Decoding carbon accounting: Exploring scope 1, 2, and 3 in corporate sustainability

Setting the standard: What are the greenhouse gas emissions to consider in GHG protocol?

The Greenhouse gas protocol provides a standardized approach to account for GHG emissions, including carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and fluorinated gasses. Gasses other than CO2 are converted into carbon equivalents (CO2eq) across different sectors and industries. These gasses are produced by, among other things, the combustion of fossil fuels, agricultural activities, the treatment of waste water and manufacturing processes. 

Clarifying carbon contributions: What are scope 1, 2, and 3 emissions?

The sources of emissions can be within the company’s operations as well as its supply chain. The Greenhouse Gas Protocol has classified and differentiated these emissions under scope 1, 2, and 3 emissions. Every scope represents a distinct group that differentiates in the level of ownership and control that the organization exercises. 

Scope 1 emissions

Emissions falling under scope 1 are those that come directly from sources that the company owns or controls. Examples include industrial buildings, the fuel burned for the company-owned motor vehicles, and emissions from combustion processes that occur on-site. Scope 1 emissions directly reflect the company's operational activities and infrastructure, allowing for business internal emission reduction strategies and direct supervision.

Scope 2 emissions

Scope 2 are indirect emissions that arise from the consumption of purchased energy, such as electricity, heat, steam, and cooling, as part of the operation in company facilities. Scope 2 emissions can be easily influenced through decisions related to energy procurement as well as energy efficiency measures and emphasize the significance of sustainable consumption practices. 

Scope 3 emissions

Scope 3 greenhouse gas emissions encompass a broader spectrum of indirect emissions that occur throughout the company's value chain. The GHG protocol further differentiates between upstream and downstream emissions. Upstream emissions are linked to activities that occur before the product reaches the company's control. While downstream emissions take place once the product is no longer within the company´s control. Emissions from business travel, employee commuting, investments, fuel and production of purchased materials, franchises, capital goods, purchased goods, leased assets, processing, use and end-of-life cycle treatment of sold products, transportation and distribution of goods, waste generated during the operation and waste disposal all categorize as scope 3 emissions. Hence, scope 3 emissions often constitute the largest portion of a company's carbon footprint and extend beyond its immediate operational boundaries, underlining the interconnectedness of business operations. This emphasizes the imperative for collaborative action not only within individual companies but also across the entire value chain. Such collaboration is essential to address the complex challenges associated with Scope 3 emissions effectively and achieve significant reductions in greenhouse gas emissions. The overview of the contribution of scope 1, 2, and 3 emissions in the overall corporate carbon footprint in various industry sectors highlights the severe impact of scope 3 emissions. Businesses that successfully disclose all three scopes will acquire a long-term advantage over their competitors.

Compliance at the forefront: Navigating emission reporting regulations

In today's world, where environmental awareness is more critical than ever, regulatory bodies are introducing stricter frameworks for companies to report their emissions. Showing compliance with new regulatory standards not only demonstrates corporate responsibility but also fosters trust with stakeholders and investors. As reporting regulations evolve, companies must adapt and embrace comprehensive emission reporting practices to navigate and manage the changing regulatory landscape effectively. Many businesses struggle to capture and quantify the indirect scope 3 emissions, which often represent a substantial portion of their carbon footprint. Overcoming these measurement challenges requires joint efforts to improve data collection processes, establish industry-wide norms, and foster cooperation across supply chains.

Emission solutions: Implementing sustainable mitigation strategies

To effectively reduce emissions and boost sustainability, organizations need to adopt a comprehensive strategy for managing their greenhouse gas emissions. This involves several key actions: enhancing energy efficiency, shifting to renewable energy sources, refining transportation logistics, and collaborating with suppliers to lower upstream emissions. By implementing these proactive measures, companies can significantly reduce their environmental impact while also improving operational efficiency and resilience.

Overcoming obstacles, seizing potential: Navigating emission challenges and opportunities

Despite the urgent need to cut GHG emissions, organizations encounter several obstacles in carbon accounting.

• Data management: collecting and managing large amounts of data from multiple sources, including internal operations and supply chains, poses a significant challenge. Companies must ensure the data is complete, accurate, comprehensive, and consistent across different emission sources. 
• Data quality: businesses may encounter difficulties related to data verification, validation, and gap filling in order to reduce errors and uncertainties. 
• Scope Coverage and Compliance: ensuring compliance with the GHG Protocol and industry regulations requires businesses to accurately account for both direct and indirect emissions across their entire value chain.
• Resource Intensiveness: carbon data collection, analysis and reporting can be resource and time intensive, requiring a great deal of experience and knowledge. 
• Integration and Automation: to ensure efficiency and accuracy, carbon accounting systems must be integrated with current data management systems. Possible obstacles are system compatibility and customisation.
• Reporting Framework Alignment: The reports generated by the carbon accounting system need to comply with industry standards as well as stakeholder expectations. However, aligning internal practices with external reporting frameworks can be rather challenging. 

These obstacles highlight the importance of choosing a solid carbon accounting solution that takes into account unique organizational requirements and guarantees adherence to reporting guidelines and industry standards. 

LCA automatization redefines emission measurements

The foundation of successful emission management procedures is granular emission measurement. As reporting regulations continue to evolve and become more stringent, companies must embrace efficient measurement tools. Streamlined Life cycle assessment (LCA) allows organizations to identify emission hotspots, areas for improvement through product design, make informed decisions to minimize their environmental impact and track progress over time, while staying up to date with regulatory requirements. Innovative LCA software, such as Yook, can help companies to easily perform LCA on their purchased goods: By automating several steps of the LCA process, such as data upload and especially data enrichment in case of potential gaps. As a result, organizations are able to thoroughly analyze and assess their Scope 3.1 emissions at scale. By prioritizing emission reduction efforts and seizing opportunities for innovation, businesses can not only decrease their GHG emissions across all three scopes but also position themselves for long-term success in a rapidly changing world.