Scope 1, 2 & 3 emissions, simplified
In 2001, the Greenhouse Gas Protocol published its “Corporate Accounting and Reporting Standard”, providing a framework for measuring and managing emissions for both private and public sectors.
The framework categorizes emissions into three distinct categories: Scope 1, Scope 2, and Scope 3. Dividing emissions into three categories is intended to help track progress towards the significant reductions required to limit global temperature increases to below 1.5°C, which is the primary objective of the Paris Agreement.
Measuring and tracking carbon emissions is the first step in making a positive climate impact and also the basis of an organization's net zero journey. In order to do this, it is important to look across the entire business and scope of emissions. The Scope 1, 2, and 3 emission framework enables businesses to break down their emissions sources and behaviors.
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Scope 1 Emissions
Scope 1 refers to “direct” GHG emissions a business makes through the course of its own activities. This includes direct emissions from a company’s owned or controlled assets.
This could be emissions from running machinery to make products, driving vehicles owned by the company, or heating buildings and powering computers.
Scope 2 Emissions
Scope 2 refers to “indirect” GHG emissions created by the production of the energy that an organization buys. For example, this could be emissions from the electricity generated for the business's facilities.
Installing solar panels or sourcing renewable energy rather than using electricity generated by fossil fuels would cut a company’s Scope 2 emissions.
Scope 3 Emissions
These are also indirect emissions – meaning those not produced by the company itself – but by actors in its value chain.
Scope 3 covers emissions produced by:
- Suppliers (i.e. those supplying products or services to the company). These may be referred to as upstream emissions.
- Customers (i.e. those who buy and use the products/services sold by the company). These may be referred to as downstream emissions.
This makes Scope 3 emissions the most difficult to measure and “nearly always the big one.” It often accounts for more than 70% of a business’s carbon footprint.
While it is straightforward for a business to control its Scope 1 and Scope 2 emissions by adopting more efficient processes, using renewable energy or switching to electric vehicles, for example, Scope 3 emissions can be more complicated to manage. One of the goals of setting Scope 3 emissions targets is that it will encourage businesses to consider emissions when choosing suppliers. And when more companies require their suppliers to reduce their own emissions, then it creates a positive flywheel where everyone is incentivized to operate more sustainably.
The importance of tracking Scope 1, 2, and 3 emissions
Improves credibility: Supplying environmental data is a great way of showing that businesses are committed to reducing their GHG emissions and allows consumers and shareholders to track their progress as well as holding them accountable.
Strengthens confidence for investors: In 2022, investors - who have become increasingly aware of the risks associated with climate change - managing over $130 trillion in assets wrote to more than 10,000 companies calling on them to supply environmental data to the CDP. This came as money managers demanded better information on climate change, biodiversity, and water security to help them analyze the performance of company boards.
Risk mitigation: Educating leaders on measuring scope 1, 2 and 3 emissions is crucial for addressing resource exposure, energy, and climate risk. Understanding the impact of these factors can help organizations make informed decisions and take action toward a sustainable future.
Along with these reasons, it is guaranteed that in the near future these will be mandatory requirements for all industries. Last week, California’s state legislature passed the Climate Corporate Data Accountability Act, which will require public and private companies with more than $1bn in annual revenues that conduct business in the state to disclose emissions- including scope 1, 2, and 3. "Beginning in 2027, companies would need to report so-called scope 3 carbon emissions, which are associated with a company’s suppliers and customers.” Getting ahead of these new regulations will be vital to an organization's bottom line.
Sylvera is a trusted carbon data provider that enables organizations to invest in real climate action. Request a demo here.
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