Scopes 1, 2 and 3 Explained
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 and 2 are emissions owned or controlled by a company. Scope 3 are emissions typically outside of a company’s control. Interestingly, 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 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 Scope 1, 2 and 3 emissions.
What Are Scope 1, 2 and 3 Emissions?
Scope 1 Emissions Explained
Also known as ‘direct emissions’, Scope 1 emissions come directly from operations a business either owns or controls, such as the greenhouse gas emissions generated from the gas used to heat offices or the petrol used in company cars.
Scope 2 Emissions Explained
Scope 2 refers 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.
Scope 3 Emissions Explained
These 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.
Why Do Businesses Measure Their Emissions in Scopes?
“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.
The first step to reducing emissions is monitoring them. Businesses are responsible for a huge amount of the world’s emissions and so must monitor and report them. With carbon making up the most significant percentage of emissions, carbon footprints are a crucial place to start taking action. Carbon is monitored via the three Scopes.
As it stands, 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 carbon emissions, carbon footprinting and aiming for net zero.
Distinguishing between the Scopes 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 retail supply chains are responsible for 25% of 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.
Retail has emissions across 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.
How Can Businesses and Retailers Measure Scope 1, 2 and 3 Emissions?
Emissions measurements aren’t something new. For decades, businesses have measured emissions, 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 actual emissions, 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.
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. This whole process begins with Scopes 1, 2 and 3.