Series of articles on methods of sustainability assessment: “Scopes 1 – 3” in corporate evaluation

An efficient and sustainable use of resources, as well as pathways to achieve carbon neutrality, are central topics of the FfE. Notably, with the EU’s Sustainable Finance Strategy, methods for assessing carbon neutrality are gaining relevance. In the following series of articles, components and criteria of sustainability assessment will be introduced. The focus will be on available methods, their application areas, and differences. This is the first contribution of the following topics, which will now appear successively on our website.

  1. Life Cycle Assessment (LCA)
  2. “Scopes 1-3” in corporate evaluation
  3. Future-oriented LCA in energy system assessment
  4. Circular economy measures

“Scopes 1 – 3” in business evaluation – Background

In recent years, sustainability has gained importance in business. Companies are increasingly under pressure to reduce their environmental impacts and transparently report on their sustainability performance. This paradigm shift is driven in particular by regulations of the EU’s Sustainable Finance Framework – the EU Taxonomy for Sustainable Activities, the Corporate Sustainability Reporting Directive (CSRD), and the Sustainable Finance Disclosure Regulation (SFDR).The main goal is to promote decarbonization of the economy and to focus more on the ecological and social responsibility of companies [1].

A central pillar of this framework is the disclosure of environmental indicators, including greenhouse gas emissions (GHG emissions). Companies are required to quantify and report their so-called “Scope 1 – 3” emissions. This step enables companies to actively contribute to addressing the climate crisis, align their business strategies with sustainability, and drive the transformation towards a sustainable economy.

What are Scope 1 – 3 emissions?

While the LCA (life cycle analysis) method assesses various environmental impacts of products or services, GHG accounting refers to the organizational or corporate level. The GHG Protocol (Greenhouse Gas Protocol) has established itself as an internationally recognized guideline for the accounting of GHG emissions of private and public organizations. Through the division into three areas (“scopes”), both direct and indirect sources of GHG emissions are covered (cf. Figure 1) [2].

Types of Scope 1 – 3 emissions upstream and downstream
Figure 1: Overview of Scope 1 – 3 emissions (own representation according to [2]).

Scope 1:

Scope 1 emissions include direct GHG emissions from combustion processes that originate from sources owned or controlled by the company [2,3]. These sources include the following:

  • Burning fuels on site (e.g., for heating): These emissions result from the combustion of fuels in stationary sources such as boilers, furnaces and turbines.
  • Business vehicles/fleet: Emissions from the transport of materials, products, waste and employees arise from the combustion of fuels in company-owned or controlled mobile combustion sources such as trucks, trains, ships, planes, buses and cars.
  • Volatile emissions: These emissions result from intentional or unintentional releases, such as leaks from equipment or from joints, packings and seals. They also include methane emissions from coal mines and venting, emissions of hydrofluorocarbons (HFCs) from the use of refrigeration and air conditioning equipment, and methane leaks from gas transport.
  • Processes: These are emissions that occur during the production or processing of chemicals and materials, such as cement or aluminium production, ammonia production and waste processing.


Scope 2:

Scope 2 emissions are indirect GHG emissions that occur when companies consume purchased energy sources such as electricity, steam, heating, cooling and compressed air in their own or controlled facilities or operations. These emissions physically occur at the facility where the electricity or energy is produced. For all Scope 2 emission factors, it is important to note that emissions from the upstream chain of combusted fuels are excluded, as these are accounted for in Scope 3 [2,4].

Scope 2 emissions play a significant role in the indirect emissions of many companies. In addition to a reduction in electricity consumption, these can be reduced by purchasing electricity from renewable sources. In this context, the accounting methodology must be taken into account: A distinction is made between so-called “location-based” and “market-based” emissions. The “location based” emissions reflect the emissions of the regional electricity mix (e.g. German electricity mix). Market-based” accounting, on the other hand, takes into account the electricity mix of the energy supplier (e.g. electricity from wind power). As soon as a company wants to report “market based”, it must also report the “location based” emissions.

Scope 3:

While Scope 1 and Scope 2 cover emissions within the company’s direct sphere of influence, Scope 3 involves indirect GHG emissions from upstream and downstream activities. These activities originate from sources not owned or controlled by the company [2].

