Climate change is one of the biggest challenges of our time. Global warming is mainly caused by emissions of greenhouse gases such as carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O). These gases cause an amplified greenhouse effect, leading to a rise in global temperature. If we reduce emissions, we can limit global warming.
Companies play an important role in limiting this rise in temperature because they are responsible for a large share of emissions. That is why the Greenhouse Gas Protocol (GHG Protocol) was designed. This protocol provides companies worldwide with a standard for measuring and reporting their CO2 emissions. The GHG Protocol distinguishes between three categories in which each type of emissions is included Scope 1, Scope 2 and Scope 3. Spoiler... the vast majority of emissions fall under scope 3!
What is the GHG Protocol?
The GHG Protocol was born out of the need to develop a standardised and reliable way for companies and governments to measure and report greenhouse gas emissions. The protocol was developed in 1998 by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). Since then, the protocol has become the global standard for climate reporting. The protocol is used to help companies, governments and organisations measure their emissions transparently and consistently and provides a common methodology for calculating emissions. This allows companies to properly inform their investors, customers and other stakeholders about reducing their environmental impact.
What are scopes?
A company's emissions can be divided into three categories, known as ‘scopes’. Why are there three scopes and what exactly do they mean? Scope 1, Scope 2 and Scope 3 refer to a company's different sources of emissions and where they are located in the value chain.
Scope 1: Direct emissions
Scope 1 emissions are the direct emissions that arise from a company's activities. These are the emissions that result directly from the combustion of fuels or other processes within the company itself. Scope 1 emissions can be measured and reduced relatively easily because the company itself is responsible for these sources.
Examples:
- Combustion of fuels by the company itself, such as gas for heating (in m2).
- Transport via vans, trucks or passenger cars leased or owned by the company (in litres of fuel)
- Greenhouse gas emissions from production processes within the company. Such as methane emissions from steel or cement production. (in m2)
- Coolants and refrigerants (in kg)
Scope 2: Indirect emissions from energy consumption
Scope 2 includes indirect emissions resulting from the consumption of purchased energy. This includes electricity, steam, heat or cooled air produced by external parties but purchased by the company. Although the company does not produce this energy itself, it does influence emissions by making choices about energy procurement. So the emissions arising from the production of this energy are indirectly caused by the company.
Examples of Scope 2 emissions are the consumption of electricity for lighting and machinery and the use of external heating or cooled air for offices or factories. For example, if you heat your office with gas, you burn the fuel on site, therefore this falls under scope 1. If the office is heated electrically and this electricity comes from a power plant running on fossil fuels, the combustion takes place elsewhere and therefore this emission falls under scope 2.
Reducing scope 2 emissions is relatively easy, for example by switching to renewable energy sources, such as solar or wind energy. This can be done by installing solar panels on the roof of the company building or, for example, switching to a sustainable energy supplier.
Examples of scope 2 emissions are:
- Electricity used by machinery in factories
- Electricity used for computers or machines
- Electricity used from company charging stations for electric cars
- District heating
- Business travel (train or private cars)
Scope 3: Other indirect emissions
Scope 1 and 2 are clear and still easy to understand but with Scope 3, things get a lot more complex. This category includes emissions from the entire life cycle of products and services a company buys, manufactures or sells. This means that these emissions occur outside the company, by partners a company works with, such as suppliers, transporters, customers and consumers.
Scope 3 emissions cover the entire life cycle of a product or service, from the production of raw materials to the use and processing of products by consumers. Collecting data and reducing scope 3 emissions can be quite challenging. This is because a company does not directly manage these activities. Yet Scope 3 emissions are inextricably linked to business operations and often form by far the largest part of a company's environmental impact.
Upstream and downstream
Scope 3 emissions cover the entire value chain and are often divided into two categories:
Upstream: Emitted greenhouse gases before a product or service reaches your company. These include, for example, purchased products, raw materials or services by suppliers. This
refers to the total emissions that these products on services entail when they are produced.
Downstream: Emissions that occur after a product or service leaves a company. This refers, for example, to a product's energy consumption during the use phase, maintenance, transport and post-consumer waste treatment.
Often more than 90 per cent of emissions are in scope 3
Scope 3 emissions are huge because they cover the entire life cycle of a product or service. Many companies outsource large parts of their production, transport and distribution. This creates emissions that are not directly visible within the operational processes of the company itself, but are part of the value chain. Downstream emissions, such as the energy consumption of a sold product or its processing after use, can be significant. In sectors such as technology, retail and food production, more than 90 per cent of total CO2 emissions often fall under Scope 3.
