5 Common Mistakes in GHG Scopes 1, 2, & 3 Reporting

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5 Common Mistakes in GHG Scopes 1, 2, & 3 Reporting

Reading Time: Approximately 7-8 minutes

Key Takeaway: Are you a business in Malaysia tasked with reporting your greenhouse gas (GHG) emissions, perhaps due to new regulations from Bursa Malaysia (like the upcoming ISSB-aligned reporting from 2025/2026) or pressure from investors and customers? You might be finding it complex, especially when dealing with Scopes 1, 2, and 3. Perhaps you're even worried about making mistakes that could damage your company's reputation or lead to inaccurate sustainability claims. Many companies fall into common traps when trying to track their carbon footprint. This article will highlight 5 Common Mistakes in GHG Scopes 1, 2, & 3 Reporting (and How to Fix Them), providing clear, actionable advice to help you avoid pitfalls, ensure accuracy, and build a credible carbon footprint report that stands up to scrutiny.

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Problem: Malaysian businesses are under increasing pressure to report their greenhouse gas (GHG) emissions across Scopes 1, 2, and 3, driven by new regulatory requirements (e.g., Bursa Malaysia's ISSB-aligned reporting from 2025/2026), investor demands for transparency, and growing public scrutiny. However, many companies, especially those new to comprehensive carbon accounting, frequently make 5 Common Mistakes in GHG Scopes 1, 2, & 3 Reporting (and How to Fix Them). These errors range from miscategorizing emissions to using outdated data, leading to inaccurate reports, a lack of credibility, and potentially accusations of "greenwashing."

Agitate: Inaccurate GHG reporting doesn't just undermine your sustainability efforts; it can directly impact your company's financial standing and reputation. Investors are increasingly relying on this data for investment decisions, and flawed reports can lead to a lower ESG rating, reduced access to "green" capital, and even regulatory penalties. The effort put into reporting becomes counterproductive if the data isn't robust, leaving businesses vulnerable to criticism and missing out on opportunities to genuinely drive decarbonization.

Solve: This article will clearly outline 5 Common Mistakes in GHG Scopes 1, 2, & 3 Reporting (and How to Fix Them), providing practical solutions for each. By addressing issues such as incomplete data collection, incorrect scope categorization, using inappropriate emission factors, and neglecting the "materiality" of Scope 3, businesses can significantly improve the accuracy, reliability, and credibility of their carbon footprint reports. Implementing these fixes will not only ensure compliance with evolving standards but also empower your organization to make more informed decisions towards meaningful emissions reduction and enhance your appeal to stakeholders.

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Summary

Reporting your company's greenhouse gas (GHG) emissions (your "carbon footprint") is becoming super important, especially with new rules like Bursa Malaysia's ISSB-aligned reporting starting soon. But it's tricky! Many companies make mistakes when trying to report their Scope 1, 2, and 3 emissions. Here are 5 Common Mistakes in GHG Scopes 1, 2, & 3 Reporting (and How to Fix Them):

• What are Scopes 1, 2, & 3?
• Scope 1: Direct emissions from things you own or control (e.g., your factory's boilers, company vehicles).
• Scope 2: Indirect emissions from the electricity, heat, or steam you buy and use.
• Scope 3: All other indirect emissions in your value chain (e.g., from your suppliers, employee commuting, waste). This is often the biggest and hardest to measure.
• Why does it matter? Investors, customers, and regulators want accurate reports to show you're serious about climate change.
• Common Mistakes (and how to fix them!):

1. Incomplete Data Collection: Not having all the right numbers. Fix: Set up good data collection systems.
2. Mixing Up Scopes: Putting emissions in the wrong category. Fix: Understand the definitions clearly.
3. Using Wrong Emission Factors: Using outdated or irrelevant conversion numbers. Fix: Use up-to-date, country-specific factors.
4. Ignoring Material Scope 3 Emissions: Not reporting on the biggest indirect impacts. Fix: Do a materiality assessment for Scope 3.
5. Lack of Assurance/Verification: Not getting your report checked. Fix: Consider third-party review.

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1. Understanding GHG Emissions and The Three Scopes

Before we talk about mistakes, let's make sure we're on the same page about what GHG emissions are and what Scopes 1, 2, and 3 mean.

What are GHG Emissions?

