Greenhouse Gas Emissions and The Three Scopes

Overview

Module 1 introduces the fundamentals of greenhouse gases (GHG) and your business's role in the value chain. We’ll cover the importance of scope 3 emissions and the complexities associated with measuring them. By completing this module, you will:

Gain a high-level understanding of greenhouse gas emissions
Learn how emission activities are classified
Understand why scope 3, in particular, is important to measure and reduce.

The estimated time to complete is 20 minutes.

Terms to Know

Value Chain - Business activities that an organization performs in order to deliver goods and services to customers.
Carbon Footprint - Also known as a GHG inventory, a carbon footprint is an estimate of greenhouse gases emitted into the atmosphere by a company or entity. Carbon footprints are generally expressed in carbon dioxide equivalent, or CO₂e.
Greenhouse Gas Protocol (GHGP) - The GHGP is the global standard methodology for measuring carbon footprints and helps companies to identify, quantify, and report greenhouse gas emissions.‍
Science-Based Target Initiative (SBTi) - A collaborative partnership that defines and promotes the best practices for setting Science Based Targets (SBTs), or emissions reduction targets that align with the Paris Climate Agreement to limit global warming to below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius.

Greenhouse Gas Emissions and the Three Scopes

Before diving into the complexities of scope 3 emissions, it’s important to understand the fundamentals of GHG emissions.

A GHG is any gas that traps heat in the atmosphere. As more GHGs are emitted, they trap more heat in the atmosphere, intensifying climate change in what is known as the Greenhouse Gas Effect.

The GHG Protocol covers the accounting and reporting of the seven greenhouse gases covered by the UNFCCC and Kyoto Protocol.‍ The table below provides information about the seven GHGs and their sources:

GHG	Formula	Common Sources
Carbon Dioxide	CO₂	Energy generation and manufacturing
Methane	CH₄	Energy generation, livestock, and oil and gas production
Nitrous Oxide	N₂O	Energy generation and fertilizer use
Hydrofluorocarbons	HFCs	Refrigeration, building insulation, fire extinguishing, and aerosols
Perfluorocarbons	PFCs	Semiconductor manufacturing (etching and cleaning) and aluminum production
Sulfur Hexafluoride	SF₆	Electrical transmission and distribution equipment (e.g., switchgear) and magnesium production
Nitrogen Trifluoride	NF₃	Microelectronics manufacturing, including semiconductors, LCDs, and solar panels

As businesses carry out routine operations, such as transporting goods or manufacturing materials, they release greenhouse gases into the atmosphere. On a global scale, this contributes to the Greenhouse Effect and intensifies climate change. The Greenhouse Gas Effect intensifies climate change by trapping heat in the Earth's atmosphere from added greenhouse gases.

The GHG Protocol sets widely recognized standards for GHG accounting, also known as carbon accounting. These standards are employed by various entities, including organizations and governments, to manage, measure, and report their GHG emissions. The GHG Protocol classifies emissions into three distinct categories:

Scope 1: Direct emissions

Scope 1 emissions are direct emissions from sources that are owned or controlled by the organization.

Examples include:

Fuel combustion in company-owned buildings or vehicles
On-site manufacturing or industrial process emissions
Direct emissions from agriculture or refrigeration systems

These emissions are typically the easiest to measure because the organization has direct control over the sources.

Scope 2: Indirect energy emissions

Scope 2 emissions are indirect emissions from the generation of purchased energy, such as electricity, steam, heating, or cooling that the organization consumes.

Although these emissions occur at a utility or energy provider’s facility, they are attributed to the reporting organization because they result from its energy use.

Scope 3: Value-chain emissions

Scope 3 emissions include all other indirect emissions that occur throughout an organization’s value chain and are not included in Scope 2. These emissions arise from activities associated with the organization but occur outside its direct ownership or control.

The GHG Protocol’s Scope 3 Standard organizes these emissions into 15 categories, covering a wide range of upstream and downstream activities, including:

Purchased goods and services
Business travel and employee commuting
Transportation and distribution
Leased assets
Use and end-of-life treatment of sold products
Investments

Scope 3 emissions are often the largest share of an organization’s total carbon footprint, but they are also the most challenging to measure. This complexity arises from factors such as:

Multiple tiers of suppliers upstream
Limited access to supplier activity data
Uncertainty around how customers use and dispose of products

Despite these challenges, organizations cannot fully understand or address their climate impact without accounting for Scope 3 emissions.

While many organizations focus first on reducing operational emissions (Scopes 1 and 2), doing so alone is often insufficient to meet long-term climate goals or stakeholder expectations. For most industries, the majority of emissions occur outside direct operations, embedded in supply chains, logistics, product use, and investments.

Scope 3 emissions provide critical insight into where climate risks and reduction opportunities truly exist across the value chain.

Scope 3 Emissions Case Study: Agora

Throughout this course, we will use a fictional computer manufacturing company, Agora, to illustrate Scope 3 concepts and examples.

Agora designs, manufactures, and distributes computers that are sold through retail channels. Customers purchase these products, have them shipped or transported home, and use them over several years. While Agora’s direct operations include offices and limited manufacturing oversight, most emissions associated with its products occur outside its direct control—during component manufacturing, transportation, product use, and end-of-life disposal.

Stephanie, Agora’s sustainability manager, is facing increasing pressure from investors to measure Scope 3 emissions in anticipation of upcoming climate disclosure requirements. Even before collecting detailed data, Stephanie can reasonably infer—based on Agora’s industry and business model—that the company’s value-chain emissions represent the majority of its carbon footprint.

This insight sets the foundation for the Scope 3 measurement, data collection, and reduction strategies explored throughout the course.