- What is the Greenhouse Gas Protocol (GHG)
- What are Scope 1 Emissions?
- What are Scope 2 Emissions?
- What are Scope 3 Emissions?
- Comparative Analysis of Scope 1, 2, and 3 Emissions
- How to Measure the different scopes of emissions: Practical Steps
- Tips for Effective Supplier Engagement on Scope 3 Emissions
- Steps for Businesses to Take to Manage and Reduce GHG Emissions
Hemingway used to say,
‘The earth is a fine place and worth fighting for’. As climate change has ceased to be a faraway problem future generations will handle. Climate change is right here, right now, and it has become a pressing reality we must all face on the individual, societal, and business scale.
As the world catches up with the consequences of rising temperatures, extreme weather events, and their effects on ecosystems and communities, reducing greenhouse gas (GHG) emissions is now a common goal. Many organizations envision their corporate social responsibility as something real, requiring measurable action to drive environmental and economic value.
How can an organization assess its emissions, especially from various operations and supply chain sources? GHG helps by providing the support organizations need to segregate and label the different emissions, helping them identify their largest environmental impact.
What do we mean when we talk about emissions? Why do their different types matter? How to reduce them? As you read this article, consider the sources of emissions that might be impacting your organization — from your company’s fleet vehicles (Scope 1) to the electricity that powers your office (Scope 2) to the hidden, complex emissions lurking in your supply chain (Scope 3).
Do you know your greatest impacts? Once you identify these differences, your organization can implement sustainable and resilient practices.
What is the Greenhouse Gas Protocol (GHG)
Businesses need a clear roadmap to navigate and understand emissions management. The protocol was developed in the late 90s by the World Resources Institute and the World Business Council for Sustainable Development. It quickly became the world’s most used greenhouse gas accounting standard. The protocol offers a far-reaching framework that guides organizations in calculating and managing their GHG emissions.
GHG provides a systematic approach to measuring emissions, ensuring transparent and comparable data reporting, which is a must for regulatory compliance and gaining investors, customers, and other stakeholders’ trust as they increasingly demand greater environmental accountability. The protocol’s framework covers all types of GHGs, from carbon dioxide (CO₂) to methane (CH₄), nitrous oxide (N₂O), and a range of other pollutants with warming effects.
The protocol divides emissions into three categories — Scope 1, Scope 2, and Scope 3 — each representing different types of emissions sources.
- Scope 1 emissions cover the direct emissions from owned or controlled sources, such as combustion in owned boilers, furnaces, and vehicles.
- Scope 2 emissions represent indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company.
- Scope 3 emissions cover indirect emissions in your value chain, both upstream and downstream, encompassing everything from raw material extraction to product disposal.
By segregating emissions, the GHG Protocol encourages a structured approach to emissions reduction, first targeting the most significant sources and developing bespoke strategies for each category. Understanding these categories and how they impact each other is essential if your organization aims to reduce its environmental footprint while navigating the complexities of today’s regulatory landscape.
What are Scope 1 Emissions?
Scope 1 emissions are the most straightforward type of greenhouse gas emissions to understand because they come directly from sources that a company owns or controls. See them as the emissions you can see or touch daily. In other words, Scope 1 emissions come from your day-to-day business operations.
Why do they matter? To start with, they are entirely within your control.
When delivery trucks roll onto the road, or your manufacturing plant’s furnaces heat up to produce goods, the resulting emissions are direct, quantifiable, and immediate. These emissions are often important, especially for manufacturing, transportation, and energy industries, where fuel combustion is a core part of daily operations.
How to manage Scope 1 emissions?
It starts with identifying all the sources that fall under this category. It means investing in newer, more fuel-efficient vehicles or transitioning to electric alternatives. It could involve upgrading to cleaner, more efficient industrial equipment or exploring alternative fuels like hydrogen or biofuels. Beyond equipment and vehicles, you can implement energy-saving practices, optimize logistics, and even reconsider facility locations to minimize transport needs.
It’s essential to treat Scope 1 emissions as a core business metric—just like profit margins or market share. If you measure it, you can manage it. For organizations committed to sustainability, understanding and reducing Scope 1 emissions is the most tangible step toward achieving broader environmental goals.
What are Scope 2 Emissions?
