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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Risk Management

Lotus Foods Ltd plans to cut risk from its Scope 1 and Scope 2 emissions. It installs rooftop solar to replace grid electricity at its factory. Which emission category is directly reduced by this step, and why?

Scope 2 is reduced because it covers indirect emissions from purchased electricity, steam, heating or cooling. Generating power from rooftop solar lowers the grid electricity bought. Scope 1 covers direct emissions from owned sources like boilers, and Scope 3 covers other value-chain emissions.

  1. AScope 2, because it covers emissions from purchased electricityCorrect
  2. BScope 1, because it covers all electricity used
  3. CScope 3, because solar is an external supplier activity
  4. DNone, because electricity does not create emissions accounting

Explanation

Scope 2 covers indirect emissions from purchased electricity, steam, heating or cooling. Replacing grid power with own solar reduces purchased electricity and therefore Scope 2. Scope 1 covers direct emissions from owned or controlled sources such as boilers and company vehicles.

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