The Concept Of Scope 3 Greenhouse Gas Emissions, And How To Measure Them For Carbon Management By Fossil Energy And Other Companies. Part 1.

Originally published on Forbes.com on March 24, 2022

NZero helps customers make data-driven decisions about decarbonizing homes, buildings, companies and communities.

There is a growing need for companies to adopt carbon management, meaning to reduce their greenhouse gas (GHG) emissions. Bankers and public stakeholders are demanding it. Worldwide investments in ESG-focused funds in 2021 were 2.3 times larger than they were in 2019.

Fossil fuel companies are being pulled into this. Some oil and gas companies may have Scope 3 emissions that are 75% of total emissions, or greater, and this is why Scope 3 is important for them. Some of these companies have committed to reducing Scope 1 and 2 emissions, which they can control. But Scope 3 emissions are a bit of mystery because they are emissions from products a company sells, such as oil for car gasoline and gas/coal for power plants, and which is partly beyond their control.

This article series will define Scope 3 emissions and explain their importance to climate goals such as net-zero emissions by 2050. How Scope 3 emissions can be measured is a critical part of knowing when/how to reduce these emissions in buildings, businesses, and communities. High-tech companies like Google and Microsoft are leaning in to Scope 3 emissions as are a few oil and gas companies.

Article 1 defines Scope 1, 2 and 3 emissions, why they are important, and what they look like for a typical oil and gas company.

Article 2 will give applications of measurement in homes, buildings, companies and communities.

Below is an interview with Josh Weber, co-founder of nZero.

BIO: Josh Weber founded nZero (then called Ledger8760) with Josh Griffin in 2017.  At that time, he was practicing as an energy and regulatory attorney focused on electric and natural gas regulation, renewables development and policy, and customer-driven sustainability initiatives.  His experience in regulatory and market issues shaped nZero’s approach to building accessible, accurate, and transparent data to drive decarbonization and guide customer strategy.
1. Your company nZero is new. Can you tell us about the company, its mission goals, employees, and location(s)?

nZero is a 24/7 climate management platform that gives companies, cities and communities accurate emissions data they need to make decisions that will allow them to reach net zero. We provide our customers with actionable and audit-ready insights that empower them to take tangible steps to lower their carbon impact and meet the increasing demands for ongoing and transparent reporting, driving climate action and accountability across a variety of industries. Unlike other carbon managementofferings who rely on outdated third-party data and opaque averages, we gather accurate, first-party, contextual data into a comprehensive view, because better data leads to better decisions. The data we provide to our customers empowers them to pinpoint inefficiencies within their operations, easily implement carbon reduction actions, and spend smarter.

Our customers own or operate over 3,000 buildings and discrete sites, spanning multiple industries in North America and Europe. We are quickly expanding globally, growing our client roster by 20% month-over-month and can help clients in any industry meet their carbon goals by providing them access to 24/7 and on-demand emissions data.

As of now, nZero’s client base is largely split between individual facilities and a growing number of “whole company” assessments. In the first category of individual facilities, we work primarily on large commercial complexes and industrial sites. However, these projects tend to upgrade to company-wide tracking as the value of the work with the individual projects quickly becomes apparent. Building a tool for individuals and homes is something we feel strongly about, but there are logistical and privacy-related challenges to manage if you want to maintain the same high level of accuracy and quality that defines the nZero product. However, these challenges are not insurmountable, and we hope to have more on this soon.

2. How will measurements of GHG emissions help us get to net-zero by 2050 — the goal of the Paris agreement?

To put it simply, you can’t change what you can’t measure. Access to accurate emissions data gathered on a 24/7 basis is key to creating an actionable roadmap to achieve more sustainable operations. Relying on averages leads to costly blind spots—for example, documented organizations under-reporting, or sometimes over-reporting certain emissions by as much as 35%. Because we make our technology easy to implement, our clients can focus on how to improve their carbon footprint, versus just how to calculate it.

