Every business, regardless of size or industry, needs to understand its Scope 1, 2, and 3 emissions. These categories, used globally, standardize emission identification and reporting, ensuring consistency and accountability.
Developed by the Greenhouse Gas (GHG) Protocol, the emissions scopes define which emissions an entity is directly or indirectly responsible for. With the planet heating at an alarming rate, it is more important than ever to be accountable for your carbon footprint.
At PivIT, we understand these challenges, are committed to sustainability, and encourage our customers to do the same. In this article, we’ll cover Scope 1 vs. 2 vs. 3 emissions - explaining their significance, how to identify them, and their role in decarbonization.
What are Scope 1, 2, and 3 Emissions?
The GHG Protocol categorizes emissions into three distinct types: Scope 1, 2, and 3. Each serves a unique purpose in reporting and setting targets.
Let’s delve into each in more detail:
Scope 1 Emissions
Scope 1 emissions are those that the company produces directly through owned or controlled sources. In other words, these are the emissions produced due to the company’s operations. These can include emissions from industrial processes, on-site energy generation, and fuel consumption.
Scope 1 emissions also include accidental or fugitive emissions (accidental releases of gases or chemicals), such as those from a gas or refrigerant leak.
The ownership and control part is crucial since it distinguishes Scope 1 emissions from Scope 2 and 3. For example, if your company partners with a logistics company, the fuel burnt by the fleet carrying the goods doesn’t count as direct emission under Scope 1.
Scope 2 Emissions
Scope 2 emissions often comprise the largest share of a company’s direct carbon footprint, especially non-industrial ones. These emissions originate from purchased or acquired energy, such as electricity, heating, or cooking gas. Essentially, it’s energy generated off-site but used on-site by a company.
For instance, if a company buys electricity from a utility company, the emissions associated with this consumption are categorized as Scope 2. In contrast, energy generated and used on-site would fall under Scope 1 emissions.
Scope 2 emissions are relatively easy to determine. For example, if you use electricity or gas from a utility company, you can use the bills to determine consumption and calculate emissions.
Scope 3 Emissions
Scope 3 emissions are indirect emissions from the company's value chain, also termed value chain emissions. These emissions, while not directly controlled by a company, are indirectly produced because of them.
The GHG Protocol further divides Scope 3 emissions into two types: upstream and downstream.
- Upstream emissions are the indirect GHG emissions from a company's purchased or acquired goods or services. Examples include employee commuting, logistics, operations waste, and emissions from upstream leased assets.
- Downstream emissions are indirect GHG emissions produced from distributed goods and services of a company. These may include product processing, use and disposal, and capital goods. Downstream emissions can also include emissions from downstream leased assets and investments.
Typically, most of a company’s emissions - up to three-fourths - are Scope 3 emissions.
The GHG Protocol
The GHG Protocol is a multi-stakeholder partnership formed in the 90s. It provides the framework for measuring emissions. The GHG Protocol Corporate Standard is the most widely used standard for environmental reporting. In addition to this standard, the organization also publishes standards for products, projects, and cities.
The protocol defines requirements for many reporting regulations worldwide, helping climate advocates push for greater accountability.
Example of An IT Company’s Emissions
Companies today are quite globalized with complex value chains. So, determining the different Scopes of emissions can be a challenge. Tech companies, in particular, can experience difficulty assessing the carbon footprint of their operations, products, and services.
Here are Scope 1, 2, and 3 emissions examples to help you make sense of it all:
Cloud Provider
A tech company offers cloud computing services for businesses. It operates its data centers in different regions using energy from local utility companies. The equipment procurement in those data centers is from a variety of vendors.
Here’s what the cloud provider’s emissions include:
Scope 1 Emissions:
- Fuel consumption from company-owned vehicles (if any).
Scope 2 Emissions:
- Purchased electricity to power data centers that house the cloud infrastructure.
Scope 3 Emissions:
- Purchased goods and services—Emissions from manufacturing and transportation of IT equipment used in data centers.
- Capital goods—Emissions associated with the production and delivery of servers, storage devices, and network equipment.
- Use of sold products—Energy consumption by users accessing the cloud service (Scope 1 or 2 for the users).
- Business travel—Employee commuting and business travel emissions.
Smartphone Manufacturer
A tech company makes smartphones in facilities that operate using on-site electricity. It sells the phones at its own and partner retail stores. All phone components, including chips, are produced in-house using materials imported from other companies.
Here’s how this company’s emissions will look like as per GHG Protocol:
Scope 1 Emissions:
- Any fossil fuel combustion for electricity generation in manufacturing facilities.
- Chemical processes used in parts fabrication and assembly.
- Fugitive emissions from refrigerants used in cooling systems.
- Transportation using company vehicles (if applicable).
Scope 2 Emissions:
- Purchased electricity for powering offices and company-owned retail stores.
Scope 3 Emissions:
- Purchased goods and services - Emissions from material extraction, processing, and transportation of raw materials like metals, plastics, and glass.
- Capital goods - Emissions associated with producing and transporting machinery and equipment used in manufacturing.
- Use of sold products - Energy consumption from phone charging and usage.
- End-of-life treatment - Emissions from phone recycling or disposal processes.
- Employee commuting - Emissions from employee travel to and from work (on vehicles not included in Scope 1).
- Business travel - Emissions from employee air travel, car rentals, and hotel stays for business purposes.
