Understanding Scope-1, Scope-2 and Scope-3 Emission

Last updated on October 29th, 2023 at 04:21 am

Scope 1, Scope 2, and Scope 3 are terms commonly used in the context of greenhouse gas (GHG) emissions accounting and reporting, particularly in the corporate and organizational settings. They represent different categories of emissions sources based on the Greenhouse Gas Protocol, a widely recognized accounting tool for GHG emissions.

Lets discuss each scope in detail :

Scope 1 emissions refer to direct greenhouse gas (GHG) emissions that originate from sources that are owned or controlled by the reporting entity. These emissions occur within the organizational boundaries of the reporting organization and are a direct result of its activities. Scope 1 emissions are considered the most direct and controllable category of emissions.

Examples of Scope 1 emissions include:

  1. Combustion of Fossil Fuels: Emissions from burning fossil fuels for various purposes, such as:
    • Combustion of natural gas for heating buildings or operating industrial processes.
    • Burning of diesel or gasoline in company-owned vehicles, trucks, or equipment.
  2. Process Emissions: Emissions resulting from specific industrial processes that release greenhouse gases, such as:
    • Methane emissions from anaerobic digestion in wastewater treatment or landfills.
    • Emissions from chemical reactions in manufacturing processes.
  3. Fugitive Emissions: Emissions that escape from equipment, pipelines, or storage facilities, such as:
    • Leaking methane from natural gas pipelines or storage tanks.
    • Fugitive emissions of refrigerants used in cooling systems.

Scope 1 emissions are considered “Scope 1” because they are within the direct control and ownership of the reporting organization. These emissions are attributed to the organization itself and are a consequence of its operational activities. As a result, organizations have a higher level of influence and responsibility for reducing Scope 1 emissions compared to indirect emissions in Scope 2 and Scope 3. However, Scope 1 emissions are often just one part of an organization’s overall carbon footprint, and addressing all emission scopes is essential for comprehensive climate action and sustainability efforts.

Scope 2 emissions refer to indirect greenhouse gas (GHG) emissions that result from the consumption of purchased electricity, heat, or steam by the reporting organization. Unlike Scope 1 emissions, which are direct emissions from sources owned or controlled by the organization, Scope 2 emissions are associated with the electricity and energy consumed by the organization, but they occur outside its operational boundaries.

Key points about Scope 2 emissions:

  1. Indirect Emissions: Scope 2 emissions are considered indirect because they are not produced directly by the reporting organization’s activities. Instead, they are generated during the production of the purchased electricity, heat, or steam used by the organization.
  2. Electricity Usage: The most common source of Scope 2 emissions is the consumption of grid electricity. When organizations use electricity supplied by utility companies, they indirectly contribute to the GHG emissions associated with the electricity generation.
  3. Renewable Energy Credits (RECs): If an organization purchases renewable energy credits or uses renewable electricity sources like solar or wind power, the associated emissions are typically lower or zero. In such cases, the organization can claim to be using “low carbon” or “zero-carbon” electricity, reducing the Scope 2 emissions.
  4. Market-based vs. Location-based Reporting: There are two methods to calculate Scope 2 emissions: market-based and location-based. The market-based approach considers the actual emissions factor of the electricity purchased from the grid, while the location-based approach uses average grid emissions factors based on the geographical location of the organization. Both methods have their advantages and considerations, and organizations may choose the one that aligns best with their sustainability goals and reporting requirements.
  5. Green Power Purchase: Some organizations opt to purchase renewable energy directly or participate in green power programs, which allows them to report zero Scope 2 emissions, as the purchased electricity comes from renewable sources with no net emissions.
  6. Responsibility and Influence: While organizations do not directly control the emissions from electricity generation, their choices in electricity consumption can influence demand for clean energy and drive change in the energy market.

Calculating and reporting Scope 2 emissions is essential for understanding an organization’s indirect carbon footprint and making informed decisions to reduce environmental impacts related to energy consumption. Addressing Scope 2 emissions is a crucial aspect of corporate sustainability and climate action efforts.

Scope 3 emissions refer to all other indirect greenhouse gas (GHG) emissions that occur in the value chain of the reporting organization, both upstream and downstream. These emissions occur as a result of the organization’s activities but outside its operational boundaries. Scope 3 emissions represent a broader and more comprehensive category of emissions compared to Scope 1 and Scope 2.

