As a business, it’s essential to be aware of your environmental footprint, plain and simple. That’s why we at Arbor crafted this straightforward guide; we want to help you cut through the confusion of the different scopes of emissions and get down to what matters for your business.
Emissions are broken into three parts: the direct emissions your company causes (Scope 1), the emissions from the energy you buy (Scope 2), and all the other indirect emissions tied to your business activities, from the supply chain to the disposal of your products (Scope 3). With easy-to-understand charts and examples from the real world, we’ve made it simpler to see where you stand and what steps you can take next.
Arbor measures Scope 1, 2, and 3 emissions with industry-leading accuracy, so if your business needs help reporting, disclosing, or measuring these scopes, let’s chat. We hope you enjoy the article!
Visual Chart of Scope 1, 2 and 3 Emissions
Look at this visual - your map to understanding greenhouse gas (GHG) emissions across three categories. Arbor provides this sharp tool to help businesses pinpoint their carbon footprint without the guesswork.
Starting at the top, we've got a lineup of the usual GHG suspects: CO2, CH4, N2O, HFCs, PFCs, and SF6. Each plays a part in the global emissions story.
For Scope 1, imagine your business as the source; your facilities and fleet immediately send these emissions into the atmosphere. They're the direct emissions you can manage hands-on because you're in the driver's seat.
Swing to Scope 2, where things get a bit more hands-off. Here, we're talking about the indirect emissions from the energy you buy—think of it as the energy's backstory before it powers your operations.
Scope 3 paints the fuller picture—it's the big net catching all other indirect emissions linked to your company's activities. We're not just talking about the stuff you buy or the waste you create but also the products you've sold and their supply chains—how they're transported, used, and finally laid to rest.
Scope 1 Emissions
Direct GHG emissions occur from sources owned or controlled by the company, such as company-owned vehicles and facilities.
Get in detail on Scope 1 with our blog: What are Scope 1 Emissions?
Stationary Combustion Sources
Combustion of fuels in stationary equipment such as generators, boilers, furnaces, burners, turbines, heaters, incinerators, engines, flares, etc.
Mobile Combustion Sources
Combustion of fuels in transportation devices such as automobiles, trucks, buses, trains, airplanes, boats, ships, barges, vessels, etc.
Refrigeration and AC
Commercial cooling equipment like air conditioners and refrigerators.
Fire Suppression Equipment
Building fire suppression systems or equipment like your company owns or controls fire extinguishers.
Scope 2 Emissions
Scope 2 accounts for emissions from energy generation purchased or otherwise brought into the company's organizational boundary.
Get in detail on Scope 2 with our blog: What are Scope 2 Emissions?
Scope 2 tracks at least 4 types of purchased energy:
Electricity
Almost all companies use this type of energy. It operates machines, lighting, electric vehicle charging, and certain heat and cooling systems.
Steam
Formed when water boils, steam is a valuable energy source for industrial processes. It is used for mechanical work, heat, or directly as a process medium.
Heat
Most commercial or industrial buildings require heat to control interior climates and heat water. Many industrial processes also require heat for specific equipment. That heat may be produced by electricity or through a non-electrical process such as solar thermal heat or thermal combustion processes (as with a boiler or a thermal power plant) outside the company’s operational control.
Cooling
Like heat, cooling may be produced from electricity or by distributing cooled air or water.
Scope 3 Emissions
Scope 3 Emissions includes all indirect emissions (not included in Scope 2) that occur in the reporting company's value chain, including both upstream and downstream emissions.
Get in detail on Scope 3 with our blog: What are Scope 3 Emissions?
1: Purchased Goods and Services
This category includes all upstream (i.e., cradle-to-gate) emissions from producing products and services purchased or acquired by the reporting company in the reporting year.
2: Capital Goods
This category includes all upstream (i.e., cradle-to-gate) emissions from the production of capital goods purchased or acquired by the reporting company in the reporting year. Capital goods are final products that have an extended life and are used by the company to manufacture a product, provide a service, or sell, store, and deliver merchandise.
3: Fuel and Energy Related Activities
This category includes emissions related to the production of fuels and energy purchased and consumed by the reporting company in the reporting year that are not included in Scope 1 or 2.
4: Transportation and Distribution (Upstream)
This category includes emissions from the transportation and distribution of products (excluding fuel and energy products) purchased or acquired by the reporting company in the reporting year in vehicles and facilities not owned or operated by the reporting company.
5: Waste Generated in Operations
This category includes emissions from third-party disposal and treatment of waste generated in the reporting company’s owned or controlled operations in the reporting year.
6: Business Travel
This category includes emissions from the transportation of employees for business-related activities in vehicles owned or operated by third parties, such as aircraft, trains, buses, and passenger cars.