Emissions Reporting: Importance and Challenges
The GHG Protocol and its designated scopes are typically used for environmental, social, and governance (ESG) reporting purposes. However, the reports can also help companies understand their carbon footprint, which includes all three scopes. Based on the data, businesses can create targets to lower their emissions and bring their impact on the environment down.
GHG emissions accounting and reporting are critical components in addressing climate change. Without comprehensive and accurate data, companies can’t set the right targets, let alone achieve them. Plus, large companies are required to report environmental data as per regulations in many parts of the world.
The mandatory reporting requirement directly results from the increasing need for accountability. The Paris Agreement, signed by virtually all countries in the world, is another reason, as it has set the deadline as 2050 for reaching net-zero status.
Benefits Beyond Environment
While reporting emissions may seem like a compliance task, it’s also good for business. According to a Morgan Stanley report, 77% of global investors are interested in sustainable investments. They’re interested in investing in companies that promise high financial returns but also consider sustainability.
Consumers also have a similar sentiment on the other side of the spectrum. With climate change awareness rising, consumers are turning to companies with green initiatives. ESG reporting allows businesses to be more transparent about their environmental impact and showcase their efforts to reduce emissions year-on-year.
The Scope 3 Dilemma
When it comes to Scope 3 emissions, there are two primary issues. First, Scope 3 reporting is generally optional, so many businesses choose not to report them. Second, it’s incredibly difficult to calculate exact Scope 3 emissions because of the lack of data and transparency or the sheer complexity of value chains.
As mentioned, Scope 3 emissions make up the majority of most businesses' emissions. So, you can’t make a substantial impact without targeting these emissions.
That all said, some progress has been made. For instance, the European Union’s latest Corporate Sustainability Reporting Directive (CSRD) requires large companies to report Scope 3 emissions. It targets both EU and non-EU companies. As many tech companies in the US have a presence in the EU, they’ll eventually be required to report value chain emissions.
Targeting Direct Emissions
Direct emissions (Scope 1) should be your first target, as they are under your control. Many also regard Scope 2 emissions as close to Scope 1 in terms of control, as one can reduce Scope 2 emissions simply by reducing energy consumption. For instance, data centers can follow sustainable practices like optimizing cooling and investing in renewable energy to reduce direct emissions.
In many cases, reporting on these two Scopes is mandatory, making their accounting a priority.
Scope 1 and 2 emissions can be targeted based on scientific evidence. The Science-based Targets Initiative (SBTi) provides detailed guidelines for target-setting for organizations in various industries, including IT.
These thorough, research-backed targets can reduce your organization’s impact on the environment. Measures such as energy efficiency or switching to renewable resources can significantly impact emissions.
Ways to Track and Reduce Scope 3 Emissions
As we’ve explored, value chain emissions are harder to target. Since you don’t have direct control over these emissions, they are challenging to authenticate and reduce. However, here are some effective strategies for tracking and lowering Scope 2 emissions:
- Require suppliers and business partners to disclose ESG data
- Use advanced ESG tools to process data from different sources and improve the accuracy of Scope 3 data
- Choose suppliers and vendors who prioritize sustainability
- Design eco-friendly products that minimize material use and have a long lifespan
- Optimize logistics and opt for low-emission shipping
- Offset emissions in-house or using credible, certified programs (only for necessary emissions)
PivIT’s Commitment to Sustainability
PivIT makes sustainability a cornerstone of its business. We’ve helped many clients reduce their carbon footprint by making smart choices with their infrastructure. Here’s how PivIT promotes sustainability for its clients:
- Procuring energy-efficient equipment
- Extending the lifecycle of equipment through third-party maintenance (OneCall)
- Buying used equipment to prevent it from ending in landfills
- Selling refurbished, tested network equipment to encourage circular economy
- Disposing of legacy equipment safely
- Remote staging environments for deployment and on-demand tech support to eliminate business-related travel
Make Sustainability a Priority!
Climate change poses a serious threat to economic stability and our very survival. The tech industry alone is estimated to be responsible for 2 - 3% of emissions globally, and with artificial intelligence and other technologies, this number may rise due to increased energy consumption.
Sustainability must be a key focus for businesses. To effect meaningful change, companies should decarbonize their operations and supply chains, addressing Scope 3 emissions to make a substantial impact on their carbon footprint.
Learn more about our sustainability initiatives!
FAQs
How to calculate scope emissions?
Calculating Scope 1, 2, and 3 emissions involves data collection and specific methodologies. The GHG Protocol offers detailed guidance documents to standardize the process.
Here's a simplified overview:
- Data collection: Gather data on fuel consumption, electricity use, materials, waste, business travel, etc.
- Emission factors: Apply emission factors that convert activity data (e.g., kg of coal burned) into emissions (e.g., kg of CO2). These factors can be found in databases or industry associations.
- Calculations: Multiply activity data by the corresponding emission factor to estimate emissions for each category within a scope.
What does net zero mean?
Net zero refers to balancing greenhouse gas emissions released into the atmosphere and those removed. This balance can be attained through emission reductions and carbon sequestration activities (offsetting) like tree planting.
Net zero is not about totally eradicating emissions but achieving an overall cancellation effect.
Is net zero possible by 2050?
According to the IPCC (Intergovernmental Panel on Climate Change), achieving net zero emissions by 2050 is ambitious but possible. It will require rapid and large-scale global efforts across industries and governments. Scientists have determined that to keep global temperature rise well below 2 degrees Celsius, the world must go net zero by 2050.
Many countries have already set net-zero targets for mid-century, reflecting a growing global commitment to address climate change.