The difference between Scope 1, 2 and 3 emissions explained

Understanding the difference between Scope 1, 2 and 3 emissions is crucial for companies aiming to reduce emissions across their operations. Mapping out the existing greenhouse gas (GHG) emissions of your company is one of the first steps to making a credible climate strategy. Knowing where emissions are coming from helps prioritize action in emission hotspots, as well as understand which key stakeholders – such as suppliers – need to be engaged in the process of emission reductions.

The Greenhouse Gas Protocol (GHG Protocol) is the biggest internationally acknowledged standard providing frameworks to measure and manage GHG emissions from companies and their value chains. They categorize emissions from companies into three scopes based on their origin. But what is the difference between Scope 1, 2, and 3 emissions? Read on to find out.

Scope 1 emissions come from the direct operations of the reporting company. These include emissions from the company’s own facilities and vehicles.

Scope 1 emissions examples:

• Manufacture or processing of materials or products.
• On-site generation of energy, such as electricity, heat, or steam.
• On-site waste processing.
• Transportation with the company’s own vehicles.
• Fugitive emissions, such as equipment leaks.

Scope 2 emissions include emissions from energy consumption from energy generated by off-site utilities. Scope 2 emissions examples include purchased electricity, heat, cooling, and steam used in the company’s operations. Companies can usually track Scope 2 emissions via metered energy consumption.

Scope 1 and 2 emissions are often relatively straight-forward to quantify and mitigate, as the company has visibility and control over the operations that have led to these emissions. Companies can take direct measures to reduce these emissions, such as improving energy efficiency, implementing changes to production processes or energy sources, or acquiring electric vehicles.

Scope 3 emissions refer to the indirect emissions from the value chain of a company. The GHG Protocol divides Scope 3 emissions into upstream and downstream emissions, depending on where they take place. Upstream emissions include emissions from the goods and services the company purchases, while downstream emissions refer to the emissions of sold goods and services, meaning that they take place after leaving the company’s ownership. Around 75-90% of most companies’ emissions take place in the value chain, making it crucial to reduce Scope 3 emissions to reach climate targets.

Scope 3 emissions examples:

• Purchased goods and services, including materials and parts of products.
• Capital goods and leased assets, such as machinery or vehicles.
• Transportation and distribution (both upstream and downstream).
• Waste generated in operations.
• Processing and use of sold products.
• End-of-life treatment of sold products.
• Franchises.
• Investments.
• Business travel and employee commuting.

One difference between Scope 1, 2 and 3 emissions is the fact that Scope 3 emissions can be significantly more challenging for companies to tackle. As indirect emissions, companies have less control over them, meaning that collaboration across value chain actors is needed. However, this can also be an opportunity for companies. Increasing collaboration and creating trust with suppliers can enhance supply chain resilience and enable companies to co-claim the climate impacts of joint investments. Scope 3 is also increasingly included in the reporting and disclosure requirements for large markets such as the EU and California, making it important for companies to track and verify Scope 3 data.

To make the difference between Scope 1, 2 and 3 emissions more concrete, let’s look at the potential emissions of a food retailer. Scope 1 emission sources for a food retailer that sells bread might include things such as packaging and transportation of the bread in company-owned vehicles, while Scope 2 emissions can come from the electricity sourced for their office buildings. Meanwhile, Scope 3 emissions include everything from the agricultural production and processing of wheat, transportation of flour and other ingredients, energy used to heat up the ovens at the bakeries they source from, the emissions of the supermarket where the bread is sold, and eventually management of food waste.

This example makes it easy to see that Scope 3 emissions often produce the bulk of emissions, but at the same time the retailer itself has limited control over much of those emissions. To reduce Scope 3 emissions, the retailer may want to make strategic agreements with its suppliers, consider changing to suppliers with lower emissions, or invest in value chain interventions such as regenerative agriculture practices to reduce the emissions at the source.

Once companies have measured their baseline emissions, or their carbon footprint, it’s time to start cutting them. Companies following international best practice are setting science-based targets under the Science Based Targets initiative. This target setting framework accounts for the difference between Scope 1, 2 and 3 emissions by having companies set separate targets for each scope. Identifying and prioritizing action on highly emitting processes across the value chain is a good way to start, while creating a robust strategy for both short and long-term emission reduction targets and implementation plans.

Learn how our value chain impact verification can help you reach your Scope 3 targets.