Why Measuring Scope 1, 2, and 3 Emissions is Important for your Business

Direct emissions, indirect emissions, and other indirect emissions: how well do you know which business practices fall under scope 1, 2, or 3 emissions? Learn more here. 

As pressure grows for businesses to report on their carbon footprint and make measurable progress towards their sustainability goals, measuring scope 1, 2, and 3 emissions becomes increasingly crucial for businesses across all sectors. 

According to the Green Business Bureau, “scope 1, 2, and 3 emissions is a classification system used to bucket greenhouse gas emissions (GHGs) exerted by an organisation, to help measure, manage and reduce business emissions.” 

The scope 1, 2, and 3 emission classification system was first used in the 2001 Greenhouse Gas Protocol (or GHG Protocol), which aimed to develop and promote standard greenhouse gas accounting and reporting processes.

Scope 1, 2, and 3 emissions: what’s the difference? 

Scope 1 emissions: direct emissions 

Scope 1 covers all direct GHG emissions by a company. This could be the emissions that are directly created by manufacturing goods, it includes fuel combustion, company vehicles, and fugitive emissions. 

Scope 2 emissions: indirect emissions 

Scope 2 covers indirect GHG emissions from the consumption of purchased electricity, including heating, steaming, or cooling. For most businesses, scope 2 emissions come from purchased electricity. Companies normally have the data needed to calculate their scope 1 and 2 emissions (though this process can be quite manual and cumbersome). 

Scopes 1 and 2 emissions are mandatory for many businesses to report on around the world, and they’re also what many businesses aim their carbon reduction targets toward—they are most often within an organisation’s control. For example, an organisation can make small changes, like switching to different lightbulbs, or bigger changes, such as transitioning to electric vehicles, in order to deliver results on reducing scope 1 and 2 emissions. 

However, scope 3 emissions can account for more than 70% of a company’s carbon footprint and are often more difficult to address.

Scope 3 emissions: other indirect emissions 

Scope 3 emissions (or value chain emissions) cover other indirect emissions (both upstream with suppliers and downstream with client activities). They are related to a company’s activities—usually considered to be the supply chain of the company—so this includes emissions caused by vendors within the supply chain, outsourced activities, employee travel and commute, and more. 

In many industries, scope 3 emissions account for the biggest amount of GHG emissions and are also the most difficult to measure and address. This is due to the fact that in today’s economy, many tasks are outsourced, and few companies own the entire value chain of their products. 

Industry matters 

Depending on what industry your business operates in, the proportions between your scope 1, 2, and 3 emissions may differ greatly. For example, oil and gas companies may have a very large amount of scope 3 emissions which can account for 90% of their total emissions because of the oil and gas they produce. On the other hand, a small business which creates no physical products can have scope 1 and 2 emissions account for a larger portion of their emissions.

How to manage your carbon footprint with scope 1, 2, and 3 emissions 

From the SEC’s proposed rules around climate-related disclosures to the EU’s new corporate sustainability reporting directive, businesses globally are increasingly required to track, report, audit, and manage emissions through different internationally recognised frameworks. However, even if it’s not mandatory to do all of this where your organisation is based, it’s a good idea to get ahead of the regulations. 

Tracking emissions helps businesses to understand where their emissions come from and find opportunities to reduce their carbon footprint. Though scope 3 emissions are harder to track than scope 1 and 2, businesses may estimate those emissions, relying on industry averages and collaborating with suppliers and others in their value chain.

Tracking scope 1, 2, and 3 emissions in SAP Concur 

The best way for companies to minimise their carbon footprint is to reduce their GHG emissions in the first place. But to reduce emissions it’s important to first understand them, because you can’t manage what you don’t measure. With a deeper understanding of carbon emissions and how to reduce them, one of the next challenges of any business is how to address the currently unavoidable emissions. The good news is that there are online solutions that can help businesses understand and then address their carbon footprint. 

The CHOOOSE Climate App for SAP Concur can help companies measure, reduce and manage their carbon footprint associated with travel directly through SAP Concur. With the Climate App, companies can access automatic, high-precision calculations based on existing Concur Travel data, and analyse and measure a company’s carbon emissions in real-time. 

Within the Climate App, you can access a portfolio of high-quality, vetted carbon solutions ranging from renewable energy and nature-based solutions to community-based projects and funding production of Sustainable Aviation Fuel (SAF). Then, businesses can access shareable material and certificates for communication purposes and ESG (Environmental, Social, and Governance) impact reports. 

Companies that manage their business travel with SAP Concur can seamlessly integrate the Climate App and start managing their business footprints today. Try the CHOOOSE Climate App for SAP Concur today.