Decoding ESG Compliance Regulations: An overview into Scopes 1, 2, and 3

Environmental, Social, and Governance (ESG) compliance has emerged as a critical aspect of corporate responsibility and sustainable business practices. In recent years, regulators and stakeholders have placed increasing emphasis on ESG performance and reporting. A significant framework within ESG compliance is the categorization of emissions into three scopes. This blog post will provide an overview of ESG compliance regulations, with a specific focus on Scope 1, Scope 2, and Scope 3 emissions.

Scope 1 Emissions:

Definition: Scope 1 emissions encompass emissions that originate from sources owned or controlled by a company.

Examples of Scope 1 Emissions:

·??????Combustion of fossil fuels in company-owned facilities, such as power plants or manufacturing sites.

·??????Emissions from company-owned vehicles, including fleets and transportation assets.

·??????Process emissions arising from manufacturing and production activities, such as chemical reactions or industrial processes.

Scope 2 Emissions:

Definition: Scope 2 emissions comprise indirect emissions resulting from the consumption of purchased energy from a utility provider

Examples of Scope 2 Emissions:

·??????Emissions associated with the electricity purchased from the grid for operating facilities and infrastructure.

·??????Indirect emissions resulting from the utilization of purchased heat or steam, often provided by external suppliers.

Scope 3 Emissions:

Definition: Scope 3 emissions encompass all indirect GHG emissions in a company's value chain that are not covered by Scopes 1 and 2. Things you don’t own!

Categorization of Scope 3 Emissions:

·??????Emissions arising from purchased goods and services used in operations, including upstream supply chain impacts.

·??????Emissions associated with capital goods, such as machinery or equipment, including their manufacturing and disposal phases.

·??????Emissions from fuel- and energy-related activities not included in Scopes 1 or 2, such as extraction or production of purchased fuels.

·??????Emissions resulting from upstream and downstream transportation and distribution activities, including logistics and freight.

·??????Waste-related emissions generated in operations, including disposal, treatment, or incineration of waste materials.

·??????GHG emissions arising from business travel, including flights, accommodations, and commuting associated with work-related activities.

·??????Emissions from employee commuting, including the transportation modes used by employees to reach their workplaces.

·??????Emissions related to leased assets, such as vehicles or machinery, including their fuel consumption and maintenance.

·??????Emissions associated with investments in companies or projects, considering their environmental impacts.

Conclusion:

Understanding the nuances of ESG compliance regulations is paramount for businesses aiming to prioritize sustainability and meet the expectations of stakeholders. Scopes 1, 2, and 3 provide a framework for assessing and addressing different types of emissions. By embracing transparency, measuring and managing their environmental impact across these scopes, companies can make significant strides in ESG compliance. Ultimately, such efforts contribute to building a more sustainable and resilient future for all.