Key points about Scope 3 emissions:

  1. Indirect and Diffuse: Scope 3 emissions are indirect, meaning they are not directly under the control of the reporting organization. Instead, they result from activities associated with the organization’s supply chain, product life cycle, and other related activities.
  2. Diverse Sources: Scope 3 emissions cover a wide range of sources and activities, making them the most complex and challenging category to quantify. Some common sources of Scope 3 emissions include:
    • Emissions from purchased goods and services, including raw materials and intermediate products.
    • Transportation and distribution of products (e.g., emissions from logistics and shipping).
    • Employee commuting and business travel.
    • Use of sold products and services by customers (e.g., energy use of appliances, fuel consumption of vehicles).
  3. Value Chain Impact: Scope 3 emissions provide insight into the broader environmental impact of an organization’s activities, considering the entire life cycle of its products or services.
  4. Collaborative Efforts: Reducing Scope 3 emissions often requires collaboration with suppliers, customers, and other stakeholders along the value chain. Organizations need to engage with these partners to identify emission reduction opportunities and implement sustainable practices.
  5. Reporting Challenges: Due to the vast range of activities involved in Scope 3 emissions, the data collection and assessment process can be more complex and resource-intensive than Scope 1 and Scope 2 emissions. However, it offers organizations a more comprehensive understanding of their carbon footprint and opportunities for improvement.
  6. Scope 3 Categories: The GHG Protocol identifies 15 categories of Scope 3 emissions to help organizations categorize and analyze their indirect emissions comprehensively.

Reporting and addressing Scope 3 emissions is increasingly important for organizations seeking to be environmentally responsible and achieve sustainability goals. Many companies recognize the significance of Scope 3 emissions in their overall climate impact and have taken initiatives to measure, manage, and reduce these emissions, aiming for more sustainable and environmentally conscious practices across their value chains.

The Greenhouse Gas Protocol identifies 15 categories of Scope 3 emissions to help organizations comprehensively assess and report their indirect greenhouse gas (GHG) emissions.

These categories cover a wide range of activities and sources along the organization’s value chain. Here are the 15 categories of Scope 3 emissions:

  1. Category 1: Purchased Goods and Services: Emissions from the production of goods and services purchased by the reporting organization. This includes emissions from raw material extraction, manufacturing, and transportation of products.
  2. Category 2: Capital Goods: Emissions associated with the production of capital goods, such as machinery, equipment, and buildings, purchased or acquired by the organization.
  3. Category 3: Fuel- and Energy-Related Activities Not Included in Scope 1 or Scope 2: Emissions from the extraction, production, and transportation of fuels and energy used by the organization but not accounted for in Scope 1 or Scope 2.
  4. Category 4: Transportation and Distribution: Emissions from transportation and distribution of the organization’s products and services, including both upstream and downstream transportation activities.
  5. Category 5: Waste Generated in Operations: Emissions from waste generated by the organization’s operations, including both hazardous and non-hazardous waste.
  6. Category 6: Business Travel: Emissions from employee business travel, including air travel, rail travel, and other modes of transportation.
  7. Category 7: Employee Commuting: Emissions from the daily commute of employees to and from their workplace.
  8. Category 8: Upstream Leased Assets: Emissions from assets leased by the organization, including the production and transportation of leased goods.
  9. Category 9: Downstream Leased Assets: Emissions from assets leased out by the organization to others, including the use and transportation of leased assets.
  10. Category 10: Franchises: Emissions from activities related to franchises held or managed by the organization.
  11. Category 11: Investments: Emissions from investments made by the organization, such as equity holdings or loans.
  12. Category 12: Downstream Transportation and Distribution: Emissions from transportation and distribution activities related to the use of the organization’s products and services by customers.
  13. Category 13: Use of Sold Products: Emissions resulting from the use of the organization’s products and services by customers. This includes energy use, maintenance, and other related activities.
  14. Category 14: End-of-Life Treatment of Sold Products: Emissions from activities related to the disposal, recycling, or treatment of the organization’s products after their useful life.
  15. Category 15: Downstream Leased Assets: Emissions from assets leased out by the organization to others, including the use and transportation of leased assets.

It’s important to note that not all organizations may have emissions in all 15 categories, and the relevance of each category depends on the specific nature of the organization’s operations and value chain. Reporting and managing Scope 3 emissions often require collaboration with suppliers, customers, and other stakeholders to identify opportunities for emission reduction and sustainability improvements across the value chain.

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