Scopes 1, 2, and 3 Explained

Location-Based Emissions

Location-based emissions are calculated based on the average fuel mix of the electricity grid that serves the area where a consumer is located. This method reflects the broader environmental impact of the grid, regardless of individual purchasing decisions.

How It Works

The electricity grid consists of power plants that generate electricity using various energy sources like coal, natural gas, nuclear, biomass, and renewables such as wind or solar power. The "fuel mix" refers to the proportion of these energy sources used within the grid. For location-based emissions, the average fuel mix over a specific reporting period, typically a year, is considered.

Example

A manufacturing company with multiple facilities in different regions wants to measure its location-based Scope 2 emissions. The process involves:

1. Gathering Electricity Consumption Data: The company collects data on how much electricity each facility consumes over the reporting period.
2. Understanding Grid Characteristics: The company identifies the specific characteristics of each local grid, including the energy sources and their proportions in the grid's overall fuel mix.
3. Calculating Emissions: The company applies the average carbon intensity of the local grids to its electricity consumption data to calculate the location-based Scope 2 emissions for each facility.

This approach gives the company an understanding of the emissions associated with the general electricity supply in each area.

Market-Based Emissions

Market-based emissions, on the other hand, are calculated based on the specific energy purchases made by an organisation. This method reflects the emissions associated with the electricity that the organisation has actively chosen to buy, considering contracts, agreements, and the specific energy mix of their suppliers.

How It Works

Market-based emissions consider the actual energy supply purchased by the organisation, including the fuel mix used by the supplier to generate the electricity. This method also considers the pricing or tariff structures tied to the electricity purchased, reflecting the organisation’s energy procurement choices.

Example

A legal firm wants to assess its carbon footprint by focusing on market-based Scope 2 emissions:

1. Requesting the Electricity Bill: The firm obtains an electricity bill from its office building manager, which includes details of electricity consumption, and the specific fuel mix used by the supplier.
2. Collecting Consumption Data: The firm collects data on the total kilowatt hours (kWh) of electricity consumed during the reporting period.
3. Analysing the Fuel Mix: The firm reviews the information on the fuel mix provided in the bill to identify the proportions of different energy sources used by the supplier.
4. Calculating Emissions: Using this data, the firm calculates its market-based Scope 2 emissions, providing a more tailored and accurate assessment of its carbon footprint based on its specific energy purchases.

In summary, location-based emissions are calculated based on the average fuel mix of the electricity grid in a specific area, providing a general measure of environmental impact. In contrast, market-based emissions reflect the emissions associated with the specific energy choices and purchases of an organisation, offering a more customised view of its carbon footprint. 

Both methods are essential for understanding and managing the emissions related to electricity usage, with location-based emissions providing a standardised measure and market-based emissions highlighting the impact of active energy procurement decisions.

Scope 3

Scope 3 includes all indirect emissions that occur in an organisation’s value chain; activities they do not own or control. These are usually the greatest share of an organisation’s carbon footprint, covering emissions associated with the following 15 categories:

 Source: Compare Your Footprint.

1. Purchased Goods and Services

This category includes emissions from the production of goods and services that a company buys to support its operations. This could include raw materials, office supplies, and outsourced services. The emissions are attributed to the supplier but are part of the purchasing company’s Scope 3 emissions. 

2. Capital Goods 

Emissions associated with the production of long-term assets that a company purchases, such as buildings, machinery, and equipment. These assets typically have a longer life span and are used over several years. 

3. Fuel-and Energy-Related Activities Not Included in Scope 1 or Scope 2 

This includes emissions from the extraction, production, and transportation of fuels and energy consumed by the company that are not covered in Scope 1 or Scope 2. It also covers emissions related to energy losses during transmission and distribution. 

4. Upstream Transportation and Distribution

Emissions from the transportation and distribution of products and materials that the company purchases. This includes emissions from third-party logistics providers and suppliers who transport goods to the company. 

5. Waste Generated in Operations 

Emissions from the disposal and treatment of waste that is generated by the company’s operations. This includes emissions from landfilling, recycling, composting, and incineration of waste. 

6. Business Travel 

Emissions from transportation used for business-related travel by employees. This includes emissions from air travel, rail, car, rentals, and other modes of transport. 

7. Employee Commuting

Emissions from the transportation employees use to commute to and from work. This includes personal vehicles, public transport, biking, and walking. 

8. Upstream Leased Assets 

Emissions from the operation of assets that are leased by the company, but not included in Scope 1 or Scope 2. These are assets that the company leases from others and are used to support its operations. 

9. Downstream Transportation and Distribution 

Emissions from the transportation and distribution of products after they leave the company’s facilities, including those handled by third-party distributors, retailers, and customers. 

Upstream transport and distribution include the transport of goods between an organisation's tier 1 suppliers and its own operations, inbound, and outbound logistics, and between an organisation's own facilities. Downstream transport and distribution include the transport of sold products between an organisation and the end customer if this transport is not paid for by the reporting organisation.

10. Processing of Sold Products 

Emissions from the processing of products sold by the company that occurs after the product has been sold to another company or customer. This is particularly relevant for companies that sell intermediate products that are processed further by other companies. 

11. Use of Sold Products

Emissions from the use of products sold by the company over their lifetime. This category captures the emissions associated with the energy needed to operate, power, or fuel the product once it is in the hands of the customer. 

12. End-of-Life Treatment of Sold Products 

Emissions from the disposal of products that the company has once sold, once they reach the end of their useful life. This includes emissions from landfilling, recycling, and incineration. 

13. Downstream Leased Assets

Emissions from the operation of assets that the company leases to others, such as buildings or equipment, and that are not included in Scope 1 or Scope 2.

14. Franchises

Emissions from the operations of franchises that are not under the direct control of the company but operate under the company’s brand. This includes all emissions related to the franchise’s activities. 

15. Investments 

Emissions associated with the company’s investments in other businesses or projects, such as stocks, bonds, or real estate. These emissions are related to the operations of the entities in which the company has invested. 

Scope 3 Categories

All scope 3 emissions fall into one of the above 15 scope 3 categories, however there are some emissions that are optional to report within the categories. For example, homeworking emissions are optional to report as part of the category ‘Employee Commuting’. Other relevant emissions may fall outside of a scope 3 category, for example, attendees travelling to an event hosted by an organisation; this should be measured and reduced if significant.

When assessing Scope 3 emissions, you can work through the following list to ensure you are covering and measuring all relevant activities within your scope: