Scope 1, 2 and 3 emissions

Scope 1, 2 and 3 emissions

What’s the difference and why it matters.

Greenhouse Gas Protocol (GHGP)

If you don’t measure, it could be a challenge to manage – and that maxim could be applied to a company’s carbon emissions. But measuring greenhouse gas emissions can be far from straightforward and the Greenhouse Gas Protocol (GHGP) has been developed by the World Business Council for Sustainable Development and the World Resources Institute.

The GHGP covers the seven direct greenhouse gases under the Kyoto Protocol:

  • Carbon dioxide (CO2)
  • Methane (CH4)
  • Nitrous oxide (N2O)
  • Hydrofluorocarbons (HFCs)
  • Perfluorocarbons (PFCs)
  • Sulphur hexafluoride (SF6)
  • Nitrogen trifluoride (NF3)1

The GHGP protocols have been developed with the establishment of three categories of emissions – Scope 1, Scope 2 and Scope 3.

These are part of the comprehensive global framework that is standardised to measure and manage emissions from private and public sector operations, value chains, products, cities, and policies.

Backed by Government

The GHGP is recognised by the UK government as an independent standard for reporting greenhouse gases and while use of the standards is voluntary, it is seen as an essential element in the mandatory Streamlined Energy and Carbon Reporting (SECR) regulations.2

The SECR requires annual reporting and disclosure of energy and carbon information within the accounts and came into effect on 1st April 2019.3

These requirements affect:

  • All UK incorporated companies listed on:
  • the main market of the London Stock Exchange
  • a European Economic Area market
  • or whose shares are dealing on the New York Stock Exchange or NASDAQ
  • Unquoted large companies incorporated in the UK, which are required to prepare a Directors’ Report under Part 15 of the Companies Act 2006
  • (Large Limited Liability Partnerships (large is defined as per the existing framework for annual accounts and reports, based on sections 465 and 466 of the Companies Act)4

The requirements mean that company annual reports now need to include more detailed reporting on energy usage, energy efficiency and greenhouse gas emissions. The government is also encouraging all other companies to adopt similar reporting structures.

As of January 2023, large companies are required to publish detailed information on sustainability performance, including scope 1-3 emissions, by the EU Corporate Sustainability Reporting Directive (CSRD)5

The three scopes

Scope 1

Direct emissions from owned or controlled sources.

Scope 2

Indirect emissions from the generation of purchased energy.

Scope 3

All indirect emissions not included in Scope 2 that occur in the value chain.

The UK government advises in “Scope 3 Emissions in the UK Reporting Landscape” (© Crown copyright 2023. OGL) that “Calculating Scope 3 emissions can be difficult and complex; they are both the most significant and most challenging source of emissions for businesses to identify, quantify and address.”6

There might be a benefit, as the government advises: “Scope 3 emissions reporting provides an opportunity to improve relationships with their suppliers. As both the reporting entities and suppliers will need to work together, future cooperation can be improved. This can lead to more efficient processes being created, lowering energy use and emissions as well as potentially lowering costs for reporting entities and their suppliers.

Increasing cooperation can be utilised for effective insetting, which benefits both the reporting entity and the suppliers involved. However, the need of reporting entities for information from their suppliers could also introduce additional tension or complexity into their relationship and have a negative effect.” (© Crown copyright 2023. OGL)7

The three scopes might help companies to lay foundations for carbon reduction strategies, with the associated financial savings. Within the wider remit, companies might be able to achieve sustainable reductions both within their operations and across global value chains. The three scopes can also help to provide more granular, useful data for investors.

This article has been written by SaveMoneyCutCarbon and is correct at 27 June 2024. This content does not constitute advice and is for general guidance only. Always undertake your own research before taking any action.

SaveMoney - CutCarbon logo

In this series…