Scope 1, 2, and 3 Emissions Explained: Where Do Carbon Credits Fit In?
As the climate crisis intensifies, businesses worldwide are under growing pressure to measure, manage, and reduce their greenhouse gas (GHG) emissions. But emissions are not all the same — they are categorized into Scope 1, 2, and 3 emissions under the widely recognized Greenhouse Gas Protocol. Understanding these categories is crucial for building an effective sustainability strategy and achieving net zero goals.
In this article, we’ll explain each scope, how they differ, and where carbon credits fit in.
What Are Scope 1, 2, and 3 Emissions?
The world is moving rapidly toward a low-carbon future. Businesses of all sizes are expected not only to measure their greenhouse gas (GHG) emissions but also to actively reduce them. To standardize how organizations account for emissions, the Greenhouse Gas Protocol introduced the concept of Scope 1, 2, and 3 emissions.
These categories help companies understand the full picture of their climate impact. However, reducing emissions across all scopes can be challenging, and that’s where carbon credits and renewable energy certificates come into play.
Scope 1, 2, and 3 Emissions: A Closer Look
Scope 1: Direct Emissions
Scope 1 emissions come directly from sources that a company owns or controls. These are the easiest to identify because they’re generated by day-to-day business operations. Examples include:
Fuel combustion in company-owned vehicles (e.g., delivery vans, corporate cars, trucks).
On-site energy generation, like natural gas boilers or diesel generators.
Industrial processes that release gases, such as cement or steel production.
Example: If an airline owns its fleet of planes, the jet fuel burned is counted as Scope 1.
Scope 2: Indirect Energy Emissions
Scope 2 covers emissions from the electricity, heat, steam, or cooling that an organization purchases from external suppliers. Even though these emissions don’t happen on-site, they are tied to a company’s activities.
If the power plant supplying your office electricity burns coal, those emissions are reported as your Scope 2 emissions.
Switching to renewable electricity — or purchasing I-RECs (International Renewable Energy Certificates) — can reduce or eliminate Scope 2 emissions.
Example: A technology company that powers its data centers with renewable electricity from certified solar I-RECs can claim zero Scope 2 emissions.
Scope 3: Value Chain Emissions
Scope 3 emissions are the most complex and far-reaching. They include all indirect emissions that occur outside a company’s direct operations, across its entire value chain. These often make up the majority of an organization’s footprint — sometimes up to 70–90%.
They are divided into 15 reporting categories, including:
Purchased goods and services (supplier emissions).
Upstream and downstream transportation and distribution.
Employee commuting and business travel.
Waste disposal.
Product use and end-of-life treatment.
Example: For an apparel company, Scope 3 includes the emissions from cotton farming, textile production by suppliers, shipping to stores, and even how consumers wash and dispose of the clothes.
Why All Three Scopes Matter
Scope 1 and 2 are often the first focus for companies because they are easier to measure and control. Switching fleets to electric vehicles or transitioning to renewable energy are straightforward solutions.
Scope 3, however, requires collaboration across suppliers, partners, and even customers. It’s complex but critical, as ignoring it leaves out the majority of a company’s climate impact.
Regulators, investors, and customers increasingly demand transparency across all three scopes. Leading companies committing to Net Zero or initiatives like RE100 must address Scope 1, 2, and 3 emissions together.
Where Do Carbon Credits Fit In?
While direct reductions should always come first, some emissions are unavoidable in the short term. That’s where carbon credits and renewable energy certificates can help.
Scope 1 (Direct emissions): If a logistics company still relies on diesel trucks, it can offset those emissions by buying carbon credits from verified reforestation or clean energy projects.
Scope 2 (Purchased electricity): Businesses can buy I-RECs or RECs to ensure their electricity use is matched with renewable generation, reducing Scope 2 to zero.
Scope 3 (Value chain): Companies can compensate for supplier or product-use emissions by investing in carbon credits that fund projects like forest preservation, carbon capture, or clean cookstove initiatives.
Important Note: Carbon credits are not a substitute for decarbonization. They are a bridge solution — enabling companies to meet near-term climate goals while investing in long-term systemic changes.
Why Use Carbon Credits Strategically
Accelerate Net Zero Journeys – Offsetting unavoidable emissions while developing longer-term reduction strategies.
Support Global Climate Action – Funding renewable energy, forestry, and community projects worldwide.
Enhance Corporate Reputation – Demonstrating climate leadership to customers, employees, and investors.
Meet Regulatory & Voluntary Standards – Many frameworks (like CDP, SBTi, RE100) recognize the role of high-quality carbon credits and I-RECs.
Conclusion
Understanding and addressing Scope 1, 2, and 3 emissions is the foundation of corporate climate responsibility. Direct reductions — like transitioning to renewable energy, upgrading fleets, and working with suppliers — should always come first. But for emissions that cannot be eliminated right away, carbon credits play a vital role in bridging the gap.
If you want to buy good quality, verified carbon credits, visit Hestiya Marketplace. Our platform ensures transparency, global standards, and impact you can trust.
