4 Strategies for Reducing Scope 1 and Scope 2 Emissions

Every year, greenhouse gas (GHG) emissions reduction becomes more urgent as the effects of human-induced climate change become more dangerous.

This urgency is not only due to consumers taking a stand and demanding action, but also from investors and governments requiring more accountability from businesses in addressing this issue. According to the EPA, electricity, industry and transportation make up the majority of total U.S. greenhouse gas emissions compared to other economic sectors.

That's why many companies are focused on reducing Scope 1 and Scope 2 emissions.

Since 1998, the Greenhouse Gas Protocol has worked toward creating internationally accepted accounting and reporting standards for emissions reduction. To address both indirect and direct emissions from a reporting organization, GHG Protocol offers developed guidance and standards that break down emissions into three scopes across the value chain.

Scope 1, 2 and 3 Greenhouse Gas Emissions Standards

The major contributors to corporate GHG emissions have been divided into three scopes. Each of these addresses emissions from manufacturing and materials all the way to a product's end-of-life, including disposal by the end user. The three scopes include:

• Scope 1 — direct emissions from company-owned facilities and company-owned vehicles.
• Scope 2 — indirect emissions from the purchase of electricity for the organization's own use.
• Scope 3 — indirect emissions from partners in the value chain.

Scope 1 emissions are perhaps the most straightforward since they cover direct emissions from sources that the organization controls. These include on-site fuel combustion from stationary and mobile sources like boilers, furnaces and vehicles. While Scope 1 addresses emissions from industry and transportation, Scope 2 addresses emissions from purchased electricity and involves collaboration with utility companies and governments.

According to the World Resource Institute's Scope 2 Guidance, "Scope 2 represents one of the largest sources of GHG emissions globally: the generation of electricity and heat now accounts for at least a third of global GHG emissions."

Scope 3 emissions cover indirect emissions both upstream and downstream of the reporting organization. Accounting for Scope 3 is difficult because it involves collaboration with stakeholders along the value chain. As most organizations have yet to begin or are early on in their journey to measure these emissions — and because Scope 1 and 2 emissions of organizations lower in the value chain contribute to Scope 3 emissions of organizations higher in the value chain - the reduction priorities for most manufacturers are instead those from Scopes 1 and 2.

Scope 1 and 2 Emissions Categories

Since they address different parts of the value chain and involve multiple organizations and energy companies, emissions reduction strategies vary by category and scope. They include a combination of efficiency, reducing consumption and switching to renewable energy.

Scope 1 Direct Emissions: Stationary Combustion

The first category of Scope 1 emissions covers all emissions from stationary combustion. This includes fuel combustion sources like:

• Boilers/furnaces
• Internal combustion engines
• Turbines
• Flares
• Process heaters/ovens
• Incinerators
• Cooling systems

In addition to combustion, this category also includes gases emitted from leaks and other business activities in organization-owned facilities.

Scope 1 Direct Emissions: Mobile Combustion

Transportation is addressed in Scope 1 and Scope 3. While Scope 3 accounts for mobile combustion from supply chain partners and employee vehicles both upstream and downstream, Scope 1 focuses on direct mobile combustion emissions from vehicles the company owns or controls. This does not include the full life cycle of greenhouse gas emissions related to the vehicle and its fuel.

In their guidance for Scope 1 vehicle emissions, the EPA notes that "users of this guidance should be aware, however, that the choice of transportation modes and fuels can greatly influence GHG emissions from a life cycle perspective. A transportation mode may have relatively few GHG emissions from the vehicle itself, but emissions could be higher from the production of the fuel."

Scope 2 Indirect Emissions: Purchased Energy

Energy generation represents nearly 40% of global GHG emissions, an amount industry is responsible for half of according to the World Resource Institute's Scope 2 Guidance. To address these emissions, two standards have been created for reporting Scope 2 emissions: a location-based method and a market-based method.

Location-based Scope 2 reporting is based on the average emissions intensity of the grids where the consumption occurs.

The market-based method derives emissions factors from contracts for the sale or purchase of energy. Market-based contracts include energy attribute certificates, direct contracts and supplier-specific emission rates. This method also provides more specific energy and emissions data to supply chain partners who are measuring their own Scope 3 output (compared to location-based average emissions).

Scope 1 and 2 Emissions Reduction Strategies

There are different strategies to reducing Scope 1 and 2 greenhouse gas emissions that organizations can use to reduce their carbon footprint. Choosing the appropriate strategy depends on factors like location, market and the type of industry and business activities involved. In most cases, a company can combine elements of each strategy to align with its unique circumstances and emissions reduction goals.

