Understanding Scope 1, 2 and 3 Emissions

Scope 1, 2 and 3 emissions – a means to categorise the various greenhouse gas (GHG) emissions a company produces in its operations and wider value chain.

Companies must seek to reduce their carbon footprint to help combat climate change, and this begins with measuring and reporting on their greenhouse gas emissions. Gaining an understanding of your present carbon footprint is key to setting ambitious reduction targets, as well as designing and delivering effective climate solutions. Without this, executing a carbon reduction strategy will be inundated with problems from the outset.

To combat this, one of the main methods to measure and assess greenhouse gas emissions is to look at them within three different scopes: 1, 2 and 3. This allows companies to categorise the various emissions produced from its operations and wider value chain (its customers and suppliers). Not only this, but it can lead to a whole host of benefits which we discuss below.

Scope 1, 2 and 3 emissions defined

In essence, scope 1 and 2 are the emissions owned or controlled by a company, while scope 3 are a consequence of the company’s activities but those that transpire from sources not owned or controlled by it. Scope 3 reporting is voluntary and is the hardest to monitor, however those companies reporting all three scopes will gain a sustainable competitive advantage.

Scope 1: direct emissions

Scope 1 emissions are the direct emissions from company-owned and controlled resources, i.e. the emissions that are released into the atmosphere as a direct result of a set of activities at business level. All fuels that produce GHG emissions must be included in scope 1.

According to GHG protocol, Scope 1 is further divided into four categories:

  1. Stationary combustion: e.g. fuels, heating sources.
  2. Mobile combustion: all vehicles owned or controlled by a company, burning fuel e.g. cars, vans and trucks. With an increase in the use of electric vehicles, some company fleets will fall into scope 2 emissions.
  3. Fugitive emissions: leaks from GHG e.g. refrigeration and air conditioning units. Did you know: refrigerant gases are considerably more damaging to the environment than CO2 emissions.
  4. Process emissions: released during industrial processes and onsite manufacturing e.g. production of CO2 during cement manufacturing, factory fumes and chemicals.

Scope 2: indirect emissions – owned

Scope 2 emissions are the indirect emissions from using energy, such as purchased energy from a utility provider. So, this scope includes all GHG emissions produced from the consumption of purchased electricity, solid and liquid fuels, heat, steam and cooling.

Scope 3: indirect emissions – not owned

Scope 3 emissions are all indirect emissions (not included in scope 2) that occur in a company’s value chain – the upstream and downstream activities of direct business activities.

According to GHG protocol, scope 3 emissions are split into 15 subcategories:

Upstream activities

These fall under several further categories.

Business travel is one of the most substantial scope 3 emissions, and includes air travel, rail, taxis, buses and private vehicles.

Employee commuting must also be reported as it’s a consequence of the emissions released through staff travelling to and from work.

Waste generated in operations refers to waste sent to landfill and wastewater treatments. Waste disposal emits methane (CH4) and nitrous oxide (N2O) which have an even more detrimental effect on our planet than CO2.

Purchased goods and services include the upstream (cradle-to-gate) emissions from the production of goods and services purchased by a company in the same year. When reporting, it helps to distinguish between the purchase of production-related products (materials, components and parts) and non-production related products (office furniture, supplies and IT support).

Transportation and distribution transpire in upstream (suppliers) and downstream (customers) elements of the value chain. It includes the emissions released by land, sea and air, as well as those relating to third-party warehousing.

Fuel and energy-related activities include emissions relating to the production of fuels and energy purchased and consumed by the company that are not contained within scope 1 and 2.

Capital goods are final products that have a prolonged life and are used by the company to manufacture, store, sell and distribute a product or deliver a service. Examples include buildings, vehicles and machinery.

Downstream activities

Investments are included mainly for financial organisations; however other businesses can still include it in their reporting. These fall into four categories: equity investments, debt investments, project finance, managed investments and client services.

Franchises are businesses that operate under a licence to sell or distribute another company’s goods or services within a specific location.

Leased assets resemble leased assets by the company (upstream) and assets to other organisations (downstream).

Use of sold products is also included, and relates to ‘in-use’ products that are supplied to customers. It measures the emissions resulting from product usage even if it varies substantially. For example, the use of an iPhone will take many years to equal the emissions produced when it’s manufactured.

End of life treatment relates to products sold to customers and is reported in the same way as waste generated during operations. Businesses must measure how their products are disposed of; however, this can be challenging as it tends to depend on the customer.

Benefits of scope reporting

  • Improved transparency, consumer trust and brand reputation
  • Higher understanding of exposure to resource, energy and climate-related risks
  • Reduced energy and resource costs
  • Positive engagement with employees and consumers
  • Compliant with regulatory GHG reporting requirements
  • Gain competitive advantage

What is Crown Oil doing to reduce our scope emissions?

We’ve achieved a significant reduction in our GHG emissions against the 2021/22 baseline:

  • Scope 1 – 87% reduction (mainly due to switching our fleet to HVO)
  • Scope 2 – 28% reduction (due to increased electricity/heating efficiencies)
  • Scope 3 – 17% reduction

We have control over our scope 1 & 2 and are in a position to reduce them immediately. These reductions are being achieved by:

  • Making changes to our infrastructure
  • Improving efficiency
  • Putting sustainability at the core of our business
  • Going beyond business as usual

Overall, this shows a 40% absolute emissions reduction across all scopes between 2021/22.