Understanding Scope 1, 2, and 3 Emissions: The Manufacturer's Guide to a Complete Carbon Footprint

In the face of climate change, the manufacturing sector stands at a critical juncture. The pressure to decarbonize is coming from every direction—governments, investors, customers, and even employees. At the core of this transition is understanding your company’s carbon footprint, a measurement that goes far beyond just your factory floor. To accurately measure, manage, and ultimately reduce your environmental impact, you must understand the three categories of greenhouse gas (GHG) emissions: Scope 1, Scope 2, and Scope 3.

This framework, established by the Greenhouse Gas (GHG) Protocol, provides a standardized way to account for emissions across a business’s entire value chain. For manufacturers, a thorough understanding of each scope isn’t just a best practice; it’s a strategic necessity.

Scope 1: The Emissions You Control Directly 🏭

Scope 1 emissions are the direct GHG emissions that come from sources your company owns or controls. Think of these as the most immediate and visible part of your carbon footprint. These emissions are generated right on your property, giving you direct control over them.

For a manufacturer, common sources of Scope 1 emissions include:

• On-site fuel combustion: This is often the largest source of Scope 1 emissions. It includes burning natural gas, fuel oil, diesel, or other fuels in boilers, furnaces, and heaters to power your production processes, generate steam, or provide heat for your facilities.
• Company-owned vehicles: Emissions from all vehicles in your company’s fleet, whether they are used for logistics, maintenance, sales, or employee transport.
• Fugitive emissions: These are unintentional leaks of GHGs. A common example in manufacturing is the release of refrigerants (like hydrofluorocarbons, or HFCs) from air conditioning or refrigeration units.
• Process emissions: Emissions released as a direct result of a manufacturing process itself. For example, the chemical reaction of heating limestone in cement production releases a significant amount of CO2.

Because these emissions are under your direct control, they are often the first target for reduction efforts, with strategies ranging from switching to cleaner fuels to improving the efficiency of your equipment.

Scope 2: The Energy You Purchase 💡

Scope 2 emissions are indirect emissions that come from the generation of purchased energy. While these emissions physically occur at a power plant far from your facility, they are a direct consequence of your energy consumption. You are responsible for them because your demand created them.

For manufacturers, the primary source of Scope 2 emissions is the electricity you buy to run your machinery, lighting, ventilation systems, and computer networks. These emissions are calculated based on the mix of energy sources (coal, natural gas, solar, wind, etc.) used by the grid that supplies your power.

Reducing Scope 2 emissions involves a different set of strategies than Scope 1. Instead of controlling the source of the emissions, you influence them by:

• Reducing energy consumption: Implementing energy efficiency measures, such as upgrading to more efficient machinery or LED lighting.
• Sourcing cleaner energy: Purchasing electricity from renewable energy providers or through renewable energy certificates (RECs).

Scope 3: The Full Value Chain Picture 🔗

Scope 3 emissions are the most complex and, for most companies, the largest part (70-80%) of their carbon footprint. These are all other indirect emissions that occur in your company’s value chain, both upstream and downstream. You don’t own or control the sources of these emissions, but they are a direct result of your business activities.

Ignoring Scope 3 would mean you’re only accounting for a fraction of your true environmental impact. A complete Scope 3 assessment is crucial for a holistic view of your footprint.

The 15 categories of Scope 3 emissions are typically broken down into two groups:

Upstream Activities (before the product is made):

• Purchased goods and services: Emissions from the production of all the raw materials, components, and services you buy. To give an example, for a car manufacturer, this includes emissions from the steel, glass, and plastic used in a vehicle.
• Capital goods: Emissions from the production of new machinery, factory buildings, and other infrastructure you purchase.
• Business travel and employee commuting: Emissions from your employees’ air travel, hotel stays, and daily commutes to and from work.
• Waste generated in operations: Emissions from the transportation and treatment of waste from your manufacturing sites. Downstream Activities (after the product is sold):
• Transportation and distribution: Emissions from shipping your finished products to customers, whether by truck, ship, or plane.
• Use of sold products: This is a huge category for products that consume energy. For example, the emissions from a customer running an appliance you manufactured for its entire lifespan.
• End-of-life treatment of sold products: Emissions from the disposal or recycling of your products at the end of their useful life.

Accurately measuring Scope 3 emissions requires collaboration with suppliers and an understanding of the entire product lifecycle, from raw material extraction to final disposal.

The Business Imperative for a Complete Carbon Footprint

Measuring and managing all three scopes isn’t just a regulatory obligation; it’s a strategic advantage. Scope 1 and 2 are easier to track and calculate given the company’s direct control over it. However, Scope 3 emissions occur outside a company’s direct operations, making them hardest to track.

Some of the key challenges include:

• Insufficient or unreliable data from suppliers and partners
• Complex, multi-tier supply chains
• Data dependency on vendors, often with no standardization
• Usage-based estimates with limited accuracy
• Time-consuming data collection and verification process
• Lack of visibility & control over third-party practices

Conclusion

Tracking and reporting carbon emissions will soon become mandatory as India gears towards achieving it’s Net Zero target. For manufacturers currently or looking to start exporting to US and Europe, this becomes even more important given these geographies’ strict regulations on carbon neutrality of products being imported.

Becoming carbon efficient will not only help meet the regulatory requirements but also expand the business and elevate your brand presence.

Solwer offers a comprehensive Carbon Footprint Management platform which integrates with your existing ERP for real time data capture. Further, the platform also helps track emissions across Scope 1, 2 and 3 while also generating customized reports for the reporting requirements under different norms. Make your business sustainable and lead the transformation of climate change while also enhancing your business expansion prospects. Discover how Solwer can help you achieve these today.