Scope 1 2 3 Emissions: Complete Guide for Hong Kong Businesses

If your company is required to report carbon emissions to the HKEX — or if you simply want to understand your carbon footprint — you need to understand the GHG Protocol's three scopes. This is the global standard for measuring greenhouse gas emissions, and it's the framework HKEX uses for climate disclosure requirements.

In this guide, we'll explain each scope in plain language, give you real Hong Kong examples, show you how HKEX requires them to be reported, and provide practical calculation steps you can follow.

What Are Scope 1, 2, 3 Emissions?

The GHG Protocol divides carbon emissions into three categories to help organisations understand where their emissions come from and how to manage them. Think of it as three concentric circles of responsibility.

Scope 1: Direct Emissions

These are emissions from sources that your company owns or directly controls. If you can point to a physical source at your facility and say "that emits CO2," it's Scope 1.

Hong Kong examples:

• Diesel generators at a data centre or industrial facility in Kwai Chung
• Natural gas combustion in a centralised kitchen (e.g., restaurant chain)
• Company-owned vehicles running on petrol or diesel (delivery trucks, executive cars)
• Refrigerant leaks from air conditioning systems in office buildings

For most office-based companies in Hong Kong, Scope 1 emissions are relatively small — often limited to a company car fleet and refrigerant top-ups for air conditioning.

Scope 2: Indirect Emissions from Purchased Energy

These are emissions generated by the production of electricity, heat, or steam that your company purchases from a utility. The emissions happen at the power plant, not at your facility — but they're caused by your energy consumption.

Hong Kong examples:

• Electricity purchased from CLP Power Hong Kong (serving Kowloon, New Territories, Lantau — mainly coal and natural gas generation)
• Electricity purchased from Hong Kong Electric (serving Hong Kong Island — mainly coal and natural gas generation)
• Towngas purchased for heating or cooking

Scope 2 is where most Hong Kong office-based companies see their largest emissions. Air conditioning is the single biggest electricity consumer in Hong Kong buildings, and because our grid still relies heavily on fossil fuels, office electricity use translates directly into significant carbon emissions.

Scope 3: All Other Indirect Emissions (Value Chain)

Scope 3 captures everything else — emissions that occur in your company's value chain but outside your direct operations. These are often the largest category, sometimes accounting for 70–90% of a company's total carbon footprint.

Hong Kong examples:

• Employee commuting: MTR rides, bus journeys, taxi trips, and driving to work
• Business travel: Flights from HKIA, hotel stays, overseas business trips
• Purchased goods and services: Emissions embedded in products manufactured by your suppliers in Shenzhen, Dongguan, or elsewhere in the Greater Bay Area
• Waste generated: Disposal of office waste, e-waste, construction waste
• Use of sold products: For manufacturers, the energy consumed by products they sell
• Transportation and distribution: Shipping goods through Kwai Chung Container Terminal or by air via HKIA

Scope 3 is the most challenging to measure because it requires data from suppliers, employees, and other external parties. However, it's also where the biggest reduction opportunities often lie.

HKEX Disclosure Requirements for Emissions

The HKEX has aligned its climate disclosure requirements with the international ESG reporting standards (IFRS S2). Here's what listed companies must report:

• Scope 1 and Scope 2: Mandatory for all Main Board issuers, starting from financial year 2025 reporting. Must disclose absolute gross emissions in tonnes of CO2 equivalent (tCO2e).
• Scope 3: Phased introduction. Large issuers (market capitalisation above HK$10 billion) must report Scope 3 emissions from financial year 2026. Other issuers report on a comply-or-explain basis initially.
• Emission methodology: Companies must state the methodology used (typically the GHG Protocol Corporate Standard) and the emission factors applied.
• Intensity metrics: Emission intensity per unit of revenue, per employee, or per square metre of floor area must also be disclosed.

Non-compliance risks are real. Failure to disclose can trigger regulatory queries, negative ESG ratings impact, and investor concerns. Companies that proactively report all three scopes demonstrate stronger governance and sustainability commitment.

Practical Calculation Steps for Hong Kong Companies

Here's a step-by-step approach to calculating your company's carbon footprint using the GHG Protocol:

Step 1: Set Organisational Boundaries

Decide which operations to include. For most Hong Kong companies, this means all offices, warehouses, and facilities in Hong Kong. If you have operations in mainland China or overseas, decide whether to use the equity share or control approach.

Step 2: Collect Scope 1 Data

Gather records of all direct fuel combustion and refrigerant use:

• Fuel purchase records for company vehicles (litres of petrol/diesel)
• Refrigerant top-up logs from facilities management
• Diesel/gas purchase records for backup generators

Multiply fuel quantities by published emission factors (e.g., from EPD's greenhouse gas emission guidelines).

Step 3: Calculate Scope 2 Emissions

This is straightforward for most Hong Kong offices:

• Get your annual electricity consumption in kWh from CLP or HK Electric bills
• Multiply by the relevant grid emission factor:
  • CLP Power (2024): ~0.37 kg CO2e/kWh
  • HK Electric (2024): ~0.70 kg CO2e/kWh
• Example: An office using 500,000 kWh/year from CLP = ~185 tCO2e in Scope 2 emissions

Step 4: Assess Scope 3 Categories

Start with the most material categories. For a typical Hong Kong company, the top three are:

1. Employee commuting: Survey employees on their daily commute mode and distance. Use average emission factors for MTR, bus, taxi, and private car.
2. Business travel: Pull data from travel expense reports. Use ICAO carbon emission calculators for flights.
3. Purchased goods and services: Engage key suppliers to request their emission data, or use spend-based estimates (multiply procurement spend by sector-average emission factors).

Step 5: Report and Set Reduction Targets

Once you have your baseline emissions inventory, you can set science-based reduction targets, identify hotspots, and track progress year-on-year. This data feeds directly into your HKEX ESG report and any TCFD-aligned climate disclosures.

Common Challenges and Solutions

Hong Kong companies face several practical challenges when calculating emissions:

• Data availability for Scope 3: Solution: Start with spend-based estimates and refine over time as you collect better supplier data.
• Multiple office locations: Solution: Aggregate electricity bills across all sites. Ensure each location's utility account is tracked separately.
• Tenant-landlord split: If you rent office space and utilities are included in the rent, request consumption data from your building management or landlord.
• Choosing emission factors: Use the most recent published factors from EPD Hong Kong, DEFRA (UK), or the GHG Protocol website. Document which factors you use and why.

How Our Course Helps You Master Carbon Accounting

Our ESG Sustainable Solutions 4.0 course includes a dedicated hands-on carbon accounting workshop where you'll calculate real-world Scope 1, 2, and 3 emissions. You'll learn to:

• Apply the GHG Protocol Corporate Standard to Hong Kong scenarios
• Use correct emission factors for CLP and HK Electric grids
• Calculate employee commuting emissions using survey methods
• Prepare emissions data for HKEX-compliant ESG reports
• Identify reduction opportunities and set science-based targets

The course is held over two weekends (Saturday & Sunday, 12:00–18:00), and GSF funding can bring your net cost to just HK$2,400.