alone cannot remove the possibility of inadvertent
double claiming between inventories and carbon markets, for example, where
inclusion in reporting is not transparent. Schemes that issue carbon credits
and companies that purchase them should avoid creating the possibility of
double claiming so far as possible, pending further integration between
markets and reporting. Alternatively, claims associated with the use of carbon
credits should shift to the ‘financial contribution’ model outlined in the
introduction to this section.

⎯ Report the emissions benefits of the Intervention alongside their company report,
for example, for marketing and communications. If the claims to the emissions
reductions are sold to third parties as carbon credits for use in offsetting or other
uniquely claimed benefits, the company should no longer make these claims (as
the right to do so is transferred with the carbon credit).

To take advantage of such claims, the company should be able to demonstrate that

6
It is noted that the rights to ownership of carbon attributes are a fundamental principle of carbon
crediting. Hence carbon credits should only be pursued by the owner of the credit, typically the supplier
involved, or to have transparently transferred that ownership to the reporting company. This is a
requirement of any credible carbon standard.

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their actions substantively contributed to or enabled the Intervention and resulting

emissions benefit. Demonstrating their contribution allows the organisation to:

⎯ Apply the changed EF generated by the Intervention more broadly (see Parts 1 and
2 for further detail)–

⎯ Make communication claims concerning the Intervention and its benefits (covered
in this section)

⎯ Access market mechanisms such as carbon credit issuance in the voluntary carbon
markets (where specific third party issuance requirements are met).

As previously noted, this contribution can be demonstrated in a number of ways:

⎯ Direct financial investment: For example, the company directly purchases or

finances the procurement of new equipment for the supplier. While circumstances
will greatly differ from Intervention to Intervention, the financial investment should
be such that, individually or collectively, it allows the Intervention to proceed and
is commensurate to the benefit to the reporting companies. Concerns could include
‘tokenistic’ investment that takes advantage of the efforts of other companies or
taking 100% of the benefits reached without a commensurate contribution to
enable this. If working collectively, the joint contributions of the different
corporates should be acknowledged.

⎯ Incentives: For example, a company offers improved contractual terms or

preferential sourcing in return for changes in production practices.

⎯ Procurement requirements: For example, an organisation introduces a new

supplier requirement for specific actions, such as no-till agriculture, or emission
reduction results, such as a 10% improvement from a baseline. Or an organisation
procures certified goods or goods that comply with a specific standard that equates
to reduced emissions.

The company may also wish to demonstrate their contribution in other ways but, if
they are going to attribute an emissions reduction to an Intervention, they should be
able to demonstrate overall that the activities associated with and the improvements
being generated by the Intervention were not occurring prior to the causal action and
that the changes would not have occurred without the Intervention.

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It is possible for companies to work together to deliver an Intervention. Accordingly,

joint attribution is also possible and should be transparently stated in reporting.
Where appropriate, net emissions changes should be adjusted for proportional
attribution of different causes and actions from different companies.

Carbon market evolution in relation to Scope 3

Many companies employ offsetting as a way to take urgent action towards

compensating residual emissions while in-boundary reductions are implemented or
while on the journey towards science-based target achievements.

Value chain engagement and Scope 3 reporting deepens, the overlap between the
activities that are employed to reduce indirect company emissions will increasingly
overlap with carbon market activities. This enhances the potential for double
claiming of one emission reduction benefit, towards a science-based target and
towards a compensatory claim, such as carbon neutrality.

Double claiming risks undermining the environmental integrity and credibility of

both the Scope 3 inventory and the offsetting claim and results in less overall
climate mitigation potential. As voluntary mitigation rises in both demand and
scrutiny, the efficacy of reporting and claims becomes especially important to avoid
accusations of greenwashing.

This Guidance therefore recommends that companies avoid seeking

issuance of carbon credits where the same reduction is also being reported
as part of their Scope 3 inventory. Likewise, it recommends that carbon
credit issuers avoid issuing both for the same reduction. Finally, this
Guidance recommends that companies do not make offsetting claims from
credits issued for activities known to be part of a Scope 3 Intervention and
where the specific reduction is being reported by another company.

