What are Scope 1, 2 and 3 emissions?

The Greenhouse Gas Protocol (GHG Protocol), an internationally recognized standard, created the three scopes to provide a full picture of a business or organization’s environmental impact.

• Scope 1 emissions are those created directly by the company.
• Scope 2 emissions are indirectly created through purchased energy.
• Scope 3 emissions are indirect emissions that occur in a company's value chain.

Categorizing GHG emissions helps companies identify the origin of their emissions and subsequently develop effective strategies to reduce them. It also allows for benchmarking and comparison across industries and sectors, fostering transparency and accountability in corporate sustainability efforts.

Reducing greenhouse gas emissions helps mitigate climate change. The main GHGs (including carbon dioxide, methane and nitrous oxide) trap heat in the Earth's atmosphere, leading to global warming. Rising temperatures are responsible for various environmental issues, including increases in extreme weather events, sea-level rise and biodiversity loss. According to the United States Environmental Protection Agency (EPA), human activities, such as burning fossil fuels for energy, are the primary causes of climate change.¹ And reports by the Intergovernmental Panel on Climate Change (IPCC) say that immediate steps must be taken to limit global warming to 1.5°C (2.7°F) above pre-industrial levels.²

Many businesses and organizations are pursuing sustainability and climate action by setting goals to achieve net zero emissions. Measuring and reporting Scope 1, 2 and 3 emissions can help them understand their contributions and identify reduction opportunities.

The GHG Protocol is a set of standards and tools developed as a joint initiative of the World Resources Institute and World Business Council for Sustainable Development (WBCSD). It provides ways to measure and manage GHG emissions from private and public sector operations, value chains and mitigation actions. Global policymakers consider the GHG Protocol the benchmark for GHG reporting standards and it is often used by countries and companies to develop their own policies for emissions measurement and reporting. It can be used to track emissions data for individual products, specific companies or countries or even an entire value chain. Because it is so widely used, it makes global emissions reporting more consistent and datasets more comparable.

Scope 1 emissions are direct emissions from onsite sources that a company owns or controls. Their causes include:

This includes the burning of fossil fuels such as natural gas, coal and oil for heat and power in stationary equipment. For example, a factory might burn coal in a boiler to create steam for its own operations.

These emissions are produced by burning fuels for transportation in company-owned or controlled vehicles such as cars, trucks, airplanes or ships.

These emissions are released during manufacturing processes or chemical reactions within a company's facilities. For instance, cement production releases a significant amount of carbon dioxide when limestone (calcium carbonate) is heated to produce lime (calcium oxide), a key ingredient in cement.

Some emissions are released through unintentional leaks from equipment or facilities. Common sources include refrigerant leaks from air conditioning and refrigeration systems, as well as methane leaks from oil and natural gas operations.

If a company does not produce its own energy, the emissions produced in generating that energy at a power plant or other source become the company’s Scope 2 emissions. These indirect emissions from the creation of electricity, steam, heat or cooling are not produced by the company’s own facilities but are still part of its carbon footprint.

For example, if a company buys electricity from a power plant that burns coal, the carbon dioxide that the power plant releases is considered a Scope 2 emission for the company. Even though the company didn't directly emit carbon dioxide from its own facilities, it indirectly caused the emission by purchasing electricity.

Scope 3 emissions are all the other indirect emissions that occur in a company's value chain, meaning the full lifecycle from production to delivery to use and disposal. These emissions don’t result from a company’s own assets or activities, but the company might have influence over their generation based on their consumption and partnerships with other businesses. Scope 3 emissions fall into two categories:

Upstream emissions come from sources that are related to a company's activities but not directly owned or operated by the company. This category generally includes emissions that are created within the supply chain before the product reaches the company. When a supplier produces emissions as a result of the ways in which it extracts raw materials, manufactures products, transports goods or handles waste disposal, these are considered upstream emissions. This category might also include emissions from a company’s business travel and employee commuting, as well as the emissions produced in the lifecycle of its capital goods (such as equipment, vehicles or buildings).

Downstream emissions result from the use of a company’s products or services. For example, if a company sells cars, the emissions that are produced when customers drive those cars would be considered downstream Scope 3 emissions. If a company includes franchises, their emissions are counted as downstream emissions for the parent company. The end-of-life treatment of sold products (meaning the ways in which they are disposed of or recycled once they are no longer useful) can also create GHG emissions. And if a company leases out assets (including vehicles or buildings), the emissions that these assets produce when used are also considered downstream Scope 3 emissions.

Both upstream and downstream Scope 3 emissions can often represent a significant portion of a company's total carbon footprint. However, they are also the most challenging to calculate and reduce, as they often occur outside the company's direct control.

Companies measure and report their emissions according to the GHG Protocol Corporate Standard. According to the GHG Protocol, developing a full emissions inventory that incorporates all Scope 1, Scope 2 and Scope 3 emissions can help companies focus their efforts on the best reduction opportunities.³

The first step is to identify the emissions sources within the company's own operations and its supply chain. Then, the company collects activity data that is related to these sources. This might include the amount of fuel that is used, distance traveled by company vehicles or amount of electricity consumed. It also requires gathering information from suppliers or other stakeholders to measure Scope 3 emissions.

Once data is collected, emissions are calculated by using specific emission factors. These factors represent the average emission rate of a greenhouse gas for a specific source or activity type. Factor lists are becoming increasingly granular and sophisticated. Selecting and applying the right emissions factor is a complex process. Emissions factors can be sourced from a variety of organizations and public sources, including the International Energy Agency (IEA) and various governmental bodies.

Finally, reporting emissions involves disclosing the total amounts for each scope, along with a description of the methodologies used, for transparency. Reporting can be done through various channels, such as corporate sustainability reports, regulatory filings such as the Corporate Sustainability Reporting Directive (CSRD) or voluntary disclosure platforms.

Reducing greenhouse gas emissions through decarbonizing operations can help companies limit their environmental impact and reach their sustainability goals. It might also cut overall costs by creating greater efficiencies and improving a brand’s reputation with customers. Common strategies to reduce a company’s total emissions include:

Companies can implement energy-efficient equipment (such as electric vehicles) and aim for greater energy efficiency in their buildings and industrial processes. They may also change manufacturing or operational processes to emit fewer GHGs. For example, cement manufacturers can reduce emissions by adjusting the blend of raw materials that are used in production. Some industries can implement carbon capture and storage (CCS) technologies to capture carbon emissions at the source and store them underground. This prevents them from entering the Earth’s atmosphere and contributing to global warming.

Companies can switch to renewable energy sources, such as wind, solar or hydropower, to reduce indirect GHG emissions created by the combustion of fossil fuels for power. Purchasing renewable energy—for example, through power purchase agreements (PPAs)—can significantly reduce Scope 2 emissions.

Scope 3 emissions are often extensive but are also the most challenging to reduce due to their complex nature. Some strategies that companies can use to influence their value chain to reduce emissions include:

• Supplier engagement: Working with suppliers to improve their emissions performance. This includes setting emission reduction targets or providing training and resources.
• Customer engagement: Influencing the way people use and dispose of products and services. This includes providing information on how to use products more efficiently or offering take-back and recycling programs.
• Product design: By designing products to be more energy-efficient, durable or recyclable, companies can reduce emissions that are associated with the use and end-of-life treatment of their products.
• Sustainable procurement: Choosing suppliers and partners who prioritize sustainability and have low carbon footprints can help reduce upstream Scope 3 emissions.