A Deep Dive into the scopes 1, 2 and 3 of Carbon Emissions

By Stuti Sharma

21st April 2022

The effects of rising global temperatures have a direct and complicated environmental impact on industry, society, and ecosystems. Companies have mostly been allowed to spew carbon until recently, but they are now increasingly discovering that those emissions come at a high cost, both monetary and social. As a result, companies that sit on the fence are severely disadvantaged in comparison to those that create risk mitigation strategies and earn a competitive advantage in a warming, carbon-constrained future. If a company truly wants to become more sustainable, the first step it should take is to assess its carbon emissions.

 


Scope 1, 2, and 3 refer to how a company categorises the many types of carbon emissions it generates in its own activities and along its value chain. Scopes were originally used in the Green House Gas Protocol of 2001, and they are now the foundation for mandatory GHG reporting.

 

 

Scope 1

 

This covers a company's direct greenhouse gas (GHG) emissions, such as those produced by its boilers and cars. To put it another way, emissions are discharged into the atmosphere as a direct outcome of a series of operations at a corporate level. The following greenhouse gases (GHGs) are produced by the combustion of fuels in stationary (non-transport) combustion sources: carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O). Boilers, heaters, furnaces, kilns, ovens, flares, thermal oxidizers, dryers, and any other device or gear that combusts carbon-carrying fuels or waste stream elements are all examples of stationary combustion.

 

The majority of GHG emissions from stationary combustion sources come from CO2. CO2 emissions from all commercial, industrial, and electrical production combustion sources account for more than 99 percent of total CO2-equivalent GHG emissions in the United States. The CO2-equivalent emissions of CH4 and N2O from the same sources account for less than 1% of total CO2-equivalent emissions.

 

Fossil fuels aren't used in all stationary combustion sources. Biomass (non-fossil) fuels (e.g., forestry-derived, agriculture-derived, biomass-derived gases) can be burned alone or in combination with fossil fuels in stationary sources.CO2 emissions (in terms of total biogenic CO2 emissions) must be tracked separately from fossil CO2 emissions, according to the GHG Protocol.

 

 Waste-derived fuels are treated in the same way as any other fuel in a company's inventory. Emissions from waste-derived fuels only include emissions from the burning process, not any "offsets" from the waste-derived fuel's use.

 

 

Scope 2

 

The Scope 2 Guidance standardises how businesses quantify emissions from electricity, steam, heat, and cooling (together referred to as "scope 2 emissions").

 

The following are some of the recommendations:
  • New GHG inventory accounting rules for emissions through energy contracts and instruments (such as renewable energy credits).
  • All contractual instruments must meet Eight Scope 2 quality criteria in order to be a reliable data source for the scope. 2 approaches depending on the market
  • Recommendations for disclosing energy purchase information in a transparent manner
  • Eleven brief case examples are provided to demonstrate the advantages of the new standards.

 

Since its introduction, the Scope 2 Guidance has been the most important revision to the Corporate Accounting and Reporting Standards. It provides much-needed clarification on how businesses calculate emissions from electricity and other forms of energy consumption. This increased level of transparency could be critical in spurring business demand for more renewable energy.

 

Energy generation accounts for over 40% of worldwide greenhouse gas emissions, with industrial and commercial organisations using half of that energy. Companies often use energy conservation, efficiency upgrades, and supply changes to low-carbon power to minimise emissions, whether through on-site installations or by altering the energy products purchased (through contracts and electricity suppliers).
Electricity will be the only source of scope 2 emissions for most businesses. Simply put, there are two types of energy consumed: The end-electrical user's use is covered by Scope 2. The energy consumed by utilities during transmission and distribution (T&D) is covered by Scope 3.

 

 

Scope 3

 

Scope 3 emissions are the outcome of actions from assets that the reporting company does not own or control but which it indirectly touches in its value chain. All sources outside of an organization's scope 1 and 2 boundaries are included in scope 3 emissions. The scope of the project The scope 1 and 2 emissions of one organisation are the scope 1 and 2 emissions of another. Scope 3 emissions, also known as value chain emissions, typically account for the bulk of a company's total GHG emissions. Scope 3 emissions are divided into 15 categories, albeit not every category will apply to all businesses. Emissions both upstream and downstream of the organization's activities are included in Scope 3.

 

When reporting and disclosing GHG emissions, all businesses should quantify scope 1 and 2 emissions, but for scope 3 emissions quantification is not necessary, according to the GHG Corporate Protocol. More companies, on the other hand, are looking deeper into their value chains to understand the overall impact of their activities on GHG emissions. Furthermore, while scope 3 emission sources may account for the bulk of an organization's GHG emissions, they frequently present chances for emissions reduction. Although the organisation has no control over the emissions, it may be able to influence the actions that cause the emissions. Companies have been missing out on huge potential for improvement because emissions along the value chain generally constitute a company's highest greenhouse gas impacts.

 

According to Kraft Foods, value chain emissions account for more than 90% of the company's overall emissions.
 

 

There are 15 categories for Scope 3 emissions:-

 

Upstream operations are broken down into several categories, with business travel being one of the most critical to track for many companies (e.g., air travel, rail, underground and light rail, taxis, buses, and business mileage using private vehicles). Employee commuting, which arises from emissions released during travel to and from work, must also be reported. It can be reduced by using public transportation and working from home. Emissions from the manufacture of products and services obtained by the company in the same year ('cradle to gate') are included in the purchased goods and services. It's critical to distinguish between purchases of production-related products (such as materials, components, and parts) and non-production-related purchases (e.g, office furniture, office supplies, and IT support). Capital goods are end-of-life products that are used by a business to make a product, offer a service, or store, sell, and distribute merchandise. Capital items include structures, vehicles, and machinery. For the purposes of accounting for scope 3 emissions, companies should not depreciate, discount, or amortise emissions from the production of capital goods. Instead, companies should account for the total cradle-to-gate emissions of capital assets purchased in the year of acquisition (GHG protocol).
Downstream emissions are those that occur after a product or service has left the control/ownership of the company. Downstream Scope 3 emissions sources include the processing of sold items, consumption of sold products, and end-of-life treatment of sold products.

 

The roles of human greenhouse gases (GHGs), which drive climate change and its consequences over the planet, are expanding. According to climate experts, worldwide carbon dioxide emissions must be reduced by up to 85% below 2000 levels by 2050 in order to keep the global mean temperature rise below 2 degrees Celsius. If temperatures climb above this point, people and ecosystems will face increasingly unpredictable and hazardous consequences. As a result, it is becoming increasingly vital to expedite efforts to reduce anthropogenic GHG emissions. Existing government initiatives are insufficient to address the issue. Business leadership and innovation are critical to progress.
 

Companies that continue to treat climate change as a social responsibility issue rather than a commercial issue will suffer the most severe effects. Of course, stakeholder expectations and social responsibility norms will influence a company's climate policies. However, the effects of climate change on business operations are now so obvious and definite that the issue is better addressed with strategic tools rather than philanthropic ones.

Our Blog