It is acknowledged that these recommendations do not fully resolve this complex

issue. It remains possible, due to the overlapping claims in Scope 3, that a
downstream user reports the benefit in their Scope 3 inventory. In time, more
sophisticated registry and tracking mechanisms are expected to emerge to formally
remove the possibility of double claiming.

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Finally, new uses of carbon markets that do not relate to offsetting/compensation

claims may arise. Examples may include corporate contributions to country targets
via domestic mechanisms. Under such schemes, double claiming may become less
of a concern. Companies should adhere to the requirements of any scheme in which
they participate and avoid double claiming between inventory and offset accounting.

3.3 Narrative claims

Beyond the scope of what can be included within reporting protocols, a company that
implements a successful initiative is encouraged to promote it in other ways, for
example through promotional material or press releases. The following types claims
could be used:

Type of Claim Description Example

Story-based Descriptive claims about By providing financial support and

narratives, the Intervention and its training, we implemented a
descriptions and impact, including the role programme of farming best
claims of the company in making practice in Togo, working with 250
it happen. smallholder farmers to improve the
sustainability of cocoa production
and deliver emissions benefits by
storing carbon in the soil.
Emissions reduction Quantified claims about Our programme of incentives led
or removal claims the impact of the to the installation of onsite
Intervention in reducing renewables at 25 factories in
or removing emissions or Georgia, reducing emissions by
lowering emissions 500,000tCO2e between 2015 and
intensity 2017.
Contribution to Paris Claims that the Our best practice supplier
Agreement or other intervention (and hence procurement protocol in Peru
policy approach the company) has reduced emissions by 1Million
supported the Paris tCO2e between 2020 and 2025,
Agreement by reducing or supporting the goals of Peru's
removing emissions Nationally Determined Contribution
and the ambition of the Paris
Agreement

Table 2 - Narrative Claims

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3.4 Double Counting: So far the issue of double claiming between offsetting, finance
and Scope 3 has been considered. There are various other forms of double counting
that affect emissions reporting. Not all instances of what may be considered double
counting are prohibited in corporate inventory accounting. The response to double
counting differs depending on the nature of reporting or claims being made – Table 2,
provides an overview of the forms of double counting relevant to supply chain
interventions and how they are treated.

Double Counting Type Example Response

Between a Company’s A company purchases This is an acceptable form

Scope 3 inventory and products from a supplier. of double-counting, since it
supplier Scope 1, 2 or 3 The company invests in or is logical that all or a
inventory influences energy efficiency portion of a company’s
improvements that reduce Scope 1, 2 and 3 emissions
emissions in the operations will be within the Scope 3
of the supplier. The emissions of all other
company includes the companies in their value
benefits of that chain. It also encourages
Intervention in their Scope joint responsibility for the
3 inventory, and the same emissions, which may
supplier incorporates the lead to an increased shared
Intervention into their focus on resolving them.
Scope 1 inventory.

Two companies account for One company invests in This risk is mitigated by
the same improved goods improvements to a given implementing a robust
and services supplier and accounts for mass-based accounting
the improvement system so that each
associated with the amount company only counts the
of goods and services improvement tied to the
purchased from them (i.e. goods they source, and the
a lower emissions factor). supplier does not “sell” the
A second company also already-claimed
buys from that same improvement to additional
supplier and also accounts customers. Other
for the lower impact or companies purchasing from
“cleaner” goods and targeted suppliers should
services purchased. consider this Guidance
when assessing their
reporting, should they wish
to include the improved
emissions status.

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Emission reductions A company includes Projects and companies

counted for both reported reductions from an should safeguard against
reductions from supply Intervention into their the same emissions
chain interventions and scope 3 emissions reductions being both sold
issued as carbon credits inventory improvements as credits that require a
from the Intervention and also issues carbon unique claim and counted
credits arising from the in inventories. See earlier
reduced emissions from in Part 3 of this document
that same Intervention. for further guidance.

Company and national A company creates an This is an acceptable form

inventories count the same intervention resulting in of double-counting, since
emissions reductions in lower emissions and all emissions can
their inventories. reports this in its inventory. simultaneously be part of
At the same time the host national emission
country captures the inventories and corporate
benefit in its national inventories. There is no
inventory. intention that corporate
accounting be exclusive of
national accounting and in
fact may lead to shared
responsibility.

Table 3 – Managing Double Counting

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