Carbon Accounting - What is scope 1, 2 and 3 emissions?

Greenhouse gas emissions are categorized into three scopes:

• Scope 1: Direct emissions from owned or controlled sources

• Scope 2: Indirect emissions from purchased energy

• Scope 3: All other indirect emissions in a company's value chain

Key points:

• Scope 1 & 2 are easier to measure and control

• Scope 3 often makes up 70-90% of a company's total emissions

• Tracking all scopes is crucial for effective carbon management

Reducing emissions across scopes can:

• Cut costs

• Improve brand image

• Attract eco-conscious investors

Businesses can lower emissions by:

1. Upgrading to energy-efficient systems

2. Switching to renewable energy

3. Working with suppliers to reduce supply chain emissions

4. Using emission tracking software

Understanding and managing all three scopes is essential for companies serious about sustainability and climate action.

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Scope 1: Emissions You Create Directly

Scope 1 emissions are the big dogs of a company's carbon footprint. These are the greenhouse gases that come straight from your business operations.

What Are Direct Emissions?

Think of Scope 1 emissions as your company's "breath." They're the gases you release directly into the atmosphere from sources you own or control.

Every time you start a company vehicle or crank up the office heating, you're adding to your Scope 1 emissions. These are the emissions you can control the most, making them your best shot at shrinking your carbon footprint.

Common Sources of Scope 1

Let's break it down:

1. Stationary Combustion

This is often the biggest culprit. It includes emissions from burning fuels in equipment like boilers, furnaces, and generators. Picture a manufacturing plant using a natural gas boiler - that's Scope 1 in action.

2. Mobile Combustion

Got a fleet of trucks or company cars? The fuel they burn is Scope 1. In 2022, UPS reported their package car fleet alone pumped out 6.5 million metric tons of CO2 equivalent.

3. Fugitive Emissions

These are the sneaky ones - gases that escape unintentionally. Think supermarket refrigeration systems. Walmart's been tackling this by switching to low-impact refrigerants, cutting these emissions by about 38% since 2016.

4. Process Emissions

Some industries can't avoid emissions in their production processes. Take cement manufacturing. The calcination process alone makes up about 50% of all emissions in cement production, according to the Global Cement and Concrete Association.

"Scope 1 emissions are important because they are the only category of emissions in carbon accounting that can be completely controlled by the company."

This quote nails why Scope 1 matters. It's where businesses have the most direct influence and responsibility.

Companies are getting creative in tackling Scope 1. Maersk, the shipping giant, is aiming for net-zero emissions by 2040. Their plan? Investing in new tech like carbon-neutral methanol-powered container ships, set to launch in 2023.

Scope 2: Emissions from Bought Energy

Ever thought about the carbon impact of turning on a light? That's Scope 2 emissions in action. These are the greenhouse gases from the energy your business buys and uses.

What Are Energy-Related Emissions?

Scope 2 emissions are indirect emissions from purchased energy powering your operations. This includes electricity, steam, heating, and cooling you buy, not produce.

Here's a surprising fact: The World Resources Institute says Scope 2 emissions make up about 60% of the average company's total emissions. That's a big part of your carbon footprint!

Main Types of Scope 2

The main Scope 2 culprits are:

1. Electricity: Powers everything from office lights to server farms.

2. Steam: Used in industrial processes, common in manufacturing and chemical plants.

3. Heating and Cooling: Keeping your workspace comfortable adds to your carbon footprint.

There are two ways to calculate Scope 2 emissions:

1. Location-based method: Looks at average emissions intensity of grids where energy consumption occurs.

2. Market-based method: Reflects emissions from electricity companies have chosen (or lack of choice).

The Brightest Team, carbon accounting experts, say:

"Location-based Scope 2 emissions calculations is the more accurate, credible method compared to a market-based Scope 2 approach."

Why does this matter? Almost 40% of global greenhouse gas emissions come from energy generation, with half used by businesses.

But here's some good news: You can control Scope 2 emissions more than you might think. Companies are getting creative. Google, for example, has matched 100% of their annual electricity use with renewable energy purchases since 2017.

Some practical steps for your business:

1. Upgrade energy efficiency: Use LEDs, improve insulation, optimize HVAC systems.

2. Pick greener energy providers: Many utilities offer renewable energy options.

3. Use on-site renewable energy: Consider solar panels or wind turbines if possible.

4. Implement energy conservation policies: Turn off lights and equipment when not in use.

Managing your Scope 2 emissions is good for the planet and business. Plan A's sustainability experts note:

"Businesses that measure and reduce their Scope 2 emissions will ultimately be able to leverage the following opportunities: Increased energy efficiency, Improved employee satisfaction, retention, and engagement, Increased stakeholder trust."

So, when you turn on that light, remember: you're not just lighting up your workspace, you're spotlighting a chance to make a real difference in your company's environmental impact.

