Scope 1, 2 and 3 emissions

Categorizing emissions into scopes is an important part of corporate carbon accounting and reporting.

By understanding what Scopes 1, 2 and 3 emissions mean, your business can align with international best practice when measuring, reporting and reducing its carbon footprint.

What are Scope 1, 2 and 3 emissions?

Greenhouse gas (GHG) emissions within a company’s corporate footprint are broken down into Scopes 1, 2 and 3:

Scope 1 - Direct emissions from the company’s operations
‍Scope 2 - Indirect energy emissions
‍Scope 3 - Other indirect emissions

Scopes 1, 2 and 3 are mutually exclusive. Within one company, there is no double counting of emissions between the scopes. For example, a company’s Scope 3 inventory does not include any emissions that are in its Scope 1 and 2 inventories.

However, one company’s Scope 3 inventory will include other companies’ Scope 1, 2 and 3 emissions.

Examples of Scope 1 emissions

Scope 1 emissions are direct emissions from operations that are owned or controlled by the company, including fuels combusted in vehicles or furnaces/boilers, fugitive or vented emissions from process equipment, or process emissions from chemical reactions.

Examples of Scope 2 emissions

Scope 2 emissions are emissions from the generation of purchased or acquired electricity, steam, heating or cooling consumed by the company. Scope 2 emissions occur at the facility where electricity is generated, not at the company's own.

These Scope 2 emissions are the Scope 1 emissions of another company (e.g. a power station).

Examples of Scope 3 emissions

Scope 3 emissions are all other indirect emissions (not included in Scope 2) that occur in the value chain of the company.

Scope 3 emissions are divided into:

• Upstream emissions → indirect emissions related to purchased or acquired goods and services
• Downstream emissions → indirect emissions related to sold goods and services

For example, a car manufacturer would include emissions generated from the production of the metals and components it purchases, the transportation of purchased products from its suppliers (and between its suppliers and their suppliers), as well as use of its sold cars.

Scope 3 emissions categories

Scope 3 is typically the biggest source of emissions for a company (on average 26x its operational emissions). There are 15 categories of Scope 3 emissions, as defined by the Greenhouse Gas Protocol:

1. Purchased goods and services
2. Capital goods
3. Upstream fuel- and energy-related emissions
4. Upstream transportation and distribution
5. Waste
6. Business travel
7. Employee commuting
8. Upstream leased assets
9. Downstream transportation and distribution
10. Processing of sold products
11. Use of sold products
12. End of life of sold products
13. Downstream leased assets
14. Franchises
15. Investments

• Learn more about measuring Scope 3 emissions

Why are there three Scopes of emissions?

To effectively take climate action, a company needs to comprehensively understand its impact. The three emissions Scopes (and their categories) provide companies with a systematic framework to organize, understand and report on their emissions.

An organized and comprehensive GHG inventory that includes all three Scopes allows companies to identify and focus efforts on their greatest emissions sources. It also allows stakeholders, investors and policymakers to more easily compare companies’ carbon footprints.

Why measure all the Scopes?

Measuring Scope 1 and 2 is mandatory in corporate carbon accounting, while Scope 3 is usually optional. However, it is best practice to measure all three Scopes.

New and changing regulations are demanding Scope 3 disclosure, and one key principle of carbon accounting is completeness. Companies and their investors and stakeholders increasingly understand the need to account for emissions across the value chain, to properly manage carbon-related risks and opportunities.  

Developing a full corporate footprint enables companies to understand their full emissions impact both on-site and across the value chain, and focus efforts where they can have the greatest impact. It also prepares you for regulations like the EU CBAM, which requires supply chain emissions data.

Although Scope 3 emissions are the hardest to measure, because they include supplier data, they are also typically the largest source of a company’s emissions.

💡 Tools like CarbonChain make the process of Scope 3 carbon accounting easier and more accurate for companies with complex supply chains.

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Ways to reduce Scope 1, 2 and 3 emissions

Typically, reducing Scope 1 and 2 emissions is more straightforward for companies because they have more control over those sources of emissions. However, to become a net zero business, companies must cut emissions across all three Scopes.

To reduce Scope 1 emissions (those generated by a company’s owned or controlled operations and facilities), companies should improve efficiencies in their processes, and deploy the many low-carbon or zero-carbon solutions that already exist. For example, shifting to electric vehicles, making buildings more passive and efficient, and using lower-carbon processes in aluminum, steel and copper production.

To reduce Scope 2 emissions, companies can source electricity from renewable sources, enter into Power Purchase Agreements (PPA), install renewable energy generation on site. In addition, companies should electrify operations that currently rely on fossil fuel energy (since most countries now have decarbonization targets for electricity grids).

Where low-carbon solutions are prohibitively expensive or unfeasible, companies should identify opportunities to transition to lower-carbon products and new markets. Companies can also demonstrate demand for renewable electricity in markets with low supply, by advocating for policy change through initiatives like RE100.

To reduce Scope 3 emissions, companies should focus on addressing their supply chain emissions (upstream and downstream). For example:

• Design products according to the principle of circularity, to reduce embedded emissions across all phases of the product lifecycle, from raw materials and processing, to end-product use and disposal
• Ask and incentivize suppliers to disclose their emissions and set net-zero targets, and to do the same with their own suppliers
• Integrating carbon emissions intensity data throughout the procurement process, whether that be through product carbon footprints (PCFs) or corporate carbon footprints

💡On CarbonChain’s platform, companies can automatically calculate their supplier emissions, and identify lower-carbon suppliers and supply chain assets, without having to source and collect the data themselves.