Scope 1,2,3 Emissions: A Guide to Current Protocols

The path toward global reduction of greenhouse gas (GHG) emissions relies on strict governance and firm policies. The GHG Protocol defines harmful emissions on three levels, Scope 1, Scope 2 and Scope 3. Not only do these categorisation standards ensure measurable and recordable data, but it also enables significant enhancements in corporate responsibility.

Why are Greenhouse Gas Emissions Categorised?

The 2015 Paris Agreement (COP21) presented harrowing facts about GHG emissions and the devastating effects of climate change. Global leaders left the summit with a renewed understanding of the situation's urgency.

“I urge you to consider the needs of the youngest generation because none of us has the right to assume that for our today they should give up their tomorrow.”

King Charles III – Great Britain

The agreement highlighted the need for worldwide strategic synchronisation, with the overwhelming consensus that swift intervention must keep increases in average global temperatures well below 2°c compared to pre-industrial levels.

At the heart of the drive towards decarbonisation is the requirement to measure and record GHG emissions. Measurable and recordable data is essential for identifying current levels, setting realistic targets, and designing and delivering achievable and practical solutions.

In response to these requirements, the GHG Protocol implemented Scope 1, 2 and 3.

The GHG Protocol

The GHG Protocol was established in the late 1990s because the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) identified the need for a structured international standard of corporate greenhouse gas accounting and reporting.

The early seeds of GHG reporting were sown in 1998 when the WRI published the groundbreaking report "Safe Climate, Sound Business”. Three years later, following consultation with numerous environmental groups (including WWF, The Pew Center on Climate Change, and The Energy Research Institute) as well as industry representatives (including BP, General Motors, Norsk Hydro, Tokyo Electric, and Shell), the 2001 corporate guidance report was released.

Flash forward to 2015, and the initial documentation received an overhaul supporting the Paris Agreement. The backbone of the GHG Protocol now includes Scope 1, 2 and 3, with guidance and tools available to assist companies in calculating GHG emissions and supporting climate change mitigation policies.

What is Scope 1, Scope 2 and Scope 3?

The GHG Protocol defines three scopes of GHG emissions. Each scope represents the ownership and level of control for that stage of emissions.

Reporting of Scope 1 and Scope 2 emissions fall into the category of mandatory for some large PL and LLP companies, while Scope 3 is currently voluntary in terms of measuring and reporting.

What is the Difference Between Scope 1 and 2 Emissions?

Reporting Scope 1 and 2 emissions is mandatory under the GHG Protocol. Scope 1 and Scope 2 relate to direct and indirect GHG emissions from operational systems that are within the reasonable control of the reporting company.

Scope 1 Emissions

Refers to direct GHG emissions resulting from operations owned or controlled by the reporting company, including:

Onsite fossil fuel energy
Refrigerants
Controlled combustion (boilers and furnaces)
Fleet vehicles
Industrial processes and onsite manufacturing

Scope 2 Emissions

Refers to indirect GHG emissions resulting from purchased or acquired energy, including:

Electricity supplied from the grid
Steam, heat, or cooling as provided via external sources.

What is Included in Scope 3 Emissions?

Scope 3 emissions are currently voluntary in terms of reporting. These include all indirect emissions that do not fall within the Scope 2 parameters, produced by assets not owned by the company. Scope 3 considers the broader value chain of the company and considers both upstream and downstream emissions.

Examples of Scope 3 Emissions

Upstream

Transportation and distribution
Purchased goods and services
Business travel
Employee commuting

Downstream

Use of sold products
End of life of sold products
Franchises
Leased assets
Investments

How are Scope 1, 2 and 3 Beneficial to Companies?

“Companies that persist in treating climate change solely as a corporate social responsibility issue, rather than a business problem, will risk the greatest consequences.”

Michael E. Porter and Forest L. Reinhardt

Understanding a company's GHG footprint is the first step towards implementing achievable reduction and mitigation targets, as well as designing and delivering effective solutions. Scope 1, 2, 3 reporting provides crucial information that enables sustainability coordinators a clear road towards alignment with The Paris Agreement protocols.

Without the thorough and concise analysis that Scope 1, 2, 3 provides, companies can't obtain a genuine perspective of their GHG emission levels. Detailed analysis and reporting offer forward-thinking executives the opportunity to make the necessary changes and open relevant communication streams.

The basic format of historic GHG reporting meant that many stones were left unturned, resulting in an unrealistic representation. It is suggested that Scope 3 emissions often make up 90% of the actual carbon footprint.

Let’s consider the example of Apple.

More than 99% of Apple's GHG emissions are Scope 3. The identification of this has enabled Apple to take significant action.

By communicating with their upstream and downstream value chain, Apple can construct new guidelines and policies that not only bring their Scope 3 emissions in hand but may ultimately lead to reduced costs, improved products, and enhanced employee engagement.

“Every company should be a part of the fight against climate change. Together with our suppliers and local communities, we're demonstrating all of the opportunity and equity green innovation can bring. We’re acting with urgency, and we’re acting together. But time is not a renewable resource, and we must act quickly to invest in a greener and more equitable future.”

Tim Cook – CEO of Apple

Scope 3, Problems and Solutions

The reporting of Scope 1 and 2 emissions has been widely accepted across many industries, with several governments listing “quoted” companies for assigned reporting. Mandatory Scope 1 and Scope 2 reporting, alongside the straightforward processes involved, has ensured a positive response.

However, many businesses, including some industry behemoths, are leaving Scope 3 emissions unreported.

The complexity of Scope 3 analysis, and difficulty in the delineation of responsibility, is often cited as the defining factor for their lack of commitment. However, some companies are deciding that public image, cost implications, and historical lack of ethical supply chain practices are reasons to ignore Scope 3 reporting.

“You can’t really develop a decent climate change strategy unless you’ve looked at Scope 3. Scope 3 is so crucial to all forms of climate change activity.”

Tom Cumberlege- Associate Director: Carbon Trust

The progression of Scope 3 emissions toward net-zero will require significant changes to businesses and their associated value chains. More agile competitors will undoubtedly replace businesses that fail to embrace the strategies related to Scope 3. All companies must place the values of Scope 3 at their very core.

Companies such as Patagonia are setting the standards that should become the future normal, as indicated by their 2020 Annual Progress Report.

Conclusion

Scope 1, 2, 3 emissions are categories developed within the GHG Protocol following the historic 2015 Paris Agreement. They refer to direct and indirect greenhouse gas emissions associated with a company. For companies adhering to the GHG Protocol Scope 1 and 2 emissions are currently mandatory for reporting, while Scope 3 reporting remains voluntary.

Scope 1, 2 and 3 emission reporting plays a crucial role in global decarbonisation strategies, while particular focus must be placed on the encouragement of mass adherence to Scope 3 protocols.

References

[1] Porter, M. E., Reinhardt, F. L., Schwartz, P., Esty, D. C., Hoffman, A. J., Schendler, A., ... & Rendlen, B. (2007). Climate business| business climate.harvard business review, 85(10), 21-44.

Scope 1,2,3 Emissions: A Guide to Current Protocols

Why are Greenhouse Gas Emissions Categorised?

King Charles III – Great Britain

The GHG Protocol

What is Scope 1, Scope 2 and Scope 3?