Why calculating scope 3 emissions
- Get a complete picture of your company's carbon footprin
- Meet the stringent requirements of the CSRD or EU Taxonomy
- Create a solid, data-driven sustainability strategy
- Get to the root of your environmental impact
- Save energy and costs and build a green reputation
Measuring is knowing. Scope 3 emissions are indispensable to get a complete picture of a company's carbon footprint. Without measuring these emissions, much of the climate impact remains invisible. This can lead to inferior sustainability strategies and missing opportunities to reduce your emissions. Companies with an understanding of Scope 3 can therefore work in a much more targeted way to become more sustainable and create an integrated plan to reduce emissions throughout the value chain.
By measuring Scope 3 emissions, companies can not only improve their carbon footprint but also offer transparency towards customers and investors. Moreover, it allows companies to respond to new obligations, regulations and market expectations.
For instance, calculating scope 3 emissions is an essential part of the Corporate Sustainability Reporting Directive (CSRD), the EU's sustainability reporting requirement that will eventually apply to most companies. Also, the EU taxonomy, the classification system that determines which economic activities are considered sustainable and can therefore attract green investments, requires the most complete picture possible of CO2 emissions, including Scope 3.
Companies that are already investing in measuring and reducing these emissions are leading the way in sustainability and meeting the expectations of customers, investors and NGOs.
Calculating scope 3 can be challenging but also an opportunity to make a substantial contribution to reducing climate impact. By addressing these emissions, companies can not only reduce their environmental impact but also operate more efficiently, save costs and work towards a green reputation, all based on the right data.
Examples of Scope 3 emissions
- Total emissions arising from the production of purchased raw materials from suppliers such as metal, cotton fabrics, plastics or other materials.
- Emissions from transport companies transporting products to customers.
- Energy consumption of products during their use phase, such as power consumption of electronic devices.
- Methane emissions or other emissions from post-consumer waste disposal.
For a complete overview of scope 3 categories, check the GHG-protocol Technical Guidance for Calculating Scope 3 Emissions
Calculating Scope 3 emissions
Calculating Scope 3 emissions is complex because it covers a company's entire value chain, from suppliers to the use and final disposal of products. This requires detailed data on each stage in the life cycle of a product or service. There are several methods to calculate Scope 3 emissions, but the basic steps are as follows:
- Identify emission sources: The first step is to identify the different emission sources in the value chain. This can include production, transport, use and waste disposal.
- Collecting data: This is often the most time-consuming step. Data needs to be collected from suppliers, logistics partners and other stakeholders. This may also include information on the energy consumption of products in their use phase.
- Apply emission factors: Emission factors indicate how much CO2 is emitted per unit of a certain activity (e.g. per kilometre of transport or per tonne of raw material produced). You can find those emission factors in databases such as GHG Protocol, Defra (Department for Environment, Food & Rural Affairs), Ecoinvent, Simapro and Science Based Targets Initiative (SBTi)
- Make calculations: By combining the collected data with emission factors, total Scope 3 emissions can be calculated. These calculations provide insight into the extent of indirect emissions.
- Analyse and report: After emissions are calculated, they can be analysed to see where the biggest opportunities for reduction lie. This information can then be shared with stakeholders and investors.
Time-consuming
Calculating scope 3 emissions can be quite time-consuming and complex. Quite a few hours will be spent collecting detailed data from companies, suppliers, logistics partners and other stakeholders. Third-party data can also be unclear or difficult to access in some cases. It is therefore important to start collecting data and setting up a system in good time.
We have expertise in calculating Scope 3 emissions and offer companies support in collecting the right data, applying emission factors and reporting the results.
Tools for Scope 3 calculations
Calculating scope 3 emissions is part of many different solutions we offer. For instance, scope 3 plays a very important role in life cycle analysis, or LCA for short, which we have already made for many companies. Through an LCA, we calculate the broad environmental impact of a product, from ‘cradle to grave’. Also in a Carbon Footprint, we use a scope 3 calculation and calculate the total CO2 emissions of a company or product.
For companies with a large product portfolio, we help to select the most important products. This way, we turn a huge challenge that scope 3 can be into clear and manageable projects.
Our experienced LCA experts have already assessed many products and services in sectors such as IT, construction (materials), financial institutions, agriculture, fashion, plastics, maritime solutions and many more.
By working with Hedgehog Company, companies can simplify the complexity of Scope 3 and take the necessary steps towards a more sustainable business model.
Want to know more, contact our experts
