The Aware Trade Guide to Climate Change
Greenhouse gas emissions are one of the most critical indicators of a company’s actual environmental footprint. Emissions are divided into three categories, called Scopes. Together, they show how much climate pollution a company is responsible for across its entire operations and supply chain. Most emissions come from Scope 3, which is also the hardest to measure and the least consistently reported.
Scope 1, 2, and 3 Emissions
Greenhouse gas emissions are grouped into three categories called Scopes. Together, they show the full climate footprint of a product’s production, transportation, and use.
Scope 1: Direct Emissions. Emissions from sources a company owns or controls. Examples: company vehicles, on-site fuel combustion, factory boilers.
Scope 2: Purchased Energy. Emissions from electricity, steam, heat, or cooling that the company buys. Examples: electricity for factories, offices, and warehouses.
Scope 3: Supply Chain and Use-Phase Emissions. All other indirect emissions across the product’s entire life cycle. Examples: farming, ingredient production, transportation, packaging, retail distribution, consumer use, and end-of-life waste. Scope 3 usually makes up 80 to 95 percent of total emissions for food and consumer goods companies.
For chocolate, food, fashion, and consumer goods, Scope 3 covers the biggest drivers of climate impact: agriculture, deforestation, global shipping, and packaging waste. Companies can look clean on paper by reporting only Scopes 1 and 2 while ignoring the far larger emissions hidden upstream.
The Greenhouse Gas Protocol (GHG Protocol)
The global standardized system for calculating and reporting Scopes 1, 2, and 3 emissions.
Used by most major companies and required by many investors and regulators.
Science-Based Targets Initiative (SBTi). An independent verifier that ensures a company’s climate targets align with the latest climate science. Companies that join SBTi must set credible plans across all scopes, including Scope 3.
CDP (formerly Carbon Disclosure Project). A disclosure platform where companies report climate, water, and forest risk data. Many brands publish annual climate data through CDP.
ISO 14064. An international standard for quantifying, monitoring, and verifying greenhouse gas emissions.
Laws and Regulations
EU Corporate Sustainability Reporting Directive (CSRD). Requires tens of thousands of companies operating in the EU to disclose Scope 1, 2, and 3 emissions, with detailed methodologies and verification.
EU Deforestation Regulation (EUDR). Requires companies selling products like cocoa, coffee, soy, and palm oil into the EU to prove their supply chains are deforestation-free. This directly affects Scope 3 emissions.
California Climate Disclosure Laws (SB 253 and SB 261). Large companies doing business in California must report Scope 1, 2, and 3 emissions, as well as climate-related financial risks.
SEC Climate Disclosure Rule (expected to phase in). Requires public companies to provide standardized climate disclosures. Scopes 1 and 2 are mandatory, while Scope 3 is needed if material.
What to Look For
Choose brands that:
• Report Scopes 1, 2, and 3 emissions
• Publish annual climate or sustainability reports
• Have SBTi-approved or SBTi-committed climate targets
• Use renewable energy for factories and processing
• Demonstrate deforestation-free supply chains
• Minimize air freight and long-distance logistics
• Use low-impact packaging and offer recyclability or compostability
What to Avoid
Avoid brands that:
• Report only Scope 1 and 2 without Scope 3
• Make vague claims like “carbon friendly” or “net zero by 2050” without details
• Rely on offsets instead of real emissions reductions
• Use deforestation-linked commodities such as conventional cocoa or palm oil
• Offers no transparency into supply chain emissions or energy use