A company’s carbon footprint measures the total amount of greenhouse gas (GHG) emissions that are caused by its activity, either directly or through its value chain. It encompasses three scopes: the choice of scopes taken into account may have a significant impact on the volume of GHG emissions reported at the end. What are these different scopes and why must all three be calculated? Read this article to find out.
A few facts
The carbon footprint methodology was developed by the GHG Protocol. Depending on the scope considered, it allows a calculation of direct and/or indirect greenhouse gas emissions. This protocol is the most well-known and widely used.
A scope designates the origin of greenhouse gas emissions emitted by a firm.
Mentioning the scopes of carbon footprints enables an understanding of the boundaries of emissions taken into account. More specifically, beyond scopes 1 and 2, reporting on scope 3 (which represents 70% to 90% of emissions) shows a firm’s commitment to sharing extensive data.
What is a carbon footprint?
Amidst global warming and rising ecological awareness, an increasing number of firms want to reduce their greenhouse gas emissions. To do so, it is first and foremost necessary to measure one’s emissions! This is where carbon accounting comes in handy.
The most common reporting framework for corporate carbon accounting is the GHG Protocol, which is a standard developed by the World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD). This methodology makes it possible to account for the direct and indirect greenhouse gas emissions produced by a firm. This method is articulated with other international reporting standards, such as ISO 14069, as well as national reporting standards, such as Bilan Carbone® in France.
An increasing number of countries are making corporate carbon disclosures mandatory. For instance, in France, private firms with over 500 employees have been required by law to carry out a regulatory GHG assessment since 2010, and this assessment will also have to report on their scope 3 emissions from 1st January 2023.
To put things simply, a carbon footprint is the first key step in enacting ESG (environment, social, and corporate governance) policies and strategies that effectively monitor greenhouse gas emissions to reduce them.
Measuring a company’s emissions involves choices, such as the scope of analysis chosen by the firm.
The scopes of a carbon footprint are used to define the boundaries of GHG emissions sources taken into account.
Each of the 3 scopes are divided in sub-categories, which correspond to specific types of activities emitting greenhouse gases. These subcategories are reported in kgs of CO2.
Emission calculation is based on a firm’s activity data. For instance, this could be litres of diesel consumed by a firm’s company cars. This data is then converted into a CO2 emission index using standard emission factors.
In France, legal obligations require large companies to draw up CSR reports that include this carbon footprint and that include the 3 scopes.
What is scope 1?
Scope 1 concerns direct emissions, i.e. those that are directly linked to the production or manufacture of a firm’s products. This includes, among others:
The combustion of coal in a coal-fired power plant for an electricity producer;
Gas from the combustion of waste for an incineration company;
Methane emitted by a farmer’s herd.
This scope therefore encompasses fuel combustion, refrigerant gas leaks, the use of technical landfill, and much more.
In concrete terms, for a service company, scope 1 includes the use of air conditioning or heating in the office, or the petrol consumed by the employees’ company cars.
What is scope 2?
Scope 2 englobes all indirect emissions linked to a firm’s energy consumption. In most cases, it primarily concerns carbon emissions linked to electricity consumption.
Please note that electricity can be more or less carbon intensive depending on the country’s energy mix! For example, France is a low-carbon emitting country because electricity is largely produced by nuclear power. On the other hand, Germany is a very carbon-intensive country because electricity is mainly produced by coal-fueled power stations.
In terms of subcategories, there are far fewer than for scope 1. These include:
Indirect emissions, which mainly concern electricity consumption;
Those linked to the consumption of other energies (such as steam, heat, fresh air, etc.)
What is scope 3?
Scope 3 is the broadest and most heterogeneous category. Indeed, it encompasses everything excluded from the first two scopes. This includes many forms of indirect emissions that aren’t directly related to a product’s manufacturing process, but that are in their upstream or their downstream value chain.
For instance, in the case of a product to be distributed, scope 3 may cover the following emissions.
Extraction of the raw materials needed to manufacture the product;
Supply of these raw materials;
Transport of these raw materials;
Emissions related to the use of the product (e.g. emissions related to the energy use of an iPhone during its lifetime);
Emissions used at the end of the product’s lifespan.
Scope 3 also covers a firm’s capital goods, i.e. assets belonging to the firm that will be used over many years.
It also includes the purchase of products or services, such as hotel nights when traveling on business.
Moreover, it covers the transport of goods and employees.
Why is it crucial to calculate scope 3?
For most sectors, scope 3 represents between 70% and 90% of the total carbon footprint. Calculating scope 3 is therefore crucial because it represents a major part of a company’s carbon footprint.
A large number of firms today claim to be carbon neutral, but the latter does not even account for scope 3. To this extent, their carbon footprint is incomplete.
Finally, as mentioned above, from 1st January 2023, French law will compel firms to comply with scope 3. All companies with more than 500 employees are concerned.
Conclusion
To effectively combat climate change at a firm level, it is essential to measure its greenhouse gas emissions using the carbon footprint measurement.
This assessment is broken down into 3 scopes which, when added up, represent all the categories of greenhouse gas emissions emitted by a firm.
The calculation of scope 3 may be complex, given its broad scope, but it nevertheless seems crucial to carry it out to find significant improvement and truly lead firms towards genuine ecological transition.
Would you like to have your company’s carbon footprint assessed? Contact us today!