Carbon emissions are becoming more and more prevalent in future company goals due to corporate sustainability. Experts have stated that inaction could cause drastic hunger levels, mass migration due to flooding and many other worrying socio-economic impacts. Sustainability has come to the forefront for the mission and purpose of many companies due to the impact it can have on the surrounding environment.
The environmental impact of companies are starting to be scrutinized across the board, which means focus is shifting to reducing carbon footprint. Many businesses are concentrating on monitoring carbon emissions by defining which emission scope they fall in to. Below we break down the different scopes and how they help businesses achieve a carbon neutral status.
The Impact of Carbon Emissions
Carbon emissions have become an important topic because they have such an impact on the environment and businesses have such varying contributions. Many companies are focusing on addressing their carbon footprint, for example, Apple has committed to making it’s supply chain carbon neutral by 2030.
Transform Net Zero has also recently emerged as an initiative created by nine large U.S companies (including Nike, Microsoft & Starbucks), which intends to accelerate the transition to a net-zero carbon economy.
Overall, carbon emissions are responsible for 81% of overall GHG emissions, and businesses are responsible for a lot of it. The other components of GHG emissions are: methane (10%), nitrous oxide (7%) and fluorinated gases(3%).
Although businesses are responsible for reporting and monitoring their emissions, they must also identify which of the three scopes their carbon footprint falls under.
Breaking Down Scope 1,2 & 3
According to Plan A, the leading GHG Protocol corporate standard, classifies a company’s greenhouse gas emissions into three scopes. While scope 1 and 2 are mandatory to report, scope 3 is much harder to monitor and is classified as voluntary to report. Companies that successfully report in all three scopes are more likely to gain a sustainable competitive advantage.
Scope 1: Direct Emissions
Scope 1 emissions comprise of direct emissions that are company-owned and controlled resources. These type of emissions are directly released into the atmosphere as a product of set activities. The activities are divided into four categories:
- Stationary Combustion – Fuel & heating sources.
- Mobile Combustion – All vehicles owned by a firm that burn fuel.
- Fugitive Emissions – Caused by leaks from greenhouse gases, which are a thousand times more dangerous than C02 emissions.
- Process Emissions – These are released during industrial processes, and on-sitr manufacturing. For example, production of C02 during cement manufacturing etc.
Scope 2: Indirect Owned Emissions
Scope 2 emissions are indirect emissions caused by the utility providers who generate purchased energy. All GHG emissions released in the atmosphere from the consumption of purchased electricity, steam, heat and cooling are considered scope 2.
Any electricity consumed by the end-user is considered Scope 2, whereas scope 3 covers energy used by utilities during transmission and distribution (T&D losses).
Scope 3: Indirect Unowned Emissions
Scope 3 emissions encompass both upstream and downstream emissions that occur in the value chain of the reporting company. These emissions are typically linked to a company’s operations.Scope 3 emissions are divided into 15 categories.
Upstream Activities
Upstream activities fall into multiple categories, including:
- Business Travel – The most significant to report.
- Employee Commuting – Can be reduced by using public transport / car pooling schemes.
- Waste Generation – Including landfill and wastewater treatments.
- Purchased Goods & Services – includes all the upstream ‘cradle to gate’ emissions from the production of goods and services purchased by the company in the same year.
- Transportation & Distribution – emissions from transportation by land, sea and air, as well as emissions relating to third-party warehousing.
- Fuel & Energy Related Activities – The production of fuel and energy purchased and consumed by the reporting company.
- Capital goods – Final products that have an extended life and are used by the company to manufacture a product.
Downstream Activities
Downstream activities have fewer categories than upstream but are far more concentrated:
- Investments – Typically for financial institutions, investments fall under 4 categories: equity investments, debt investments, project finance, managed investments and client services.
- Franchises – Businesses operating under a operating under a licence to sell or distribute another company’s goods or services within a certain location. Franchisees should include emissions, from operations under their control.
According to Plan A:
Leased assets correspond to leased assets by the reporting organisation (upstream) and assets to other organisations (downstream). The calculation method is complex and shall be reported in scope 1 or 2, depending on the nature of the leased asset.
Used of sold products is included, concerning “in-use” products that are sold to the consumers. It measures the emissions resulting from product usage, even if it varies considerably. For example, the use of an iPhone will take many years to equal the emissions emitted during production.
At the same time, “end of life treatment” corresponds to products sold to consumers, and is reported similarly as “waste generated during operations”. Companies must assess how their products are disposed of, which can be difficult as it usually depends on the consumer. This encourages firms to design recyclable products that limit landfill disposal.
The Importance Of All 3 Scopes
Carbon emissions typically represent the biggest GHG impact along the value chain. Companies have historically failed to improve their corporate sustainability. Only now is it becoming important to companies, to analyze all three scopes. Here at EnergyLink, we believe in the triple bottom line, which factors in corporate sustainability, people and the planet.
The importance of identifying where your company falls within the three scopes is that it helps to reach carbon neutrality and have a more responsible impact on the environment.
