Bitesize Lesson: Scope 1, 2 and 3 Emissions Explained

Setting your sights on achieving net zero for your business? You've probably come across the crucial terms 'Scope 1, 2, and 3' emissions by now. 

These categories are essential in understanding and measuring your company's carbon footprint. If the jargon seems daunting, worry no more.

We're here to clarify these terms and help you navigate through identifying and tackling each emission category, setting you on a clear path to sustainability.

Scope 1, 2 and 3 Emissions

What is Scope 1 

Scope 1 emissions are your created greenhouse gas emissions.This means they’re the ones that your company directly produces through resources that you own or control, such as gas boilers, heaters, gas ovens, and company vehicles.

What is Scope 2?

Your Scope 2 emissions are your consumed greenhouse gas emissions. These are emissions from the electricity and energy that your company has used.

What is Scope 3?

Your Scope 3 emissions are everything else. They’re products of activities from resources which aren’t directly owned or controlled by your company but that your company impacts.

This means that…

• Purchased goods/services
• Sold goods/services
• Waste
• Employee commuting
• Business travel
• Product distribution
• Investments
• Leased assets

… all fall into your Scope 3. With that in mind, it should be no surprise that the vast majority of your company’s emissions will be Scope 3.

For example, in 2020, Starbucks’s Scope 3 emissions comprised 96% of its overall emissions.

Scope 3 emissions also include your suppliers, ie. where you’re buying your products or materials from.

That’s why it’s important that you choose your suppliers wisely and engage them in sustainability initiatives if you’re trying to reach net zero.

Why do the scopes matter?

The scopes form the basis for emissions measuring and reporting.

If you intend to publish your emissions data, you’ll have to divide up this data into different scopes.

But even if you aren’t interested in measuring or reporting your emissions, new requirements on larger companies will likely increase pressure on your business to measure, disclose, and reduce your emissions now.

These requirements include the Streamlined Energy and Carbon Reporting (SECR) policy and the Sustainability Disclosure Requirements (SDR).

What’s SECR?

SECR was implemented in 2019 and requires large businesses to disclose their energy and carbon emissions.

Companies must report their emissions if they use more than 40,000 kWh of energy in the reporting year, earn a gross income of at least £36 million, have balance sheet assets of at least £18 million, or have at least 250 employees.

More than 11,900 UK organisations meet these criteria and must comply with SECR regulations.

What’s the SDR?

The SDR was introduced earlier this year and builds off rules already set by the Task Force on Climate-Related Financial Disclosures (TCFD).

The TCFD was created in 2015 and provides data to investors on how climate change will affect corporations and what companies are doing to mitigate their financial risk.

However, the SDR goes a step further by requiring that large businesses declare how their activities impact the climate.

With the new rules for corporate emissions set to take effect soon, it's time that smaller firms get in on this action.

For instance, Apple announced that it will require companies in its supply chain to disclose their strategy for becoming carbon neutral.

They are also implementing annual audits to monitor their suppliers’ progress continually.

Another example of a large company holding its suppliers accountable is Tesco.

They announced before COP26 that they were asking their suppliers to declare details of their existing emissions by the end of 2021, their net zero targets by the end of 2022, and their net zero strategies by the end of 2023.

In this way, big businesses like Apple and Tesco have already started directly impacting the timeline of environmental policy action among SMEs.

That means SMEs that don’t already have sustainability initiatives or net zero strategies must start implementing them.