The public declaration of a greenhouse gas (GHG) emission goal can be both exciting and daunting for a large company looking to reduce its environmental impact. Whether government-mandated, consumer-driven or brought forth by ethical social responsibility, ESG goals are often much easier to set than attain.
With climate milestones like 2030, 2050 and beyond approaching, many organizations must quickly adapt to meet local emissions standards and stay relevant in the business world.
Today, a business' GHG portfolio is defined in three distinct scopes, each representing a different portion of the company's operations. In this educational blog, we define Scope 1, 2 and 3 emissions and address some of the most common challenges businesses face in meeting environmental goals.
First, Scope 1 emissions represent any greenhouse gases that are produced by company-owned or company-controlled assets such as buildings and vehicles. GHGs produced in Scope 1 are typically categorized as one of the following:
In general, most organizations have some control over Scope 1 emissions, with the ability to change and improve. For this reason, many regulatory agencies and energy consultants focus on first improving direct emissions.
Scope 1 emissions are typically reported as the estimated sum of all annual GHGs emitted from company-owned assets. For small, office-based businesses, it is relatively common that an organization may have no Scope 1 emissions to report.
Although many assets in Scope 1 can be modified, there are still a considerable amount of challenges associated with meeting direct emissions standards that are beyond a business’s control. For instance, many energy companies and manufacturing facilities rely on GHG-emitting processes simply to produce a product.
Externally, local resources may also limit the reality of adopting clean energy, both logistically and financially. For example, a midsize company with a fleet of vehicles may not be able to afford a dozen electric vehicles (EVs) and charging stations.
Today, Scope 1 emissions are targeted and thwarted all over the world by making buildings and business systems more energy efficient. Annual Scope 1 emissions can be drastically reduced by:
Besides improving the facilities, companies also have the opportunity to reduce GHGs in manufacturing and internal processes. Vehicles that consume gasoline or diesel fuel can be replaced with electric or hybrid transportation options.
As mentioned above, GHG emissions are inevitable for some organizations. To mitigate this, it is also possible to purchase carbon offsets as a credit for the company’s annual direct emissions.
Scope 2 emissions are defined as indirect emissions produced as a result of energy purchased from a utility. Although utility-generated greenhouse gases are released off-site, any organization that purchases electricity, heat, cooling or steam must report the acquired energy in its total GHG inventory under Scope 2.
For most companies, all reported Scope 2 emissions are the result of local electric utilities providing power generated from fossil fuels. It is easy to estimate total Scope 2 emissions by identifying annual electricity usage and referencing a utility provider’s grid emissions portfolio.
When identifying ways to lower GHGs, Scope 2 emissions are increasingly becoming one of the easiest parts of a portfolio to reduce. Today, organizations have more control as to where their power is coming from and most large companies have the freedom to explore several alternatives to traditional utility power.
Like Scope 1 emissions, Scope 2 emissions can be lowered by improving the energy efficiency of a building or campus to reduce the amount of electricity consumed on-site. To take another step forward, there are also many ways that a company can adopt clean electricity in place of utility power. Most commonly, this includes:
Beyond purchased energy, Scope 3 emissions represent all other indirect GHGs released along a company’s value chain. For most large companies, Scope 3 emissions should represent the highest percentage of GHGs in an organization’s portfolio.
Scope 3 emissions span both upstream and downstream activities and are generally more difficult to control than Scope 1 and 2 emissions. Although the Scope 3 umbrella is quite wide, here are some of the most common examples of value chain emissions:
Accurately reporting Scope 3 emissions can be challenging for most organizations. The Scope 3 reporting standard includes 15 distinct categories for identifying and quantifying potential value chain GHG emissions.
And while a company is not responsible for reporting everything that happens along its supply chain, any emissions data that is relevant to the business’s goals and operations should be reported.
Unlike in Scopes 1 & 2, it is much more difficult to accurately track and overcome Scope 3 GHGs. Companies with large value chains (i.e., suppliers and distributors) may find it challenging to identify organizations with low GHG portfolios or convince existing partners to adopt new practices.
Value chain emissions can also be hard to avoid when considering the necessity of business travel and the inevitability of waste production. Electronics, transportation, packaging and end of life treatment in consumer products can account for a large, ongoing emissions issue.
Companies generally have the least amount of control over their Scope 3 emissions because the GHGs are produced by outside sources. This implies a tremendous challenge to reduce Scope 3 emissions but also lends itself to the necessity for innovation and global compliance.
With many enterprise organizations already leading the way, here are a few examples of what a company can do to begin reducing its Scope 3 emissions:
Priority Power is committed to creating energy solutions that help the companies of today and tomorrow meet their emissions goals. For more information, feel free to read our most recent energy blog posts.