Cut through the carbon jargon
If you’re running a business, you’ve probably heard the buzz about greenhouse gas emissions and their growing impact on operations, partnerships and customer trust. But decoding terms like Scope 1, Scope 2 and Scope 3 emissions can seem like tackling an environmental puzzle.
Let’s break it down into clear, actionable steps so you can lead the way in sustainability and set your business apart.
Scope 1: Emissions you control directly
Imagine Scope 1 as the emissions that happen on your own turf. These are direct emissions—produced right where your business operates.
According to the Greenhouse Gas Protocol, there are four primary categories:
- Mobile Combustion
This category covers emissions from the combustion of fuels in vehicles and other mobile equipment, such as cars, trucks, buses, trains, planes and ships. It includes any moving entity that emits gases due to fuel combustion, provided the company owns or controls it. - Stationary Combustion
Unlike mobile combustion, this involves burning fuels in stationary sources, such as boilers or furnaces. For instance, a commercial kitchen using LPG would fall into this category, and the combustion process releases carbon dioxide, methane and nitrous oxide. - Fugitive Emissions
These emissions are the unintentional release of greenhouse gases from equipment or processes, including leaks from refrigeration units, air conditioners or coal mines. Despite being often overlooked, these emissions contribute significantly to a company’s greenhouse gas footprint. - Process Emissions
These are emissions that occur during the chemical transformation of materials in industrial processes, like cement or aluminium production. Not all companies will have process emissions, as they are generally specific to certain industries like oil and gas or cement manufacturing.
The good news?
These emissions are entirely within your control.
By upgrading to energy-efficient equipment, transitioning to electric vehicles, or optimising your operations, you can reduce your Scope 1 footprint.
These small but powerful steps showcase your commitment to sustainability and can even lower costs over time.
Scope 2: Energy you use, emissions you share
Scope 2 emissions come from the energy your business buys and uses—like electricity, steam, or heating. While these emissions occur outside your premises, they’re directly tied to your energy consumption.
So, how do we categorise Scope 2 emissions?
Four primary types of purchased energy fall under this category:
- Electricity
This is a universal need for businesses, powering everything from machinery and lighting to electric vehicle charging stations and HVAC systems. - Steam
An essential energy source for numerous industrial applications, steam is used for mechanical tasks, heating, or as a direct medium in processes. When it comes to steam produced by Combined Heat and Power (CHP) plants, companies must ensure the emission allocations for electricity and heat/steam are in line with best practices, such as those detailed in the GHG Protocol’s guidelines for CHP plants. - Heat
Heat is indispensable for maintaining the climate within commercial or industrial buildings and heating water. It’s also crucial for specific industrial equipment. Heat can be generated using electricity or through non-electrical means like solar thermal or combustion processes, typically beyond the company’s direct control. - Cooling
Similar to heating, cooling can be achieved using electricity or by distributing chilled air or water. It is essential for maintaining temperature control in facilities.
Reducing Scope 2 emissions often means rethinking your energy choices. Switching to renewable energy, installing solar panels, or purchasing energy credits are simple, impactful moves that demonstrate responsibility and help cut carbon emissions.
Customers love businesses that care about their power sources—it’s a win-win.
Understanding emissions today builds a cleaner, smarter business for tomorrow.
Scope 3: Your value chain’s carbon footprint
Here’s where things get a little more complex, and exciting. Scope 3 emissions cover all the indirect emissions tied to your supply chain and value chain. From the goods and services you purchase to your employees’ commutes and the full lifecycle of your products, Scope 3 spans a wide web of connections.
It’s important to recognise that for most businesses, Scope 3 Emissions make up at least 75%, and often over 90%, of their total emissions. The implication? It’s essential to work with your supply chain to reduce emissions.
Here are some examples:
- Purchased goods & services
Emissions from producing goods and services that a company buys or acquires. - Capital goods
Emissions from the creation and production of capital goods (e.g., buildings, machines, equipment) that a company uses in its operations. - Fuel- and energy-related activities
Emissions related to the production of fuels and energy purchased and consumed by a company that is not covered in Scope 1 or 2. - Upstream transportation & distribution
Emissions associated with the transportation and distribution of products in the supply chain before they reach the company. - Waste generated in operations
Emissions that result from disposing of and treating waste generated in the company’s operations. - Business travel
Emissions from transportation used for business-related travel by employees. - Commuting employees
Emissions from the transportation of employees between their homes and their workplace. - Upstream leased assets
Emissions from the operation of assets that the company leases in its value chain. - Downstream transportation & distribution
Emissions associated with the transportation and distribution of products after they leave the company, until they reach the final consumer. - Processing of sold products
Emissions from processing products sold by the company in the downstream value chain. - Use of sold products
Emissions that occur during the use phase of the products sold by the company. - End-of-life treatment of sold products
Emissions associated with disposing of or recycling products once they are no longer used by the consumer.
Take Coles, for example. They’ve partnered with suppliers to reduce emissions across critical commodities like coffee and sugarcane. Their approach highlights a growing trend: businesses that want to stay competitive must show they’re serious about tackling Scope 3 emissions.
For SMEs, this might involve collaborating with suppliers, rethinking packaging or finding smarter ways to deliver products.
Why does this matter?
Understanding and managing these three scopes isn’t just about compliance or reducing costs—it’s about building trust with customers, partners and investors.
Mapping out your emissions, especially the intricate Scope 3, signals transparency and a genuine commitment to sustainability. The urgency for Australian SMEs to adopt carbon accounting practices cannot be overstated.
Ready to lead in sustainability?
Your business’ approach to carbon management can be a game-changer. Whether you’re looking to cut costs, attract eco-conscious customers, or stay ahead of industry demands, starting with your emissions is the key.
We’re more than happy to have a chat about your business and what’s involved with getting started with carbon accounting. Give us a ring on (02) 8188 9019 or complete our enquiry form.
We work with Ecommerce & Retail, Import & Distribution, Manufacturing, Not-For-Profits, Professional Services and Software Developers.
Want to know more about carbon accounting?
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Check out our blog Carbon Accounting 101: A Beginner’s Guide for Australian SMEs
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