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Understanding the Differences Between Scope 1, 2, and 3 Emissions

Sustainability

By Ayna Custovic

Understanding emissions is crucial when it comes to disclosing climate impacts and adhering to regulatory requirements. However, understanding the differences can be challenging.

Emissions are categorised into three distinct scopes, each with its own significance and implications. In this article, we’ll provide a comprehensive guide to Scope 1, 2, and 3 emissions and their different sources and impacts.

Scope 1 Emissions:

Scope 1 emissions encompass direct greenhouse gas (GHG) emissions produced by sources that are owned or controlled by your company. These emissions primarily result from activities such as burning fossil fuels on-site for heating or powering machinery, as well as from process emissions in industrial operations. Common sources of Scope 1 emissions include combustion of natural gas, gasoline, diesel, and other fuels. Examples of industries with significant Scope 1 emissions include manufacturing, transportation, and energy production.

Scope 2 Emissions:

Scope 2 emissions refer to indirect GHG emissions associated with electricity, steam, heating, or cooling consumed by your company. While these emissions occur off-site, they contribute to your company’s energy consumption. Scope 2 emissions are typically generated by utility companies and are accounted for based on the emissions intensity of the electricity or energy purchased.

Companies can influence and minimise their Scope 2 emissions through making appropriate decisions about energy procurement and efficiency measures. Common strategies to reduce Scope 2 emissions include increasing energy efficiency, transitioning to renewable energy sources, and investing in carbon offsets.

Scope 3 Emissions:

Scope 3 emissions cover all other indirect GHG emissions that occur in the value chain of your company but are not included in Scope 1 or Scope 2. These emissions result from activities such as purchased goods and services, employee commuting, business travel, waste disposal, and upstream and downstream activities in the supply chain.

Scope 3 emissions often represent the largest portion of an organisation's carbon footprint and can be challenging to measure and manage due to the complex nature of supply chains and dependencies on external factors. However, addressing Scope 3 emissions is essential for achieving comprehensive sustainability goals and reducing your overall environmental impact.

Key Differences:

The primary distinction between Scope 1, 2, and 3 emissions is based on their source and control mechanisms. Scope 1 emissions originate from sources directly owned or controlled by the company, Scope 2 emissions from purchased energy consumption, and Scope 3 emissions encompass a broader range of indirect emissions throughout the value chain.

While Scope 1 and Scope 2 emissions are more within the direct control of organisations, Scope 3 emissions often require collaboration with suppliers, customers, and other stakeholders to address effectively.

Conclusion

Understanding the differences between Scope 1, 2, and 3 emissions is essential for businesses and policymakers seeking to mitigate their environmental impact and ensure accurate sustainability disclosure. By identifying and analysing emissions across all scopes, organisations can develop targeted strategies to reduce their carbon footprint, enhance operational efficiency, and demonstrate environmental leadership.

Nowadays, most companies are required to disclose sustainability reports across all three Scopes. Without having a thorough understanding of the meaning and differences, as well as a software solution that is able to take all three types of emissions into account, this can be difficult, overwhelming, and time-consuming - and there are potential risks if these emissions aren’t accurately accounted for.

How does neoeco’s solution help?

neoeco’s sustainability accounting software reports across all three emissions, ensuring audit-ready reports aligned with global regulations - making ESG reporting effortless.

Book your free demo now to see how our solution makes ESG reporting across all three scopes effortless - saving your team time, money, and stress.

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