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In simple english, carbon reporting involves measuring and calculating how many greenhouse gas (GHG) emissions your business puts into our atmosphere. This total number is known as your total carbon footprint, and is typically expressed in a unit of CO2e (Carbon dioxide equivalent).
The process involves measuring your emissions from various activities, such as energy consumption, transportation, and waste management. Because businesses have so many activities, frameworks exist to help categorise the emissions into buckets.The most common framework that is widely used is called the The Greenhouse Gas Protocol. This popular framework has standardised all types of emissions into different "Scopes" to help standardise reporting and create global consistency.But before we dive into the scopes, let's back up to understand why we're all doing this in the first place?
Really, there are three main reasons for the growing need for companies to do this exercise.
1. Supplier requirements: Many organisations now require their suppliers to disclose their carbon footprint as part of their sustainability initiatives. By assessing the environmental impact of their supply chain, companies can make informed decisions and choose suppliers who align with their sustainability goals.
2. Investor and stakeholder demands: Investors and stakeholders are placing greater emphasis on environmental considerations. They expect transparency and accountability from organisations regarding their carbon emissions. Companies that can demonstrate effective carbon management and reduction strategies may attract more investment and stakeholder support.
3. Compliance and regulations: Carbon reporting is becoming a regulatory requirement in some jurisdictions. For example, the Science-Based Targets initiative (SBTi) requires companies to set emission reduction targets aligned with the Paris Agreement's goal of limiting global warming to well below 2 degrees Celsius. Reporting emissions is a crucial step in achieving such targets and demonstrating a commitment to a net-zero future. For more information on Net Zero, download our Free Net Zero Guide.Now we've covered the basics, let's dive into each scope, with an example of what each is.
To make things easier, let's use an example company called Company ABC, which manufactures and sells consumer electronics products. Original hey? Well, for Company ABC, here's how each scope looks for them.Scope 1 emissions
Scope 1 emissions refer to the direct greenhouse gas (GHG) emissions released into the atmosphere from sources that are owned or controlled by a company. These emissions are categorised based on different types of activities or processes that generate GHG emissions. There are four types of Scope 1 Emissions:
1. Stationary Combustion: This refers to the emissions released when a company burns fossil fuels, such as natural gas or coal, in stationary equipment like boilers, furnaces, or generators that they own or control.
2. Mobile Combustion: These emissions result from the burning of fossil fuels, such as gasoline or diesel, in mobile sources owned or controlled by the company. This includes vehicles like cars, trucks, or forklifts used for transportation or business operations.
3. Fugitive Emissions: Fugitive emissions are GHG emissions that are unintentionally released during various industrial processes or activities. For example, refrigeration systems, air conditioning units, or equipment leaks can emit GHGs like hydrofluorocarbons (HFCs) or sulfur hexafluoride (SF6).
4. Process Emissions: Process emissions occur during specific manufacturing or industrial processes. They can result from chemical reactions or the use of specific substances. Examples include the release of GHGs like nitrous oxide (N2O) from industrial processes or emissions from on-site manufacturing activities.Example: Company ABC operates a manufacturing facility where they produce consumer goods. Their Scope 1 emissions would include the CO2 emissions from burning natural gas in their boilers (stationary combustion), the CO2 emissions from their fleet of delivery trucks (mobile combustion), the release of refrigerants (fugitive emissions) used in their cooling systems, and the emission of nitrous oxide (N2O) during their production processes (process emissions). These are all examples of direct emissions that Company ABC generates through its owned or controlled activities.Scope 2 emissionsScope 2 emissions refer to the indirect greenhouse gas (GHG) emissions associated with the consumption of purchased electricity, heat, steam, or cooling by a company. Scope 2 emissions are the emissions generated from the electricity or other energy sources a company buys to power its operations, even though the emissions occur at the facility that generates the electricity, not directly at the company's own site.There are two different types of Scope 2 Emissions:1. Purchased Electricity: These emissions are associated with the electricity a company purchases from a utility or an independent power producer. The GHG emissions occur at the power plant that generates the electricity, but they are attributed to the consuming company.
