Exploring Scope 3 Emissions in Business Operations

What is the difference between scope 1 scope 2 and scope 3?

To manage their environmental impact, organisations must navigate the intricacies of greenhouse gas emissions, particularly the differences between Scope 1, Scope 2, and Scope 3 emissions.?

Scope 1 Emissions: Direct Emissions

Scope 1 emissions are direct greenhouse gas emissions originating from sources owned or controlled by an organisation. This includes emissions from company-owned vehicles, on-site fuel combustion, and various industrial processes. (1)

Example: You are a delivery company and you have 3 company-owned vans in your fleet and 1 head office. Your scope 1 emissions would include:

- gas consumed for heating the office

- petrol used in vans

Scope 2: Indirect Emissions from Energy Consumption

Delving deeper, Scope 2 emissions encapsulate the indirect impact associated with the consumption of purchased or acquired energy. This involves emissions from the generation of electricity, heat, or steam that an organisation acquires from external sources. (1)

Example: You are a delivery company and you have1 head office. Your scope 2 emissions would include:

- electricity consumed in the office?

Scope 3: A Broader Canvas of Indirect Value Chain Emissions

Widening the perspective, Scope 3 goes beyond direct control, encompassing all other indirect emissions within the organisation's value chain. This includes emissions from the entire supply chain, business travel, employee commuting, and the use of products or services provided by the organisation. There are 15 subcategories within Scope 3 emissions. (1)

Example: You are a delivery company and you have 1 head office. Your scope 3 emissions would include:

- employee travel?to the office

- office waste

- homeworking emissions?

To summarise, Scope 1 addresses direct emissions, Scope 2 deals with indirect emissions from purchased energy, and Scope 3 extends to a broader range of indirect emissions throughout the entire value chain.

What are scope 3 reporting methodologies?

Now that we've explained the scopes of carbon emissions, it’s time to understand the methodologies that govern them.?

The Greenhouse Gas Protocol for Scope 3:

This widely recognised protocol offers guidelines for companies to account for and report their Scope 3 emissions. It includes 15 categories, covering areas such as purchased goods and services, transportation, distribution, and waste generated in operations.

ISO 14064-1:

As an international standard, ISO 14064-1 provides principles and requirements for quantifying and reporting GHG emissions and removals. It includes guidance on the accounting of Scope 3 emissions, ensuring a standardised approach.

Sector-Specific Guidelines:

Certain industries have developed their own sector-specific guidelines for Scope 3 reporting, tailored to address the unique characteristics and challenges of their value chains. These sector-specific standards include industries like Agriculture, Aquaculture and Fishing.?

Navigating Scope 3 Reporting: Methods Employed by Greenr

Let's explore Greenr’s practical methods for businesses to report on Scope 3 emissions:

Greenr's Approach: Activity-Based and Spend-Based Modelling

Greenr follows the standards of both the Greenhouse Gas Protocol and ISO 14064-1 and employs two calculation methods: activity-based and spend-based modelling.

Activity-Based Process:

This involves the Carbon Health Check and the Greenr Employee Engagement App. The Carbon Health Check utilises a self-reporting questionnaire to delve into various aspects of the company, establishing a estimated baseline measurement of the business carbon footprint. The Employee Engagement App focuses on employees, incorporating a carbon quiz to understand their personal carbon footprint, contributing to the Scope 3 data associated with the organisation. It's important to first consider an activity-based approach to capture data that is either not reflected in expenses accounts (such as homeworking emissions) or activities where the price is very volatile (for example international flights).

Spend-Based Calculations:

The second step is to use Greenr’s AI-powered platform which integrates into your accountancy and expense software,?allowing you to track your carbon emissions on a clear, customisable dashboard with regular reports and a full emission breakdown. The integration categories all relevant expenses into Scopes 1, 2 and 3 emissions and then applies an emission factor (kgCO2e emitted per ￡ spent). Greenr's Expense integration also uses NLP to subcategorise each expense into more precise and accurate categories. To date, we integrate with the following expense systems: Xero, Quickbooks, Oracle and Sage.?

Merging the Methods:

The final step involves merging both methodologies to obtain an overview of a business' emissions for the last 12 months. You can then download an automated carbon report which includes tailored carbon-reduction recommendations based on the report’s findings to help you actually reduce your footprint at source through business decisions.?

If you want to find out more about measuring your company's carbon emissions, please book a call with one of our sustainability advisors!?

1. Greenhouse Gas protocol