What are Scope 1, 2, and 3 Emissions?

Your organization needs to measure these scopes before you can make any progress on your net zero or carbon-neutral pledges. In other words, you can’t manage what you can’t measure. To understand scopes, you first need to know who established them.

The World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) created the Greenhouse Gas Protocol (GHGP) in 2001 to streamline emissions measurement and help organizations identify opportunities to reduce emissions.

Under the GHGP, all emissions are broken down into three scopes. Many countries and organizations require scope 1 and 2 emissions reporting, whereas measuring scope 3 emissions is voluntary for most. Knowing the difference between each scope of emissions can help your organization make accurate assessments.

Let’s go more in-depth on each scope, how you can measure them and why it’s important to know your organization’s emissions.

What Are Scope 1 Emissions?

Scope 1 emissions include direct emissions from operations the organization directly owns. Examples of scope 1 emissions include the fuel consumption of company-owned vehicles or the energy use in on-site buildings.

Scope 1 covers the following types of emissions:

• Stationary combustion, like fuel combustion emissions from boilers
• Fugitive emissions, like leaks from the refrigerant gas
• Mobile combustion, like emissions from owned cars that burn fuel
• Process emissions, like emissions generated when manufacturing steel

Since organizations have direct control of emissions created on-site, scope 1 emissions are typically the easiest to manage and mitigate.

What Are Scope 2 Emissions?

Scope 2 emissions are indirect emissions generated from purchased electricity, gas, steam, heat, or cooling from the company's operations. Although organizations don’t control or own the sources that generate scope 2 emissions, they’re important to report since organizations indirectly cause them.

For example, scope 1 covers the emissions an air conditioning unit creates on-site at the office. Scope 2 focuses on emissions created at the power plant that generated the energy for that air conditioning unit.

Scope 2 emissions for most organizations are reported with a location- and market-based method.

• The market-based method uses information from contractual instruments for the electricity you’ve purposefully picked (like if you purchase renewable energy).
• The location-based method uses the average emissions intensity from the grids where energy consumption occurs.

What Are Scope 3 Emissions?

Scope 3 emissions cover indirect emissions that happen throughout an organization’s value chain that it doesn’t directly produce on-site or that happen due to its direct consumption.

Scope 3 emissions are complex and difficult to measure since many are out of an organization’s direct control. Measuring these also requires comprehensive data collection to get accurate information.

These emissions encompass 15 categories: purchased goods and services, waste generated, transportation and distribution, use of sold products, investments, franchises, and employee commuting.

Each category has a specific methodology to measure emissions. Organizations must decide which categories are relevant to their operations, what should be measured, and which calculation type best suits their available data (like spend vs. fuel-based).

Categories are also further divided into upstream and downstream activities. We’ll cover these categories next.

Upstream Activities

Upstream activities include all emissions from an organization’s purchased goods and services. For many businesses, these are emissions generated to create and deliver their goods and services to customers.

Below are categories considered upstream activities according to the GHGP:

• Category 1: Purchased goods and services, such as emissions generated to create motherboards an organization has purchased to build computers
• Category 2: Capital goods used to provide, sell, store, or deliver products or services, such as emissions from a warehouse to store products
• Category 3: Fuel and energy-related activities not counted for scopes 1 or 2, such as the extraction of natural gas needed to generate heating
• Category 4: Upstream Transportation and distribution, such as emissions generated from transporting materials between suppliers
• Category 5: Waste generated in operations and treated by a third party, such as emissions from waste disposed of in a landfill
• Category 6: Business travel, such as emissions from air and bus travel to a client meeting
• Category 7: Employee commuting, such as emissions from car travel to the office
• Category 8: Upstream Leased assets not counted for scopes 1 or 2, like emissions from a leased building the company is using to store products

Downstream Activities

Downstream activities encompass emissions generated after goods and services leave an organization’s facilities. This includes all emissions created when these goods and services are distributed, sold, and taken home with the end user.

Below are categories considered downstream activities according to the GHGP:

• Category 9: Transportation and distribution after the point of sale, such as emissions from a customer traveling to a retailer for a product
• Category 10: Processing of sold intermediate products used to create a final product, such as emissions created from the rubber produced and sold to another company to make car tires
• Category 11: Use of sold products, such as emissions the end-user generates after purchasing and driving off in their new car
• Category 12: End-of-life treatment of sold products, such as emissions created when a customer’s wrecked car is taken to a junkyard
• Category 13: Downstream Leased assets not counted for scopes 1 or 2, such as emissions from a car that a rental car company leases to customers
• Category 14: Franchises, meaning all emissions created by franchises under a company
• Category 15: Investments, such as emissions generated in an infrastructure project a company has financed

Does Going Net-zero Include Scope 3 Emissions?

Going truly net zero includes scope 3 emissions, even though these are normally voluntary to report. These emissions typically comprise most of an organization’s emissions since they encompass many types. Reducing these emissions can make the biggest impact, especially since it may also require reductions for other organizations.

How Can Organizations Measure Scope 1, 2, and 3 Emissions?

Organizations can look to technology solutions like climate management and accounting platforms (CMAPs) to measure, manage and reduce scope 1, 2, and 3 emissions.

CMAPs are software tools that use all of the carbon accounting frameworks to accurately measure an organization's emissions. They act as a central source of carbon truth since it’s easy to upload data. Once uploaded, CMAPs show where most emissions occur throughout a value chain. This gives organizations the data to create effective goals and a plan to reach them.

Companies can easily access scope 1 and 2 data by calculating their greenhouse gas (GHG) emissions amount against purchased fuel and electricity. Scope 3 data can come from a variety of sources.

