Roadmap to Sustainability

Scope 1, 2 and 3 Emissions: What to Address First in Your GHG Reduction Journey

Roadmap to Sustainability Series: A Blog Series to provide the framework on how to develop and achieve long-term sustainability goals
5 min read

Climate change is driven by increasing greenhouse gas (GHG) emissions, like carbon dioxide, methane, and nitrous oxide, which trap heat in the atmosphere. These gases are released into the atmosphere, often from business operations, including, but not limited to, power usage for facilities, transportation of goods, and industrial manufacturing processes. Climate change is one of the most urgent challenges facing businesses today. As public awareness grows around this issue, major corporations are looking to reduce their carbon footprint and lessen their emissions impacts.

More businesses are also taking inventory of their greenhouse gas (GHG) emissions sources, either direct or indirect, to find areas of improvement in order to comply with disclosure rules, set targets, and better align mitigation and adaptation strategies.

Companies are also implementing their own aggressive business-wide sustainability goals to become leaders in their respective industries and to access the growing list of economic, environmental and social benefits of doing so. As another critical component of goal setting, many businesses are creating target dates (e.g., 50% or 100% emissions-free by year 2030 or 2040) to maintain accountability in reaching their emission reduction goals.

The first key step is understanding the different categories of emissions associated with business operations. Before your business implements targeted strategies for reduction, let’s dive into the emissions, categorized into three scopes:

  • Scope 1 emissions: Originate from sources owned or controlled by the company.
  • Scope 2 emissions: Arise from fossil fuel consumption for power, such as power plants providing purchased electricity.
  • Scope 3 emissions: Come from indirect sources, such as company travel and supply chain management.

These emissions are defined by the GHG Protocol, which is widely recognized and used as the international standard for measuring and managing greenhouse gas emissions.

Starting with Scope 1 Emissions

Scope 1 emissions comprise of sources from a business’s owned or controlled assets, and upgrades to these areas are typically the most feasible to measure, control and reduce. These emissions can be separated into four primary categories:

Stationary Combustion: Emissions resulting from the on-site burning of fuels to power equipment like boilers, generators furnaces and more. Examples of these fuels are natural gas, propane, gasoline, diesel, biomass and wood.

Mobile Combustion: Emissions arising from fuel burned by vehicles that are owned or leased by a company, including transportation fleets.

Fugitive Emissions: Emissions from unintentional leaks and releases of greenhouse gases such as refrigeration, air conditioning and fire suppression systems that may leak chemicals.

Process Emissions: Emissions generated directly from industrial activities and chemical reactions in heavy industry and manufacturing plants.

Measuring and reducing scope 1 emissions is foundational to any corporate carbon management strategy. Businesses can implement various energy solutions, such as enhancing energy efficiency, incorporating electric vehicles (EVs) into their fleet, or incorporating renewable natural gas (RNG) into your energy supply, to curtail these emissions effectively.

Scope 2 Emissions

Scope 2 emissions represent indirect greenhouse gas emissions associated with purchased electricity, steam, heating and cooling used to power company operations. These emissions, although physically occurring at the facility where they are generated, are included in an organization’s GHG inventory because they stem from the organization’s energy use, as highlighted by the EPA.1

When accounting for scope 2 emissions from purchased electricity, businesses have two primary approaches:

Location-Based Method: Assesses average emission factors for your regional utility grids supplying your company’s facilities. It provides insights into the general carbon intensity of electricity where your company operates.

Market-Based Method: Reflects emissions from electricity that companies have purposefully chosen. It inventories emissions via contractual instruments, which include any type of contract between two parties for the sale and purchase of energy bundled with attributes about the energy generation, or for unbundled attributes.

Scope 2 emissions may also include purchased heating and cooling that companies purchase from their utility or energy suppliers.

Reducing scope 2 emissions involves voluntarily matching electricity supply requirements with a carbon-free power generation source, which supports the use of emission-free electricity and demonstrates a commitment to the environment. Other strategies to reduce scope 2 emissions include: energy efficiency measures, implementation of on-site generation, purchasing renewable energy certificates (RECs) or emissions free energy certificates (EFECs) and enhanced grid interaction.

Scope 3 Emissions

Scope 3 emissions encompass all other indirect GHG emissions associated with upstream and downstream activities across a company’s supply chain. These emissions, though indirect, play a significant role in contributing to a company’s total carbon footprint. Key components of scope 3 emissions include:

Upstream Emissions

Upstream emissions refer to indirect emissions associated with activities occurring before the product or service reaches the company’s operations. These emissions include:

  • Purchased goods and services
  • Capital goods
  • Fuel and energy related activities
  • Transportation and distribution from company suppliers
  • Waste from operations
  • Business travel
  • Employee commuting
  • Assets leased by the company

Downstream Emissions

Downstream emissions refer to indirect emissions associated with activities occurring after the product or service leaves the company’s operations and is used or disposed of by customers or end-users. These emissions include:

  • Transportation and distribution from company to distributors, retailers and end users
  • Processing sold products
  • Use of sold products, both products that directly or indirectly consume energy
  • End-of-life treatment of sold products
  • Assets owned by the company but leased to other companies
  • Franchises
  • Investments

Steps to reduce scope 3 emissions are often complex and require mindful and strategic action. Reduction efforts involve choosing more sustainable vendors and encouraging existing ones to engage in more sustainable practices. Businesses may implement a scope 3 or GHG materiality threshold to better understand their emissions. A scope 3 or GHG materiality threshold is designed to help companies identify and understand the relative importance of specific ESG and sustainability topics and is typically looked at through two lenses: potential impact on the organization and importance to stakeholders. Completing a scope 3 or GHG materiality threshold is a key step to take in order determine which emissions can be considered ’material’ to your climate disclosure and keep stakeholders up to date on scope 3 emissions.

While scope 3 emissions are indirect, they often account for the majority of a company’s total emissions. Scope 3 measurement and reporting is still in its early stages and is likely the most difficult scope to address for reduction. Since scope 3 emissions are indirect, it is difficult to gain primary emissions data for activities outside of a business’s normal operations. Additionally, reducing scope 3 emissions relies on influencing external partners and vendors across a business’s value chain to report and reduce their emissions.

Optimize Your Emissions Reduction Strategy

The path to comprehensive emissions measurement and reduction is complex, requiring a customized approach tailored to each company’s operations, budget, goals and timeline. By taking a proactive, multi-pronged approach to emissions reduction, businesses can effectively shrink their emissions and environmental impact.

Addressing climate change and reducing greenhouse gas emissions are critical challenges that businesses must tackle head-on. By understanding the different categories of emissions and implementing targeted strategies across scopes 1, 2 and 3, businesses can make significant progress in shrinking their carbon footprints.

Constellation Navigator, a division of Constellation, stands ready to assist businesses in this journey. With our customized paths to decarbonization and sustainable solutions, backed by advanced technology platforms and experienced advisors, we can help organizations set and meet their environmental and operational goals. From carbon accounting and sustainability advisory to utility bill management and rebate administration, Constellation Navigator has the expertise to guide businesses towards a more sustainable future. Contact Constellation Navigator today to start your emissions reduction journey and pave the way towards a more sustainable, cost-effective, efficient future for your business.

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