Scope 3 Category 14 Overview: Franchises
SCOPE 3 CATEGORY 14
Scope 3 emissions, as defined by the Greenhouse Gas (GHG) Protocol, are indirect emissions caused by a firm's actions but originating from sources that the company does not own or control. These typically comprise emissions from the manufacturing of acquired goods and services, business travel, staff commuting, waste disposal, and so on. Category 14 of Scope 3 emissions is specifically concerned with "franchises," which refers to emissions from franchise activities that the reporting company does not directly manage or own.
Category 14: Franchises
The inclusion of franchisees in Scope 3 is crucial because it allows businesses to fully account for and report GHG emissions from franchise activities. This is especially important for organizations that use a franchise business model. According to the GHG Protocol, emissions from franchises should be included in the reporting company's Scope 3 emissions if they do not fall within the company's operational or financial control boundaries. This means that if a corporation licenses a franchise model in which the franchisee works independently of the franchisor's direct management, the franchisor is responsible for reporting any GHGs released by the franchisee as Scope 3.
This categorization helps in creating a more accurate picture of a company’s total GHG impact, especially for companies whose business models significantly leverage franchising. By including Scope 3 category 14 emissions, companies can engage franchise operators in GHG management and reduction strategies, promoting sustainability across the value chain.
Example
- Envision a global fast-food chain that has both company-owned and franchised units. The emissions from cooking, waste management, and energy consumption in franchise locations over which the parent company has no direct operational control would be classified as Scope 3, category 14 emissions. This guarantees that the parent company's GHG inventory includes emissions from all of its operations, both direct and indirect, supporting overall environmental accountability.
Assessing and reporting Scope 3 Category 14 emissions enables businesses to properly account for the environmental effect of their franchise activities. This transparency is critical for stakeholders to evaluate the company's overall sustainability performance and for enterprises to implement targeted emission reduction initiatives, even in areas of their business operations over which they have no direct influence.
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