What are Scope emissions and how are they classified?

You will often hear the terms, Scope emissions, Scope 1, Scope 2, and Scope 3 when discussing net zero strategies.

Net Zero emissions refer to striking a balance between greenhouse gas emissions produced and emissions taken out of the atmosphere in the fight against climate change.

Carbon neutral refers to the concept of still producing emissions but offsetting them by taking alternative action.

Carbon negative refers to all activity that involves removing additional carbon dioxide from the atmosphere.

When plotting the path to Net Zero, businesses must monitor and report their carbon dioxide emissions and classify their carbon footprint in three scopes.

Scope 1 – Direct Emissions

Scope 1 emissions are a direct consequence of company-owned and controlled resources. This scope of emissions includes four subcategories: Stationery combustion, mobile combustion, fugitive emissions, and process emissions.

Stationary Combustion

These include all emissions from fuels and heating. All fuels that produce greenhouse gases must be included in Scope 1.

Mobile Combustion

These emissions include any that are produced by all vehicles controlled by a business including cars, trucks, vans, and bikes.

Fugitive Emissions

These are greenhouse gas leaks from assets such as refrigeration and air conditioning units. Refrigerant gases are much more harmful than CO2 emissions.

Process Emissions

These emissions are released during on-site processes. Examples include CO2 emissions in cement production, factory fumes, and chemicals.

Scope 2 – Indirect emissions – Owned

Scope 2 emissions are indirect emissions that result from the generation of purchased energy from a provider. This covers all greenhouse gases released into the atmosphere as a result of consuming electricity, steam, heating, and cooling.

Scope 3 – Indirect emissions – not owned

Scope 3 emissions are all indirect emissions that take place in the value chain of the reporting business. It includes upstream and downstream emissions and includes 15 categories.

Upstream activities

Upstream activities include many categories and can broadly be defined as activities that a company or its employees engage in to carry out its business.

Travel

For many businesses, travel is one of the most significant activities to report. This includes air, rail, underground, public transport, and employee commuting in private vehicles.

Waste

This relates to waste sent to landfills and wastewater treatments. Waste disposal emits methane (CH4) and nitrous oxide (N2O), which cause more damage than CO2.

It is important to distinguish between production waste (e.g chemicals) and non-production waste (office furniture).

Transportation and Distribution

Transportation and distribution occur in upstream and downstream elements of the value chain. It includes emissions from transportation by land, sea, air, and emissions relating to third-party warehousing.

Fuel and energy-related activities

Emissions relating to the production of fuels and energy purchased and consumed by the reporting company, in the reporting year that is not included in scope 1 and 2.

Capital goods

Examples of capital goods include buildings, vehicles, machinery. For purposes of accounting for scope 3 emissions, companies should not depreciate, discount, or amortise the emissions from the production of capital goods over time.

Downstream activities

Investments

Investments fall under 4 categories: equity investments, debt investments, project finance, managed investments, and client services.

Franchises

Franchisees that pay a fee to the franchisor should include emissions from operations under their control.

Use of sold products

This measures the emissions resulting from product usage. For example, the use of an iPhone will take many years to equal the emissions emitted during production.