Businesses above a certain threshold must measure and report their carbon footprint to maintain sustainable operations while ensuring regulatory compliance.
This article explains the three scopes of GHG emissions, covering direct and indirect sources as defined by the Greenhouse Gas Protocol. From process emissions to electricity, steam, and heating sources, each category within the emissions inventory plays a role in a company’s environmental impact. Scope 3 encompasses value chain emissions, including both upstream and downstream emissions, end-of-life impacts, and third-party contributions.
Understanding and tracking these chain emissions reveals reduction opportunities essential for long-term sustainability (Gaia’s carbon accounting software is a perfect place to start).
The 3 Scopes of Carbon Emissions
Companies categorise emissions into 3 scopes to achieve a comprehensive view of their total greenhouse gas emissions across all areas of operation. Not a flat figure but an ongoing measurement; emissions are released across all parts of the company, largely requiring robust carbon software for the ongoing capture of this.
The 3 emissions scopes are defined by the GHG Protocol—the most widely used framework for managing greenhouse gas emissions.
Scope 1 includes direct emissions from sources owned or controlled by a company. These emissions, often stemming from fossil fuel combustion, are generally easier to identify, measure, and manage, making them prime targets for reduction or offsetting efforts.
In contrast, Scope 2 emissions encompass the indirect emissions let off by generating a business area’s electricity, steam, heating or cooling. Instead of direct control over the source, this tends to lie in the hands of the providers who may choose greener energy sources to help reduce emissions indirectly linked to the company.
Scope 3 encompasses all other indirect emission sources. These occur in a company’s value chain, both upstream (e.g., raw material extraction) and downstream (e.g., product use and disposal).
Upstream emissions occur before a service or product reaches the company (such as the mining of metals for architecture) and downstream emissions occur after the product or service leaves the company (such as the emissions from a product’s use or disposal by the end consumer).
Accurate carbon footprint calculations that account for Scope 3 emissions, including factors like business travel and waste disposal, are essential for businesses looking to reduce emissions and lessen their reliance on fossil fuels.
Scope 1 Emissions
Scope 1 emissions, as defined by the GHG Protocol, includes direct emissions from sources owned or controlled by a company. These emissions, often stemming from fossil fuel combustion and fugitive emissions, are generally easier to identify, measure, and manage, making them prime targets for reduction or offsetting efforts.
Contributors of Scope 1 emissions could include manufacturing companies (such as cement factories, steel mills, and chemical plants), non-renewable energy companies (like oil and gas extraction firms), plus industries like coal mining, power generation, airlines, agriculture, construction, waste management and more.
Scope 2 Emissions
In contrast, Scope 2 emissions encompass the indirect emissions let off by generating a business area’s electricity, steam, heating or cooling. Instead of direct control over the source, this tends to lie in the hands of the providers who can make smart changes to the greener operators as a way to lower emissions.
They usually acquire regular data from the providers in order to maintain the monitoring processes.
Scope 3 Emissions
Scope 1 is direct, Scope 2 is indirect, and then Scope 3 covers everything else in the corporate value chain. Businesses yield even less control over these than Scope 2. Importantly, Scope 3 can be split into upstream and downstream.
Upstream Emissions
Upstream refers to all supply chain activities early in the supply chain, such as forestry operations, textile sourcing, agricultural production, oil and gas extraction, or mining raw materials.
This involves focusing on the early stages of the supply chain and the beginning of a product’s life. It places an emphasis on the sustainability of inputs, as well as quality.
This could be the inputs that are required to start production and the obtaining and processing of these raw materials.
With upstream, communications will be with third-party suppliers and raw material providers.
Downstream Emissions
In contrast, downstream refers to the later stages in the supply chain, where the finished product heads towards customers or end-users (final customers). This could be customer delivery, distribution and logistics, waste management, or customer relationship management.
This involves the end stages of the product’s life, and communications with distributors, retailers, and end customers. Downstream emission assessment is crucial for customer satisfaction, strong market reach, and brand loyalty.
15 Categories of Scope 3 Emissions
Scope 3 encompasses a broad range of operations within the supply chain, which can be categorised into 15 sectors:
- Purchased Goods and Services, to aid understanding of emissions from the products and materials purchased. Companies can change to more sustainable suppliers if needed.
- Capital Goods cover emissions from long-term company assets—like machinery, equipment, or buildings—involving their manufacturing or delivery.
- Fuel and Energy-Related Activities (that aren’t included in Scope 1 or 2) are important to track in order to measure indirect energy impacts. This includes emissions from the transportation or production of fuels and electricity.
- Upstream Transportation and Distribution accounts for emissions from transporting goods to company facilities, encouraging logistics efficiency and sustainable transport choices.
- Waste Generated in Operations focuses on emissions from waste disposal, promoting waste reduction, operational efficiency, and circular economy practices.
- Business Travel captures emissions from work-related travel, motivating companies to reduce travel frequency and costs through sustainable travel practices.
