What are the “Three Scopes” of emissions and why is the third so important?

This short article will explain the three different ‘scopes’ of emissions for companies, addressing an issue that holds relevance across all industries and will be critically important for business moving forward. The article will also discuss what they mean for corporations trying to tackle the climate crisis or achieve their own targets and goals.

Scope 1 has a narrow focus just on the greenhouse gas emissions that the company produces directly, such as the use of boilers for offices or warehouses or the petrol in company vehicles.

Scope 2 is out of company control but holds in-direct responsibility for, such as emissions produced to provide electricity or other energy for essential business tasks.  

Scope 3 is more complicated and thus harder for companies to assess and determine themselves. It encompasses all other indirect emissions from a broad range of activities and actions which all make significant contributions to greenhouse gas emissions, ranging from purchased goods and services and business travel through to investment and use of sold products. It is helpful to break down scope 3 further into upstream and downstream activities of the reporting company. The upstream activities focus on the emissions from purchased or acquired goods whereas the downstream instead give attention to sold goods and services.

These scope 3 emissions have the biggest environmental consequences by a significant margin, making up 65–95% of most companies’ carbon impact according to various sources. As a result, it is often an area where companies try to shake responsibility, due to it presenting the biggest challenge. The broad criteria for scope 3 makes it much harder to assess and measure emissions due to businesses’ detachment from it and consequently pose significant hurdles for companies to reduce or affect significantly. For example, in the financial services sector, Scopes 1 and 2 are extremely limited compared to the impact of the companies or assets they invest in. With 39% saying it was very difficult to disclose and 42% saying it was somewhat difficult. Furthermore, the Green House Gas protocol currently only requires that companies account for scopes 1 and 2 of their emissions, and offers freedom over the need to report or calculate scope 3. Which often discourages businesses from delivering on this point.

Moving forward it is essential that businesses recognise the potential of dealing with to make a significant impact on climate targets set out at COP summits. Increased transparency would also provide a greater opportunity to analyse climate-related risks. Companies are also considered to be “carbon neutral” if they are able to offset scopes 1 and 2, despite their limited nature.

Understanding each of these scopes and the insight they can offer about a business’s environmental impact is extremely valuable for any individual looking to build commercial awareness.