What are the scopes and how can they help companies, particularly in construction and development? | foresight.skanska.com
DECARBONIZING CONSTRUCTION

What are the scopes and how can they help companies, particularly in construction and development?

Contact image Pankaj Bhatia, Director of GHG Protocol Pankaj Bhatia, Director of GHG Protocol

Greenhouse gas (GHG) accounting is a powerful tool for businesses. But what does it entail and how can businesses leverage GHG accounting to serve company goals? GHG accounting is the process of measuring and monitoring GHG emissions using standardized methods and rules. The most widely used GHG accounting standards come from Greenhouse Gas Protocol, which developed the framework of the three scopes.

“Overview of GHG Protocol scopes and emissions across the value chain,” Greenhouse Gas Protocol, Technical Guidance for Calculating Scope 3 Emissions, p 6.

 

 

GHG Protocol’s corporate inventory approach quantifies the direct and indirect emissions attributable to a company’s activities, classified into three scopes. Scope 1 refers to direct emissions from a company’s owned or controlled sources. Scope 2 refers to indirect emissions from the generation of energy purchased and consumed by a company. Scope 3 emissions are indirect emissions not included in scope 2. Scope 3 emissions are all other indirect emissions that occur in the value chain of a reporting company, grouped into fifteen mutually exclusive categories that distinguish upstream and downstream emissions.


Measuring emissions enables companies to manage their GHG impacts, as well as achieve multiple other business goals. GHG accounting enables companies to identify and understand risks and opportunities associated with value chain emissions and engage value chain partners in GHG management. GHG accounting also allows companies to provide stakeholders with valuable information through participating in voluntary and mandatory disclosure programs.


Looking specifically at the construction and real estate industry, different types of companies will have different types of emissions impacts. For example, real estate investment trusts (REITs) will often see a large share of scope 3 emissions in investments (category 15). Construction contractors will often see a large share of scope 3 emissions in purchased goods and services (category 1), capital goods (category 2) and waste generated in operations (category 5). Building developers will often see a large share of scope 3 emissions in capital goods (category 2), fuel and energy-related activities not included in scope 1 or scope 2 (category 3), upstream transportation and distribution (category 4), use of sold products (category 11), and end-of-life treatment of sold products (category 12). Building owners will often see a large share of scope 3 emissions in purchased goods and services (category 1), capital goods (category 2), fuel and energy-related activities not included in scope 1 or scope 2 (category 3), and downstream leased assets (category 13).


Therefore, emissions calculations in the construction industry can be complex and will depend on a particular company’s organizational structure, as well as which parties are responsible for the various purchasing decisions made during project construction.


Emissions on a construction site will mainly consist of fuel burned onsite to operate heavy machinery, and the electricity used to provide lighting, operate fans and pumps, and to operate other construction equipment. These will be the scope 1 (fuel) and scope 2 (purchased energy) emissions for the construction firm or subcontractor that owns and operates the construction equipment.


Other emissions are associated with the building materials used to construct projects, including concrete, lumber, steel, drywall, and various interior finishes. These materials will generally be accounted for by the general contractor in their scope 3, category 1 emissions (purchased goods and services). If a subcontractor is primarily responsible for these procurement decisions, it may be more appropriate for the subcontractor to report these emissions.


Transportation of materials to the construction site is another source of emissions during construction and will similarly be reported either by the general contractor or subcontractor depending on who pays for the material and shipping to the construction site. These emissions will be categorized as scope 3, category 4 (upstream transportation and distribution).   
Once a project has been finished, the owner of the project should report the emissions from the construction of the project as scope 3, category 2 (capital goods). A building owner that leases a building to tenants may also report emissions from the ongoing use of the building in scope 3, category 13 (downstream leased assets) or in their own scope 1 and 2, depending on the nature of the lease agreement and the company’s chosen approach for consolidating emissions. Finally, if a building is sold to another party, then the seller should account for the projected lifetime emissions of the building in scope 3, category 11 (use of sold products), as well as emissions from eventual demolition and waste disposal in scope 3, category 12 (end-of-life treatment of sold products).