[Save Edition] What is the GHG Protocol? A detailed explanation of the differences between Scope 1, Scope 2, and Scope 3

In order to reduce the burden on the environment, companies are required to understand, calculate, and disclose their greenhouse gas (GHG) emission amount . In Japan, too, there are an increasing number of cases where companies are required to calculate and report their GHG emission amount through the Global Warming Countermeasure Act, the Energy Conservation Act, and more recently, the SSBJ Standards. The international standard that supports the practice of calculating and reporting emission amount is the GHG Protocol.

What is the GHG Protocol?

The GHG Protocol is an international standard for calculating GHG emission amount.

The GHG Protocol is an international standard and guidance for calculating and reporting GHG emission amount , developed by the World Resources Institute (WRI), a US environmental think tank, and the World Business Council for Sustainable Development (WBCSD), whose secretariat is based in Switzerland. It is designed to enable companies and organizations to calculate and disclose GHG emission amount associated with their business activity in a consistent manner.

Currently, the majority of companies and organizations around the world have adopted this standard, making it the de facto standard for calculating and reporting GHG emission amount Protocol classifies the range of GHG emissions related to a specific organization's activity into three scopes: Scope 1 (direct emissions), Scope 2 (indirect emissions from Energy sources), and Scope 3 (other indirect emissions occurring throughout the company's value chain).

The GHG Protocol enables consistent and comparable disclosure of GHG emission amount information between companies, and is used as an important indicator for evaluating a company's progress in climate change countermeasures and decarbonization management.

Why the GHG Protocol focuses on value chain emission amount

The GHG Protocol focuses on understanding not only the GHGs emitted within an individual company, but also the emission amount generated throughout a company's entire upstream and downstream value chain, from raw material procurement to Manufacturing , transportation, product use, and disposal.

Even if a company makes progress in reducing its emission amount, if emission amount increase upstream or downstream, the reduction effect of its overall activity may be limited or even canceled out. For this reason, the GHG Protocol places emphasis on calculating emission amount , including Scope 3, so that companies can view their business activity from the perspective of the entire value chain and consider more effective reduction measures.

For all companies and industries
Zeroboard
Solutions that calculate and visualize GHG emission amount across the entire supply chain, and collect data between group companies and from suppliers
View Details

About Scope 1 to 3

Scope 1 1 : Direct emissions from the business itself

Scope 1 refers to GHG emission amount that occur directly from sources owned and controlled by a company. Also known as "direct emissions," these emissions are those that occur under a company's control as a result of business activity. Specific examples include CO2 and CH4 generated by fuel combustion at a company's factories and offices, CO2 derived from chemical reactions in industrial processes, and emissions from the operation of company vehicles. Scope 1 also includes refrigerant leaks from refrigeration and air conditioning equipment. Because Scope 1 emissions are sources that a company can directly control, it is relatively easy to understand the reduction effects of measures such as equipment upgrades and fuel conversion.

Scope 2 2 : Indirect emissions associated with the use of purchased electricity and heat

Scope 2 refers to GHG emission amount that are indirectly generated through the consumption of Energy such as electricity, heat, and steam supplied by others. Emissions do not occur directly on a company's premises; sources of emissions include power plants and heat supply facilities that generate purchased Energy. For example, electricity used in offices and factories that is supplied under contract with others, and the use of heat from district heating and cooling systems are subject to Scope 2. These Energy emit CO2 and other greenhouse gases when fuel is burned during the energy generation process, and companies calculate these emission amount as indirect GHG emission amount.

The GHG Protocol defines Scope 2 based on the idea that companies that consume Energy also bear some responsibility for the emissions that occur during the energy generation process. Therefore, switching to electricity plans derived from renewable Energy sources and promoting energy conservation measures are effective ways to reduce Scope 2 emission amount.

Scope 3 3 : other indirect emissions throughout your company's value chain

Scope 3 is " other indirect emissions," which covers GHG emission amount generated in the value chain as a result of a company's business activity , other than those included in Scope 1 and Scope 2. It includes not only a company's direct emissions, but also a wide range of emission sources across all business activity , including the activity of business partners and customers.

Specifically, upstream activity include emissions from purchased raw materials, Manufacturing products, and their transportation and delivery, while downstream activity include Energy consumption during the use of sold products and emission amount generated when products are disposed of or recycled.

