The Greenhouse Gas Protocol (GHG Protocol) has developed the most recognized standard for reporting greenhouse gas emissions. The standard divides emissions into three different scopes based on where the emissions come from. Dividing emissions in this way makes it easier to set emission reduction targets and measure progress.
The figure below shows the distribution of different scopes at Nordic Steel, and where the emissions come from.
Our smallest category is scope 1, followed by scope 2 and finally scope 3, which accounts for up to 90 percent of emissions. We report scope 1 and 2, and parts of scope 3, annually. In addition, we work continuously to reduce emissions across all three categories(read more in our sustainability strategy).
Scope 1 refers to the company's direct emissions, i.e. emissions associated with the day-to-day activities that the company owns or controls. For example, from the operation of machinery or use of vehicles. At Nordic Steel, we have very low scope 1 emissions, as almost all production is electrified. The remaining emissions come from diesel for company cars and forklifts. By 2023, we will have replaced almost all our diesel trucks with electric trucks. And soon the last diesel trucks will be gone too.
Scope 2 is indirect emissions associated with the production of energy that the company purchases, in other words, the company's electricity consumption. In Norway, most of our electricity comes from renewable sources, unlike other countries where electricity may be produced from non-renewable sources. However, we can still do better at reducing our electricity consumption. At Nordic Steel, we work continuously to reduce consumption, and since 2019 we have had stable consumption despite increased sales, more employees and a large increase in production facilities.
Scope 3 includes all indirect emissions apart from electricity (scope 2) that are related to the company's activities, such as emissions from the production of materials used by the company or emissions from transportation. Scope 3 is the most complex category and spans 15 different sub-categories. It is also usually the largest category, often representing more than 70 percent of a company's total emissions (Source: https://www2.deloitte.com/uk/en/focus/climate-change/zero-in-on-scope-1-2-and-3-emissions.html).
The same applies to us at Nordic Steel. We estimate that around 90 percent of our emissions come from scope 3. Here we can divide the emissions into two groups: upstream and downstream activities. In upstream activities, emissions come from the production of purchased steel, transportation, waste, business travel and employee travel to work. In downstream activities, emissions come from the use of sold products, transportation and end-of-life treatment of sold products.
There are major challenges associated with measuring scope 3. It can be difficult to access data from the value chain. The figures may be incomplete, inconsistent or rely heavily on estimates. In addition, scope 3 is very challenging to control and reduce.
Despite the complexity of scope 3, we have a close dialog with our suppliers and customers to reduce scope 3 emissions. We purchase the greenest steel available in the market, optimize transport routes in collaboration with transport suppliers, and design material-efficient solutions, to name a few examples.
By working together in this way, we not only reduce scope 3 emissions, but also reduce climate risk and resource consumption, as well as increase transparency and knowledge across the value chain.
