Scope 2 and Carbon-Neutral Claim at Ridgeway Logistics
Ridgeway Logistics operates 180 owned trucks and contracts 40% of its freight to small carriers. For FY2024 it reports 44,000 tCO2e Scope 1, 9,600 tCO2e Scope 2 location-based and 7,100 tCO2e market-based after purchasing renewable energy certificates (RECs) from a wind farm in the same country but a different grid region. Scope 3 is 260,000 tCO2e, including 190,000 tCO2e from subcontracted freight; the company has not yet collected carrier fuel data, so it used an industry average. A key client asks Ridgeway to certify a shipment as 'carbon neutral' and to provide a GHG Protocol-compliant inventory. Ridgeway's marketing team wants to use the market-based Scope 2 figure and the industry-average Scope 3 estimate in a public claim. The sustainability manager is unsure whether the RECs are valid for the market-based method and whether purchased freight belongs in Scope 1 or 3.
1. Assess whether Ridgeway can use the RECs in its market-based Scope 2 figure and how it should report Scope 2.
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The key tests are market boundary and instrument quality. GHG Protocol Scope 2 Guidance requires contractual instruments from the same market. A different grid region within the same country can be acceptable if the market boundary is national and the RECs are properly tracked and retired on Ridgeway's behalf. If the grid region is a separate market, or the RECs are not retired for Ridgeway, they fail.
Verify vintage, tracking system, retirement, and the wind farm's market. Report both location-based (9,600 tCO2e) and market-based (7,100 tCO2e if valid; otherwise 9,600 tCO2e). Disclose the instruments and the market boundary. Do not use market-based alone in public claims without explaining the method. If the RECs are invalid, remove the 2,500 tCO2e reduction. Additionality is not a GHG Protocol requirement, but it matters for marketing claims.
2. How should subcontracted freight be classified, and what data-quality issues arise?
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Subcontracted carriers are not owned or controlled by Ridgeway, so their emissions belong in Scope 3, not Scope 1. For purchased transportation, this is Scope 3 category 4 (upstream transportation and distribution). If Ridgeway sells the transport service and uses a subcontractor, the emissions still sit in Scope 3 unless Ridgeway operates the vehicles.
The 190,000 tCO2e figure uses an industry average. That is acceptable for screening but low quality for a client-specific carbon-neutral claim. Improve it by collecting carrier fuel or activity data, distance, load factor, and vehicle type, starting with key lanes. Disclose data quality and uncertainty.
Do not shift subcontracted emissions into Scope 1 to make the inventory look more complete. Transparency about estimation methods is part of a GHG Protocol-compliant inventory.
3. Advise Ridgeway on the client's request to certify a shipment as carbon neutral.
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A carbon-neutral claim requires a complete boundary for the shipment, accurate primary data, reductions first, and high-quality verified offsets for the residual. Ridgeway cannot rely on market-based Scope 2 and an industry-average Scope 3 estimate for a shipment-specific claim.
Offer a carbon footprint with methodology and uncertainty instead. If the client insists on carbon neutral, use a transparent label, verified offsets, and a clear statement that data are estimated. Check consumer-protection and advertising rules before publishing. Present a reduction plan: route optimization, load consolidation, carrier switching, and fuel efficiency.
The reasoning is claim integrity and legal risk. A precise footprint with a reduction path is more defensible than a 'neutral' label built on weak data.