What are Scopes 1, 2, and 3 of the GHG protocol?

Emily Cay
Emily Cay
March 27, 2023
min read

The greenhouse gas protocol is a widely recognised and respected framework for measuring and reporting greenhouse gas emissions. It is regarded as the international carbon accounting gold standard and serves as the foundation for various carbon accounting frameworks, including TCFD, GRI, CDP, etc. The GHG protocol assists businesses, governments and global enterprises measure their emissions, setting reduction targets, and providing regular updates on their progress. Within the GHG protocol, there are three distinct “scopes” to categorise direct and indirect emission sources based on their proximity and control. This article will provide some insight into Scope 1, 2, and 3 emissions.

Scopes 1, 2, and 3 of the GHG Protocol
Scope 1-3 emissions infographic

Scope 1: Direct emissions

Scope 1 of the GHG Protocol refers to direct emissions that are owned or controlled by the organisation. Such emissions are generated by a company's own sources including but not limited to the combustion of fossil fuels, industrial processes, and transportation. These emissions are linked to an organisation's activities, making them easier to quantify and manage. Scope 1 emissions can be calculated and divided into four categories:

Stationary combustion is fossil fuel combustion in stationary equipment such as boilers, furnaces, burners, turbines, heaters, incinerators, engines, flares, and similar apparatus. These equipment types are used for heating, cooling, and other industrial processes.

Mobile combustion is generated from the use of transportation vehicles, including aircraft, automobiles, trucks, boats, ships, barges, vessels, and others. The increasing use of hybrid cars and electric cars may result in some of these emissions falling under Scope 2.

Fugitive emissions refer to the intentional or unintentional emissions from leakage and other irregular releases of gases or vapours from pressure-containing equipment, such as  refrigerants.

Process emissions are chemical reactions and emissions that arise from industrial processes and on-site manufacturing.

Certain emissions, such as Co2 from the combustion of biomass and GHG emissions outside the purview of the Kyoto Protocol (e.g. CFCs, NOx, etc), should be reported separately and not incorporated into Scope 1.

Scope 2: Indirect emissions

Scope 2 emissions refer to the indirect emissions associated with the acquisition of energy from external providers, such as a utility company. This includes the consumption of purchased electricity, heat, steam, or cooling by an organisation. Scope 2 emissions physically occur at the site where the energy is generated.

Scope 3: Indirect emissions

Scope 3 refers to all indirect emissions associated with an organisation's activity – the things that the organisation has affluence over, not a direct influence. Scope 3 is a comprehensive and detailed framework for measuring and reporting emissions from cradle to grave. The emission sources are divided into fifteen categories, divided by upstream in the supply chain and downstream in the value chain.

Upstream emissions occur before the organisation receives its goods and services, such as extraction of raw materials, production, transportation, and distribution along with the waste generated by purchased goods and services.The upstream categories are:

Category 1: Purchased goods and services – Cradle-to-gate emissions from the production of goods and services purchased by the company in the same year.

Category 2: Capital goods – These are goods used by the company to manufacture products, provide a service, store, sell and deliver merchandise. Capital goods include buildings, vehicles, and machinery.

Category 3: Fuel and energy-related activities – Emissions relating to the extraction, production of fuels, and energy purchased and consumed by the company in the reporting year. Scope 1 and 2 are not included.

Category 4: Upstream transportation and distribution – Transportation of materials and products from suppliers to a company’s facilities by land, sea, and air. Along with emissions from third-party warehousing.

Category 5: Waste generated in operations – Waste generated during company operations. Waste disposal emits methane (CH4) and nitrous oxide (N2O) that cause greater damage than Co2 emissions.

Category 6: Business travel – Emissions from transporting employees for business-related activities by air travel, public transport, taxis, and business mileage using private vehicles.

Downstream activity transpires after the organisation delivers its goods and services. Including the processing and utilisation of purchased products and services, as well as the transportation and distribution of sold products and services. Additionally, it includes the end-of-life treatment of said sold products and services. The downstream categories are:

Category 7: Employee commuting – Emissions from employees commuting to and from work by automobile, bus, rail, and other modes of transportation.

Category 8: Upstream leased assets – Includes emissions from leased assets such as buildings and equipment of the company in the reporting year that are not already included in the reporting of the companies' Scope 1 and Scope 2 inventories.

Category 9: Downstream transportation and distribution – Transportation and distribution of sold products in vehicles and facilities not owned or controlled by the company.

Category 10: Processing of sold products – Emissions from processing sold intermediate products by third parties (e.g. manufacturers). Intermediate products are those that require further processing or inclusion in another product before use.

Category 11: Use of sold products – Usage, maintenance, and repair of sold products or services by reporting the company to end users.

Category 12: End-of-life treatment of sold products – Disposal or recycling of products sold by the reporting company. Difficult to measure since it usually depends on how the customer chooses to dispose of the product.

Category 13: Downstream leased assets – Emissions from the operation of assets that are owned by the organisation (acting as the lessor) and leased to other entities that are not already included in Scope 1 and Scope 2.

Category 14: Franchise – Businesses operating under a licence to sell or distribute another company's goods or services within a certain location. Emissions from operations under their control are not included in Scope 1 and 2.

Category 15: Investments – Largely for investors and companies that provide financial services. Investments fall under the following categories: equity investments, debt investments, project finance, managed investments, and client services.

The emissions falling within Scope 3 are typically the largest source of an organisation’s carbon footprint. Nevertheless, they are also the most challenging to measure and tackle. In order to calculate Scope 3 emissions, an organisation needs to collect data from all of its suppliers, customers, and other stakeholders across its value chain. It can be a time-consuming and complex process.

Why measure Scope 1, 2, and 3?

Sustainability is a business imperative, and should not be a mere component of corporate social responsibility. It's also beneficial for companies to measure and reduce their emissions in order to comply with global regulatory requirements and thus maintain a competitive edge over other firms. For instance, the European Union has carbon tax legislation in over 30 countries. The SEC proposal in the United States requires publicly traded companies to disclose to investors how their operations impact the climate and add to carbon emissions. Additionally, New Zealand has mandatory scope regulations. Overall, measuring all three scopes of emission holds significant importance as it enables organisations to comprehend the full impact of their activities on the environment. Moreover, it allows them to explore opportunities for reducing carbon emissions and promote sustainability.

How Avarni can help

Measuring and reducing carbon emissions can enhance the overall value chain of companies and contribute to a more sustainable future. Avarni facilitates decarbonisation by making it easy to import spend and activity data, and by offering a visualisation of your organisation’s Scope 1, 2, and 3 emissions. Avarni's comprehensive methodology for calculating emissions and collecting data from your supply chain ensures that all 15 categories within Scope 3 are identified. Furthermore, Avarni pulls live public data on emissions, SBTis, and reduction initiatives from the web for thousands of companies. With Avarni, you can forecast your organisation’s future emissions by creating scenarios that model changes in your supply chain emissions over time while also considering external macroeconomic factors. Additionally, Avarni allows you to model financial costs under different scenarios by setting carbon prices. Overall, Avarni provides an effective solution for you to measure, track, and reduce your Scope 1-3 carbon emissions, contributing to a more sustainable future for all.

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