Blog Post
Scope 1, 2 & 3 Emissions
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Under the widely-recognized GHG Protocol corporate standard, a company's greenhouse gas emissions are categorized into three groups, known as Scopes 1, 2, and 3. This framework is crucial for organizations aiming to address climate change and reduce their carbon footprint while promoting sustainable development. Scopes 1 and 2 emissions reporting is often compulsory, covering direct emissions from owned or controlled sources and indirect emissions from purchased electricity, respectively. In contrast, Scope 3 – which captures all other indirect emissions across a company's value chain – is not mandated and presents greater challenges for tracking and reporting. Nonetheless, organizations that effectively report across all three scopes may secure a lasting competitive edge by demonstrating their commitment to comprehensive sustainability practices and emission reduction efforts.
The Different Scopes:
- Scope 1: Direct and Owned Emissions: Emissions from company-owned and controlled sources, which include four categories: stationary combustion (e.g., using fuel in heating), mobile combustion (e.g., fuel burned by vehicles), fugitive emissions (e.g., equipment leaks), and process emissions in industrial processes & manufacturing.
- Scope 2: Indirect and Owned Emissions: Emissions from the consumption of purchased energy for own use, such as electricity, steam, heat & cooling. This often relates to energy efficiency measures and the adoption of renewable energy sources, which are essential for transitioning to a low-carbon economy.
- Scope 3: Indirect and Not Owned Emissions: Emissions from sources that are not under a company's control and occur in its value chain, both upstream and downstream. This includes emissions linked to the company’s operations and business processes. This is where the bulk of a company's business activity takes place and where often 80 to 90% of overall emissions are generated. CarbonLeap therefore encourages firms to address the Scope 3 carbon footprint to achieve real GHG impact, particularly as they pursue net zero emissions goals.
Reporting of Emissions
Scope 3 emissions reporting, which includes all other indirect emissions that occur in a company's value chain, is not currently mandatory but is strongly encouraged. It is considered a critical step for organizations to gain a complete understanding of their carbon footprint and support efforts to achieve net zero targets. Scope 3 emissions typically represent the majority of an organization's carbon footprint but are more challenging to calculate due to their indirect nature.
Despite being voluntary, there is a growing trend toward making Scope 3 emissions reporting morestandardized and, in some cases, mandatory. In regions like the UK, reportingon all three scopes has become a basis for mandatory greenhouse gas (GHG) reporting. However, requirements vary by region. In the United States and Canada, for example, proposals are in place that could make Scope 3 reporting mandatory if those emissions are material or if the company has set carbon reduction targetsfor them. These rules are not yet finalized and could face legal challenges.
In Europe, the Corporate Sustainability Reporting Directive (CSRD), which went into effect in January 2023, includes Scope 3 emissions reporting as part of a phased introduction based on company size. Additionally, under a proposed directive, companies may need to include Scope 3 emissions in their transition plans aligned with climate neutrality goals.
The trend clearly movestoward more comprehensive reporting requirements that include Scope 3 emissions, highlighting the growing importance of corporate transparency in addressing climate change. Companies are increasingly advised to prepare for and start reporting on their Scope 3 emissions, even where it is not yet a legal requirement, as this could become a standard expectation in the near future.
Reporting of Scope 1 and Scope 2 emissions is already mandatory under the GHG Protocol, which organizations use to report their greenhouse gas emissions. These categoriesare easier to measure as they involve emissions from sources directly owned or controlled by the reporting entity—such as fuel combustion in company vehicles or electricity generation.
As organizations strive for sustainable mobility solutions and low-carbon transport options like electric vehicles (EVs), understanding these emission scopes becomes vital for developing effective transport decarbonization plans. By integrating smart mobility practices and alternative fuels into their operations, companies can significantly reduce their overall carbon transport impact while contributing positively to sustainable infrastructure development.
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