If you’ve started looking into creating a net zero target and strategy for your business, chances are you’ve run into the terms ‘Scope 1, 2 and 3’. They’re ways of categorising different kinds of emissions, and they form the basis of how emissions are measured.

If you’re confused over this terminology and which emissions fall into each category, we’ve got you covered. In this article, we’ll explain in simple terms what each of the Scopes is and suggest some next steps for how you can measure and reduce your emissions. 

What is Scope 1? 

Your Scope 1 emissions are your created greenhouse gas emissions. This means they’re the ones that your company directly produces through resources that you own or control, such as from gas boilers, heaters, gas ovens, and company vehicles. 

What is Scope 2? 

Your Scope 2 emissions are your consumed greenhouse gas emissions. These are emissions from the electricity and energy that your company has used.

What is Scope 3?

Your Scope 3 emissions are everything else. They’re products of activities from resources which aren’t directly owned or controlled by your company, but that your company impacts. This means that… 

• Purchased goods/services
• Sold goods/services
• Waste
• Employee commuting
• Business travel
• Product distribution
• Investments
• Leased assets

… all fall into your Scope 3. With that in mind, it should come as no surprise that the vast majority of your company’s emissions will be Scope 3 emissions. For example, in 2020, Starbucks’s Scope 3 emissions made up 96% of their overall emissions. 

Scope 3 emissions also include your suppliers, ie. where you’re buying your products or materials from. That’s why it’s important that you choose your suppliers wisely and engage them in sustainability initiatives if you’re trying to reach net zero. 

Why do the scopes matter?

The scopes form the basis for emissions measuring and reporting. That means that if you intend to publish your emissions data, you’ll have to divide up this data into different scopes. 

But even if you aren’t interested in measuring or reporting your emissions, new requirements on larger companies will likely result in increasing pressure on your business to measure, disclose, and reduce your emissions in the near future. These requirements include the Streamlined Energy and Carbon Reporting (SECR) policy and the Sustainability Disclosure Requirements (SDR). 

What’s SECR?

SECR was implemented in 2019 and requires large businesses to disclose their energy and carbon emissions. Companies are required to report their emissions if they use more than 40,000 kWh of energy in the reporting year, earn a gross income of at least £36 million, have balance sheet assets of at least £18 million, or have at least 250 employees. More than 11,900 UK organisations meet these criteria and so need to comply with SECR regulations.

What’s the SDR?

The SDR was introduced earlier this year and builds off rules already set by the Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD was created in 2015 and provides data to investors on how climate change will affect corporations, and what companies are doing to mitigate their financial risk. However, the SDR goes a step further by requiring that large businesses declare how their activities impact the climate.

You might be thinking: these frameworks aim to hold large companies to account, so how are SMEs involved? In short, for large businesses to show that they’re taking these new rules seriously by significantly reducing their emissions, they will need to assess the environmental policies of the smaller companies that make up their supply chain and encourage those companies to start taking action. 

For instance, Apple announced yesterday that it will require companies in its supply chain to disclose their strategy for becoming carbon neutral. They are also implementing annual audits to continually monitor their suppliers’ progress. 

Another example of a large company holding their suppliers accountable is Tesco. They announced before COP26 that they were asking their suppliers to declare details of their existing emissions by the end of 2021, their net zero targets by the end of 2022, and their net zero strategies by the end of 2023.

In this way, big businesses like Apple and Tesco have already started to directly impact the timeline of environmental policy action among SMEs. That means that it’s in the interest of SMEs which don’t already have sustainability initiatives or net zero strategies in place to start implementing them.

What should I do next? 

Our first recommendation is that you write an environmental policy. Once you’ve got it on paper, make sure that you’ve got a page on your website dedicated specifically to this policy to which you can point your customers and the businesses that you supply if they ask for it. 

In this environmental policy, set a net zero target. We’d suggest 2025 as a good deadline, as 2 years should be plenty of time for small businesses to act decisively to reduce and offset their emissions. 

Finally, you should start measuring your emissions. Start with your Scope 1 and 2 emissions, and consider measuring your Scope 3 emissions as well. 

If you’re struggling to get started building a policy and measuring your emissions, our tool, Small99 Hero, can help. Small99 Hero breaks down these big goals into small, achievable steps, so that you can start making an impact quickly.

How can I measure my emissions? 

There are two main ways that you can measure your emissions, depending on how much time and money you’re willing to dedicate and how accurate you’d like your measurements to be. These are: 

• Accounts-based measurements: this is done by analysing your bills and how much you spend on different resources, for example on petrol. This will only give you a roughly 70% accurate idea of what your emissions are, but it’s relatively fast and cheap.
• Activity-based measurements: this is done using a professional consultant who will track your business’s activity over a period of a few months. This is a more expensive and time-consuming method, but is likely to be much more accurate.

If you want to get started now with some personalised actions you can take to reduce your emissions, take our Net Zero Scorecard. You just need to answer a few non-technical questions, and we’ll not only provide you with an analysis of your biggest emission areas, but we’ll also plant 5 trees!

Conclusion

Hopefully, you now feel more confident with what Scope 1, 2, and 3 emissions actually are, and you’ve got some more direction as to how you can start measuring your company’s emissions. 

However, our final piece of advice would be not to get too bogged down by the measuring process. It’s always better to start making changes as soon as you can rather than waiting to gain accurate and detailed figures on your emissions data. Though this might make for more modest statistics when it comes to comparing your before and after, your speedy action to reduce your environmental impact will impress your customers and the businesses that you supply more.