2. Purchased Heat, Steam, or Cooling: If a company purchases heat, steam, or cooling from an external source, the emissions associated with the generation of that energy are considered Scope 2 emissions.Example: Company ABC procures its electricity from the local utility company. The electricity is primarily generated from a mix of sources, including coal, natural gas, and renewable energy. The emissions associated with the generation of this electricity are considered Scope 2 emissions for Company ABC. These emissions occur at the power plants where the electricity is generated, but they are accounted for by Company ABC because it consumes the electricity to power its operations.
Scope 3 emissionsScope 3 emissions are a crucial component of a company's carbon footprint, accounting for all the indirect greenhouse gas (GHG) emissions generated throughout the value chain. These emissions go beyond a company's direct operations and encompass a wide range of activities, making them the most challenging to measure and manage. Your scope 3 emissions, can often account for 90% of all your total emissions.1. Purchased goods and services: Emissions associated with the production of goods and services purchased by your company, such as raw materials, components, or finished products from suppliers.Example: Emissions from the production of packaging materials purchased by Company ABC for its product packaging.
2. Capital goods: Emissions associated with the production of capital goods, such as machinery, equipment, or vehicles, that your company purchases or leases.Example: Emissions from the manufacturing of machinery purchased by Company ABC for its production processes.
3. Fuel- and energy-related activities: Emissions associated with the extraction, production, and transportation of fuels and energy sources used by your company.Example: Emissions from the extraction and transportation of natural gas used for heating in Company ABC facilities.
4. Upstream transportation and distribution: Emissions associated with the transportation and distribution of goods and materials to your company, including logistics and freight services.Example: Emissions from the transportation of raw materials from suppliers to Company ABC's manufacturing plants.
5. Waste generated in operations: Emissions from the disposal of waste generated during your company's operational activities, including solid waste, wastewater, and hazardous waste.Example: Emissions from the landfilling of manufacturing waste generated by Company ABC.
6. Business travel: Emissions from employee travel on behalf of your company, including air travel, rail travel, car rentals, and hotel stays.Example: Emissions from employee air travel for business meetings and conferences.
7. Employee commuting: Emissions from the daily commute of your company's employees to and from their workplace.Example: Emissions from employees' daily car commuting to Company ABC office.
8. Upstream leased assets: Emissions associated with the production, maintenance, and disposal of assets leased by your company, such as vehicles, machinery, or equipment.Example: Emissions from the production and disposal of leased delivery trucks used by Company ABC for product distribution.
9. Downstream transportation and distribution: Emissions associated with the transportation and distribution of your company's products to customers, including logistics and freight services.Example: Emissions from the transportation of finished goods from Company ABC's warehouses to retailers.
10. Processing of sold products: Emissions associated with the use of your company's products by customers, including their energy consumption, maintenance, and end-of-life treatment.Example: Emissions from the energy consumption of electronic devices produced by Company ABC when used by customers.
11. Use of sold products: Emissions associated with the use of products and services purchased by your company for its own operations.Example: Emissions from the energy consumption of computers and office equipment purchased by Company ABC for its offices.
12. End-of-life treatment of sold products: Emissions associated with the disposal, recycling, or treatment of products that reach the end of their useful life.Example: Emissions from the recycling process of electronic devices sold by Company ABC.
13. Downstream leased assets: Emissions associated with the production, maintenance, and disposal of assets leased by your company to its customers.Example: Emissions from the production and disposal of leased construction equipment provided by Company ABC to contractors.
14. Franchises: Emissions associated with the activities and operations of your company's franchises.Example: Emissions from the energy consumption and waste management in Company ABC's franchised restaurants.
15. Investments: Emissions associated with your company's investments in other companies, including equity investments and loans.Example: Emissions from the energy-intensive activities of a manufacturing company in which Company ABC has made an equity investment.
When businesses have totalled up all their carbon emissions (across all Scopes), then voilà, you have your total carbon footprint. Now you're in a position to start properly managing your carbon footprint, and for that we'd recommend checking out our Carbon Footprint 101 article.
For now that's pretty much it. First get started to measure your carbon and then you can take bigger strides towards setting pledges and targets. After all, we only have one planet, so why not do what you can now?
Looking for what's next once you've measured your carbon?Check out our article on Carbon Footprint 101
For more information, download our Free Net Zero Guide
If your business is looking for help with measuring, reducing and reporting on your carbon emissions, discover how Futureproof can help with our full GHG Carbon Reporting Software for your business. If you want to learn more, speak to our team today.
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