Carbon accounting is essential for businesses seeking to measure and manage their environmental impact. A key component of this process is the categorization of greenhouse gas (GHG) emissions into three distinct scopes: 1, 2, and 3. Developed under the internationally recognized GHG Protocol, this framework provides a comprehensive approach to assessing a company's carbon footprint. By differentiating between direct emissions, indirect energy-related emissions, and other indirect emissions, businesses can effectively evaluate and address their overall carbon impact.
In this article, we will explore the significance of scopes 1, 2, and 3 and their role in constructing a thorough carbon footprint assessment.
How are greenhouse gas emissions accounted for?
Companies and organizations must quantify their greenhouse gas (GHG) emissions when building their carbon footprint to identify their impact on climate change. The company must provide internal data on its activity, such as gas, electricity and petrol consumption. Third-party data are also collected, from the entire upstream and downstream value chain of the company (purchases, freight, use and end of life of products sold, etc.).
Once data is collected, an emissions volume is assigned to the organization's various activities. This step translates activity data into CO2 equivalents.
Scopes 1, 2, and 3 represent three distinct categories for classifying GHG emissions. Each scope is further divided into sub-categories based on the sources of carbon emissions. Let's take a closer look at these different emission scopes.
Understanding Scopes 1, 2, and 3 in carbon accounting
Scope 1: direct emissions
Scope 1 refers to a company's direct greenhouse gas (GHG) emissions, for which it is directly responsible during the manufacture of its products or the provision of its services. Heating in the company's premises, the refrigeration unit needed to preserve food or the fuel used for the company's vehicles fall into this category.
Scope 1 includes five sub-categories:
Stationary combustion: fuel that burns in non-moving energy production facilities such as industrial boilers and thermal power plants;
Mobile combustion: fuel that burns in moving machinery such as a company's fleet of vehicles;
Direct process emissions: emissions from agricultural and industrial processes such as those resulting from fermentation in the food industry or bioethanol production;
Fugitive emissions: emissions that escape accidentally or intentionally, such as the leakage of refrigerant gases used in air conditioning, refrigeration, or freezing systems;
Emissions from biomass (soil and forests).
Greenhouse gas emissions that occur upstream of combustion are not included in scope 1.
Scope 2: indirect energy-related emissions
Scope 2 concerns greenhouse gas emissions related to the consumption of electricity, heat or cold necessary for the proper functioning of the company. These are indirect emissions because their production has led to emissions upstream of their use, as these processes are only energy carriers.
To calculate scope 2 emissions, companies must take into account the GHG emissions produced by the power plants or heating and cooling facilities that supply the energy consumed by the company. Scope 2 includes two subcategories:
Indirect emissions from electricity consumption;
Indirect emissions related to the consumption of steam, heat or cold.
Scope 3: other indirect emissions (not owned)
Scope 3 encompasses all indirect emissions not included in scopes 1 and 2. It covers a wide range of emissions related to the entire value chain of the company.
Scope 3 typically represents the largest share of a company’s total emissions, often between 70% and 90%. This significance arises because it includes all indirect impacts associated with the company’s activities, even those outside its direct control. This includes emissions from the purchase of goods and services, transportation and distribution, use of sold products, and even financial investments.
These emissions are divided into fifteen distinct categories, grouped into two major sections: upstream and downstream emissions:
Upstream emissions involve all activities related to suppliers and production before the product or service leaves the company. This includes, for example, raw material extraction and component transportation.
Downstream emissions cover everything that happens after the product or service leaves the company. This includes the product's use by the consumer and its end-of-life (disposal or recycling).
The accounting of scope 3 has become crucial for companies, not only for transparency reasons but also to identify opportunities for emission reductions throughout their value chain.
What is the role of scopes 1, 2, and 3 in carbon accounting?
Scopes 1, 2, and 3 play a fundamental role in carbon footprint assessments, as they provide a framework for structuring and organizing the accounting of an organization's greenhouse gas (GHG) emissions. By categorizing emissions based on their origin and level of control, these three scopes offer a comprehensive view of a company’s carbon footprint. This approach, aligned with international standards such as the GHG Protocol, allows for a detailed analysis of emission sources.
They are crucial for establishing science-based decarbonization targets (such as SBTi) and robust mitigation strategies. They also support non-financial reporting following emerging standards such as the Corporate Sustainability Reporting Directive (CSRD) or the Task Force on Climate-related Financial Disclosures (TCFD) and meet investors' growing expectations for climate transparency.
Beyond Scopes 1, 2, and 3: The Emerging Concept of Scope 4.
According to the GHG Protocol, "avoided emissions" (sometimes referred to as "scope 4") "are emission reductions that occur outside of a product’s life cycle or value chain, but as a result of the use of that product". For example, if a company's product enables a customer to reduce their emissions, these reductions can be counted as avoided emissions. This calculation is based on a life cycle analysis of the product, comparing it to a reference scenario.
However, the GHG Protocol has not officially recognized the term "scope 4" and prefers to use the term "avoided emissions". While these emissions are not subject to regulatory obligations, they can complement a company's carbon footprint by highlighting its positive impact. Nevertheless, it is essential to communicate them separately from scopes 1, 2, and 3 emissions to ensure clarity in the presentation of results.
Why should companies measure their emissions?
Measuring greenhouse gas emissions, particularly in the context of a carbon footprint, serves multiple purposes. First of all, once the organization has a clear idea of the carbon footprint of its activity on the environment, it can implement an action plan to reduce it. It can identify areas for improvement and then determine an emissions reduction trajectory aligned with the Paris Agreement. But that's not all, a carbon footprint also allows the company to:
identify the potential vulnerability of its activity to the increasing scarcity of fossil fuels,
anticipate future regulations (quotas or carbon taxes) more easily,
have a more ecological brand image that can be promoted,
reinvest the money saved by reducing its energy expenses elsewhere.
Measuring and reporting emissions can help to build trust with stakeholders, including customers, employees, investors, and the general public. By demonstrating a commitment to sustainability and transparency, a company can improve its reputation and potentially attract more business.
Conclusion
Scopes 1, 2, and 3 are essential tools for measuring and reducing the environmental impact of companies. They provide a comprehensive view of greenhouse gas (GHG) emissions, allowing for the identification of the most significant emission sources and the implementation of effective reduction strategies. Taking all scopes into account, particularly the often underestimated scope 3, is crucial in this process.
Understanding these scopes is fundamental for any organization wishing to effectively contribute to the global effort to reduce GHG emissions. According to the UN, emissions must decrease by 7.6% per year between 2020 and 2030 to limit warming to 1.5°C, the target set by the Paris Agreement. This underscores the urgency of utilizing these frameworks to their full potential.
As the fight against climate change intensifies, these frameworks will continue to evolve and play a key role in the transition to a low-carbon economy. By embracing and acting upon the insights provided by scopes 1, 2, and 3, companies can make meaningful strides in reducing their environmental impact and contributing to global climate goals.
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