Comprehensive guide to GHG emission scopes and categories

In today’s climate-conscious world, businesses must understand and report on their carbon footprint in order to remain competitive. As sustainability becomes a pivotal element of corporate strategy, grasping the full spectrum of GHG emission scopes and categories is critical. This knowledge equips companies to effectively navigate the intricate landscape of environmental impact, ensuring they can take meaningful actions toward a more sustainable future. Accordingly, this article demystifies the complexities of GHG emission scopes and their categories, serving as an essential resource for businesses committed to reducing their ecological footprint.

What are GHG emissions?

Greenhouse gases (GHGs) are gases in the atmosphere that contribute to the greenhouse effect and warm the planet. Carbon dioxide (CO2), ozone (O3), methane (CH4), and nitrous oxide (N2O) are the main gases that drive the increase in atmospheric temperature. According to the IPCC report, an estimated 59 billion tonnes of GHGs were emitted in 2019, with a large portion being carbon dioxide.

The three scopes of emissions for carbon accounting

As categorised by the Greenhouse Gas Protocol, the world’s most widely used GHG accounting standard, GHG emissions are divided into Scope 1, 2 & 3 emissions:

Scope 1 emissions are direct emissions that originate from sources owned or controlled by an organisation, such as emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc. By quantifying Scope 1 emissions, organisations gain insight into their internal carbon footprint, enabling targeted reduction strategies.

Scope 2 emissions are indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company. These emissions occur at the facility where electricity is generated, not at the point of consumption by the reporting company.

Scope 3 includes all other indirect emissions that occur in an organisation's value chain. These emissions are a consequence of the company's activities but occur from sources not owned or controlled by the company. Scope 3 includes both upstream and downstream emissions linked to the company’s operations, such as the extraction and production of purchased materials and fuels, transport-related activities in vehicles not owned or controlled by the company, electricity-related activities (not included in Scope 2) for the production of goods sold by the company, outsourced activities, waste disposal, etc.

Scope 1, 2 & 3 emissions — Scopes 1, 2 & 3 according to the GHG Protocol.
Credit: Plan A

As outlined within the table below, Scope 3 emissions are further divided into 15 categories, as outlined in the Corporate Value Chain (Scope 3) Standard, which helps organisations identify and engage with the relevant parts of their value chain.

GHG Scope 3 categories: Upstream activities

Emission Category	Description
1. Purchased goods and services	Relate to the extraction, production, and transportation of goods and services a company buys. In simpler terms, emissions from making and moving products and services the company acquires.
2. Capital goods	Relate to the extraction, production, and transportation of capital goods purchased or acquired by the reporting company in the reporting year. In other words, emissions from the creation and transport of big company purchases, like machinery.
3. Fuel and energy-related activities	(not included in Scope 1 or 2) correspond to emissions from: - Making and moving fuels used by the company. - Producing the electricity the company buys. - Power loss in transmitting that electricity.
4. Upstream transportation and distribution	Involves transportation and distribution of products among suppliers and the company. Simply put, emissions from moving goods between the company and its suppliers.
5. Waste generated in operations	Relates to waste sent to landfills and wastewater treatments. Waste disposal emits methane (CH4) and nitrous oxide (N2O), which cause greater damage than CO2 emissions. It refers to the disposal and treatment of waste created by the company. In simpler terms, emissions arise from handling and disposing of the company's waste.
6. Business travel	Centres on employee travels for work using non-company vehicles (e.g. planes, trains, cars). Essentially, emissions from company-related travel, excluding company-owned modes of transport.
7. Employee commuting	Concerns the daily travel of employees between their homes and workplaces. Simply, emissions from staff's daily commutes.
8. Upstream leased assets	Refer to emissions from assets the company leases but don't count in its direct emissions. In simpler terms, emissions from using assets the company rents but doesn't own.

