How Life Cycle Assessment (LCA) Helps Businesses Decode Scope 1, 2, and 3 Emissions

Understanding and managing greenhouse gas (GHG) emissions is essential for businesses aiming to enhance their sustainability profile and step up their game and competitiveness.

Companies are increasingly expected to disclose their Environmental, Social, and Governance (ESG) reports, driven by regulatory requirements, investor scrutiny, and consumer demand for transparency, where their carbon footprint takes place. However, measuring emissions is not as straightforward as summing fuel consumption or electricity usage. Emissions emerge at multiple points along a company’s value chain, where sometimes information gathering is a difficult and shady process. In these scenarios, building a structured approach is a top priority to capture the full picture.

Life Cycle Assessment (LCA) offers a science-based framework for evaluating environmental impacts across a product’s entire lifespan, from raw material extraction and manufacturing to distribution, usage, disposal, and even repair and maintenance. When combined with the categorization of emissions into Scope 1, 2, and 3 under the GHG Protocol, LCA provides businesses with a clear, segregated, data-driven map of where and how emissions occur, unlocking compliance with climate disclosure frameworks and leading companies to successfully pinpoint the most impactful areas for emissions reduction.

This article explores how businesses can integrate LCA with Scope 1, 2, and 3 emissions tracking to develop a more accurate and actionable understanding of their carbon footprint. Breaking down emissions at each stage of the value chain takes companies beyond surface-level carbon accounting and brings meaningful strategies for decarbonization.

Understanding Scope 1, 2, and 3 Emissions

The Greenhouse Gas Protocol categorizes emissions into three scopes to facilitate comprehensive reporting and management:

• Scope 1: Direct emissions come from sources owned or controlled by the company. These emissions are the most straightforward to measure, as they result from company-owned assets such as manufacturing facilities, boilers, furnaces, company vehicles, and on-site fuel combustion.

• Scope 2: Indirect emissions are generated elsewhere but attributed to the company due to its consumption of purchased electricity, steam, heating, or cooling. These emissions typically originate from power plants and utilities supplying energy to the company’s operations. The intensity of Scope 2 emissions depends on the energy mix of the grid the company relies on - regions powered primarily by coal will have a higher carbon intensity than those relying on renewables.

• Scope 3: All the remaining indirect emissions from the value chain are the most complex and typically the most significant, often accounting for more than 70% of a company’s total carbon footprint. These emissions originate from activities outside the company’s direct control but are essential to its operations. Scope 3 is further divided into 15 categories, covering both upstream (supplier-related) and downstream (customer-related) emissions.

  • Upstream Scope 3 Emissions: Include emissions from the extraction and production of raw materials, transportation of goods, business travel, employee commuting, and capital goods.

  • Downstream Scope 3 Emissions: Arise after a company sells a product or service and include emissions from product transportation, product use, disposal, and end-of-life treatment.

Because Scope 3 emissions are often embedded deep within the supply chain, they require collaboration with suppliers, customers, and logistics partners to measure and reduce. Many companies even set supplier engagement policies, implement sustainable procurement strategies, and design products for durability and recyclability to tackle Scope 3 emissions effectively.

How LCA and PCF Unravel Hidden Emissions

Product Carbon Footprinting (PCF) is a subset of Life Cycle Assessment (LCA) that focuses specifically on estimating the carbon emissions of a product throughout its entire life cycle. Unlike corporate carbon accounting, PCF provides a granular, product-specific analysis, which is instrumental in identifying hotspots within the supply chain where emissions are most significant, helping businesses make informed decisions to minimize their environmental impact.

Mapping a product’s emissions at each stage enables businesses to accurately allocate impact in line with the GHG Protocol, transforming what was once a complex, time-intensive, and costly process into a clear, correct, and structured assessment of a product’s contribution to the company’s overall carbon footprint. Let’s look at some possible scenario allocations:

• Raw Material Extraction and Processing (Upstream Scope 3)

  Emissions from sourcing raw materials—whether mining metals, extracting crude oil for plastics, or cultivating crops—fall under Scope 3, Category 1: Purchased Goods and Services. For instance, in the apparel industry, the high carbon intensity of polyester production or the water-intensive nature of cotton farming significantly contribute to total product emissions. Correctly allocating these emissions ensures that businesses can work with suppliers to transition toward lower-carbon materials, such as recycled fibers or bio-based alternatives.

• Manufacturing and Production (Scope 1, 2 & 3)

  Emissions from in-house production processes, including fuel combustion for machinery or heat generation, fall under Scope 1. Similarly, purchased electricity will take part in Scope 2. However, if production is outsourced (if paying a third-party manufacturer), these emissions shift to Category 1.

• Transportation and Distribution (Scope 1, 2, or 3)

  • Scope 1: If a company owns and operates its own transportation fleet, emissions from fuel combustion fall under Scope 1.

  • Scope 2: If electric vehicles or other indirect energy sources are used, purchased electricity emissions can be allocated to Scope 2.

  • Scope 3: If the company relies on third-party shipping partners, emissions from logistics providers are considered Scope 3, either in Category 4: Upstream Transportation and Distribution or Category 4: Downstream Transportation and Distribution, depending on origin.

• Use Phase (Scope 3, Category 11: Use of Sold Products)

  For some products, the majority of emissions occur not during production but during consumer use. Electronics, appliances, and vehicles are prime examples where energy consumption over a product’s lifetime often surpasses the emissions from manufacturing. Correct allocation here helps businesses identify opportunities for designing more energy-efficient products or shifting to business models like leasing and product-as-a-service, which encourage longevity and repairability.

• End-of-Life Treatment (Scope 3, Category 12: End-of-Life Treatment of Sold Products)

  The disposal or recyclability of products also contributes to corporate emissions. If a product is landfilled, incinerated, or poorly recycled, emissions can be significantly higher than those of well-managed circular solutions.

For instance, a company that previously focused only on direct emissions (Scope 1 and 2) may realize through PCF that the majority of its footprint stems from Scope 3 upstream (supplier emissions) or Scope 3 downstream (product usage and disposal). This shift in understanding allows businesses to prioritize high-impact interventions, such as:

• Collaborating with suppliers to transition to lower-carbon materials and processes

• Optimizing logistics and transportation to reduce emissions from distribution

• Redesigning products for circularity, energy efficiency, and longer lifespans

• Engaging consumers by providing transparent impact data and sustainable usage guidance

But beyond internal decision-making, accurate emissions allocation also strengthens regulatory compliance and corporate transparency. As frameworks like the EU Corporate Sustainability Reporting Directive (CSRD), the Science-Based Targets initiative (SBTi), and Carbon Disclosure Project (CDP) impose stricter reporting requirements, businesses that correctly integrate LCA and PCF into their corporate emissions strategy will be ahead of the curve. And in the end, effective emissions allocation transforms sustainability actions from a reactive reporting task into a proactive business strategy, providing companies with a clear, data-driven roadmap to decarbonization, making their sustainability efforts measurable, credible, and actionable.

Call to Action

Understanding and managing emissions across all scopes has surpassed the regulatory obligation; instead, it's seen as a strategic opportunity. Companies are encouraged to jump on comprehensive assessments of their products' life cycles to bring hidden emissions to the table and implement effective reduction strategies. Engaging with experts in LCA and PCF can provide the insights and tools needed to navigate this complex landscape.