How to Address Scope 3 Emissions in the Mining Value Chain

Many metals and other mined materials are going to play an important role as we transition to a low-carbon economy. However, the mining sector itself is one of the largest industrial contributors to global greenhouse gas emissions — directly accounting for 4% to 7% of scope 1 and scope 2 emissions globally.

When indirect scope 3 emissions are considered, mining is responsible for on an even larger share of global emissions. A recent McKinsey analysis found that up to 28% percent of global emissions are the result of the indirect impacts of mining operations.

The journey to net zero can’t be travelled without the mining industry, but it will also require a way to reduce the mining’s industry impact throughout its value chain.

Scope 3 and the Value Chain

To understand how to look at emissions in the complex value chain for an industry like mining, it helps to understand where different emissions com from. Emissions are broken up into Scope 1, 2 and 3 emissions, based on who the emitters are:

• Scope 1 emissions are direct emissions from owned or controlled sources, such as the combustion of diesel in mining vehicles.
• Scope 2 emissions are indirect emissions from purchased or acquired electricity, steam, heat, or cooling.
• Scope 3 emissions for mining consist of all other indirect emissions that the organization  impacts, both upstream and downstream of its operations, such as the upstream production of fuels used in the mining operations, or the downstream smelting, refining, and manufacturing processes utilizing the mined ore.

The size of the scope 3 problem may vary significantly depending on an organization's operational boundaries in its value chain. The SBTi recommends that organizations should include reducing scope 3 as part of their net zero commitment when scope 3 emissions make up more than 40% of its cumulative scope 1, 2, and 3 total. In these sorts of situations — which include most mining operations — scope 3 is a risk to the company's operations. Any net zero plan won’t be effective unless it addresses the broader impact a company has.

Where the mining industry stands

Using 2021 data, we calculated the proportion of Scope 3 emissions to total emissions for the top 6 global mining companies. Aggregating this data shows that on average, scope 3 emissions contribute to more than 95% of total emissions. Overlaying the fact that scope 3 emissions are historically underreported, it is clear that scope 3 emissions is the biggest decarbonization challenge for mining companies.

The big opportunity

While daunting, the big decarbonization challenge that mining companies face could be approached as an opportunity to gain a competitive advantage.

The global transition to a low-carbon economy is already increasing the demand for metals as raw materials for green infrastructure, electric vehicles, battery storage, solar panels, and wind turbines. To ensure a green value chain, metals will need to be mined and refined in a sustainable fashion.

Companies that are able to supply the building blocks for a green infrastructure while reducing emissions while reducing emissions across the supply chain will stand apart by being part of a virtuous cycle. Furthermore, shareholders, investors, and government bodies will be looking for mining companies to set SBTi-aligned scope 3 and net-zero targets, backed by realistic and balanced strategies to meet these targets. By being ahead of the game, mining companies can future-proof themselves against these demands and ensure a more profitable future.

Moving mining forward

To take a first step toward reducing scope 3 emissions, mining companies should:

1. Improve reporting and transparency of scope 3 emissions. Without understanding in great detail the upstream and downstream contributions to a scope 3 inventory, it becomes impossible to identify reduction opportunities for the future.
2. Engage with suppliers and customers within their value chain to improve data accuracy and support value chain decarbonization efforts.
3. Get all levels of the company on board. It is impossible to make lasting changes within an organizational buy-in at every level of the company.
4. Identify and implement mitigation efforts that reduce climate change and business risk, while demonstrating financial returns where possible.

Staying ahead of the curve may not be easy, but it may help guarantee success down the road while making it easier for everyone to find a path to net zero.

At SINAI we help companies measure and reduce scope 3 emissions. Whether it is your 1st scope 3 inventory, or engaging with your value chain to improve your scope 3 calculation and identify reduction opportunities, our software can help you every step of the way.

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