Why Measuring the 'Scope' of Carbon Emissions Is Tricky

When a company pledges to cut its carbon emissions, how big a deal is it? That depends on what’s being counted. An oil company’s direct emissions – those from its trucks, drills and facilities – are only a small fraction of the CO2 released when the fuel it sells is burned. A pledge by McDonald’s Corp. to buy solar energy for its offices can be viewed alongside the much larger carbon impact of its suppliers raising cattle and franchises that sell its burgers. As more investors take environmental factors into account, what has been a technical debate is taking on increased importance, as a matter of “scope.”

It’s a method of tallying a company’s impact on climate change, using three categories to account for the various ways that companies can pollute the atmosphere. Under what’s known as the Greenhouse Gas Protocol, emissions are classed as Scope 1, 2 or 3. Scope 1 covers direct emissions from sources owned or controlled by a company, like a fleet of cars or a power plant. Scope 2 covers emissions from the generation of energy the company buys, such as electricity. Scope 3 is everything else linked to the company: the emissions produced by the entire value chain, including suppliers and customers. This three-tiered approach grew out of a partnership between the World Resources Institute, a global environmental non-profit organization, and the World Business Council for Sustainable Development, an association of more than 200 companies.