Our insights help users weigh the carbon and cost impact of decisions and understand not only which investments can produce the greatest reductions, but which investments can have the highest Carbon ROI, so they can quickly and confidently make operational decisions to reduce emissions faster than ever before. This instant access to accurate data will enable companies to move towards their net-zero goals much faster than previous measurement methods have allowed while allowing them to report their process to their stakeholders and consumers along the way.

3. Please define Scope 1, 2, and 3 emissions, and say why Scope 3 emissions are important.

It’s important to communicate these categories in a manner that the average consumer can easily understand. We like to tell people that Scope 1 is what you personally emit, Scope 2 is what you directly induce someone else to emit, and Scope 3 are the embedded emissions you buy or sell. So, if I drive a car that burns gasoline and emits GHG, it falls under Scope 1. If I flip on a light switch, someone, somewhere turns up a generation unit that likely emits greenhouse gases, and since I’ve directly induced them to do so, it falls under Scope 2.

If I purchase a sandwich, I’ve paid for packaging that was created using fossil fuel, bread that was grown with fertilizer and baked in a gas oven, and meat, cheese and mayonnaise that was processed, all of which involved significant GHG emissions and the sum of those emissions I’ve purchased make up my Scope 3. Another way to look at it is that my Scope 3 impact is someone else’s scope 1 and scope 2. My Scope 1 and Scope 2 are someone else’s Scope 3.

Scope 3 emissions are important for two reasons. Firstly, the impact of all the things I buy and sell may outweigh the impact of the fuel I burn and the electricity I use. Secondly, Scope 3 emissions are an acknowledgment that we are all in this together, and my behavior as a consumer, a corporation, or a public entity is utterly entwined with others. It is a problem we all must solve, and a problem that we all can influence.

If our goal is simply to maintain a correct inventory of emissions, then, theoretically, we could do that by knowing the Scope 1 and Scope 2 of everyone out there emitting greenhouse gases. But our goal is much bigger; we need to understand and reduce our impact. I can choose between the ham sandwich or a garden salad, and neither will change my Scope 1 or Scope 2, but my choice may materially affect my Scope 3 impact. On a larger scale, there is a significant difference between the full lifecycle Scope 3 impact of choosing to buy a brand-new home rather than purchasing a remodeled cottage. My new, energy efficient home may have lower Scope 1 and Scope 2 emissions, but how long will it take to offset the Scope 3 impact of the new lumber, steel, and concrete required to build it?

From a corporate perspective, looking at downstream emissions, failure to consider the Scope 3 impact of the gasoline sold by an oil and gas company hides the massive impact of that oil company’s primary product, and it removes any incentive for that company to sell a more renewable product instead of gasoline. Scope 3, then, is essential to move beyond taking carbon inventories to understanding the GHG impacts of doing business. And it reminds us that nothing we do takes place in a vacuum. We are all part of the problem, and we must all be part of the solution.

4. Give an example of where Scope 1, 2, and 3 emissions come from in a major oil and gas company like BP, or Shell, or ExxonMobil.

nZero does not have access to any proprietary data about any of the companies you mention, so I cannot comment on the activities of any major oil or gas company beyond what you find reported in the public domain. But put simply, if your business involves exploration and extraction of oil and gas, refinement, shipping, and marketing, emissions will be associated with each of these activities. Scope 1 includes the fuels used for vehicles and facilities used for exploration, extraction and shipping, and leakage from pipelines or wellheads can be significant. Large facilities such as Refineries typically have very large electric loads, which will account for significant Scope 2 emissions.

Finally, while oil and gas companies will have upstream emissions embedded in the materials they purchase, by far the largest source of all emissions is represented by the fuels that they sell. These companies are built around selling products that, when used, emit greenhouse gases. That’s the reason that they have an outsized Scope 3 emissions profile, sometimes approaching 95% of total emissions.