Scope 2 emissions are less direct but no less critical. These emissions come from the energy a company purchases to run its operations — mainly electricity, heating, cooling, and steam. Essentially, Scope 2 emissions result from the company’s energy consumption. If they are not
directly produced by your organization, they still are a byproduct of the energy that a company consumes.
Why are Scope 2 emissions important? Often, they represent a large portion of your organization’s carbon footprint, especially for organizations that rely heavily on electricity.
Every time your office lights are turned on, or servers run, Scope 2 emissions are generated — even if the power comes from an external source. And while you may not have direct control over the power plant emitting carbon dioxide, you do have control over how much energy you use and where it comes from.
What can businesses do to reduce Scope 2 emissions?
It’s about reducing energy consumption and sourcing cleaner energy. This can include investing in energy-efficient appliances and technologies, optimizing heating and cooling systems, and employing smart lighting systems. Organizations can also conduct regular energy audits to identify waste and implement energy-saving measures. However, we must go beyond a simple usage reduction, which involves purchasing renewable energy directly from a green energy provider or through renewable energy credits (RECs). Think about it: What if every kilowatt-hour your business consumed came from wind, solar, or hydroelectric power?
The impact could be a game-changer reducing your Scope 2 emissions and contributing to a cleaner grid. Moving toward renewable energy sources demonstrates a commitment to sustainability that resonates with customers, investors, and regulators alike.
Understanding Scope 1 and Scope 2 emissions is just the start. But what about those emissions that aren’t directly tied to your operations or energy use — the ones that occur up and down your value chain? That’s where Scope 3 comes in.
What are Scope 3 Emissions?
Scope 3 emissions are where things get more complex—and often more impactful. If Scope 1 and Scope 2 emissions are straightforward to measure and manage, Scope 3 emissions involve diverse indirect emissions that occur up and down the entire value chain. The company does not directly produce these emissions, nor are they the result of the electricity or energy a company purchases. Instead, activities outside the organization influence them and include extracting raw materials and disposing of different products.
Scope 3 emissions can be divided into two main categories: upstream and downstream. Upstream emissions include all indirect emissions from the company’s supply chain, such as the production and transportation of raw materials, business trips, and team commuting. On the other hand, downstream emissions cover emissions after a product is sold, including those from product use and disposal.
Scope 3 emissions comprise most organizations’ carbon footprints, often accounting for over 70% of total emissions.
Why do Scope 3 emissions matter so much? They reveal the full extent of a company’s impact on the planet. While it’s easy to ignore emissions from far-flung suppliers or the energy used by customers, these sources collectively represent a significant portion of global greenhouse gas emissions. Ignoring them means missing the biggest opportunities for reduction. For organizations aiming to be truly sustainable, addressing Scope 3 emissions is not optional—it’s essential.
How can we tackle Scope 3 emissions?
Managing Scope 3 emissions begins with mapping the full value chain and identifying the largest sources of emissions. This process often requires extensive data collection and collaboration with suppliers, customers, and other stakeholders. Businesses can start by engaging their supply chain partners to encourage more sustainable practices, such as switching to low-carbon materials or improving logistics efficiency. Organizations like yours can also design products with lower environmental impacts, such as those that consume less energy during use or are easier to recycle at the end of their lifecycle.
You can also innovate in your product and service offerings. For example, you transition to circular economy models where products are designed for reuse, refurbishment, or recycling, reducing the need for new materials and minimizing waste. You could also join carbon offsetting programs to compensate for unavoidable emissions, though this should be viewed as a last resort after all reduction opportunities have been explored.
Addressing Scope 3 emissions often requires a drastic shift — moving beyond the organization’s boundaries to consider the entire products and service lifecycle. It’s a challenging task, but if you take it on, the rewards are substantial:
- Reduced risks
- Increased efficiency
- A stronger brand reputation
- A more resilient business model in a low-carbon future.
Comparative Analysis of Scope 1, 2, and 3 Emissions
Understanding the differences between Scope 1, 2, and 3 emissions is crucial, but it’s equally important to see how they interrelate and why managing all three categories matters. So, how do these scopes compare? What makes each unique, and where do they overlap?
While Scope 1, 2, and 3 emissions all contribute to a company’s overall carbon footprint, they differ significantly in their sources, measurement methods, and management strategies. To effectively address all three, businesses must first understand these differences and identify where they can have the most significant impact.
