More and more businesses and retailers worldwide are reporting their greenhouse gas emissions. There are several reasons for this — either their country or region requires it, they’re a company committed to the environment and wellbeing of people, their key target audience is conscious consumers, their investors demand it or perhaps all of the above.
Carbon emissions are reported in three Scopes, Scope 1, 2 and 3. The difference between scope 1 2 and 3 emissions can be difficult to understand at first, but once these differences are explained, the different Scopes become much easier to leverage. Scope 1 and 2 carbon emissions are emissions owned or controlled by a company, while Scope 3 are carbon emissions typically outside of a company’s control. A key difference between Scope 1, 2 and 3 emissions is how Scope 3 is the most complex to calculate while also being where most of the emissions reductions need to be made.
Here we’ve detailed a breakdown of the Scopes, the difference between Scope 1 2 and 3, emissions and why they’re measured this way. In particular, we have explained why retail emissions are important to the health of our planet, what they are, and how businesses and retailers can measure their carbon emissions via Scope 1, 2 and 3.
What Are Scope 1, 2 and 3 Emissions?
In our exploration of corporate environmental impact, understanding what Scope 1, 2 and 3 carbon emissions are and each of the different categories of is crucial. Scope 1, 2, and 3 carbon emissions delineate the various sources of greenhouse gases that a business might directly or indirectly produce, from on-site operations to the broader value chain.
This section will delve into each scope, shedding light on their distinctions and why they’re pivotal for companies committed to sustainability, helping you understand exactly what Scope 1, 2 and 3 carbon emissions are.
Scope 1 Emissions Definition and Explained: Direct Emissions
A company’s Scope 1 carbon footprint is quite easy to understand. Also known as ‘direct emissions’, Scope 1 carbon emissions come directly from operations a business either owns or controls. Scope 1 carbon emissions can, for example, include the greenhouse gas emissions generated from the gas used to heat offices or the petrol used in company cars.
In the landscape of carbon management, measuring and reducing a company’s carbon footprint in Scope 1 is one of the simpler tasks, as being in direct control allows easy access to the data needed to accurately track Scope 1 carbon emissions.
Scope 2 Emissions Definition and Explained: Indirect Emissions
Greenhouse gas (GHG) Scope 2 carbon emissions are our first example of indirect emissions. Scope 2 carbon emissions refer to indirect carbon emissions from the generation of purchased electricity and steam used to power and heat facilities owned or controlled by a business, such as offices and stores.
When it comes to carbon management, GHG Scope 2 carbon emissions are relatively easy to track. Although not as simple to account for as direct emissions, Scope 2 carbon emissions are closely related to a company’s operational choices and come with many options for reduction.
Scope 3 Emissions Definition and Explained: Indirect Emissions
Scope 3 emissions include all other indirect emissions occurring across a business’s value chain and product life cycle. In the case of retailers, this includes emissions from (but not limited to) production, transportation, use and disposal. GHG Scope 3 carbon emissions are not within the direct control of a business.
GHG Scope 3 carbon emissions are challenging to track because they encompass all other indirect emissions that occur in a company’s value chain, including both upstream and downstream activities. The difficultly in accessing quality primary data from down the supply and value chain is what makes Scope 3 emissions so notorious for retail brands and businesses to track and reduce.
For a deeper dive into Scope 3, click here.
How do Companies Measure and Calculate Greenhouse Gas Emissions?
“Developing a full emissions inventory – incorporating Scope 1, Scope 2 and Scope 3 emissions – enables companies to understand their full value chain emissions and focus their efforts on the greatest reduction opportunities.”
— The Greenhouse Gas Protocol
When it comes to carbon accounting and reduction in Scope 1, 2 and 3, the first step to reducing carbon emissions is monitoring them. Businesses are responsible for a huge amount of the world’s emissions and so must monitor and report them. When it comes to greenhouse (GHG) emissions in Scope 1, 2 and 3, carbon makes up the most significant percentage of emissions, making carbon footprints are a crucial place to start taking action. Carbon is monitored via the three Scopes.
If you want to know how to measure the carbon emissions of a company, Scopes 1, 2 and 3 are crucial. After categorizing impact into the three Scopes, companies must then understand how to actually calculate their Scope 1, 2 and 3 emissions. As part of the calculations, it’s necessary to apply emission factors to quantify these emissions in terms of CO2 equivalents. Utilizing greenhouse gas accounting tools like Vaayu and adhering to standards like the Greenhouse Gas Protocol ensures accuracy. Regular monitoring and third-party verification help maintain credibility, while the insights gained guide target setting and reduction strategies, enabling effective environmental impact management.
