Guide to Organizational Emission Calculation

Guide to Organizational Emission Calculation: Scope 1, 2, and 3

As businesses worldwide intensify their efforts to combat climate change, accurately measuring and managing greenhouse gas (GHG) emissions has become a critical responsibility. Organizations are increasingly held accountable by stakeholders, regulators, and consumers to disclose their carbon footprints and implement effective reduction strategies. Failure to do so can lead to reputational damage, financial risks, and regulatory penalties.

The Greenhouse Gas (GHG) Protocol provides the global framework for measuring emissions, helping organizations establish credible reduction strategies. It offers standardized methodologies to ensure consistency, transparency, and comparability across industries and regions.

The protocol classifies emissions into three scopes: Scope 1, Scope 2, and Scope 3. Each scope represents a different aspect of an organization’s carbon footprint, from direct on-site emissions to indirect emissions generated throughout the value chain. Understanding these scopes and their impact is essential for effective carbon management, corporate sustainability reporting, and achieving long-term net-zero goals. By integrating GHG accounting into business strategy, companies can improve efficiency, reduce costs, and contribute meaningfully to global climate action.

The GHG Protocol and Its Importance

The GHG Protocol, developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), is the most widely used standard for measuring and reporting greenhouse gas emissions. It provides comprehensive methodologies to help organizations account for direct and indirect emissions throughout their operations and value chains.

The GHG Protocol defines three categories of emissions:

Scope 1: Direct emissions from owned or controlled sources.
Scope 2: Indirect emissions from purchased electricity, steam, heating, and cooling.
Scope 3: Indirect emissions from the value chain, including both upstream and downstream activities.

Reference: Green House Gas Protocol

Scope 1: Direct Emissions

Scope 1 emissions originate from sources that an organization owns or controls. These emissions occur from fuel combustion and other direct activities. Examples include:

Stationary combustion: Emissions from burning fuels in equipment such as boilers, furnaces, and generators.
Mobile combustion: Emissions from company-owned vehicles and fleets.
Process emissions: Emissions released during industrial processes, such as chemical reactions in manufacturing.
Fugitive emissions: Unintentional emissions from refrigeration systems, gas pipelines, and leaks in industrial operations.

Reducing Scope 1 Emissions

Organizations can minimize Scope 1 emissions by adopting cleaner energy sources, improving fuel efficiency, and investing in low-carbon technologies.

Scope 2: Indirect Energy-Related Emissions

Scope 2 emissions stem from the generation of electricity, steam, heating, and cooling that an organization purchases and consumes. These emissions occur off-site at the power plants supplying the energy but are attributed to the organization due to its usage.

Reducing Scope 2 Emissions

Organizations can mitigate Scope 2 emissions by:

Increasing energy efficiency through better insulation, equipment upgrades, and process optimization.
Transitioning to renewable energy sources such as solar, wind, or hydroelectric power.
Purchasing green energy credits or entering power purchase agreements (PPAs) with renewable energy providers.

Scope 3: Indirect Value Chain Emissions

Scope 3 emissions encompass all other indirect emissions that occur in an organization’s value chain. These emissions are not directly controlled by the company but result from its activities. Scope 3 is often the largest portion of an organization’s carbon footprint and includes 15 categories classified into upstream and downstream activities.

Reference: Green House Gas Protocol

15 Categories of Scope 3 Emissions

Upstream Emissions (Before Products Reach the Organization)

Purchased goods and services: Emissions from producing raw materials, components, and services purchased by the organization.
Capital goods: Emissions from the production of physical assets like buildings, vehicles, and machinery.
Fuel- and energy-related activities (not in Scope 1 or 2): Emissions from fuel extraction, refining, and transportation.
Upstream transportation and distribution: Emissions from the transportation and storage of purchased goods before reaching the company.
Waste generated in operations: Emissions from waste disposal, treatment, and recycling of materials used by the company.
Business travel: Emissions from employee travel, including flights, rail, car rentals, and hotels.
Employee commuting: Emissions from daily employee travel to and from the workplace.
Upstream leased assets: Emissions from leased equipment, buildings, or vehicles not accounted for in Scope 1 or 2.

Downstream Emissions (After Products Leave the Organization)

9. Downstream transportation and distribution: Emissions from delivering sold products to end users, including retail, storage, and logistics.

10. Processing of sold products: Emissions from the transformation of sold goods into other products.

11. Use of sold products: Emissions generated when consumers use a company’s products (e.g., fuel combustion in vehicles, energy use in appliances).

12. End-of-life treatment of sold products: Emissions from disposal, recycling, or incineration of sold goods.

13. Downstream leased assets: Emissions from assets leased out to other businesses or customers.

14. Franchises: Emissions from franchise operations not owned by the company.

15. Investments: Emissions associated with investments, such as portfolio companies and managed assets.

Managing Scope 3 Emissions

Scope 3 emissions require extensive collaboration across the supply chain. Organizations can reduce their impact by:

Partnering with suppliers to encourage sustainable sourcing and low-carbon materials.
Optimizing transportation and logistics to reduce fuel use.
Innovating product design for energy efficiency and recyclability.
Promoting circular economy practices to extend product life cycles.

Why Is Emission Calculation Important?

Accurately measuring Scope 1, 2, and 3 emissions allows organizations to:

Identify key emission sources and opportunities for reduction.
Set Science-Based Targets (SBTis) aligned with global climate commitments.
Enhance transparency in sustainability reporting and regulatory compliance.
Improve brand reputation and stakeholder confidence.
Drive efficiency and innovation within the business.

Calculating and managing emissions under the GHG Protocol’s Scope 1, 2, and 3 framework is a fundamental step toward sustainability. Organizations must take a holistic approach by addressing direct emissions, energy-related emissions, and complex value chain emissions. By implementing robust measurement and reduction strategies, businesses can contribute meaningfully to global climate action while enhancing long-term resilience and efficiency.