Scope 1 emissions, being direct and under the company’s control, are typically the easiest to measure. These include emissions from owned vehicles, on-site fuel combustion, and other directly controlled sources. Most organizations use direct monitoring tools, such as fuel meters, gas flow meters, or emissions sensors, to quantify their Scope 1 emissions.
Scope 2 emissions, though indirect, are also relatively straightforward to measure since they are tied to the energy purchased from utility providers. Organizations can calculate Scope 2 emissions by multiplying the energy consumed (in kilowatt-hours) by the emissions factor provided by their energy supplier, representing the average emissions produced per unit of energy generated.
Scope 3 emissions, however, pose the greatest challenge. They span various activities across the entire value chain, making data collection and measurement complex. For example, measuring emissions from raw material extraction or end-of-life disposal of products often requires extensive collaboration with suppliers, customers, and other external partners. Businesses may need to rely on primary data (from direct engagement with suppliers and partners) and secondary data (industry averages and databases) to estimate Scope 3 emissions accurately.
How to Measure the different scopes of emissions: Practical Steps
Real-Life Examples of Emission Measurement and Reduction
IKEA’s Journey to Carbon Neutrality
IKEA committed to becoming climate-positive by 2030. To achieve this ambitious goal, IKEA measures its emissions across all three scopes. For Scope 1 missions, the company tracks fuel consumption in its delivery fleets and energy use in its warehouses. For Scope 2 missions, they shifted to 100% renewable electricity in its stores and facilities, significantly reducing its carbon footprint.
However, the real challenge lies in managing Scope 3 emissions, which comprise most of IKEA’s carbon footprint. These include emissions from raw material sourcing, product manufacturing, and customer use. IKEA implemented a strong supplier engagement program, working closely with suppliers to improve energy efficiency, switch to renewable energy, and adopt sustainable practices. It also designs products that use fewer resources, are easier to transport, and have a longer lifespan, reducing emissions throughout the product life cycle.
Microsoft’s Science-Based Targets
Microsoft set ambitious science-based targets to become carbon-negative by 2030. The company actively measures and manages Scope 1 emissions from its data centers and buildings. For Scope 2 missions, Microsoft has invested heavily in renewable energy and signed multiple power purchase agreements (PPAs) to source 100% of its electricity from renewables.
Scope 3 emissions present a significant challenge for Microsoft, given its vast global supply chain. To tackle this, Microsoft uses advanced data analytics tools to measure emissions across its entire value chain. The company collaborates with suppliers through its Supplier Climate Program, providing tools and resources to help suppliers calculate and reduce their emissions. Microsoft also invests in carbon removal technologies and offsets to address the remaining Scope 3 emissions, which it cannot eliminate directly.
Ikea and Microsoft set the stage for meaningful emissions reductions and showcase leadership in their respective industries.
Tips for Effective Supplier Engagement on Scope 3 Emissions
Engaging suppliers is essential to regulate Scope 3 emissions, as emissions often originate from upstream activities like raw material extraction, manufacturing, and logistics. Here are some practical tips to help businesses effectively engage their suppliers:
Why Should Businesses Care About All Three Scopes?
Addressing GHG emissions across all scopes isn’t just an environmental imperative but a strategic approach that can drive long-term value. Why should businesses invest time and resources in managing emissions beyond their direct control?
- Regulatory Compliance and Future-Proofing
Environmental regulations and reporting requirements become more stringent by the minute. Understanding these scopes empowers organizations to anticipate regulatory changes, avoid penalties, and position themselves as compliant leaders. The European Union’s Corporate Sustainability Reporting Directive (CSRD) requires large organizations to disclose their full carbon footprint, including Scope 3 emissions.
- Enhancing Reputation and Brand Value
Today’s consumers, investors, and stakeholders are increasingly aware of environmental issues. An organization that actively reduces emissions across all scopes can boost its brand reputation, build stronger customer loyalty, and attract sustainability-focused investors. Research highlights that 70% of consumers are ready to pay more for sustainable products, and 80% of investors consider ESG (Environmental, Social, and Governance) factors in their investment decisions.
