Carbon accounting is a crucial process for businesses aiming to measure and manage their environmental impact. At the heart of this practice lies the categorization of greenhouse gas (GHG) emissions into scopes 1, 2, and 3. This framework, established by the internationally recognized GHG Protocol, provides a comprehensive approach to carbon footprint assessment.
By distinguishing between direct GHG emissions, indirect energy-related emissions, and other indirect emissions, this categorization offers a structured method for companies to understand and address their carbon footprint.
How are greenhouse gas emissions accounted for?
To identify their impact on climate change, companies and organizations must quantify their greenhouse gas (GHG) emissions when building their carbon footprint. The company must provide internal data on its activity, such as its gas, electricity and petrol consumption. Third-party data are also collected, from the entire upstream and downstream value chain of the company (purchases, freight, use and end of life of products sold, etc.).
The service provider responsible for accounting for the company's carbon emissions then associates a volume of emissions with the organization's activity data.
Scopes 1, 2 and 3 designate three distinct perimeters called "scope" in which GHG emissions are classified. Each scope is divided into sub-categories corresponding to the carbon sources emissions. Let's dive into the different carbon emissions scopes.
A closer look at Scopes 1, 2, and 3
Scope 1: direct emissions
The first scope concerns the company's direct GHG emissions. The company is directly responsible for these emissions during the manufacture of its product or the implementation of its service. Heating in the company's premises, the refrigeration unit needed to preserve food or the fuel used for the company's vehicles fall into this category. Scope 1 includes five sub-categories:
Stationary combustion: fuel that burns in non-moving energy production facilities such as industrial boilers and thermal power plants;
Mobile combustion: fuel that burns in moving machinery such as a company's fleet of vehicles;
Direct process emissions: emissions from agricultural and industrial processes such as those resulting from fermentation in the food industry or bioethanol production;
Fugitive emissions: emissions that escape accidentally or intentionally, such as the leakage of refrigerant gases used in air conditioning, refrigeration, or freezing systems;
Emissions from biomass (soil and forests).
Greenhouse gas emissions that occur upstream of combustion are not included in Scope 1.
Scope 2: indirect energy-related emissions
Scope 2 concerns greenhouse gas emissions related to the consumption of electricity, heat or cold necessary for the proper functioning of the company. These are indirect emissions because their production has led to emissions upstream of their use, as these processes are only energy carriers. To calculate scope 2 emissions, companies must take into account the GHG emissions produced by the power plants or heating and cooling facilities that supplied the energy consumed by the company. Scope 2 includes two subcategories:
Indirect emissions from electricity consumption;
Indirect emissions related to the consumption of steam, heat or cold.
Scope 3: other indirect emissions (not owned)
Scope 3 encompasses all indirect emissions not included in scopes 1 and 2. It covers a wide range of emissions related to the entire value chain of the company.
Scope 3 typically represents the largest share of a company’s total emissions, often between 70% and 90%. This significance arises because it includes all indirect impacts associated with the company’s activities, even those outside its direct control. This includes emissions from the purchase of goods and services, transportation and distribution, use of sold products, and even financial investments.
These emissions are divided into fifteen distinct categories, grouped into two major sections: upstream and downstream emissions:
Upstream emissions involve all activities related to suppliers and production before the product or service leaves the company. This includes, for example, raw material extraction and component transportation.
Downstream emissions cover everything that happens after the product or service leaves the company. This includes the product's use by the consumer and its end-of-life (disposal or recycling).
What is the role of scopes 1, 2, and 3 in carbon accounting?
Scopes 1, 2, and 3 form the essential methodological foundation for a comprehensive and structured quantification of an organization's greenhouse gas (GHG) emissions. This approach, aligned with international standards such as the GHG Protocol, enables a detailed analysis of emission sources.
Their consideration is crucial for establishing science-based decarbonization targets (such as SBTi) and robust mitigation strategies. It also supports non-financial reporting following emerging standards such as the Corporate Sustainability Reporting Directive (CSRD) or the Task Force on Climate-related Financial Disclosures (TCFD) and meets the growing expectations of investors for climate transparency.
Why should companies measure their emissions?
Measuring greenhouse gas emissions, particularly in the context of a carbon footprint, serves multiple purposes. First of all, once the organization has a clear idea of the carbon footprint of its activity on the environment, it can put in place an action plan to reduce it. It can identify areas for improvement and then determine an emissions reduction trajectory aligned with the Paris agreements. But that's not all, a carbon footprint also allows the company to:
identify the potential vulnerability of its activity to the increasing scarcity of fossil fuels,
anticipate future regulations (quotas or carbon taxes) more easily,
have a more ecological brand image that can be promoted,
reinvest the money saved by reducing its energy expenses elsewhere.
Measuring and reporting on emissions can help to build trust with stakeholders, including customers, employees, investors, and the general public. By demonstrating a commitment to sustainability and transparency, a company can improve its reputation and potentially attract more business.
Conclusion
Scopes 1, 2, and 3 are essential tools for measuring and reducing the environmental impact of companies. They provide a comprehensive view of greenhouse gas (GHG) emissions, allowing for the identification of the most significant emission sources and the implementation of effective reduction strategies. Taking all scopes into account, particularly the often underestimated scope 3, is crucial in this process.
Understanding these scopes is fundamental for any organization wishing to effectively contribute to the global effort to reduce GHG emissions. According to the UN, emissions must decrease by 7.6% per year between 2020 and 2030 to limit warming to 1.5°C, the target set by the Paris Agreement. This underscores the urgency of utilizing these frameworks to their full potential.
As the fight against climate change intensifies, these frameworks will continue to evolve and play a key role in the transition to a low-carbon economy. By embracing and acting upon the insights provided by scopes 1, 2, and 3, companies can make meaningful strides in reducing their environmental impact and contributing to global climate goals.
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