Reducing Consumption and Energy Conservation

Finding ways to 1) reduce energy consumption; 2) conserve energy onsite; and within 3) an organization's fleet is the most logical strategy for reducing GHG emissions from business activities. However, in most cases, operations depend on energy, so other strategies must be enacted to meet reduction goals.

Power Purchase Agreements

With a power purchase agreement (PPA), a third-party developer installs and operates an energy system on an organization's property, allowing the company to buy low-cost renewable energy from them. In turn, the owner of the energy system can benefit from tax credits and income from the sale of the energy. This solution is ideal for businesses operating in locations or industries that require increased energy consumption.

Energy Efficiency and Transportation Optimization

With the amount of data available to companies today, creating efficiencies with energy consumption is a strategy that can also benefit business operations. Optimizing transportation through specialized management systems and supply chain network optimization technology that identifies the most energy-efficient routes is another way to reduce Scope 1 emissions and contribute to overall operational efficiency.

Carbon Offsets

When reducing consumption is challenging and energy efficiency isn't enough to meet your Scope 1 and 2 emissions reduction targets, an organization can opt to offset their emissions by purchasing carbon offsets. In this exchange, the emissions reduction of one entity can be transferred to another to create a net climate benefit.

2. Reduce Carbon Consumption and Footprint

Once you accurately measure your carbon footprint, you can begin implementing emissions reduction strategies. This includes replacing capital equipment to increase energy efficiency. This is an important first step, especially if you plan to implement power purchase agreements. The less energy you consume during day-to-day operations, the less you will have to pay for energy down the line.

Here are a few approaches to reducing energy consumption in manufacturing for some of the biggest drivers of electricity usage:

• Injection Molding Machines: Legacy injection molding machines relying on hydraulic energy, consuming up to 70% more energy than machines that use electric energy. By replacing these machines with hybrid or electric machines, a company can reduce energy consumption. Another way to reduce energy consumption would be to use hot runner controllers to take the burden off the machine itself needing to heat the molds, heating them externally and pulling power at a lower voltage.
• Compressors and Chillers: Compressors are one of the biggest energy consumers at a manufacturing facility, responsible for anywhere between 15% and 30% of a site's total energy use. One way to mitigate carbon emissions from compressors is by adding a variable speed drive (or a variable frequency drive) to vary the amount of air pushed out of the compressor. This ensures that it is only pushing out air when driving a process and also aids in air leak detection. Bringing new chillers online once equipment approaches its 18-year lifespan can also help reduce electricity consumption by up to 30%.

3. Produce Renewable Energy

While reducing energy consumption is a great starting point, producing renewable energy onsite is another pillar that can help companies and third-party energy suppliers reach their Scope 2 GHG emissions reduction goals.

Solar panels are a common way organizations choose to produce renewable energy onsite. However, since manufacturing requires substantial energy, this will only address a fraction of the energy needed for operations. The ownership of a facility may also be a roadblock to producing energy onsite; leased buildings may need to lean on alternative reduction strategies, including engaging with local utilities to incorporate green power.

4. Procure Clean Energy

Since a company's ability to produce renewable energy for its own use can be limited due to factors like facility size, location and ownership, the next pillar in our approach is procurement.

Tools like Direct PPAs, where renewable energy is delivered to the site from a renewable source, are an effective method for procuring clean energy. Some utility companies also offer solar, hydro and wind power to customers.

It has become common for organizations to rely on procurement strategies like renewable energy certificates (RECs) or guarantees of origin (GOs) that involve little more from the company itself than signing a check to reach carbon neutrality. While this does reduce the emissions a company is reporting, it does not effectively address the need for all organizations to reduce their actual GHG emissions, which will help slow the climate change crisis.

The Bottom Line of Scope 1 and 2 Emissions Reduction

Effective Scope 1 and 2 GHG emissions reduction strategies do more than just help us address the major causes of climate change. They also offer added business benefits like cost savings from operational efficiency, increased sales and customer loyalty, innovation, and improved relationships with stakeholders.

With the majority of greenhouse gas emissions coming from industry, it is essential for companies to begin accounting for and reporting Scope 1 and 2 emissions. This is also the foundation for being able to calculate Scope 3 emissions, which are still being standardized today. Implementing sustainable business practices can be challenging given the lack of data in some areas and the upfront costs of some emissions reduction strategies. However, these challenges also present new leadership opportunities for companies that are willing to put in the work.