Scope 3 Emission Disclosure in Supply Chains: Equity and Efficiency
72 Pages Posted: 18 Jul 2024
Date Written: June 15, 2024
Abstract
Firms are increasingly disclosing Scope 3 (supply chain) carbon emissions in addition to Scope 1-2 (direct and energy consumption) emissions. Two common Scope 3 emission assessments exist: Life-Cycle which encompasses emissions of all firms in the supply chain, and Cradle-to-Gate which encompasses emissions of all upstream firms. One can also conceptualize a Gate-to-Grave assessment which encompasses emissions of all downstream firms. We consider a supply chain where each firm discloses its carbon emissions subject to societal pressure, and study their carbon-reduction and product-pricing decisions and the supply chain outcome in terms of equity and efficiency under the different carbon emission-disclosure regulations. We find that Gate-to-Grave is consistently the most equitable Scope 3 assessment in terms of both carbon and profit reductions along the supply chain, whereas all assessments are equally efficient in terms of both consumer welfare and supply chain profit for given supply chain emissions. These findings are found to be robust in two extensions. They provide strong support for the formal recognition and potential implementation of the Gate-to-Grave Scope 3 emission assessment.
Keywords: climate change, carbon dioxide, greenhouse gas, double counting, Life-Cycle Assessment
Suggested Citation: Suggested Citation
Ma, Ruize and Hu, Bin and Mai, Yunke, Scope 3 Emission Disclosure in Supply Chains: Equity and Efficiency (June 15, 2024). Available at SSRN: https://ssrn.com/abstract=4895277 or http://dx.doi.org/10.2139/ssrn.4895277
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