- Driving Cost Savings and Operational Efficiency
Measuring and managing emissions can highlight inefficiencies across a company’s operations and supply chain. For example, reducing energy consumption (Scope 2) through efficiency upgrades or transitioning to renewable energy can lead to substantial cost savings over time. Optimizing supply chain logistics and materials usage (Scope 3) can reduce waste and lower overall costs. Giants like Nestlé reported millions of dollars in savings by adopting more sustainable supply chain practices.
- Mitigating Risks and Building Resilience
Climate change brings many business risks, from supply chain disruptions caused by extreme weather events to changing market dynamics and resource scarcity. By managing their emissions comprehensively, organizations can identify vulnerabilities in their value chain, mitigate risks, and build resilience against climate-related impacts. Organizations that invest in renewable energy and sustainable supply chain practices will be less exposed to fluctuating energy prices and disruptions.
- Meeting Stakeholder Expectations
Stakeholders, including customers, employees, investors, and partners, expect everyone to demonstrate a strong commitment to sustainability. Addressing all three scopes shows that an organization is serious about its environmental responsibilities and takes a holistic approach to climate action. This can help attract top talent, secure investments, and strengthen partnerships. Industry leaders like Patagonia and Salesforce have gained significant market traction and employee loyalty by embedding sustainability into their business strategy.
- Unlocking In-Ovation and New Market Opportunities
Reducing emissions can drive innovation by encouraging organizations to reimagine their products, services, and business models. Proactively addressing your carbon footprint will create new opportunities in emerging markets, such as renewable energy, circular economy products, or carbon offsetting services. Engaging in sustainability efforts can also lead to collaborations and partnerships that drive growth and generate new revenue streams.
Steps for Businesses to Take to Manage and Reduce GHG Emissions
Successfully reducing greenhouse gas emissions requires a far-reaching approach that covers the three scopes. Here is what you can do to manage and reduce your GHG emissions:
Conduct a GHG Inventory
Start with a detailed GHG inventory to identify and quantify all emissions sources across Scopes 1, 2, and 3. Use tools like the GHG Protocol’s Corporate Standard or specialized software to ensure accuracy and consistency. The inventor provides a baseline that helps identify the most significant emission sources and sets the stage for developing a targeted reduction strategy.
Set Science-Based Targets
Align your emissions reduction targets with the latest climate science to ensure they participate in global efforts to limit temperature rise to 1.5°C above pre-industrial levels. Science-based targets provide a clear roadmap for reduction and demonstrate a commitment to meaningful climate action. Many organizations, like IKEA and Microsoft, have set ambitious targets, as verified by the Science Based Targets initiative (SBTi).
Improve Energy Efficiency
Invest in energy-efficient technologies, processes, and practices to decrease energy consumption, such as upgrading lighting and HVAC systems, optimizing manufacturing processes, or implementing energy management systems. Recently, Siemens significantly reduced its Scope 1 and 2 emissions by upgrading its facilities to more energy-efficient standards and implementing smart energy management practices.
Transition to Renewable Energy
Purchasing or generating renewable energy to power your operations means signing power purchase agreements (PPAs), installing on-site renewable energy sources, or buying renewable energy certificates (RECs). Google, for instance, has committed to running on 100% renewable energy and has invested in large-scale solar and wind energy.
Engage the Supply Chain
Encouraging your suppliers to adopt sustainable practices will help address scope 3. To do that, you can provide resources, incentives, and tools to help suppliers improve their energy efficiency, reduce waste, and switch to renewable energy. For example, Walmart launched Project Gigaton to encourage its suppliers to reduce greenhouse gases from its supply chain by 2030.
Build Sustainable Products
Incorporate sustainability into product design to minimize emissions across the product lifecycle, including using recycled materials, designing for energy efficiency, or planning for end-of-life recycling. For example, Apple designs its products focusing on recyclability and has introduced a robot named “Daisy” that disassembles iPhones to recover valuable materials.
Prone Circular Economy Practices
Adopt circular economy models to reduce waste and emissions, leading to rethinking business models to prioritize product reuse, repair, and recycling. Fast fashion giants like H&M heavily invest in circular fashion initiatives, such as clothing recycling programs and sustainable materials, to reduce their Scope 3 emissions.
