Defining Scope 1 and Scope 2 Emission Classifications for CSRD Requirements

The CSRD, or Corporate Sustainability Reporting Directive, is a relatively new mandate from the EU that from 2025, requires large companies operating in the EU to disclose how sustainable their operations are, as do SMEs (small and medium-sized enterprises), but only from 2027. The aim of this reporting directive is to enable understanding of how companies are contributing to addressing climate change and their effectiveness in reducing GHG emissions (greenhouse gases), which is becoming increasingly an urgent issue, with 250,000 people expected to die every year due to climate change.

As it is new, with the end of this financial year being the first time these corporate sustainability reports will be received, let’s discuss what this report really means, how it can financially benefit your business to have a good report, what scope 1 and scope 2 emissions classifications mean in terms of the CSRD, and how you can reach your targets for future CSRD reports.

What is the CSRD?

As already mentioned, the whole purpose of the Corporate Sustainability Reporting Directive is to track how sustainable large businesses are, as well as SMEs eventually, too. They must disclose the risk and opportunities their operations have on social and environmental issues.

They must report according to ESRS (European Sustainability Recording Standards), which means you must include:

• Governance
• Strategy
• Impact, Risk, and Opportunity Management (IRO)
• Metrics and targets

Each company must disclose through the CSRD the targets they have set each year to mitigate their contribution to climate and social issues, and how successful, or unsuccessful, they have been in achieving those targets. They also must disclose the absolute values of their emissions, in either tonnes or percentage of emissions, as well as give information on types of energy consumption, such as:

• Coal
• Oil
• Gas
• And renewable energy

However, the CSRD, Scope 1, and Scope 2 aren’t just about compliance with the EU’s Green New Deal. Performing well in this climate reporting directive and reaching these targets is in a company’s best interests. Consumers are becoming more aware of their carbon footprint and are increasingly only wanting to support businesses that have a similar outlook on the environment that they do, and performing well in the CSRD and achieving these targets will give these companies a competitive edge. 

The CSRD rewards sustainability and corporate responsibility, so now let’s discuss the different emission classifications, in the form of scope 1, scope 2, and scope 3.

Scope 1 Emissions

There are 3 ways that the EU classifies emissions, with Scope 1 being the first one for the CSRD. This emission classification is about the direct impact that a company’s operations have on the environment from their energy consumption. An example of this is the fuel burned by a fleet that is owned by the company. 

If your energy consumption is rather poor where the CSRD Scope 1 is concerned, this scope is the easiest one to reach the CSRD target of, as it is up to each company how they use energy in their operations.

Scope 2 Emissions

Scope 2 emissions in CSRD are classified by the indirect emissions caused by a company’s operations. An example of Scope 2 emissions is the electricity used in a company’s office or the gas that has gone into heating the rooms they rent. Scope 2 emissions aren’t caused directly by the services offered by the company, but they still occur and contribute to climate change.

Like Scope 1, Scope 2 emissions are also relatively easy targets to reach, as businesses could adopt different sustainability strategies in the day-to-day running of their operations to reduce their Scope 2 emissions for the CSRD.

Scope 3 Emissions

While not the focus of this article, Scope 3 emissions in the CSRD are still important, and these are the emissions that are caused in a company’s supply chain, or value chain - including the customer. Since a lot more people are involved in Scope 3 emissions, it’s therefore much more difficult to control, and a lot of companies have high Scope 3 scores. Reducing these to meet the CSRD’s targets is much more challenging.

How Symphony Energy can help you reduce emissions

Keeping your Scope 1 and Scope 2 emissions as low as possible isn’t just important for the CSRD, but our planet as a whole. However, in order to demonstrate corporate responsibility and corporate sustainability, as well as achieve the CSRD targets, we must transform our commercial buildings into more sustainable and cost-effective spaces that benefit everyone.

At Symphony Energy, our engineers employ unrivalled cutting-edge technology for saving you HVAC energy (heating, ventilation, air conditioning), with up to 80% reduction in HVAC costs. After successful collaborations with Tesco and the Royal College of Surgeons in Ireland, we can support your goal of reaching the targets for Scope 1 and Scope 2 emissions to reflect your commitment to sustainability outside of the CSRD and exceed ESG objectives for environmental responsibility.

If you want to know more about how Symphony Energy can help you transform and optimise your energy performance, schedule a demo with our team today.