According to the GHG Protocol, Scope 3 emissions are divided into 14 different categories (see Figure 1). Examples from upstream and downstream activities include extraction and production of purchased materials, transportation of purchased fuels, use of sold products and services, waste disposal, and business travel. Emissions in the value chain of raw materials used for Scope 1 and Scope 2 activities also fall under Scope 3.

Advantages for companies

Although the reporting of Scope 1 – 3 emissions initially involves additional effort for companies, the recording also provides the basis for targeted emission reduction measures. On the basis of the emissions balance sheet and an identification of so-called “hotspots”, individual emission reduction measures can be derived. In this way, not only can the ecological footprint be reduced, but the long-term resilience of the company can also be strengthened. By addressing Scope 1 – 3 emissions in a timely manner, companies can prepare for mandatory reporting in accordance with the regulations of the EU’s Sustainable Finance Framework. There are also the following benefits for companies:

  • Cost and resource efficiency: Capturing and transparently reporting Scope 1 – 3 emissions enables companies to better understand their direct as well as upstream and downstream environmental impacts. This allows companies to control not only their direct emissions – but also indirect emissions along the supply chain and business operations can be effectively factored into sustainability efforts [2, 4]. Implementing measures to reduce environmental footprint can also go hand-in-hand with cost savings.
  • Reputation and stakeholder trust: Customers, investors, employees and other stakeholders increasingly expect transparency regarding emissions and sustainability performance. By communicating openly about their environmental impacts, companies can build trust with their stakeholders. This can lead to increased customer loyalty, improved brand image and increased attractiveness to investors.
  • Competitive advantage and market positioning: Sustainability has become a crucial competitive factor in recent years. Companies that already disclose their Scope 1 – 3 emissions and proactively implement sustainable measures can position themselves as pioneers in their industry. This opens up new business opportunities and partnerships, facilitates access to sustainability-conscious markets, and establishes the company as an attractive employer.



How can we assist you?

FfE already has many years of experience with the implementation of emission balances and the development of methodological competencies in companies. Here are some highlights from our projects on Life Cycle Analysis:

We are ready to support your company in preparing for new requirements. Here’s how we can assist you:

  • Training and building up methodological expertise in the area of emissions accounting and “Life Cycle Assessment (LCA)” methodology within your company
  • Implementation of Life Cycle Assessments
  • Collection of energy & emission data and derivation of key figures for reporting purposes

Feel free to contact us without any obligation at: aregett@ffe.de, +49 (0)89 158121-45, or info@ffe.de.


[1] Europäische Kommission. (2021). DELEGIERTE VERORDNUNG (EU) …/… DER KOMMISSION zur Ergänzung der Verordnung (EU) 2020/852 des Europäischen Parlaments und des Rates durch Festlegung des Inhalts und der Darstellung der Informationen, die von Unternehmen, die unter Artikel 19a oder Artikel 29a der Richtlinie 2013/34/EU fallen, in Bezug auf ökologisch nachhaltige Wirtschaftstätigkeiten offenzulegen sind, und durch Festlegung der Methode, anhand deren die Einhaltung dieser Offenlegungspflicht zu gewährleisten ist; https://eur-lex.europa.eu/legal-content/DE/TXT/?uri=PI_COM%3AC%282021%294987 (retrieved on 20.07.2023)

[2] World Business Council for Sustainable Development (WBCSD) World Resources Institute (WRI) (2004); The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard. Geneva, Washington D.C.: World Business Council for Sustainable Development (WBCSD); https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf (retrieved on 20.07.2023)

[3] World Resources Institute & wbcsd. (2013). Technical Guidance for Calculating  Scope 3 Emissions; https://ghgprotocol.org/sites/default/files/standards/Scope3_Calculation_Guidance_0.pdf (retrieved on 20.07.2023)

[4] Umweltbundesamt (2020): Huckestein, Burkhard: Der Weg zur treibhausgasneutralen Verwaltung – Etappen und Hilfestellungen. Dessau-Roßlau; https://www.umweltbundesamt.de/sites/default/files/medien/5750/publikationen/2021_fb_weg_zur_treibhausgasneutralen_verwaltung_bf.pdf (retrieved on 20.07.2023)