Greenhouse Gas Emissions: Understanding Emissions Domains 1, 2 and 3

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

Michael E. Porter și Forest L. Reinhardt

According to the GHG Protocol’s top corporate standard, a company’s greenhouse gas emissions are classified into three areas. Scopes 1 and 2 are mandatory for reporting, while scope 3 is voluntary and the most difficult to monitor. However, companies that manage to report on all three areas will gain a sustainable competitive advantage.

In the current context, marked by a growing awareness of the impact of human activities on the environment, companies are increasingly concerned with monitoring and reducing greenhouse gas (GHG) emissions. A key tool in this endeavor is the GHG Protocol, which classifies emissions into three main categories: Scope 1, Scope 2 and Scope 3. This classification helps organizations better understand the source of emissions and develop effective strategies to reduce their impact on the climate.

What are Scope 1 Emissions?
Scope 1 emissions are the direct emissions generated by activities that an organization owns or controls. These include, for example, emissions from manufacturing processes or the use of fuels by company vehicles.

Examples of Scope 1 Emissions
Plastic resin production: Emissions generated in facilities where resin is produced from raw materials.
Motor Vehicle Manufacturing: Emissions from the manufacturing of the engine or chassis, as well as their assembly into the final product.

What are Scope 2 Emissions?
Scope 2 emissions are the indirect emissions generated by the energy purchased and used by the organization. These include emissions from electricity consumption, heating or cooling.

Examples of Scope 2 Emissions
Plastic resin production: Emissions from the use of purchased electricity for resin production.
Motor vehicle manufacturing: Emissions from the use of electricity supplied by a power company at motor vehicle assembly facilities.

What are Scope 3 Emissions?
Scope 3 emissions include all other indirect emissions that occur in a company’s value chain but are not directly controlled by it. These can be the most significant as they often represent the majority of an organization’s total emissions.

Examples of Scope 3 Emissions
Plastic resin production: Emissions from primary petrochemical production and delivery of raw material to the plastic manufacturer.
Vehicle manufacturing: Emissions from the purchase of materials (aluminum, zinc, plastic, etc.) and the final use of the vehicle by the consumer.

Why is it Important to Know Scope 1, 2 and 3 Emissions?
Understanding and managing these three categories of emissions is crucial to any effective sustainability strategy. It enables companies to identify the most significant sources of emissions and develop action plans to reduce them. This process is also essential for compliance with climate change regulations and for improving the company’s environmental performance.

Scope 3 Emissions Accounting and Reporting Challenges
Calculating Scope 3 emissions is often complex, as it requires collecting data along the entire value chain and managing issues of privacy and accessibility of information. It also requires collaboration and alignment between different actors in the supply chain.

How Can Circularise Help with Scope 3 Emissions Reporting?
We offer you a calculation solution based on the GHG Protocol for supply chain transparency, enabling companies to track their carbon footprint along the value chain. With the resulting report, we facilitate the collection of the primary data required for accounting for Scope 3 emissions, thus contributing to your efforts to reduce their impact on the environment.