Furthermore, emissions from employee commuting and business trips, as well as from operations outsourced to third parties, are also included in Scope 3. In order to organize these diverse emission sources, the GHG Protocol classifies Scope 3 emission amount into 15 Category.

For all companies and industries
Zeroboard
Solutions that calculate and visualize GHG emission amount across the entire supply chain, and collect data between group companies and from suppliers
View Details

Revisions to Scope 2 calculation standards

Under the GHG Protocol, discussions are underway to revise the location and market standards for Scope 2 calculations with the aim of improving the reliability of calculations.

GHG Protocol Revision Discussion Materials DownloadHere
Q&A materials regarding the GHG Protocol revision discussions can be downloaded here.Here

summary

By understanding the GHG Protocol and each scope, it becomes possible to systematically grasp the GHG emission amount of not only your own company but also your entire business, including your supply chain, etc. Calculating emission amount allows you to identify processes and activity with high emissions, known as hotspots, and is the first step in considering effective reduction measures.

In recent years, accounting and disclosure of GHG emission amount has become an important topic for many companies, against the backdrop of legal regulations, information disclosure systems, and requests from investors and business partners. In addition to responding to these requests, companies can expect to promote decarbonized management, reduce risks, and even improve their corporate value in the medium to long term by addressing emission amount management from an early stage.

Common Issue in calculating GHG emission amount

While an increasing number of companies are working to calculate their GHG emission amount, many of them face a variety of practical Issue. The most common issues are "not knowing what should be included in the calculation," "not making progress in collecting Scope 3 information," and "not being confident in the validity of the calculation method or Emission factor."

Furthermore, there are cases where data consistency and reproducibility cannot be ensured due to personal management using Excel and different calculation methods for each department or location. As a result, the annual calculation work becomes a burden, and Issue tend to arise that do not lead to continuous improvement.

If these Issue are left unaddressed, there is a risk that responding to information disclosure will become the sole purpose, and that the information will not be fully utilized in decision-making and policy considerations aimed at reducing emissions, which is actually important.

The importance of utilizing primary data

In calculating GHG emission amount , it is common to roughly estimate emission amount using "secondary data" such as Emission factor and industry averages. However, in recent years, particularly with regard to Scope 3, there has been an increasing emphasis on using "primary data" collected from business partners and suppliers in order to grasp emission amount more accurately.

Utilizing primary data not only improves the accuracy and reliability of emission amount, but also enables a more accurate understanding of which processes in the value chain are producing the most emissions. This provides an important foundation for considering effective reduction measures and promoting decarbonization efforts in collaboration with business partners.

In light of future information disclosure requests from SSBJ, CSRD, and others, the use of primary data is not only a "response that will be required in the future," but also an important element in enhancing a company's decarbonization capabilities.

Utilizing emission amount data management tools

In order to continuously calculate GHG emission amount and utilize them in management and business strategies, a system that can efficiently and centrally manage emission amount data is essential. As calculation work becomes more complex, an increasing number of companies in recent years are using emission amount data management tools that support the calculation and management of Scope 1 to 3 emissions.

Introducing these tools not only standardizes the calculation process and reduces workload, but also makes it easier to manage calculation grounds and data history. They are also effective for collecting data from departments, location, and suppliers, and for managing data with an eye toward future regulatory compliance and audit responses.

Rather than limiting emission amount calculations to a simple "response task," it is important to consider using data management tools that suit your company's structure and objectives in order to utilize the data in considering reduction measures and for management decisions.

For all companies and industries
Zeroboard
Solutions that calculate and visualize GHG emission amount across the entire supply chain, and collect data between group companies and from suppliers
View Details

throughout the supply chain
GHG emission amount calculation/visualization,
For centralized management of environmental items
Zeroboard

For detailed information and Contact us about the entire Service ,
Please check here.

• Resources
• Contact us

＜Reference source＞

*1) The Scope 3 Standards and Basic Guidelines treat transportation as an optional accounting subject.
*2) The Scope 3 Standards and Basic Guidelines exclude transportation from the scope of calculations, but you may still include it in your calculations. https://www.env.go.jp/earth/ondanka/supply_chain/gvc/files/SC_gaiyou_20230301.pdf