Setting Your Carbon Scope

Monday 24th August 2020

It is becoming increasingly important for businesses to be transparent about their greenhouse gas emissions, and therefore to have a solid understanding of how these are best categorised and measured.

The carbon footprint of your business is the amount of greenhouse gas emissions released into the atmosphere as a result of its activities. In order for the size of this carbon footprint to be determined, your business must set its carbon scope by deciding on the range of emissions which will be measured and reported. Under the Greenhouse Gas (GHG) protocol, emissions can be categorised into three ‘scopes’.

Scope 1 is the direct emissions from business-owned sources, including fuel combustion, company vehicles and fugitive emissions. Scope 2 is the indirect emissions from the generation of purchased electricity, heat and steam used by companies. Scope 1 and 2 emissions tend to align with the most commonly and easily reported emissions – they include electric, gas and transport fuel that must be accounted for under Streamlined Energy and Carbon Reporting (SECR). In SECR, adding scope 3 is voluntary.

Scope 3 covers the other indirect emissions that occur in a company’s value chain, covering a very wide range both upstream and downstream from the operating company. These include employee commuting, business travel, waste generated in operations, the processing and use of sold products, as well as franchises and investments. Scope 3 emissions can account for the majority of a company’s carbon footprint, despite these often not being measured. Companies may choose not to report Scope 3 emissions because they may be indirect, dispersed, potentially difficult to measure and not legally required.

If your company has never reported its carbon emissions before, it can be a good idea to start with Scope 1 and 2 only, as these are often mandatory and simpler to measure than Scope 3. Your company can then review available funds, business goals and level of ambition to determine how best to conduct Scope 3 reporting. The GHG Protocol recommends reviewing the following to settle on a scope 3 boundary:

  • Organisation Boundary and Approach. This is something which may have already been specified when reporting scope 1 and 2 emissions. Confirming where the organisation boundary sits depends on the approach you take – you could include everything where the company has operational control, where the company has financial control or based on equity share. Everything outside of this could be scope 3.
  • Define Business Goals. Why is the company measuring scope 3 emissions? Is it to enhance stakeholder information and public reputation by publically reporting? Is it to identify risks and opportunities within the value chain? Is it to identify opportunities to reduce GHG emissions, and track progress against targets? By confirming these, you will get the most value out of the carbon reporting process.
  • Map the Value Chain. This will ensure you don’t miss any areas, and allows you to put in place a plan for the next steps in the process. What products do you buy? What happens to sold products? Which emissions categories are irrelevant to your business and can be excluded?
  • Screen the Scope 3 Emissions. This gives you an initial estimation for each activity and emissions category. These estimates can be based on industry standards or averages, rather than on collected data. This allows you to identify the most significant categories within your business goals.
  • Collect Data for Most Significant Categories. This is the final stage within confirming the scope. You may choose to focus on supplier emissions, in which case you start working with upstream companies to measure their actual scope 1 and 2 emissions. Or perhaps you want to reduce waste associated with the final product to appeal to consumers, in which case review production materials and processes, and work with packaging partners. Finalise the scope to show in which categories you will continue to use estimated data, and where you will concentrate on getting actual data. This can evolve year on year to expand the level of collected data, with the aim of making the reported emissions more accurate over time.

The scope, once decided, needs to be recorded in a methodology, to ensure transparency and consistency in reporting.

There are many reasons why your business should consider going beyond Scope 1 & 2 reporting. By developing a full corporate GHG emissions inventory, this enables the identification of ‘emission hotspots’ across your entire supply chain, allowing these to be targeted for reductions. There is also increasing expectation from customers, employees and stakeholders that companies measure their full carbon footprint so as to be transparent and proactive in improving their environmental practices. Additionally, by understanding the sustainability performance of your suppliers and products, this fosters positive engagement on issues that your company would otherwise have little control over.

If your business would like to understand more about setting a carbon scope, get in touch with E2 today. We can provide assistance at every stage of the carbon footprinting process, including:

  • Support with scoping your carbon footprint including reviewing business goals and organisation boundaries.
  • Data methodologies and collection, including initial screening to give significant areas of emissions, allocations and full data collation.
  • Setting reduction targets, third party assurance and public reporting.