If you’ve been keeping up with our Trust Geek Glossary, you may feel like you’re becoming an expert on ESG reporting frameworks and how to set a net zero target. But greenhouse gas (GHG) emissions may still mystify you. What’s the difference between all the scopes and direct vs indirect emissions? And how is the GHG Protocol related to scope emissions? Never fear – we’ll clear up all your questions here. We’ll cover:
Download the infographic for a quick guide to the three GHG scopes and direct vs indirect emissions
What’s the GHG Protocol? How’s it related to scope emissions?
The Greenhouse Gas Protocol (GHG Protocol) is a partnership of businesses, NGOs, governments, and other organizations convened by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). It was established in 1998 to address the need for a consistent and comparable framework for GHG reporting and is one of the most widely recognized standards for measuring GHG emissions today. To date, the GHG Protocol has released several GHG standards for companies, countries, cities, and other entities. Differentiating between emissions that organizations control directly vs indirectly is a central part of the standard which categorizes emissions into three scopes (Scope 1 2 and 3 emissions). In addition to standards, the GHG Protocol also provides guidance, calculation tools, and training to help businesses and governments measure and manage their emissions.
What’s the GHG Protocol Corporate Standard?
The first GHG Protocol Corporate Standard was published in 2001 to provide a global framework and guidance to companies on how to calculate and report on their GHG emissions. The standard covers the accounting and reporting of seven GHGs covered by the Kyoto Protocol – carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PCFs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3). It defines clear requirements for data collection, as well as what the content and structure of corporate carbon reports should look like. GHG emissions are classified into three categories for accounting and reporting purposes: Scope 1 (direct), Scope 2 (indirect from purchased energy), and Scope 3 (indirect other). This is to help ensure that companies won’t double count emissions in the same scope. By leveraging a standardized approach based on best practices from many organizations, the GHG Protocol helps ensure optimal transparency, consistency, and efficiency for companies to measure, track, and reduce their GHG emissions.
Why is the GHG Protocol important for companies?
As the largest contributors (70%) to global GHG emissions , businesses, particularly the transport, energy, and industrial sectors, have a responsibility to track and reduce their emissions. Greenhouse gases trap heat, leading to negative effects such as extreme heat and drought, rise in sea levels, flooding, biodiversity loss, and more. The Kyoto Protocol, and subsequently the Paris Agreement, aim to limit the rise of global temperatures to mitigate these effects of the climate crisis. Companies that want to measure and track their GHG emissions in line with these global goals need to use widely-accepted standards such as the GHG Protocol. By doing so, they are more likely to address stakeholder needs and be recognized for their transparency, accountability, and climate leadership.
Additional business benefits of using the GHG Protocol
According to the GHG Protocol Corporate Standard, companies frequently cite the following additional benefits for using the standard:
What are Scope 1, 2, and 3 emissions? What are direct vs indirect emissions?
The GHG Protocol Corporate Standard defines three types of GHG emissions as shown in the infographic below:
Companies that use the GHG Protocol are required to report Scope 1 and 2 emissions. Reporting Scope 3 is voluntary but recommended, especially since Scope 3 can represent more than 90% of a company’s emissions. As a case in point, nearly 100% of Apple’s emissions are Scope 3.
(Direct) Scope 1 emissions
Scope 1 emissions are direct emissions from sources owned or controlled by the reporting company. Examples include fossil fuels burned on-site or in a company fleet. Scope 1 emissions are divided into four categories:
The GHG Protocol provides calculation tools and online training for companies on how to calculate emissions using the Corporate Standard.
(Indirect) Scope 2 emissions
Scope 2 emissions are indirect emissions that result from the consumption of purchased energy such as electricity, heating, or cooling. This includes energy purchased to run operations or power an owned fleet. Scope 2 is indirect because the emissions occur due to the reporting company’s energy usage but are released outside of facilities it controls. Accounting for Scope 2 emissions is important because nearly 40% of global GHG emissions can be traced to energy generation, and half of that energy is used by businesses. Purchased energy also typically represents the most significant reduction opportunities for companies. Examples include implementing energy efficiency measures, participating in green power markets, or installing on-site co-generation plants.
There are two methods for Scope 2 accounting: a market-based or location-based approach. They represent different ways of “allocating” the GHG emissions created by energy generation to the end consumers of a given grid. The market-based approach reflects emissions from a specific electricity supplier or individual electricity product the reporting company has chosen. The location-based approach reflects the average emissions intensity of the grids where the electricity consumption takes place. The GHG Protocol provides comprehensive guidance and online training for companies on how to calculate Scope 2 emissions using either approach.
(Indirect) Scope 3 emissions
Scope 3 emissions are the remaining indirect emissions that result from a company’s activities that aren’t related to purchased energy. Examples include the production of purchased materials, business travel, product distribution and end-of-life treatment. There are 15 categories of Scope 3 emissions divided between upstream and downstream activities:
Scope 3 categories: Upstream activities
These are indirect GHG emissions related to purchased or acquired goods and services that occur to up to the point of receipt by the reporting company.
Scope 3 categories: Downstream activities
These are indirect GHG emissions related to sold goods and services that occur after they are sold by the reporting company and/or control has been transferred from the reporting company to another entity.
The GHG Protocol provides comprehensive guidance and online training for companies on how to calculate Scope 3 emissions.
Who uses the GHG Protocol?
The GHG Protocol is one of the most widely adopted standards for measuring GHG emissions. As of 2016, 92% of Fortune 500 companies responding to the CDP used the GHG Protocol directly or indirectly. A more recent analysis of 200 randomly selected S&P 500 companies found that 81% reported Scope 1 and Scope 2 emissions in accord with the GHG Protocol. Furthermore, 82% of the companies that got third-party assurances of their emissions disclosures used the GHG Protocol as the calculation method.
How does GHG Protocol reporting work?
The GHG Protocol provides globally recognized standards for measuring and reporting your GHG emissions that are compliant with major ESG reporting frameworks such as CDP. Keep in mind that there are other metrics you may need to include in your ESG report to meet the needs of all your stakeholders. To learn more, read the blogs on measuring your corporate carbon footprint and how to jump start your ESG program and reporting.
How can OneTrust help?
Today’s stakeholders are scrutinizing corporate impact more than ever before, and a large part of that focus is on how companies are contributing to the climate crisis. To meet and exceed these expectations and be recognized as a climate leader, companies must demonstrate transparency and accountability when it comes to measuring, tracking, and reducing their GHG emissions. The OneTrust ESG & Sustainability Cloud makes it simple with real-time intelligence and built-in calculation methodologies that are fully compliant with leading carbon accounting standards such as the GHG Protocol. Easily calculate and report on your Scope 1 and 2 emissions, including energy consumption and mobile combustion, as well as Scope 3 emissions from upstream and downstream activities. Intelligent workflows, collaboration features, and integrations significantly reduce the time and effort needed to collect data. Actionable insights such as hotspot analyses and industry benchmarks help you get an in-depth understanding of your emissions.
The OneTrust ESG Cloud is part of the Trust Intelligence Platform™ that delivers visibility across four trust domain areas, action based on AI and regulatory intelligence, and automation. It unifies teams, data, and workflows across privacy, GRC, ethics, and ESG programs – so you can build trust by design. The OneTrust Centers of Excellence are also available to help guide you with resources, best practices, and tips gained from working with thousands of global customers. Empower your organization to collaborate seamlessly and unlock value by doing what’s good for people and the planet.