Sustainability: What are Scope 1, Scope 2 and Scope 3 Emissions?
Not all emissions are the same. Measuring different types of greenhouse gas emissions is central to assessing corporate sustainability. To enable better analysis, emissions are divided into 3 categories - known as Scope 1, Scope 2 and Scope 3 emissions.
Since the late 20th century, the reduction of greenhouse gas emissions became an international issue.
Shortly after the Kyoto Protocol of 1997, in which countries set targets in this regard, it became clear that the measurement of target achievement should be uniform.
This resulted in the GHG Protocol (Green House Gas Protocol). This protocol sets out various guidelines on how emissions are to be measured.
Emissions are divided into three categories. But what is the difference between Scope 1, Scope 2 and Scope 3?
Scope 1 emissions
Scope 1 emissions are direct emissions. They come from sources directly from the company. These are again divided into four categories:
- stationary combustion (e.g., fuels, heating sources),
- mobile combustion (e.g. cars, trucks),
- fugitive emissions (e.g., air conditioning systems), and
- Process emissions (e.g., factory fumes, chemicals).
Scope 2 emissions
Scope 2 emissions are indirect emissions from purchased energy. Scope 2 emissions are probably one of the most common types of emissions worldwide. This energy is very often purchased in the form of electricity. The emissions are indirect because the purchased electricity is generated outside the company. Other Scope 2 emissions can come from purchased steam, or heating and cooling, for example.
Scope 3 emissions
Scope 3 emissions are indirect emissions that directly affect a company's value chain. Here, the GHG Protocol also distinguishes between upstream and downstream emissions.
Upstream emissions are emissions that occurred before a good was purchased or a service was related for the company. They happened before the company acted and arose from the production of the good purchased or the provision of the service purchased.
Downstream emissions are emissions that occurred after the company sold a good or provided a service. They happened after the company acted and arose from the use of the good sold or the provision of the service presented.
All Scope 3 emissions are associated with the company's operations.
GGX analyzes the incurred emissions of companies in the form of raw data and includes them in its ESG ratings.
About the author
Mauro Baumann is an apprentice at St.Galler Kantonalbank and completed an internship at Global Green Xchange as part of the KV4.0 practical year. He became interested in the world of investments early on with an interest that will probably never be exhausted.