The SME Climate Commitment tracks emissions using standardized categories according to the Greenhouse Gas Protocol. These categories help businesses identify and address their environmental impact:
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Scope 1 - Direct Emissions: These are greenhouse gasses directly released from your owned or controlled sources. Examples include:
- Emissions from company vehicles (fuel combustion)
- On-site boilers and generators (fuel combustion)
- Chemical processes using your equipment
- Leaking refrigerants
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Scope 2 - Indirect Emissions from Purchased Energy: These emissions are generated when you purchase electricity, heat, steam, or cooling. While you don't directly control the source, your choices of energy providers and usage impact the overall emissions.
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Location-based accounting ties a company's Scope 2 emissions to the average emissions intensity of the electricity grid it's connected to. This approach reflects the region's overall energy mix.
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Market-based accounting considers a company's specific electricity procurement strategies, such as power purchase agreements (PPAs) and purchasing renewable energy certificates (RECs). It allows companies to claim lower emissions if they invest in cleaner energy sources.
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Location-based reflects the regional context, while market-based showcases a company's efforts to reduce emissions. It is mandatory for SMEs to report on their location-based Scope 2 emissions with the SME Climate Hub, and ideally, both should be considered for a comprehensive understanding.
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Scope 3 - Value Chain Emissions: These are a consequence of your activities but occur at sources beyond your direct control. Examples include:
- Business travel and employee commutes
- Waste disposal from your operations
- Production and transportation of goods you purchase
- Use of products you sell
- Investments you make
While Scope 1 emissions are often the easiest to identify, a complete picture requires considering all three scopes. Scope 3 emissions can often be significant, and addressing them demonstrates a comprehensive approach to sustainability.
Read more about how should I approach measuring my company’s emissions?