- Employee Commuting involves emissions from the daily travel to and from work of employees. This covers a range of transport types.
- Upstream Leased Assets refer to leases for offices or vehicles, which a company may not directly use but will rent. This is to ensure comprehensive coverage of emission tracking.
- Downstream Leased Assets include emissions from assets that the company leases out to others—like equipment, buildings, or vehicles.
- Downstream Transportation and Distribution encompasses the emissions released by the distribution and transportation of company products. This is downstream, so after they leave the company.
- Processing of Sold Products covers emissions from downstream customers who further process products, guiding companies toward product designs with lower energy requirements.
- Use of Sold Products is emissions from product usage for energy-consuming goods. This is to encourage energy-efficient design to benefit customers and meet regulatory standards.
- End-of-Life Treatment of Sold Products assesses which methods are destroyed to destroy products, from disposal and recycling to incineration. This supports a circular economy and encourages lower-impact options.
- Franchises are another category, covering the emissions from operations at locations which are franchised. This means emissions in locations that operate under the brand but may be managed independently.
- Investments are a category that must be considered in Scope 3 emissions. This is a consideration of the impact of emissions on financial decisions to ensure best green practices.
The Reasons 3 Scopes Exist
The 3 scopes exist to ensure a comprehensive coverage of emissions company-wide, including direct and indirect throughout the entire supply and value chain. The standardised scopes are a benchmark to follow. They guide companies towards complete transparency and clarity, aligning operations with a robust framework and internationally recognized standards.
Why Measure Carbon Emissions and All Scopes?
Without measuring carbon emissions across all scopes, it’s impossible to truly understand your company’s carbon footprint. Being generally ‘green’ does not suffice—as the 15 categories of Scope 3 alone quite clearly indicate. It’s likely that most first-time assessments will reveal significant unseen emissions, with nearly every activity having an impact. Then, meaningful reductions can begin.
With a reduced carbon footprint, businesses better comply with regulations such as Net Zero targets and SECR. This is more enticing to consumers, especially those younger, who are increasingly seeking to support brands with transparent sustainable practices. Conscious carbon accounting can make it more likely to secure long-term customer loyalty.
Companies reduce carbon footprints and finally achieve carbon neutrality, after various reduction strategies. When this happens they are granted immense branding opportunities. PAS 2060 or Carbon Trust Standard are primary examples—allowing the brand to add their logos, highlight this in sustainability reports, or showcase the certifications within client pitches. They are widely-recognised by the public as granted to companies who have made immense climate efforts, such as through meaningful carbon accounting.
The Importance of Reducing Carbon Emissions
With carbon being the leading driver of climate change, businesses have a critical responsibility to acknowledge and address their impact. One person can make a positive environmental impact by reducing CO₂ emissions, but the scale at which businesses operate holds immense potential to significantly help preserve the planet’s atmosphere. They contribute to greenhouse gas emissions in the atmosphere, trapping heat and raising the planet’s surface temperature, causing extreme weather events, rising sea levels, droughts, biodiversity loss and ocean acidification.
‘Large’ companies in the UK (with over 250 employees, £36 million in turnover, or £18 million in balance sheet total), must meet carbon accounting standards by law, under the SECR (Streamlined Energy and Carbon Reporting) framework.
Beyond this, carbon accounting crucially prevents green-washing and other misleading claims regarding environmental responsibility. It combines reduction processes with effective reporting tools for corporate transparency, enhancing brand reputation by demonstrating environmental responsibility to customers, investors, and stakeholders. Businesses future-proof their operations against increasingly stringent environmental regulations and keep up with consumers increasingly seeking eco-friendly brands.
How to Measure Carbon Emissions
There are several ways to calculate emissions, categorised into direct calculation methods and data-driven calculation methods. Direct calculation methods involve using specific activity data, like electricity usage, and multiplying it by emission factors, such as kg CO2e per kWh, to directly estimate emissions. On the other hand, data-driven methods include spend-based calculations, which estimate emissions based on the monetary value of purchases using average emission factors, and activity-based calculations, which use broadly collected data rather than precise measurements. Reporting standards should be met.
How to Reduce Carbon Emissions
The environmental impact of carbon dioxide and greenhouse gases, to a detrimental degree, has enforced shifts in traditional structures. Today, there are countless methods that businesses of any scale can employ to hugely reduce their carbon footprint and help in the mission to net zero, from electric vehicles and renewable energy sources like solar panels to sustainable packaging and energy-efficient manufacturing processes.
At Gaia, we offer one of the strongest AI-powered carbon accounting software for UK businesses. Whether you’re setting emission reduction targets or looking to meet regulatory requirements, Gaia provides everything you need to stay ahead in the race to net zero. Read more here.
More Information
https://ghgprotocol.org/standards
https://www.iso.org/standard/66453.html
https://www.bsigroup.com/en-GB/capabilities/environment/pas-2060-carbon-neutrality