Scope 1, Scope 2 and Scope 3 Emissions: What They Mean and Why They Matter

Greenhouse gas emissions generated by business activities can be classified into three main categories: Scope 1, Scope 2, and Scope 3. This division, introduced by the GHG Protocol (Greenhouse Gas Protocol), allows companies to identify the sources of their emissions and better understand their environmental impact.

Let’s take a closer look at what each area means and why they are crucial for effective and transparent corporate sustainability reporting.

Scope 1: Direct emissions

Scope 1 emissions represent all direct greenhouse gas emissions that result from sources owned or under the direct control of the company. These include:

– Fuel combustion: Emissions from the use of fossil fuels in company vehicles, heating systems, or other machinery.

– Industrial processes: Emissions generated during production phases, such as in the case of chemical or metallurgical processes.

– Refrigerant gas leaks: Emissions caused by gas leaks from cooling or air conditioning systems.

Because the company has direct control over these sources, Scope 1 emissions are relatively easy to monitor and manage. Reducing these emissions is a priority for many businesses, as Scope 1 sources often account for a significant share of overall emissions. Companies can reduce Scope 1 emissions by adopting more efficient technologies, switching to electric vehicles, or reducing the amount of fossil fuels used.

Scope 2: Indirect Emissions from Purchased Energy

Scope 2 emissions are indirect emissions generated by the production of energy purchased and consumed by the company, such as electricity, heating and cooling. Although the company does not directly control the production of this energy, it is responsible for the emissions associated with its consumption.

For example, if a company uses electricity generated by coal-fired power plants, the emissions from that energy production are classified as Scope 2 emissions. To reduce these emissions, companies can:

– Opt for renewable sources: Buy energy from sustainable sources such as solar, wind, or hydropower.

– Improve energy efficiency: Reduce energy consumption through investments in more efficient technologies and infrastructure, such as LED lighting or more advanced heating and cooling systems.

The goal of reducing Scope 2 emissions is crucial as energy use accounts for a significant portion of many companies’ total emissions.

Scope 3: Indirect Emissions along the Value Chain

Scope 3 emissions include all other indirect emissions that result from the company’s activities but are not Scope 1 or Scope 2. These emissions come from the company’s value chain, both upstream (suppliers and production of raw materials) and downstream (distribution, use and disposal of products). Scope 3 sources include:

– Production and transport of purchased goods: Emissions generated by suppliers and logistics.

– Product distribution: Emissions from the transportation and distribution of products to customers.

– Use and disposal of products: Emissions caused by the use and disposal of products sold.

Scope 3 emissions are often the most difficult to measure and manage, as they depend heavily on suppliers and customers outside the company. However, they account for a major share of overall emissions and are crucial for understanding the total environmental impact. Companies can reduce Scope 3 emissions by:

– Partnering with sustainable suppliers: Choosing suppliers who use low-carbon practices.

– Designing sustainable products: Creating products that are more energy-efficient and can be recycled or disposed of sustainably.

Why is the distinction between scope 1, 2 and 3 important?

The distinction between Scope 1, 2, and 3 helps companies gain a comprehensive view of their environmental impact and identify areas where they can reduce emissions. Clear and transparent reporting of these areas is critical to regulatory compliance and to meeting the growing expectations of stakeholders, including investors, customers and regulators.

Taking steps to reduce emissions in the three areas is essential to any corporate sustainability strategy. Companies that commit to monitoring and reducing emissions throughout the value chain can improve their reputation, attract sustainable investments and make a real contribution to the fight against climate change.