Greenhouse Gas Emissions: Understanding and Reporting on Scopes 1, 2, and 3

March 14, 2024

Many organizations are actively working to diminish their greenhouse gas (GHG) emissions. When tracking and reporting progress, the terms ‘Scopes 1, 2, and 3 emissions’ are frequently used. But what do these designations mean?

Scopes 1, 2, and 3 Defined

The ‘scopes’ for reporting come from the Greenhouse Gas Protocol (GHG Protocol), an international organization that has been working to provide standardized frameworks for measuring and reporting on GHG emissions. The three scopes categorize different types of emissions an organization generates, encompassing both its internal operations and its broader ‘value chain,’ which includes suppliers and customers.

Scope 1 emissions:
These are direct emissions owned or controlled by a company, such as those from burning fuel in the company’s fleet of vehicles.
Scope 2 emissions:
Indirect emissions caused by a company that arise from the production of energy it purchases and uses. For example, emissions generated when producing the electricity used in company buildings fall into this category.
Scope 3 emissions:
These encompass emissions not directly produced by the company but are indirectly linked to its activities up and down its value chain. An example is the emissions associated with buying, using, and disposing of products from suppliers. Scope 3 emissions include all sources beyond the scope 1 and 2 boundaries.

Reducing scope 1, 2, and 3 emissions involves various considerations beyond emissions alone, including cost and practicality. While organizations can exert more control over scopes 1 and 2, emissions in scope 3 often represent the largest proportion of total emissions and are typically more challenging to minimize. Collaborating with suppliers, partners and customers on emission reduction solutions is one way organizations can address scope 3 emissions, recognizing the interconnected nature of the broader value chain.

Why Measure GHG Emissions?

For those aiming to align with the evolving priorities of the federal government, you may be at a strategic advantage to begin measuring and reporting on your GHG emissions now. In November 2022, the Federal Acquisition Regulatory Council (FAR Council) proposed the Federal Supplier Climate Risks and Resilience Rule, as part of the Federal Sustainability Plan, which sets a goal to achieve net-zero emissions procurement by 2050. Significant contractors may find themselves obligated to conduct an inventory and report following the GHG Protocol Corporate Accounting and Reporting Standard: https://ghgprotocol.org/corporate-standard.

Currently, according to Subpart 23.8 – Ozone-Depleting Substances and Greenhouse Gases, government contractors registered in the System for Award Management (SAM) and receiving $7.5 million or more in Federal contract awards in the prior Federal fiscal year at a minimum must:

Represent whether they publicly disclose greenhouse gas emissions.
Represent whether they publicly disclose a quantitative greenhouse gas emissions reduction goal.
Provide the website for any such disclosures.

With a global emphasis on Environmental, Social, and Governance (ESG)-focused reporting, organizations must prepare for the potential impact of these proposals by understanding requirements, assessing personnel needs, and adjusting processes related to data collection, reporting, and control activities.

GRF Can Help

Our team of experts are well-versed in federal contracting compliance, ESG, and ERM, and are ready to guide you through the evolving landscape, ensuring that emerging regulations do not disrupt your mission.

Initiate an in-depth evaluation of your organizational compliance to identify areas of alignment with federal regulations.
Gain insights into your stakeholders and value chain, recognizing key influencers and understanding their impact on your ESG initiatives.
Establish cutting-edge governance structures and processes aligned with industry standards, ensuring robust compliance with evolving federal sustainability requirements.
Engage in meticulous data collection and documentation processes to support the comprehensive reporting of your ESG initiatives and compliance efforts.
Meet disclosure, science-based targets, and reporting obligations with precision, ensuring adherence to federal guidelines and demonstrating commitment to sustainability.
Strategically position your organization to leverage procurement opportunities and incentive initiatives by showcasing your robust FAR-compliant ESG program.