What Are the Challenges of Reporting Scope 3 Emissions?

Reporting on scope 3 emissions can be daunting since it requires a great deal of data collection. On top of collecting the data itself, organizations can run into issues with getting accurate data. For example, the reporting organization may not have accurate scope 3 calculations if suppliers in their value chain don’t accurately measure their emissions.

It’s difficult to develop an effective climate change strategy without scope 3. These emissions comprise the vast majority of most companies' emissions and are the hardest to manage and mitigate. According to the CDP’s 2021 Global Supply Chain Report, there are 11.4 times more emissions in a company’s supply chain compared to its direct operations.

How Can Organizations Overcome the Challenges of Scope 3 Emissions?

Organizations can look to frameworks and collaborate with others to get to the bottom of their scope 3 emissions. Both routes are key to getting the right data and identifying your organization’s GHG hot spots.

Look to Frameworks and Methodologies for Guidance

The GHG Protocol Corporate Value Chain (Scope 3) Standard and the GHG Protocol Product Standard help organizations evaluate emissions on the value chain. The Corporate Value Chain (Scope 3) Standard looks at the corporate level, while the Product Standard looks at the product level.

Other frameworks and methodologies have grown around some of the scope 3 categories to give more granular guidance where the GHGP was lacking. The Partnership for Carbon Accounting Financials (PCAF) is an example.

PCAF was designed to build upon the GHGP’s scope 3 category 15: investments. It gives specific methodologies to account for six different asset classes, generating detailed calculations of financial institutions' loans and investments.

Collaborate With Other Companies

To support this effort, some categories of scope 3 encourage collaboration with other organizations in the reporting organization's value chain. Reducing one organization’s scope 3 emissions could mean reducing another’s scope 1 and 2. This creates a domino effect by increasing efficiencies in supply chain management and reducing operational costs.

Why Should Organizations Measure All of These Emissions?

Organizations that understand and engage with scopes 1, 2, and 3 will benefit by improving transparency and stakeholder engagement, getting ahead of upcoming regulations, identifying climate risk across their operations and value chain, and acting on resource-saving climate opportunities.

1. Improve Transparency and Trust

Investors, customers, employees, and other stakeholders care about the GHG emissions your organization creates. Keeping real numbers readily available can help customers and employees decide if they want to work with your company.

Investors especially want to know your environmental, social, and governance (ESG) impact. Being transparent with investors about your potential climate risk can help them make decisions about their investments. PwC’s U.S. investor survey found that 61% of investors consider a company’s exposure to ESG risk before investing.

2. Get Ahead of Upcoming and Current Regulations

More countries and entities are beginning to require emissions reporting. Starting now gives your organization more time to create a streamlined process for measuring and reporting emissions.

3. Create Benchmarks for Net-zero Goals

Accurate GHG emissions measurement is the first step to reaching decarbonization goals and avoiding the worst effects of climate change. Knowing where your organization currently stands with your emissions is a major step in creating attainable net zero and carbon-neutral goals.

4. Identify Opportunities To Lower Emissions

After gathering the data and implementing scalable ways to measure emissions, your organization is positioned to start taking action. You can quickly see your highest areas of emissions and begin looking for solutions. The data also identifies risks you might have otherwise missed.

5. Increase Efficiency and Lower Expenses

Lowering emissions can also save your organization more than you’d think. Less consumption and improved operations can equate to lower costs. For example, cutting down on business travel can save your company expenses while saving the Earth from unnecessary emissions.

Accurate measurement can also identify suppliers or partners in your supply chain who are responsible for excessive emissions. Uncovering the data through carbon accounting can help you find ways to work more efficiently.

Getting started on measuring scope 1, 2, and 3 emissions can be overwhelming if you don't know where to start. Finding reliable software is one important step to gathering accurate information.

Learn more about our carbon accounting platform to see how we can help streamline your data to make it usable and actionable.

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Frequently Asked Questions (FAQs)

What are the challenges in measuring and managing Scope 1, Scope 2, and Scope 3 emissions?

Challenges include data collection and accuracy, defining organizational boundaries and scope boundaries, obtaining reliable data from suppliers, and addressing the complexities of indirect emissions within the value chain. Additionally, organizations may face difficulties in setting reduction targets for Scope 3 emissions due to limited control over these indirect emissions.

Who defines scope 1, 2, and 3 emissions?

Scope 1, 2, and 3 emissions are defined by the GHG Protocol corporate standard. Companies are required to report scope 1 and 2 emissions, while scope 3 emissions are voluntary and more challenging to monitor. The GHG Protocol provides guidelines for classifying greenhouse gas emissions into these three scopes. Ensuring compliance and transparency in emissions reporting is crucial for driving sustainability efforts.

Why are scope 3 emissions so important?

Scope 3 emissions are often the largest contributor to a company's overall carbon footprint—and are therefore becoming increasingly important to measure and manage as part of a comprehensive climate strategy. Companies that prioritize addressing scope 3 emissions are better equipped to mitigate their environmental impact, meet stakeholder expectations, comply with regulations, and capitalize on new business opportunities.

What are scope 4 emissions?

Scope 4 emissions, also known as avoided emissions, refer to greenhouse gas (GHG) emissions prevented by using more efficient products and services. These emissions reductions are crucial for combating climate change and achieving sustainability goals.

How can organizations set targets for scope 1, 2, and 3 emissions?

Setting targets for each scope requires a comprehensive understanding of emissions sources, baseline data, and the organization's sustainability goals. Organizations can establish science-based targets, aligning with international climate goals, or set internally determined targets based on reduction potentials and stakeholder expectations.