The scope 1, 2, and 3 emissions classification system was developed in the 1990s to help organisations understand and manage their greenhouse gas emissions. It is now widely accepted and used by governments, investors, and other stakeholders to assess the climate impact of organisations.
Scope 1 emissions are direct emissions from owned or controlled sources.
Scope 2 emissions are indirect emissions from the generation of purchased or acquired electricity, heat, or steam.
Scope 3 emissions are all other indirect emissions that occur in the value chain of the reporting company.
In the UK, scope 1 and 2 emissions reporting are already mandatory for large companies with over 250 employees. Scope 3 reporting is not yet mandatory, but it is expected to become mandatory for large companies in the UK by 2025.
In the EU, scope 1, 2, and 3 emissions reporting will become mandatory for large companies with over 500 employees starting in 2024. This includes companies that are headquartered in the EU, as well as companies that do business in the EU.
Scope 1 are those direct emissions that are owned or controlled by the reporting company, whereas scope 2 and 3 indirect emissions are a consequence of the activities of the reporting company but occur from sources not owned or controlled by it.
Scope 1 emissions (Direct emissions)
Scope 1 of the GHG Protocol refers to direct emissions that are owned or controlled by the organisation. Such emissions are generated by a company’s own sources including but not limited to the combustion of fossil fuels, industrial processes, and transportation. These emissions are associated to an organisation’s activities, making them easier to quantify and manage. Scope 1 emissions can be calculated and divided into four categories:
Certain emissions, such as CO2 from the combustion of biomass and GHG emissions outside the purview of the Kyoto Protocol (e.g. CFCs, NOx, etc), should be reported separately and not incorporated into Scope 1.
Scope 2 emissions (Indirect emissions)
Scope 2 emissions refer to the indirect emissions associated with the acquisition of energy from external providers, such as a utility company. This includes the consumption of purchased electricity, heat, steam, or cooling by an organisation. Scope 2 emissions physically occur at the site where the energy is generated, while the report company don’t produce these emissions themselves, they’re indirectly responsible for those emissions.
The increasing use of hybrid cars and electric cars may result in some of mobile combustion (Scope 1) falling under Scope 2.
Scope 3 emissions (Indirect emissions)
Scope 3 emissions, also referred to as value chain emissions, refers to all indirect emissions associated with an organisation’s activity include all sources not within an organization’s scope 1 and 2 boundary. The emission sources are divided into fifteen categories, divided by upstream in the supply chain and downstream in the value chain, for measuring and reporting emissions from cradle to grave.
Upstream emissions occur before the organisation receives its goods and services, such as extraction of raw materials, production, transportation, and distribution along with the waste generated by purchased goods and services. The upstream categories are:
Downstream activity transpires after the organisation delivers its goods and services. Including the processing and utilisation of purchased products and services, as well as the transportation and distribution of sold products and services. Additionally, it includes the end-of-life treatment of said sold products and services. The downstream categories are:
Scope 3 emissions typically make up more than 90% of a company’s carbon footprint. Addressing these emissions is crucial, not just for the company but for the global effort to transition to a low-carbon economy.
Reported energy use and related Scope 1 & 2 Greenhouse Gas (GHG) emissions, those emissions are generally easier for a company to control. They are primarily linked to direct purchases of gas and electricity, and companies usually have the necessary data to calculate these emissions in greenhouse gas equivalents (GHGs). This data may be housed in various departments like procurement, finance, facilities management, or sustainability.
UK’s SECR Policy and Compliance
The UK’s Streamlined Energy and Carbon Reporting (SECR) policy was enacted on April 1, 2019. It requires businesses to report their Scope 1 and 2 emissions. Publicly traded companies must continue to disclose these emissions, along with an emissions intensity ratio, and global energy use. They must also provide a year-over-year comparison after the first reporting period.
This sustainability reporting system looks at both greenhouse gas emissions and efforts taken to improve energy efficiency; the methodology used; and the intensity ratio (comparing emissions data with a business model).
Various factors are pushing companies to pay more attention to their Scope 3 emissions:
Additionally, on July 31, 2023, the European Commission officially put into effect the European Sustainability Reporting Standards (ESRS). These guidelines outline how companies should disclose their sustainability impacts, opportunities, and risks, and are a crucial component of the Corporate Sustainability Reporting Directive (CSRD). The ESRS implementation represents a major move towards comprehensive sustainability reporting. Companies will be required to include Scope 3 emissions in their value chain sustainability reports.
With this in mind and the fact that company which do report their sustainability initiatives at board level fair better than those that don’t, reporting is now becoming a major priority for large organisations.
At Design Conformity we have understood this and we have built a robust and market leading suite of products that help furniture manufacturers report their carbon footprints for their clients and themselves. We focus on scope 1 and 3 and we focus on a number of different sectors where we provide Life Cycle Assessment (LCAs):
An interview by Katie Furmston, Head of Design & Research at Design Conformity, speaking to Evannah Jayne, the founder of Terran Industries, …