Comparison of 3 Carbon Emission Measurements
When conducting ESG assessment for listed companies, carbon emissions are important indicators in the environmental assessment system. Scope 1 2 3 is a measure of the three different types of carbon emissions generated by the company, namely:
Scope 1: Greenhouse gas emissions directly generated in the company’s business activities, such as steel manufacturing enterprises, may emit carbon dioxide to the outside world during the production of steel;
Scope 2: Greenhouse gas emissions generated in the middle of the company’s business activities, such as steel manufacturing enterprises, use purchased electricity for production, and electricity production may also emit carbon dioxide;
Scope 3, the company related but more indirect greenhouse gas emissions, such as iron ore mining enterprises, the upstream raw material supplier of steel manufacturing enterprises, may emit carbon dioxide in ore mining;
Relationship of three carbon emission classifications
It can be seen from the definition of Scope 1 2 3 that Scope 1 2 is relatively easy to measure and Scope 3 is relatively difficult. In actual policies, regulators often require enterprises to disclose Scope 1 2, but do not impose obligations on Scope 3. For example, in March this year, the US Securities Regulatory Commission proposed the following requirements for enterprise climate disclosure rules:
The proposed rules also would require a registrant to disclose information about its direct greenhouse gas (GHG) emissions (Scope 1) and indirect emissions from purchased electricity or other forms of energy (Scope 2). In addition, a registrant would be required to disclose GHG emissions from upstream and downstream activities in its value chain (Scope 3), if material or if the registrant has set a GHG emissions target or goal that includes Scope 3 emissions.
US SEC, March 2022
References:
https://www.federalreserve.gov/newsevents/pressreleases/other20221202b.htm
