What are Scope 1, 2, and 3 Emissions?
Scope 1, 2, and 3 emissions are different categories or “scopes” that classify types of emissions from direct and indirect sources within an organization.
Scope 1 refers to the direct emissions from an organization's owned operations, including company-owned vehicles and buildings.
Scope 2 refers to indirect emissions from purchased electricity, steam, heating, and cooling.
Scope 3 refers to all other indirect emissions generated throughout an organization’s value chain.
Your organization needs to measure these scopes before you can make any progress on your net-zero or carbon-neutral pledges. In other words, you can’t manage what you can’t measure. To understand scopes, you first need to know who established them.
The World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) created the Greenhouse Gas Protocol (GHGP) in 2001 to streamline emissions measurement and help organizations identify opportunities to reduce emissions.
Under the GHGP, all emissions are broken down into three scopes. Many countries and organizations require scope 1 and 2 emissions reporting, whereas measuring scope 3 emissions is voluntary for most. Knowing the difference between each scope of emissions can help your organization make accurate assessments.
Let’s go more in-depth on each scope, how you can measure them and why it’s important to know your organization’s emissions.
What Are Scope 1 Emissions?
Scope 1 emissions include direct emissions from operations the organization directly owns. Examples of scope 1 emissions include the fuel consumption of company-owned vehicles or the energy use in on-site buildings.
Scope 1 covers the following types of emissions:
Stationary combustion, like fuel combustion emissions from boilers
Fugitive emissions, like leaks from the refrigerant gas
Mobile combustion, like emissions from owned cars that burn fuel
Process emissions, like emissions generated when manufacturing steel
Since organizations have direct control of emissions created on-site, scope 1 emissions are typically the easiest to manage and mitigate.
What Are Scope 2 Emissions?
Scope 2 emissions are indirect emissions generated from purchased electricity, gas, steam, heat or cooling used as a result of the company's operations. Although organizations don’t control or own the sources that generate scope 2 emissions, they’re important to report since organizations indirectly cause them.
For example, scope 1 covers the emissions an air conditioning unit creates on-site at the office. Scope 2 focuses on emissions created at the power plant that generated the energy for that air conditioning unit.
The market-based method uses information from contractual instruments for the electricity you’ve purposefully picked (like if you purchase renewable energy).
The location-based method uses the average emissions intensity from the grids where energy consumption occurs.
What Are Scope 3 Emissions?
Scope 3 emissions cover indirect emissions that happen throughout an organization’s value chain that it doesn’t directly produce on-site or that happen as a result of its direct consumption.
Scope 3 emissions are complex and difficult to measure since many of them are out of an organization’s direct control. Measuring these also requires comprehensive data collection to get accurate information.
These emissions encompass 15 categories, including purchased goods and services, waste generated, transportation and distribution, use of sold products, investments, franchises, and employee commuting.
Each category has a specific methodology to measure emissions. Organizations have to decide which of these categories are relevant to their operations, what should be measured, and which calculation type is best suited to their available data (like spend vs. fuel-based).
Categories are also further divided into upstream and downstream activities. We’ll cover these categories next.
Upstream activities include all emissions from an organization’s purchased goods and services. For many businesses, these are emissions generated to create and deliver their goods and services to customers.
Below are categories considered upstream activities according to the GHGP:
Category 1: Purchased goods and services, such as emissions generated to create motherboards an organization has purchased to build computers
Category 2: Capital goods used to provide, sell, store, or deliver products or services, such as emissions from a warehouse to store products
Category 3: Fuel and energy-related activities not counted for scopes 1 or 2, such as the extraction of natural gas needed to generate heating
Category 4: Upstream Transportation and distribution, such as emissions generated from transporting materials between suppliers
Category 5: Waste generated in operations and treated by a third party, such as emissions from waste disposed of in a landfill
Category 6: Business travel, such as emissions from air and bus travel to a client meeting
Category 7: Employee commuting, such as emissions from car travel to the office
Category 8: Upstream Leased assets not counted for scopes 1 or 2, like emissions from a leased building the company is using to store products
Downstream activities encompass emissions generated after goods and services leave an organization’s facilities. This includes all emissions created when these goods and services are distributed, sold and taken home with the end-user.
Below are categories considered downstream activities according to the GHGP:
Category 9: Transportation and distribution after the point of sale, such as emissions from a customer traveling to a retailer for a product
Category 10: Processing of sold intermediate products used to create a final product, such as emissions created from the rubber produced and sold to another company to make car tires
Category 11: Use of sold products, such as emissions the end-user generates after purchasing and driving off in their new car
Category 12: End-of-life treatment of sold products, such as emissions created when a customer’s wrecked car is taken to a junkyard
Category 13: Downstream Leased assets not counted for scopes 1 or 2, such as emissions from a car that a rental car company leases to customers
Category 14: Franchises, meaning all emissions created by franchises under a company
Category 15: Investments, such as emissions generated in an infrastructure project a company has financed
Does Going Net-zero Include Scope 3 Emissions?