Scope 3: Supply Chain Emissions

Scope 3 emissions are the hidden giants of a company's carbon footprint. These greenhouse gases come from your entire value chain - from the materials you buy to the products you sell. And here's the kicker: they're often the biggest part of a company's emissions.

Types of Supply Chain Emissions

Scope 3 emissions aren't directly under your control, but they're still your responsibility. Let's break them down:

Upstream emissions (the backstage of your business):

• Purchased goods and services

• Business travel

• Employee commuting

Downstream emissions (after your product leaves your hands):

• Use of sold products

• End-of-life treatment

Take Apple, for example. They found that 98% of their carbon footprint comes from Scope 3 emissions, mostly from making their products. That's huge!

Tracking Supply Chain Emissions

Measuring Scope 3 emissions is like trying to count all the fish in the sea. It's tough, but it's crucial for any serious climate action.

Why? Three main reasons:

1. Data gaps

2. Complex calculations

3. Changing business landscape

But don't let these challenges stop you. Companies are getting creative:

PepsiCo is aiming to cut their Scope 3 emissions by 40% by 2030. They're rethinking everything from product transportation to supplier electricity use.

Maersk, the shipping giant, is launching carbon-neutral methanol-powered ships in 2023. They're tackling one of the trickiest parts of Scope 3: transportation.

"Reaching Net Zero should consider an organization's entire value chain of emissions, including those generated by suppliers and end-users (scope 3)." - Persefoni

This quote hits the nail on the head. Scope 3 isn't just about your office or factory. It's about your whole business ecosystem.

Here's a pro tip: Start with a materiality assessment. Figure out which Scope 3 categories matter most for your business. Then, team up with your suppliers and customers to gather data and set targets. It's not a solo game - everyone needs to play.

How to Track and Report Emissions

Tracking and reporting greenhouse gas emissions isn't just good for the planet - it's essential for businesses. Let's break down how you can measure and manage your carbon footprint without getting lost in the weeds.

Ways to Calculate Emissions

Calculating emissions isn't rocket science, but it does require a systematic approach. Here's the lowdown:

Scope 1 and 2 Emissions

For Scope 1, look at your direct emissions from fuel use in operations and transportation. For Scope 2, it's all about the energy you buy.

Scope 2 has two main calculation methods:

1. Location-based: Uses the average emissions of your local grid.

2. Market-based: Reflects emissions from the specific electricity you've chosen.

Scope 3 Emissions

Scope 3 is the big one - it often makes up over 85% of a company's total emissions. Here's how to tackle it:

1. Figure out which emission categories matter most to your business.

2. Start with rough estimates, then dig deeper into the important stuff.

3. Get your whole team involved in gathering data.

For purchased goods and services, you've got options:

• Ask suppliers for their data

• Use industry averages based on what you've bought

• Calculate based on how much you've spent

Don't sweat it if you're not measuring everything in Scope 3 yet. Less than 10% of companies do, so you're already ahead of the game.

Software for Tracking Emissions

Want to make tracking emissions easier? There's an app for that. Here are some top picks:

Emerald Power

This platform is built for mid-sized businesses. It offers:

• Automatic data collection

• Calculations that follow the GHG Protocol

• Real-time emission data

• Easy-to-use visuals

• Tools to set and track targets

Prices start at €249/month for basic reporting.

Other Solid Choices

1. Persefoni: Uses AI to help you measure and report your carbon footprint.

2. Microsoft Sustainability Cloud: Offers tools like Sustainability Manager for clear data and insights.

3. Newtral: An all-in-one platform for managing carbon and ESG data, including supply chain emissions.

When picking software, think about:

• How easy it is to collect and integrate data

• Whether it can produce reports in the format you need (like GRI or CDP)

• If it's user-friendly enough for your team

• What kind of support and training you'll get

• Whether the cost makes sense for what you need

How to Lower Your Emissions

Want to shrink your carbon footprint? It's not just good for the planet - it's smart business. Let's look at how companies can cut emissions across all three scopes.

Cutting Direct and Energy Emissions

Most businesses start by tackling Scope 1 and 2 emissions. Here's how to make a real dent:

Upgrade Your HVAC: A few tweaks to your heating and cooling can work wonders. You'll save energy, cut carbon, and trim those bills.

Go Renewable: Time to tap into sun and wind power. Google's been doing it since 2017 - they match all their yearly electricity use with renewable energy. You can too:

1. Put solar panels or wind turbines on-site

2. Sign up for Corporate Power Purchase Agreements (CPPAs)

3. Buy Renewable Energy Certificates (RECs)

Electric Vehicles: Ditch the gas guzzlers. Electric vehicles can slash your Scope 1 emissions. But remember, charging them falls under Scope 2 - so pair this with renewable energy for the biggest impact.

