Calculating a Carbon Footprint: What are Scope 1, 2 and 3?

Understanding the impact of your business operations is vital in reducing your carbon footprint and getting to Net Zero.
Posted by
James Parker
on
March 21, 2022

Introduction

Efficient measurement, tracking, and reporting of greenhouse gas (GHG) emissions is essential in order to tackle climate change. Many governments and businesses are legally bound to climate protocols; for example the UK government is set to enshrine mandatory climate disclosures in law for the largest companies. In addition to this many countries and businesses are committing to become Net Zero by 2050 or earlier. 

There is no better time to understand your GHG footprint and begin developing an effective climate strategy.

Carbon emissions are categorised into different scopes (1, 2 & 3) by the world’s most widely used Greenhouse Gas accounting framework - the GHG Protocol. The 3 scopes are designed to help organisations measure and report their carbon footprint by identifying the emissions an organisation generates through its own operations as well as the wider value chain.

Scope 1 emissions: direct emissions from owned or controlled sources. Examples include emissions from company vehicles and company facilities, e.g. office, warehouse, factory. 

Scope 2 emissions: indirect emissions from the purchase and generation of electricity, steam, heating and cooling.  

Scope 3 emissions: all indirect emissions, not included in scope 2, that occur in the value chain of the reporting company, including both upstream and downstream emissions. Examples include supply chain emissions, transportation and distribution, business travel, use of sold products, waste from operations, and end-of-life treatment. 

Our diagram below, based on the GHG Protocol, highlights Scope 1, 2 and the 15 Scope 3 categories.

The Significance of Scope 3

Scope 3 emissions are particularly important as they are usually the most substantial contributor to an organisation’s carbon footprint and, unfortunately, also the most difficult to reliably quantify and analyse. 

Scope 3 encompasses all indirect emissions accumulated within a company’s value chain. The complexity is that these emissions fall outside of a company’s direct control and line of sight. The reporting of Scope 3 emissions has traditionally remained relatively voluntary, due to their external nature and difficulties in accurately tracking and reporting data, but this is rapidly changing with increasing regulation. 

Neglecting to report Scope 3 emissions omits what is normally the largest contributor to a carbon footprint, as it is estimated that these emissions account for more than 70% of most organisation’s carbon footprint.

Despite such complexity, organisations do have an influential ability to engage with their Scope 3 emissions. The following are good examples of Scope 3 carbon reduction initiatives:

  • Supply chain emissions can be significantly reduced through either a strict procurement policy or direct engagement with suppliers to help them reduce their own footprint. 
  • Companies can reduce business travel emissions through an ambitious sustainability strategy, such as incentivising train travel over domestic flights. 
  • Downstream emissions may be harder to influence however selling sustainable products and implementing circular economy principles such as recycling or reusable goods will reduce an organisation’s downstream footprint.

Scope 3 Reporting: More than helping the environment

While it’s  crucial for organisations to reduce emissions, there are many secondary benefits to sustainable business practices. For a business, understanding Scope 3 emissions provides new insights into the company’s value chain vulnerability, identifies potential operational efficiencies and incentivises innovation.

Furthermore, investors are paying ever more attention to a company’s environmental credentials, as part of a broader movement towards integrating non-financial performance metrics such as Environmental, Social and Governance (ESG) measures, to assess corporate performance. Enhanced tracking and reporting of emissions are becoming an increasingly important criterion for attracting investment.

As climate risk disclosures become widespread internationally, the tracking, reporting and reduction of Scope 3 emissions will be unavoidable. Managing emissions is not only a question of what is best for the planet but also what makes best business sense. Carbon intensity has already made the transition to an urgent business liability as well as an environmental one.

Next steps for your Organisation:

  • If Net Zero by 2050 is your company’s goal, do you have a feasible plan in place to begin significantly reducing your Scope 1 & 2  emissions, for example by transitioning to electric vehicles and renewable energy sources? 
  • Has your business integrated a roadmap for Scope 3 emissions reductions into its corporate strategy?

Minimum offers the best-in-class automated sustainability solutions across all 3 scopes. Book a call today to kick-start your carbon reporting.

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