As it stands, carbon accounting in Scope 1, 2 and 3 is not heavily mandated but regulation is on the rise. Reporting on Scope 1 and 2 is mandatory to report while Scope 3 is voluntary. Reporting across all three Scopes, however, is the most efficient method when it comes to reducing Scope 1, 2 and 3 carbon emissions, carbon footprinting and aiming for net zero.
Reducing greenhouse (GHG) emissions and impact across Scope 1, 2 and 3 requires investment and understanding in their importance. Distinguishing between the Scopes is the first step, and also helps businesses determine direct versus indirect emissions, find company-specific carbon hotspots and enable greenhouse gas emissions reduction at scale.
What Are Retail Emissions?
The retail industry is among the world’s most significant contributors to global warming. It’s expected that the retail industry and its supply chains are responsible for 25% of carbon emissions worldwide, according to the World Economic Forum, while in the UK alone, the sector’s annual greenhouse gas emissions are 80% higher than those of all road traffic in the country.
The retail industry of course has carbon emissions and a carbon footprint across Scope 1, 2 and 3 — all three Scopes. However, many retailers don’t realise that most of their emissions come from Scope 3. This is because Scope 3 includes emissions generated across the value chain: likely not directly in the retailers’ control, even if they are internally focussing on their climate strategy. Scope 3 includes the emissions of suppliers during manufacturing and transportation — often external supplies — as well as the use phase of products, which lies in the customers’ hands.
According to McKinsey, Scope 3 emissions can account for 80% of the total carbon footprint for many companies, and as much as 98% for home and fashion retailers. The British Retail Consortium (BRC) states that, for example, the UK’s largest share of retail emissions comes from food, drink and tobacco due to the sheer volume of grocery sales. The BRC also notes some products that only need to be bought once come with higher emissions due to their use phase, like electronics.
It’s clear that every product’s and business’s emissions vary massively, depending on many case-specific factors. This is also what makes measuring impact within the different Scopes difficult. Lowering the retail industry’s impact starts with reducing its carbon emissions and footprint across Scope 1, 2 and 3.
Why Should Companies Measure Their Scope 3 Emissions?
Carbon accounting and reduction across Scope 1, 2 and 3 is more important than ever. Decarbonization in Scope 1, 2 and 3 including accurately measuring tricky Scope 3 carbon emissions — essential for companies to gain a full understanding of their environmental impact, as these emissions often constitute the bulk of their total greenhouse gas contributions. When it comes to reasons why companies should measure their Scope 3 emissions, analyzing emissions across the entire value chain, including upstream and downstream activities, enables businesses to pinpoint key areas for improvement. This comprehensive approach not only aids in effective supply chain management but also enhances the company’s ability to develop targeted emission reduction strategies, leading to more sustainable operations.
Furthermore, the measurement of Scope 3 emissions is becoming increasingly important for regulatory compliance, investor relations, and customer satisfaction. As global awareness of climate change grows, so do expectations for corporate transparency and responsibility in mitigating environmental impacts. Addressing Scope 3 emissions can uncover opportunities for cost savings through efficiency improvements, foster innovation for competitive advantage, and help companies navigate the risks associated with climate change and shifting regulations, ultimately contributing to a more sustainable and resilient business model.
Emissions measurements aren’t something new. For decades, businesses have measured carbon emissions in the hopes of driving decarbonization in Scope 1, 2 and 3, but the process has been manual, drawn out and littered with inaccurate data and human errors. This no longer needs to be the case. Every business is different, so every business’s emissions are different, and because of this, granular data across entire supply and value chains is needed for accurate emissions measurements. So what’s the solution?
One size does not fit all when it comes to carbon emissions accounting and reduction in Scope 1, 2 and 3, but businesses now have access to technologies that do the measurements for them. Automatically. Seamlessly. Accurately. And in real-time. At Vaayu, our science-based platform provides granular, automated and accurate carbon calculations that make it easy to understand your emissions and take action throughout the value chain to meet your reduction targets. From fashion and beauty to consumer goods, health and beyond, Vaayu is the only climate software tailored to retailers and dedicated to driving decarbonization in Scope 1, 2 and 3 at scale.
If businesses want to make meaningful changes to reduce emissions and lower their impact on the planet, they must first begin measuring their carbon. Accurately, granularly and with care, and this whole process begins with understanding Scopes 1, 2 and 3. If you're ready to start your business's decarbonization journey, get in touch today.
