1.5 Degree Transition Challenge - Liontrust Engagement Update 11.21 - Flipbook - Page 6
Direct and indirect emissions – Scope 1,2 and 3
At present, we are concentrating on direct emissions from companies,
so-called Scope 1 and Scope 2. These are linked to either assets
the company owns or the energy it purchases, both of which it has
most control over. This is clearly not the whole picture, however, and
businesses also need to understand their indirect emissions (Scope
3). While this tends to be more challenging, most of the companies
we have spoken to are aware of their largest indirect emissions and
many have plans to reduce these.
businesses, the most relevant indirect emissions might be from the energy
their products consume in use and, for these, innovation and more
efficient or alternative fuelled products are the best place to concentrate
efforts to provide as low-carbon alternatives as economically possible.
Carbon Dioxide
Carbon Dioxide
Global
GHG emissions
by gas
While we are increasingly being asked about indirect emissions, it
should be recognised that these are all effectively some other party’s
direct (Scope 1+2) emissions and the relevance is dependent on the
industry as well as company specific.
Where a business consumes large quantities of materials, for example, it
should be trying to source as much of those in recycled rather than virgin
form. In designing products, companies should also be thinking about
end-of-life and how to facilitate easy dismantling and reuse. For other
Direct emissions
65%
(fossil fuel and industrial processes)
11%
(forestry and other land use)
Methane
16%
Nitrous Oxide
6%
F-gases
2%
Source: IPCC, 2014
Indirect emissions
Scope 1
Scope 2
Scope 3
Measures carbon dioxide
equivalents (not just CO2, but
also other Greenhouse gases)
emitted by assets a company
owns.
Measures carbon dioxide
equivalents (again, including
other GHG) emitted from the
energy sources the business
uses (purchased electricity,
natural gas or other).
Measures carbon dioxide equivalents emitted indirectly as a
result of this business (these are Scope 1 or 2 emissions from
another party). There are 15 categories, as follows.
Upstream
Purchased good and services
Capital goods
Fuel and energy related activities (not included in Scope 1+2)
Upstream transportation and distribution
Upstream leased assets
Business
Waste generated from operations
Business travel
Employee commuting
Downstream
Downstream transportation and distribution
Processing of sold products
Use of sold products
End of life treatment of sold products
Downstream leased assets
Other
Franchises
Investments
Source: Liontrust/GHG Protocol
We cannot get away from the fact that all actors in the economy,
government, companies and individuals, need to halve their direct
emissions and must not stand back waiting for others to take the lead.
It will be some time before we can understand whether indirect
positive impacts (saving emissions from the products a company
6 - Liontrust: 1.5 degree Transition Challenge – engagement update
sells for example) can offset Scope 1+2 and we are therefore
encouraging businesses to concentrate on direct emissions first. In
time, we will better understand where a company should direct its
decarbonisation efforts in terms of indirect emissions, with each part
of our economy different.