Going truly net-zero includes scope 3 emissions, even though these are normally voluntary to report. These emissions typically make up most of an organization’s emissions since it encompasses many types. Reducing these emissions can make the biggest impact, especially since it may also require reductions for other organizations.
How Can Organizations Measure Scope 1, 2, and 3 Emissions?
Organizations can look to solutions like climate management and accounting platforms (CMAPs) to measure, manage and reduce scope 1, 2, and 3 emissions.
CMAPs are software tools that use all of the carbon accounting frameworks to accurately measure an organization's emissions. They act as a central source of carbon truth since it’s easy to upload data. Once uploaded, CMAPs show where most emissions occur throughout a value chain. This then gives organizations the data to create effective goals and a plan to reach them.
Companies have relatively easy access to scope 1 and 2 data by calculating their greenhouse gas (GHG) emissions amount against purchased fuel and electricity. Scope 3 data can come from a variety of sources.
What Are the Challenges of Reporting Scope 3 Emissions?
Reporting on scope 3 emissions can be daunting since it requires a great deal of data collection. On top of collecting the data itself, organizations can run into issues with getting accurate data. For example, the reporting organization may not have accurate scope 3 calculations if suppliers in their value chain don’t accurately measure their emissions.
It’s difficult to develop an effective climate change strategy without scope 3. These emissions make up the vast majority of most companies' emissions and tend to be the hardest to manage and mitigate. According to the CDP’s 2021 Global Supply Chain Report, there are 11.4 times more emissions in a company’s supply chain compared to its direct operations.
How Can Organizations Overcome the Challenges of Scope 3 Emissions?
Organizations can look to frameworks and collaborate with other organizations to get to the bottom of their scope 3 emissions. Both routes are key to getting the right data and identifying your organization’s GHG hot spots.
Look to Frameworks and Methodologies for Guidance
The GHG Protocol Corporate Value Chain (Scope 3) Standard and the GHG Protocol Product Standard both help organizations evaluate emissions on the value chain. The Corporate Value Chain (Scope 3) Standard looks at the corporate level, while the Product Standard looks at the product level.
Other frameworks and methodologies have grown around some of the scope 3 categories to give more granular guidance where the GHGP was lacking. The Partnership for Carbon Accounting Financials (PCAF) is an example of this.
PCAF was designed specifically to build upon the GHGP’s scope 3 category 15: investments. It gives specific methodologies to account for six different types of asset classes, generating detailed calculations of financial institutions' loans and investments.
Collaborate With Other Companies
To support this effort, some categories of scope 3 encourage collaboration with other organizations in the reporting organization's value chain. Reducing one organization’s scope 3 emissions could mean a reduction in another’s scope 1 and 2. This creates a domino effect by increasing efficiencies in supply chain management and reducing operational costs.
Why Should Organizations Measure All of These Emissions?
Organizations that understand and engage with scopes 1, 2, and 3 will benefit by improving transparency and stakeholder engagement, getting ahead of upcoming regulations, identifying climate risk across their operations and value chain, and acting on resource-saving climate opportunities.
Improve Transparency and Trust
Investors, customers, employees and other stakeholders care about the GHG emissions your organization creates. Keeping real numbers readily available can help customers and employees decide if they want to work with your company.
Your environmental, social and governance (ESG) impact is something investors especially want to know. Being transparent with investors about your potential climate risk can help them make decisions about their investments. PwC’s U.S. investor survey found that 61% of investors consider a company’s exposure to ESG risk before investing.
Get Ahead of Upcoming and Current Regulations
More countries and entities are beginning to require emissions reporting. Starting now gives your organization more time to create a streamlined process to begin measuring and reporting emissions.
Create Benchmarks for Net-zero Goals
Accurate GHG emissions measurement is the first step to reaching decarbonization goals and avoiding the worst effects of climate change. Knowing where your organization currently stands with your emissions is a major step in creating attainable net-zero and carbon-neutral goals.
Identify Opportunities To Lower Emissions
After gathering the data and implementing scalable ways to measure emissions, your organization is positioned to start taking action. You can quickly see your highest areas of emissions and begin looking for solutions. The data also identifies risks you might have otherwise missed.
Increase Efficiency and Lower Expenses
Lowering emissions can also save your organization more than you’d think. Less consumption and improved operations can equate to lower costs. For example, cutting down on business travel can save your company expenses while saving the Earth from unnecessary emissions.
Accurate measurement can also identify suppliers or partners in your supply chain who are responsible for excessive emissions. Uncovering the data through carbon accounting can help you both find ways to work more efficiently.
Getting started on measuring scope 1, 2, and 3 emissions can be overwhelming if you don't know where to start. Finding reliable software is one important step to gathering accurate information.
Learn more about our carbon accounting platform to see how we can help streamline your data to make it usable and actionable.
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Persefoni is a leading Climate Management & Accounting Platform (CMAP). The company’s Software-as-a-Service solutions enable enterprises and financial institutions to meet stakeholder and regulatory climate disclosure requirements with the highest degrees of trust, transparency and ease. As the ERP of Carbon, the Persefoni platform provides users a single source of carbon truth across their organization, enabling them to manage their carbon transactions and inventory with the same rigor and confidence as their financial transactions.