Demystifying Corporate Emissions: A Beginner's Guide to Scope 1, 2, and 3

The built environment, which includes commercial and residential structures, is estimated to account for approximately 40% of annual global greenhouse gas (GHG) emissions. Measured across the supply chain, these emissions are classified into three different scopes: Scope 1, Scope 2, and Scope 3. Understanding these scopes is fundamental to improving sustainable practices and achieving reduction goals.

Scope 1 Emissions: Direct Emissions from Owned or Controlled Sources

Scope 1 encompasses GHG emissions from an organization’s owned or controlled sources. According to GRI, this includes any physical unit or process that releases GHG into the atmosphere, such as CO₂ emissions from fuel consumption.

At ClarkDietrich, our main Scope 1 emission sources are:   

• Emissions from the combustion of natural gas, diesel, and propane in our manufacturing plants to power various equipment.   
• Emissions from the combustion of gasoline and diesel in our company vehicles.    
• Emissions from the use of welding gases in our manufacturing facilities.   
• Fugitive emissions, including refrigerants leaking from air conditioning systems.   

Organizations can reduce their Scope 1 emissions in various ways, such as switching to electric vehicles and equipment, or capturing Process and Fugitive Emissions through flues and ventilation systems.

Scope 2 Emissions: Indirect Emissions from Purchased Energy

Scope 2 emissions refer to an organization’s indirect emissions resulting from the generation of purchased or acquired electricity, heating, cooling and steam. Although these emissions are occurring at a third-party source, the consuming organizations are still held accountable since the emissions are being created by their demand for these resources. 

The energy ClarkDietrich consumes is generated by various types of power plants, including:   

• Fossil fuel power plants, which burn coal, natural gas, or oil to generate electricity.   
• Nuclear power plants, which use nuclear fission to generate electricity.   
• Renewable energy power plants, which use solar, wind, hydro, or geothermal energy to generate electricity.   

Scope 2 emissions are typically the easiest for an organization to measure. To reduce Scope 2 emissions, an organization can opt for renewable energy sources and/or improve its overall energy consumption efficiency.

Scope 3 Emissions: All Other Indirect Emissions Across the Value Chain

Scope 3 emissions look beyond the organization itself, measuring indirect emissions from the rest of its value chain—both upstream and downstream. Scope 3 includes everything from the organization’s emissions from purchased materials (e.g., from outsourced manufacturing), to the airplane emissions when its employees travel for a work conference, to its products’ end-of-life emissions.

For ClarkDietrich, these emissions are primarily associated with:

• Purchased Goods and Services: Emissions generated in the production of goods and services we purchase, including facility water and sewer services.
• Waste Generated in Operations: Emissions produced from the disposal of solid waste, wastewater, and sewer water. This also includes emissions associated with our recycling processes for steel and other materials.
• Business Travel: Emissions from various modes of transportation used for business purposes, including commercial air travel, rail, bus, rental cars, taxis/ridesharing services, and employee gas reimbursements. Emissions associated with hotel stays are also included.
• Employee Commuting: Emissions from employees commuting to and from work, as well as emissions related to our telework infrastructure.
• Upstream Transportation and Distribution: Emissions from the transportation of raw materials and components to our manufacturing facilities. 
• Downstream Transportation and Distribution: Emissions from the transportation of our finished products to customers and distribution centers, including via delivery truck, rail, or other methods. 

Although this scope is the most difficult to measure, it’s vital for both organizations and consumers to consider, as Scope 3 is most organizations’ largest contributor to overall emissions. While these emissions are largely outside of an organization’s direct control, the power of choice provides opportunities to reduce this scope. For instance, an organization can choose to source goods or services from a vendor that is reducing its own Scope 1 and 2 emissions. Manufacturing products with their end in mind—and clearly communicating recycling and responsible disposal procedures to end customers—is also crucial to reducing Scope 3 emissions. For ClarkDietrich, this comprehensive view of Scope 3 emissions highlights the importance of collaborating with our suppliers, customers, and employees to minimize our environmental impact throughout the value chain.

Understanding Our Emissions

ClarkDietrich completed its first comprehensive GHG emissions study for fiscal year 2023. This study provides detailed insights into our Scope 1, 2, and limited Scope 3 emissions, helping us to identify areas where we can reduce our environmental impact.   

MT of Steel is a metric ton (1,000 kg) of steel.   

We will report our emission intensities annually to show progress or regression in emissions efficiencies year over year. You can read more about this in our FY2023 Corporate Sustainability Report and future reports. 

Taking Action to Reduce Our Emissions

ClarkDietrich is committed to reducing our GHG emissions, and we are reviewing a number of steps to achieve this, including:

• Improving manufacturing and building energy efficiency in our facilities. (Scopes 1 & 2)
• Investing in renewable energy sources. (Scope 2)
• Working with our suppliers to reduce their emissions. (Scope 3)
• Developing products with lower embodied carbon. (Scopes 1, 2, & 3)

How You Can Help

Our customers can help us reduce our Scope 3 emissions by:

• Selecting products with lower embodied carbon.
• Recycling our products at their end of life.

Together, we can make a difference in the fight against climate change.

New to any other sustainability terms used in this blog? Check out our new Sustainability Glossary for a comprehensive guide on key terms and concepts.