Scope 1, 2, 3 Under the TGO Requirements

Almost every question about a corporate footprint eventually becomes a question about classification: is this emission ours, is it from energy we bought, or is it something that happens elsewhere because of us? The TGO Requirements for Calculating and Reporting the Carbon Footprint of an Organization (2022) answer this with a three-category system, usually called Scope 1, 2 and 3. This article sets out the definitions, the mapping to ISO 14064-1:2018, the examples the document gives, and the special rules for electricity and for significance.

#Direct and indirect: the definitions

The requirements define a direct GHG emission as an emission from a source that the organization owns or has authority to control, and note that the standard uses ownership or control (financial or operational) to define the organizational boundary (TGO CFO Requirements, 2022, p.10). An indirect GHG emission is one that results from the organization's operations and activities but does not come from a source the organization owns or controls; such emissions typically occur upstream and downstream in the supply chain (TGO CFO Requirements, 2022, p.11).

Two more definitions make the numbers comparable. Global warming potential is the potential of a gas to cause warming, based on its radiative efficiency and atmospheric lifetime, relative to carbon dioxide; and carbon dioxide equivalent is the mass of a gas multiplied by its GWP (TGO CFO Requirements, 2022, p.11). The organizational boundary is defined as the activities or facilities the organization controls operationally or financially, or apportions by equity share, and the reporting boundary as the emissions and removals reported within that organizational boundary (TGO CFO Requirements, 2022, p.13).

#The three Thai categories

Section 5.2.2 divides emissions and removals into three categories (TGO CFO Requirements, 2022, p.16):

• Category 1, direct: stationary combustion; mobile combustion; direct process emissions; fugitive emissions and other releases; and direct emissions and removals from biomass such as soil and forests.
• Category 2, energy indirect: electricity imported from outside for use within the organization, and other imported energy such as steam, heat, cooling and compressed air (TGO CFO Requirements, 2022, p.17).
• Category 3, other indirect: everything outside categories 1 and 2 that results from the organization's activities. The organization may follow ISO 14064-1:2018 or the GHG Protocol, which divides these into 15 categories (TGO CFO Requirements, 2022, p.17).

The 15 categories listed in the requirements are purchased goods and services; capital goods; fuel- and energy-related activities not already in categories 1 and 2 (split into upstream fuel, fuel for purchased energy, transmission losses, and electricity bought for resale); upstream transportation and distribution; waste generated in operations; business travel; employee commuting, which explicitly includes company-chartered shuttle services and visitors; upstream leased assets; downstream transportation and distribution; processing of sold products; use of sold products; end-of-life treatment of sold products; downstream leased assets; franchises; and investments (TGO CFO Requirements, 2022, pp.17-19). Several of the descriptions repeat the same warning: the figure must not double count what has already been reported in category 1 or 2 (TGO CFO Requirements, 2022, pp.17-19).

#Mapping to ISO 14064-1:2018

Appendix 3 explains that the Thai three-category structure is comparable to the six categories of ISO 14064-1:2018. Thai category 1 corresponds to ISO category 1, direct emissions and removals; Thai category 2 to ISO category 2, indirect emissions from imported energy; and Thai category 3 spans ISO categories 3 to 6, which are indirect emissions from transportation, from products used by the organization, associated with the use of products from the organization, and from other sources (TGO CFO Requirements, 2022, p.41). This is useful when a customer or auditor works in ISO terms: Scope 3 is not a single ISO category but four.

#Worked examples of what goes where

The appendices give concrete examples that resolve most classification arguments. For direct emissions, stationary combustion means fuel burned in fixed equipment such as heaters, gas turbines and boilers to produce heat, mechanical work and steam; mobile combustion means fuel burned in transport equipment such as cars, trucks, ships, aircraft, trains and forklifts (TGO CFO Requirements, 2022, p.42). Travel in vehicles outside the organizational boundary is not category 1 but should be reported as indirect emissions from business travel, commuting by employees, customers or visitors, or upstream leased assets (TGO CFO Requirements, 2022, p.42). Direct process emissions include cement and lime production, chemical production and oil and gas refining (TGO CFO Requirements, 2022, p.42). Fugitive emissions can come from fossil fuel handling equipment such as flanges and valves, from refrigeration systems, from agricultural processes such as manure and nitrogen fertilizer, and from uncontrolled waste decay in landfills, composting and wastewater treatment (TGO CFO Requirements, 2022, p.43).

Category 2 is narrower than people expect. It covers only the combustion emissions of producing the final energy delivered to you, such as electricity, heat, steam, chilled water and compressed air, and excludes upstream emissions of the fuel from cradle to power plant gate, emissions from building the power plant, and transmission and distribution losses (TGO CFO Requirements, 2022, p.43). Those excluded items belong in category 3.

Appendix 4 adds business examples. Purchased goods and services include the emissions from producing sugar for a soft-drink factory or steel for a can factory, and from contracted manufacturing and services (TGO CFO Requirements, 2022, p.50). Fuel- and energy-related activities include the production of diesel used in the organization's own vehicles, and electricity bought and sold on, such as electricity supplied to staff housing (TGO CFO Requirements, 2022, p.51). Upstream transportation includes diesel used by contractors' delivery trucks and activities in third-party warehouses; waste generated in operations includes landfill, incineration and wastewater treatment carried out by others; business travel includes staff flights (TGO CFO Requirements, 2022, p.51).

#The electricity rule

Appendix 14 is normative. Emissions from imported electricity used in the organization must be calculated with the location-based approach, using the most appropriate grid emission factor, whether a dedicated line, a local or regional grid average or the national average. The grid factor should be that of the reporting year if available, or the latest available, and must reflect the generation mix of the grid (TGO CFO Requirements, 2022, p.85). The factor may additionally include other indirect emissions related to generation, such as transmission and distribution losses and upstream fuel life-cycle stages (TGO CFO Requirements, 2022, p.85). The same requirements apply to imported and exported heat, steam, cooling and compressed air (TGO CFO Requirements, 2022, p.85). Market-based accounting for renewable purchases is therefore something you report in addition to, not instead of, the location-based figure.

#Deciding which Scope 3 sources are significant

The organization must have a written process for identifying the category 3 sources it will include, stating the significance criteria it used and taking into account how the inventory will be used; choosing not to report a source requires a reason (TGO CFO Requirements, 2022, p.20). Appendix 12 lays out the process. First, identify the intended use of the inventory, which may be regulatory or voluntary disclosure, a public commitment, an emissions trading scheme, performance tracking, a reduction project, the annual report, investor information, risk and opportunity identification, or due diligence (TGO CFO Requirements, 2022, p.81). Then set criteria that fit that use, applying the five principles; under Relevance, for example, the question is which indirect emissions must be assessed to meet the needs of the users of the data, considered activity by activity or in combination (TGO CFO Requirements, 2022, p.81).

The screening prompts in section 5.2.5 are practical: is the source presumed large, can the organization monitor and reduce it, does it create risk, does the industry's own guidance treat it as significant, does it come from outsourcing a core activity, and can it motivate employees to take part in reductions (TGO CFO Requirements, 2022, p.20).

#Putting it to work

In CarbonBiz each activity type is pre-assigned to a scope, Scope 3 entries are tagged to one of the 15 categories, and a significance score can be set per activity so the Fr-03.2 assessment can be produced from the records rather than reconstructed later. Electricity is calculated with the location-based grid factor by default, with market-based renewable purchases recorded separately for dual reporting.