LED Lighting: Here's a bright idea - switch to LEDs. This simple change can cut your lighting energy use by 50-70%. That's good for your carbon footprint and your wallet.

"Efficient regulation of indoor air temperature has benefits beyond reducing energy consumption." - Antea Group

Reducing Supply Chain Emissions

Scope 3 emissions often make up the biggest chunk of a company's carbon footprint. Here's how to tackle this tricky area:

Map Your Supply Chain: You can't fix what you can't see. Start by finding your major emission sources. For most global companies, upstream Scope 3 emissions are 11.4 times higher than their direct operational emissions.

Set Clear Expectations: Don't be shy - tell your suppliers what you want. Ford Motor Company asks their key suppliers to share data on GHG emissions, environmental risks, and corporate governance.

Team Up and Innovate: Work with your suppliers to set big goals. Mastercard's aiming to cut absolute Scope 3 GHG emissions by 20% by 2025. They're not just setting goals - they're pushing their suppliers to set their own science-based targets.

"Mastercard has set an ambitious goal of reducing absolute Scope 3 GHG emissions 20% by 2025, so mobilizing our suppliers to set their own science-based targets is a top priority for us." - Kristina Kloberdanz, Chief Sustainability Officer, Mastercard

Rethink Your Products: Make sustainable products with recyclable or compostable packaging and parts. This cuts your Scope 3 emissions and can boost your brand image.

Use Tech: Use data analytics and AI to spot carbon hotspots in your supply chain. This can help you create targeted strategies to cut carbon.

Wrap-up

Let's recap what we've learned about Scope 1, 2, and 3 emissions and how businesses can tackle their carbon footprint.

Key Points

The Greenhouse Gas Protocol's three-scope framework gives a full picture of a company's emissions - from what they directly produce to what's hidden in their supply chain.

Scope 1: Direct Emissions These are the emissions you control directly. Think:

• Factory smokestacks

• Company vehicles

Tackling these can lead to quick wins and save you money.

Scope 2: Purchased Energy This covers the energy you buy. You have more control here than you might think. Google, for example, matches 100% of its yearly electricity use with renewable energy purchases.

Scope 3: Supply Chain Emissions This is often the biggest chunk of emissions - up to 95% of a company's total. It's tough to measure but crucial to address.

"What gets measured, gets managed." - Peter Drucker

This quote rings especially true for emissions. Start by setting a baseline - you can't improve what you don't track.

Tools and Tech There are lots of tools out there to help you track and report emissions. From Emerald Power to Microsoft Sustainability Cloud, pick one that fits your business size and needs.

Action, Not Just Numbers It's not just about reporting - it's about making changes. Take PepsiCo, for example. They're aiming to cut Scope 3 emissions by 40% by 2030. They're rethinking everything from how they transport products to how their suppliers use energy.

Team Effort Cutting emissions, especially in Scope 3, needs everyone on board. Get your suppliers, customers, and employees involved in your sustainability efforts.

Good for Business Reducing emissions isn't just about helping the planet. It can also:

• Save you money

• Boost your brand image

• Attract eco-conscious investors

FAQs

Let's tackle some common questions about Scope 1, 2, and 3 emissions:

What of emissions are scope 3?

Scope 3 emissions are the big kahuna of carbon footprints. For most companies, these indirect emissions make up over 70% of their total greenhouse gas output.

Take Apple, for example. In their latest report, a whopping 98% of their carbon footprint came from Scope 3 emissions. These come from making, using, and tossing out their products.

How to calculate scope 1, 2, 3 emissions?

Calculating emissions across all scopes isn't a walk in the park, but here's the gist:

1. Scope 1

Count direct emissions from stuff you own or control. Think company cars and on-site fuel burning.

2. Scope 2

Tally up indirect emissions from energy you buy. Check your electricity bills and consider your local grid's energy mix.

3. Scope 3

This is the tricky one. You need to assess all other indirect emissions in your value chain. It often means teaming up with suppliers and customers.

Many companies use tools like Emerald Power to make this process smoother. Their platform automates data collection and crunches numbers in line with GHG Protocol standards.

How are scope 1, 2, and 3 emissions measured?

Here's the simple version:

• Scope 1: What you burn directly

• Scope 2: Energy you buy

• Scope 3: Everything else

Scope 1 and 2 are pretty straightforward to measure. Scope 3? Not so much. It often involves educated guesses and working closely with suppliers and customers.

What are scope 1, scope 2, and scope 3 emissions?

In a nutshell:

• Scope 1: Direct emissions you own or control

• Scope 2: Indirect emissions from energy you purchase

• Scope 3: All other indirect emissions in your value chain

Let's say you're a car maker. Your Scope 3 emissions would include those from producing the metals and parts you buy, shipping these goods from suppliers, and even the emissions from customers driving the cars you sell.