GHG Scope 3 categories: Downstream activities

Emission Category	Description
9 - Downstream transportation and distribution	Pertains to the movement and storage of products the reporting company sells in the reporting year. This includes the journey between the company's operations and the end consumer when not financed by the company, as well as retail and storage in vehicles and facilities that the company doesn't own or control.
10 - Processing of sold products	Refers to the transformation of the company's sold intermediate products for end-use. Emissions when the company's products are processed or altered before final use.
11 - Use of sold products	Concerns the emissions when consumers use the company's products. Simply, emissions from end-users using the company's products.
12 - End-of-life treatment of sold products	Refers to emissions from the disposal or recycling of the company's sold products. In simpler terms, emissions are when the company's products are discarded or recycled.
13 - Downstream leased assets	Are assets the company rents to others and their associated emissions. Essentially, emissions from assets that the company leases out.
14 - Franchises	Refers to the operations of franchises in the reporting year, which don't fall under the direct emissions categories of Scope 1 and Scope 2. Emissions from business activities at franchised outlets that function under the company's brand but are not directly managed by the company.
15 - Investments	Pertains to the functioning of investments in the reporting year, encompassing equity, debt investments, and project finance, which are not covered in Scope 1 or Scope 2 emissions.

What are Scope 4 emissions?

Scope 4 emissions, also known as ‘avoided emissions,’ introduce a novel dimension to carbon accounting by focusing on the emissions reductions achieved via the use of a company’s products or services. For example, if a company manufactures an energy-efficient appliance, the emissions saved by consumers using this appliance instead of a less efficient model are considered Scope 4 emissions. Unlike Scopes 1, 2, and 3, which address emissions directly or indirectly associated with a company’s operations, Scope 4 considers the positive environmental impact of its offerings.

How can companies calculate their GHG emissions?

For companies to calculate their GHG emissions, they must first set the boundaries of what they will measure. Next, the organisation must collect data on their direct emissions, the energy they purchase, and all other indirect emissions linked to their operations. By applying specific emission factors to this data, companies can determine the amount of emissions in terms of carbon dioxide equivalent. These calculations help companies understand and report their impact on the environment, which is crucial for making informed decisions on reducing their carbon footprint.

How to calculate carbon footprint — Mathematical formula to calculate a carbon footprint.
Credit: Plan A

As recommended by the World Resources Institute, companies looking to reduce their GHG emissions can adopt various effective strategies. These include making their operations more energy-efficient, using renewable energy, and improving waste management practices. Companies can also optimise their transportation, engage employees in sustainability efforts and involve their suppliers in their environmental goals – all of which can be done efficiently via investing in innovative sustainability technologies. Meanwhile, regularly reporting on decarbonisation progress and setting clear reduction targets is crucial for transparency and continuous improvement, and can be automated via sustainability software.

How to mitigate climate change — Credit: World Research Institute

Today, numerous software solutions provide features such as sophisticated emissions methodologies that cover multiple regions and are grounded in up-to-date climate science. While companies typically used spreadsheets for manual calculations in the past, a method that was both time-consuming and susceptible to errors in data entry and calculations. Additionally, these older methods often utilised generic emissions intensity estimates, neglecting emissions variations based on region and specific activities. Hence, software solutions provide an automated alternative that frees up valuable time and resources.

Moreover, reporting and reducing carbon emissions is time-consuming, challenging, and deserves close expertise, and sustainability software enables companies to simply disclose their corporate carbon footprint for regulatory reporting and share progress to stakeholders via a centralised platform.

In a world increasingly defined by environmental imperatives, understanding and accounting for GHG emissions is no longer optional for businesses. By embracing the evolving landscape of emission scopes and categories, companies can not only mitigate their environmental footprint but also drive innovation, enhance stakeholder trust, and pave the way towards a sustainable future. As companies look to reduce their emissions, it is critical that innovative technologies such as carbon management software is leveraged to meet sustainability goals and gain a competitive edge.

Plan A offers unique tools to reduce your carbon emissions per scope. To efficiently measure and reduce your emissions today, schedule a call to see Plan A's Carbon Management Platform in action.