Zeroing in on Carbon Emissions: What are Scope 1,2 and 3 emissions and why measuring all three is crucial for real climate action
Many governments are taking steps to reduce Greenhouse Gas (GHG) emissions through national policies that include the introduction of emissions trading programs, voluntary programs, carbon or energy taxes, and regulations and standards on energy efficiency and emissions. As a result, companies must be able to understand and manage their GHG emissions if they are to ensure long-term success in a competitive business environment, and to be prepared for future national or regional climate policies.
Introducing The Concept of Scope
Scope 1, 2 and 3 is a way of categorizing the different kinds of carbon emissions a company creates in its own operations and its wider value chain. The term first appeared in the Green House Gas Protocol of 2001, and today scopes are the basis for mandatory GHG reporting.
Scope 1 Emissions: What You Personally Emit
They are direct GHG emissions from operations that are owned or controlled by a company, for example, emissions from running boilers and vehicles. It is divided into four categories:
Stationary combustion: This includes GHG emissions produced from heating sources
Mobile combustion: This includes all vehicles owned or controlled by a firm that burn fuel
Fugitive emissions: These are caused by leaks of greenhouse gasses through refrigeration units, air conditioners etc
Process emissions: These are released during industrial processes, and on-site manufacturing
Scope 2: What You Directly Make Someone Else Emit
These are indirect emissions from the generation of purchased energy from a utility provider. This includes all GHG emissions released into the atmosphere, from the consumption of purchased electricity, steam, heat and cooling. For most organizations, electricity will be the unique source of scope 2 emissions.
Scope 3: Embedded Emissions You Buy Or Sell
These are all other indirect emissions (not included in scope 2) that occur in the value chain of a company. Emissions-wise, scope 3 is nearly always the big one. GHG protocol divides scope 3 emissions into upstream and downstream emissions- further divided into a total of 15 categories. The distinction is based on the financial transactions of the reporting company.
A. Upstream emissions are indirect GHG emissions related to purchased or acquired goods and services. These include:
Purchased goods and services- Extraction, production, and transportation of goods and services purchased or acquired by the company, not otherwise included in Categories 2 - 8 (mentioned below)
Capital goods- Extraction, production, and transportation of capital goods purchased or acquired by the company
Fuel- and energy related activities -Extraction, production, and transportation of fuels and energy purchased or acquired by the company in the, not already accounted for in scope 1 or scope 2
Upstream transportation and distribution-Transportation and distribution of products purchased by the company between its tier 1 suppliers and its own operations (in vehicles and facilities not owned or controlled by the reporting company). It also includes inbound and outbound logistics, and transportation and distribution between a company’s own facilities (in vehicles and facilities not owned or controlled by the reporting company)
Waste generated in operations-Disposal and treatment of waste generated in the company’s operations in facilities not owned or controlled by the company
Business travel- Transportation of employees for business-related activities in vehicles not owned or operated by the company.
Employee commuting- Transportation of employees between their homes and their worksites in vehicles not owned or operated by the company
Upstream leased assets- Operation of assets leased by the company and not included in scope 1 and scope 2
B. Downstream emissions are indirect GHG emissions related to sold goods and services. These include the following categories
Downstream transportation and distribution- Transportation and distribution of products sold by the company between its operations and the end consumer (if not paid for by the company), including retail and storage (in vehicles and facilities not owned or controlled by the reporting company)
Processing of sold products- Processing of intermediate products sold by downstream companies (e.g., manufacturers)
Use of sold products- End use of goods and services sold by the company
End-of-life treatment of sold products- Waste disposal and treatment of products sold by the company (in the reporting year) at the end of their life
Downstream leased assets- Operation of assets owned by the company (lessor) and leased to other entities, not included in scope 1 and scope 2 – reported by lessor
Franchises- Operation of franchises, not included in scope 1 and scope 2 – reported by franchisor
Investments- Operation of investments (including equity and debt investments and project finance), not included in scope 1 or scope 2
Why measure all 3 scopes?
Scope 1 and 2 are mandatory to report, whereas scope 3 is voluntary and the hardest to monitor. However, companies succeeding in reporting all three scopes will gain a sustainable competitive advantage. If our goal is simply to maintain a correct inventory of emissions, then, theoretically, that could be done by knowing the scope 1 and scope 2 of everyone out there emitting greenhouse gasses. But real and meaningful climate action needs more work; businesses need to understand and reduce their overall impact. Scope 3 emissions are important for two reasons- Firstly, the impact of indirect emissions may outweigh the impact of the fuel a company burns and the electricity it uses. Secondly, scope 3 emissions are an acknowledgment of our shared responsibility; and our choices as a consumer, a corporation, or a public entity is completely entwined with others
Together the three scopes provide a comprehensive accounting framework for managing and reducing direct and indirect emissions. With a comprehensive measurement and mitigation plan, a company can benefit from efficiency gains throughout the value chain.
Managing carbon emissions is time-consuming, challenging and deserves close expertise. TraceSafe offers unique tools to measure, reduce and offset your carbon emissions, per scope. Start your journey towards net zero emissions with TraceSafe
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July 14, 2022
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