There is a whole new vocabulary that C-suites are dealing with as new policies to tackle climate change gather momentum. Some of the new phrases were already reduced to their acronyms, such as GHGs (greenhouse gases) and ESG (environmental, social and governance policies).
Others are only now entering the boardroom vernacular. A prime example of this is “Scope”. Note the capital letter. The dictionary definition of “scope” is “space or opportunity for action or thought”.
Understanding Scope is necessary for industrial businesses looking to reduce GHG emissions on the road to net zero.
In the regulatory world Scope is usually followed by a number – 1, 2, or 3 – and refers to a specific range of industrial activities that generate GHG emissions. The definitions for Scope 1-2-3 activities form a worldwide standard, first defined in the Green House Gas Protocol of 2001, created by World Resources Institute and the World Business Council for Sustainable Development.
According to the U.S. Environmental Protection Agency, Scope 1 emissions are direct GHG emissions from sources controlled or owned by an organization, such as fuel combustion in boilers, furnaces and vehicles. These sources of emissions are most often required in the operations of the business. Companies that have fuel, oil, or natural gas delivered to facilities for their heating and, or manufacturing operations, must track and report them as Scope 1 emissions.
Scope 2 is a very different kettle of fish – it applies to all industrial, commercial, and even governmental organizations. It refers to indirect GHG emissions associated with purchasing electricity, steam, heat or cooling. So, for instance, an electricity generation plant powered by coal will report its emissions in Scope 1, but the organizations purchasing that electricity must account for their consumption of electricity as Scope 2 emissions. The EPA graphic from the EPA link above calls this “upstream”.
One interesting thing about the relationship between Scope 1 and Scope 2 is that organizations may shift their emissions from 1 to 2. For instance, replacing gas/diesel-powered vehicles with electric vehicles (EVs) removes the Scope 1 GHG emissions and replaces them with Scope 2 emissions. EVs are far more fuel efficient than gas-powered vehicles on a mileage basis; that means organizations will report much lower emissions by making the switch.
For example, a 2018 study by the University of Michigan’s Transportation Research Institute found that the average annual cost of driving a typical new gasoline vehicle that year in the U.S. was $1,117, while driving an EV averaged $485. These figures are clearly out of date, due to supply chain disruptions over the past several years, but it doesn’t change the underlying physics – using EVs simply doesn’t produce the same amount of GHGs. If companies purchase carbon offsets to cover the effect of their emissions, it’s important to find ways to move from Scope 1 to Scope 2 to save money.
Then there is Scope 3 – referred to as “downstream” emissions by the EPA and other regulators around the globe, or as value chain or product lifecycle emissions. This is much harder to quantify, because it addresses all the emissions associated with the production and use of a specific product, from cradle to grave – from the raw materials, manufacturing, transport and storage, to sale, use and disposal.
Think of buying a one-pound package of individually wrapped cheese slices. The producer of that specific product will be tracking its Scope 1 and Scope 2 emissions, but that doesn’t capture the disposal of the cellophane wraps around each slice, for instance – which carry an impact on landfills. It might sound small, and for each wrap it is, but how many billions of them are thrown away each year?
Companies truly committed to climate change find great opportunities to reduce GHG emissions – in the case of those cheese slices, for instance, by finding a biodegradable material to replace the cellophane.
Despite the nuances between Scope 1,2 and 3, two certainties remain. From the boardroom to the production floor and beyond, the importance of Scope will only continue to grow. It’s also not sufficient to just report on emissions and greenhouse gas numbers — executives and operations teams need tools to actively reduce emissions as part of a larger effort to control costs from the inefficiencies causing emissions.
Executives and operations teams also need tools that manage carbon offset purchase expenses, and help manage credit profiles on Wall St. Such tools deliver the visibility and collaborative control of their total manufacturing and production environment to better manage Scope and address GHG emissions.
Kelvin.ai provides organizations the industrial intelligence that comes with a common view of the total production process – including correlating failures and inefficiencies with the excess energy consumption and carbon emissions due to inefficiencies.
Our collaborative control software leverages machine learning (ML) failure detection algorithms, trained on decades of failure data. As a result, we empower engineers and operators to better leverage asset, component, and specific failure mode data.
Our capabilities extend to providing specific, targeted recommendations to correct failures and indicate savings potential, both on energy costs as well as carbon offset purchases. Further, this information is available from an asset level all the way up to a site, business unit or total enterprise level for a variety of assets. This allows both operations teams and executives to make use of this information directly in their workflows.
The result is over 53% reduction in Scope 1 fugitive emissions (CH4) for our customers.
We see every day how this alignment and augmented capability to the technical workforce of an organization impacts the energy consumption utilized to calculate metrics like GHG emissions in metric tons of CO2 (MtCO2). And this value is amplified when integrated with third-party Governance Risk and Compliance (GRC) tools to share this information into existing enterprise workflows for ESG reporting and compliance.
To learn more about how Kelvin.ai helps customers reduce emissions and hit net-zero goals, while boosting production and efficiency, contact us today.