Greenhouse gas accounting 101: how to calculate your scope 1, 2, 3 emissions

January 10, 2022
Climate Huddle

You’re familiar with what greenhouse gas accounting is and why it’s important, but how does it actually work? What will you need to prepare beforehand? And what will you take away from the exercise?

There are five steps to calculating a greenhouse gas inventory:  

  1. Assigning resources 

  2. Defining the scope 

  3. Collecting data 

  4. Calculating emissions 

  5. Reporting the results – and designing your roadmap 

Assigning resources 

Step one (you’re already doing it): educate yourself about greenhouse gas accounting to help you assign resources for the exercise. Experts like us can help you determine the business goals of the greenhouse gas inventory. What is your vision for the inventory? And what are the guiding principles? Are all the relevant stakeholders on board to support you with its delivery? 

You should also make sure your data owners are ready to be proactive early on. Greenhouse gas accounting is really dependent on data: the more granular (meaning that it is based on actual activity, like gallons of gasoline, and not on estimates) the data you can provide, the more accurate your inventory will be, and the more targeted your emission reduction roadmap can become. More granular data transforms your greenhouse gas accounting into a ‘management metric’ rather than a reporting metric. That means your interventions, based on high-quality emissions data, will have a more transformative impact.  

Defining the scope 

Before you begin collecting data, you’ll need to work out where your inventory begins and ends. This means a thorough review of the organisational and operational structures of your business, so you can understand which operations you own and whose emissions should therefore be captured by the footprint (‘organisational boundaries’). Meanwhile, the ‘operational boundaries’ determine which operations and sources generate emissions in order to classify them appropriately. 

Next, the inventory will need to work out which ‘scopes’ to include. Scopes are a way of dividing up your energy consumption into direct and indirect emissions: 

  1. Scope 1 (direct emissions): The source of these emissions is directly owned or controlled by you. For example, a facility or a fleet of vehicles to transport goods (which burn fossil fuels). 

  2. Scope 2 (indirect emissions): These emissions are based on the energy you purchase to directly run your business. The most common example is your electricity consumption. 

  3. Scope 3 (other indirect emissions): These emissions are caused by activities not directly owned by your business but which are associated with its operation. For example, business travel, waste management, and your employee commuting. 

Business ‘activities’ (as they are known) will be grouped under each of these scopes for the purposes of the analysis. For example: the fuel used to run company-owned vehicles would be under scope 1, the electricity that is purchased to operate machines would be under scope 2, and the emissions from employee commuting would be under scope 3.  Finally, the scoping exercise will determine the level of detail for analysis. 

Collecting data 

This is where you’ll need to do the most work, collecting accurate data from across your business and doing your best to make sure it is as complete as possible. Building the greenhouse gas inventories is, after all, an iterative process. Data won’t always be available, especially in the first year of your accounting. It may also be appropriate to use secondary data such as industry and national averages. 

Calculating emissions 

The data that’s been collected – and classified according to scopes and emission sources – can now be used to calculate your emissions in tonnes of carbon dioxide equivalent (tCO2e), the standard unit for the exercise. 

This is where it gets quite technical, but the basic calculation is as follows: take your ‘activity data’ (so, for example, 10,250 litres of petrol used to run company-owned vehicles) and multiply that by the appropriate ‘emission factor’ (a coefficient describing the rate at which that activity – here, burning petrol – releases greenhouse gases into the atmosphere) to work out the emissions for that activity (the result, in this instance, is 23.93 tCO2e). Emission factors should be obtained from reputable sources like government agencies (the UK Department for Business, Energy, and Industrial Strategy) or intergovernmental organisations (the International Energy Agency and the IPCC). 
The calculations are split up for each emission source with each emission scope. They are totalled to give your overall footprint for the given time period. 

Reporting your results and designing your roadmap 

Once the calculations are finalised, your results are ready to be written up and published in a greenhouse gas accounting report. Then comes the most important part of the exercise: interpreting your greenhouse gas inventory and working out how to shrink it. Where are your emission hotspots? Where can efficiencies be made? How would switching to renewable energy change your footprint?

The inventory allows you to develop an informed sustainability strategy and set credible, relevant climate targets. You should repeat the accounting exercise each year to keep track of your progress and be accountable to your goals. 

Decarbonisation begins with greenhouse gas accounting; as soon as you’ve taken this crucial first step, you’re ready to begin the climate journey proper. 

Need help with your GHG inventory?

If you have any questions about any of steps mentioned above, join the Huddle Community and ask our experts! We're here to support you on your climate journey.

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