7: Employee Commuting
This category includes emissions from the transportation of employees between their homes and worksites.
8: Leased Assets (Upstream)
This category includes emissions from the operation of assets leased by the reporting company in the reporting year and not already included in the reporting company’s scope 1 or scope 2 inventories.
9: Transportation and Distribution (Downstream)
This category includes emissions from transportation and distribution of products sold by the reporting company in the reporting year between its operations and the end consumer (if not paid for by the reporting company) in vehicles and facilities not owned or controlled by the reporting company.
10: Processing of Sold Products
This category includes emissions from the processing of intermediate products sold by third parties (e.g., manufacturers) after the reporting company sells them. Intermediate products require further processing, transformation, or inclusion in another product before use, resulting in emissions from processing after sale by the reporting company and before use by the end consumer.
11: Use of Sold Products
This category includes emissions from the use of goods and services sold by the reporting company in the reporting year.
12: End-of-Life Treatment of Sold Products
This category includes emissions from the waste disposal and treatment of products sold by the reporting company (in the reporting year) at the end of their life.
13: Leased Assets (Downstream)
This category includes emissions from the operation of assets owned by the reporting company (acting as lessor) and leased to other entities in the reporting year that are not already included in Scope 1 or 2.
14: Franchises
This category includes emissions from the operation of franchises not included in Scope 1 or Scope 2. A franchise is a business operating under a license to sell or distribute another company’s goods or services within a certain location.
15: Investments
This category includes Scope 3 emissions associated with the reporting company’s investments in the reporting year, not already included in Scope 1 or 2. This category applies to investors (i.e., companies that make an investment to make a profit) and companies that provide financial services
Frequently Asked Questions About Scope 1, 2 and 3 Emissions
What are Scope 1, 2, and 3 emissions?
Scope 1 emissions are direct emissions from owned or controlled sources. Scope 2 emissions are indirect emissions from the generation of purchased energy. Scope 3 emissions are all other indirect emissions in a company's value chain, including upstream and downstream activities.
How do Scope 3 emissions impact a company’s carbon footprint?
Scope 3 emissions can account for a significant portion of a company's total carbon footprint, often between 80% and 95%. They encompass activities from assets not owned or controlled by the company but are part of its value chain.
Are companies required to report Scope 3 emissions?
Most Scope 3 emissions disclosures remain voluntary under various frameworks. However, they are increasingly becoming a focus for companies that are serious about addressing their environmental impact.
How can businesses reduce their Scope 1, 2, and 3 emissions?
Companies can reduce their Scope 1 emissions by optimizing energy use and switching to renewable sources. Scope 2 emissions can be minimized by purchasing renewable energy and energy-efficient products. Reducing Scope 3 emissions involves working with suppliers to improve their carbon footprint, among other methods.
What are some examples of Scope 2 emissions?
Scope 2 emissions typically include those related to purchased electricity, steam, heat, and cooling. These emissions occur at the facility where energy is generated but are accounted for by the organization purchasing the energy.
How are Scope 3 emissions calculated?
Calculating Scope 3 emissions involves analyzing spend-based, activity-based, and supplier-based data to estimate emissions across the company's entire value chain. Arbor can help measure your Scope 1, 2 and 3 Emissions accurately.
Why is it challenging to track Scope 3 emissions?
Scope 3 emissions are difficult to track because they extend beyond a company's direct operations and involve multiple levels of the supply chain, making accurate measurement and reporting complex.
What strategies exist for reducing Scope 3 carbon emissions?
Businesses can reduce Scope 3 emissions by offering performance-based incentives to suppliers, engaging in long-term sustainability projects, and using more carbon-friendly materials. See these Scope 3 best practices.
How does reporting on Scope 1, 2, and 3 emissions benefit companies?
Comprehensive reporting on all emissions scopes aligns with global sustainability goals, enhances a company's reputation, satisfies stakeholder and investor inquiries, ensures regulatory compliance, and can lead to improved environmental performance and cost savings.
Summary
Navigating the realm of Scope 1, 2, and 3 emissions is crucial for companies committed to sustainability and environmental responsibility.
Our 2024 guide elaborates on how direct emissions from company-controlled sources, indirect emissions from acquired energy, and all other indirect emissions within a company’s value chain play pivotal roles in shaping a company’s carbon footprint.
It highlights the significance of embracing comprehensive emissions reporting to align with global sustainability goals, enhance corporate reputations, and achieve significant cost savings through improved environmental performance.
Do you need help measuring or reporting Scope 1, 2, and 3 Emissions? Chat with Arbor’s carbon experts today to get your company on track.
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