What’s the Difference Between Scope 1, 2, and 3 Emissions?
The issue of carbon emissions has become an increasingly important topic in the business world as companies strive to meet sustainability goals and reduce their impact on the environment. Whether the pressure is coming from consumers, investors, employees, or regulations, one thing is clear; the pressure isn’t going away... but neither is the complexity.
In our March 2023 webinar, we took a deep dive into Scope 3 emissions, where the technology is still developing, boundaries get muddy, and responsibility for emissions is grey. Clear organizational boundaries are critical to understanding where you have responsibility, control, or influence. Here’s a look at how we draw lines between Scope 1, 2, and 3 greenhouse gas emissions.
Emissions Explained
NOTE: Before we jump into Scopes, let’s define some terminology. Often, experts use the term “carbon emissions” intermixed with “greenhouse gas emissions.” In reality, there are a host of gases emitted in the manufacturing or operating of goods; these gases are referred to as “constituent greenhouse gases.” For carbon accounting purposes, all of these gases are converted to a total carbon equivalent using coefficients (check out February 2023’s webinar for Danny’s deep dive into coefficients). In the end, you have total tons of CO2e which we deem a company’s “carbon emissions.”
Scope 1 emissions refer to direct emissions that result from activities that are owned or controlled by the organization, such as emissions from the combustion of fossil fuels in company-owned vehicles or emissions from on-site energy generation. These emissions are often the easiest to measure and manage because they are within the direct control of the organization.
Scope 2 emissions refer to indirect emissions that result from the generation of purchased electricity, heat, or steam that is used by the organization. These emissions occur outside of the organization's direct control, but can still be influenced through decisions about energy procurement and use. For example, a company may choose to purchase renewable energy from a third-party supplier in order to reduce its Scope 2 emissions.
Scope 3 emissions refer to all other indirect emissions that result from activities that are not owned or controlled by the organization, but are related to the organization's activities. These emissions are often the most challenging to measure and manage because they occur upstream or downstream in the organization's value chain. For example, Scope 3 emissions may include emissions from the production of raw materials used in the organization's products, emissions from transportation of products to customers, or emissions from disposal of the organization's products at end-of-life.
Establishing Organizational Boundaries
In order to effectively manage carbon emissions, it is important to establish clear organizational boundaries to differentiate between Scope 1, 2, and 3 emissions. This involves determining which activities and emissions are owned or controlled by the organization, and which are outside of its control. These boundaries are important because your carbon emissions are someone else’s Scope 3 emissions.
One approach to establishing organizational boundaries is to use the GHG Protocol Corporate Accounting and Reporting Standard, which provides guidance for companies to measure and report their greenhouse gas emissions. The standard defines three scopes of emissions, which align with the definitions of Scope 1, 2, and 3 emissions discussed above. Using a guided framework such as the GHG Protocol walks you step by step through creating organizational boundaries that are broadly accepted.
Prioritizing Decarbonization Projects
Once the organizational boundaries have been established, the organization can begin to measure and manage its carbon emissions for each scope. This involves collecting data on emissions sources, calculating emissions inventories, and setting targets and strategies for emissions reduction. (Read more about Carbon Accounting here!)
Once you understand your carbon emissions, you can take action to reduce them. Organizational boundaries help you grasp which areas you have the most control over (typically Scope 1 & 2). Additionally, you can use a materiality study to identify the most significant emissions sources for the organization. This involves evaluating the environmental, social, and economic impacts of your activities and identifying the emissions sources that have the greatest impact on these areas. By focusing on the most material emissions sources, you can prioritize your efforts to manage carbon emissions and make the most effective use of your resources.
For Scope 1 emissions, the organization may implement measures such as improving energy efficiency, switching to renewable energy sources, or using low-carbon fuels. For Scope 2 emissions, the organization may work with its energy suppliers to increase the use of renewable energy. For Scope 3 emissions, the organization may engage with its suppliers and customers to encourage emissions reduction throughout the value chain, or explore options for product design or end-of-life management that reduce emissions. Ultimately, carbon reduction will involve every department at your company.
In conclusion, understanding the differences between Scope 1, 2, and 3 carbon emissions is crucial for effective carbon management and achieving sustainability goals. By establishing clear organizational boundaries and focusing on the most material emissions sources, organizations can effectively measure and manage their carbon emissions, reduce their impact on the environment, and demonstrate their commitment to sustainable practices. As the importance of sustainability continues to grow, organizations that prioritize carbon management will be well-positioned to meet the expectations of their stakeholders and contribute to a more sustainable future.
Interested in more specific topics surrounding sustainability? Check out our free monthly webinar put on by industry experts at Foresight Management.