Offset Unavoidable Emissions
For emissions that cannot be eliminated, invest in high-quality carbon offsets that fund projects to capture or reduce greenhouse gasses elsewhere. While offsets should not be the primary strategy, they can help achieve net-zero goals when complementing direct reduction efforts. BP, for example, is investing in reforestation and renewable energy projects to offset some of its unavoidable emissions.
Real-Life Examples of GHG Emission Reductions
Unilever
As part of its ambitious commitment to become a carbon-neutral company by 2039, Unilever took multiple steps to reduce its GHG emissions. The company sources 100% of its electricity from renewable sources for all its operations and has invested in energy-efficient technologies in its manufacturing facilities. For Scope 3 missions, Unilever works closely with its suppliers to improve sustainable sourcing practices and reduce emissions throughout its supply chain. The company also engages with consumers to promote lower-impact lifestyles, such as reducing water usage and waste.
Patagonia
Well-known for its environmental advocacy, Patagonia has integrated sustainability into its core business model. They committed to reaching carbon neutrality across its entire value chain by 2025. Patagonia has invested heavily in renewable energy for its stores, offices, and distribution centers, reducing Scope 2 emissions. To tackle Scope 3 emissions, Patagonia prioritizes using recycled and sustainable materials in its products, supports fair labor in the supply chain, and encourages product reuse and recycling through initiatives like its “Worn Wear” program.
General Motors (GM)
GM targets carbon neutrality by 2040 at the latest. The organization’s ambition is to remove tailpipe emissions from its vehicles (Scope 1 and 2) by transitioning to an all-electric vehicle fleet. GM is also working to reduce its Scope 3 emissions by collaborating with suppliers to decrease manufacturing processes’ carbon footprint and promote using sustainable materials in vehicle production. The organization also committed to sourcing 100% renewable energy for its global operations before 2035.
Steps to manage and reduce GHG emissions
Embedded Emissions Management into Business Strategy
Integrate GHG management into your core business strategy. Set clear goals, assign responsibilities, and allocate resources for reducing emissions. Ensure that sustainability objectives are aligned with overall business goals to create a cohesive approach.
Adopt Digital Tools and Technology:
Take advantage of digital tools like AI and data analytics to optimize operations, track emissions, and identify reduction opportunities. Technology can help automate data collection, improve accuracy, and provide insights into areas where emissions can be cut.
Engage Stakeholders: Communicate your sustainability goals and progress to your people, customers, investors, and the members of your communities. Transparency fosters trust and encourages accountability, while stakeholder engagement can generate new ideas and support for your efforts.
Monitor, Report, and Adjust
Measure and report emissions to assess progress against targets. Use these in your right to refine your strategies and adjust your approach as needed. Therefore, continuous improvement will be mandatory to achieve long-term success in reducing emissions.
Seek Expert Guidance
Team up with organizations specializing in GHG emissions management to get expert advice and support. Whether through consulting services or industry collaborations, leveraging external expertise can help accelerate your journey to sustainability.
Concluding Thoughts: Why must we act for a sustainable future?
Shortly, where do you stand in the fight against climate change? Are you merely compliant or ready to embrace the opportunities that come with real and impactful action? Understanding and managing Scope 1, 2, and 3 emissions is more than a checkbox exercise—it’s about preparing for a future where sustainability is no longer optional but a core driver of business success.
Think about it: What would it look like if your organization met its emissions targets and went beyond them to lead your industry in sustainability? What new markets could open up if you innovated around sustainable products and services? What risks could you mitigate by building a resilient, low-carbon supply chain? The potential is vast, but it starts with asking the right questions and taking the first step toward a deeper commitment to change.
Reducing greenhouse gas emissions is a complex challenge and an opportunity for growth, innovation, and leadership. And this journey is far from over. How do you navigate the complexities of Scope 3 emissions in your value chain? What strategies will you use to bring your suppliers and customers along on this journey? How will digital tools and technologies help you track, manage, and reduce your carbon footprint more effectively?
The road to sustainability involves understanding carbon offsets, the future of carbon markets, and even the role of emerging technologies like AI and blockchain in emissions management. The path is dynamic, evolving, and filled with possibilities.
Optimize your ESG strategy and gain a competitive edge.
We’re here to help you navigate this complex landscape. Whether you’re starting your sustainability journey or looking to boost your existing efforts, let’s explore the possibilities together. What’s your next move?
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