GHG stands for Greenhouse Gas. These are gases that trap heat in the Earth's atmosphere, leading to climate change. The main one we talk about is carbon dioxide (CO2), but there are others like methane (CH4) and nitrous oxide (N2O). When a company reports its GHG emissions, it's essentially measuring its "carbon footprint."

Why is Reporting Important?

Reporting GHG emissions is becoming super important for businesses, especially in Malaysia:

• Bursa Malaysia: Our stock exchange (Bursa Malaysia) is making it mandatory for listed companies to report their sustainability efforts, including climate-related information, using new global standards from the International Sustainability Standards Board (ISSB). This will start from annual reporting periods on January 1, 2025, onwards for larger companies.
• Investors: More and more investors want to put their money into companies that are serious about climate change. They use GHG data to decide if a company is a good long-term investment.
• Customers: Many customers, especially large corporations, want to work with suppliers who can show they are reducing their environmental impact.
• Reputation: Being transparent and accurate about your carbon footprint builds trust and shows you're a responsible business.

The Three Scopes of Emissions (GHG Protocol):

The most widely used way to categorize emissions is the GHG Protocol, which divides them into three "scopes":

• Scope 1: Direct Emissions (What you own or control directly)
• These are emissions that come directly from sources owned or controlled by your company.
• Examples:
• Burning natural gas or diesel in your factory's boilers or furnaces.
• Fuel used in company-owned vehicles (cars, trucks, forklifts).
• Fugitive emissions from refrigerants in your air conditioning units or industrial processes.
• Emissions from waste treatment facilities owned by your company.
• Scope 2: Indirect Emissions from Purchased Energy (The electricity, steam, heating, and cooling you buy)
• These are emissions that happen at the power plant that generates the electricity (or heat/steam) you buy and use. You don't directly produce these emissions, but your consumption causes them.
• Examples:
• Electricity you buy from TNB (Tenaga Nasional Berhad) to power your office building, factory, or data center.
• Purchased steam for your industrial processes.
• Scope 3: Other Indirect Emissions (Everything else in your value chain)
• This is often the largest and most complex category. It includes all other indirect emissions that happen both upstream (from your suppliers) and downstream (from your customers or products) in your company's value chain, but which your company doesn't directly own or control.
• There are 15 different categories for Scope 3 emissions. Common examples include:
• Upstream:
• Purchased goods and services (emissions from making the raw materials and products you buy).
• Capital goods (emissions from making the buildings and machinery you buy).
• Fuel- and energy-related activities (e.g., emissions from mining coal that generates the electricity you use, even before it gets to the power plant).
• Upstream transportation and distribution (shipping of goods to your facility).
• Employee commuting (employees traveling to and from work).
• Waste generated in operations (emissions from waste going to landfills or incineration).
• Downstream:
• Business travel (flights, hotel stays for employees).
• Downstream transportation and distribution (shipping of your products to customers).
• Processing of sold products (if your products are used as raw materials by others).
• Use of sold products (emissions from customers using your products, e.g., a car you sell).
• End-of-life treatment of sold products (emissions from disposing of your products).
• Investments (emissions from companies you invest in).
• Franchises and leased assets.

Now that we have a basic understanding, let's look at the common mistakes companies make.

 

2. 5 Common Mistakes in GHG Scopes 1, 2, & 3 Reporting (and How to Fix Them)

Mistake #1: Incomplete Data Collection

Many companies struggle to gather all the necessary data, leading to gaps in their carbon footprint report. They might track some fuel use but miss others, or only collect data for one part of their operations.

• Why it's a mistake: Incomplete data means your carbon footprint won't be accurate. It can lead to underreporting your emissions, which looks good in the short term but can hurt your credibility when someone checks your numbers or when regulations get stricter.
• How to Fix It:
• Create a Data Map: Make a list of all your potential emission sources (vehicles, generators, boilers, electricity meters, waste bins, business travel records, supplier invoices, etc.).
• Assign Responsibilities: Clearly assign who in your company is responsible for collecting each piece of data (e.g., Fleet Manager for fuel logs, Finance for utility bills, HR for travel data).
• Set Up Regular Collection: Establish a routine for data collection (e.g., monthly for utility bills, quarterly for waste data).
• Automate Where Possible: Use smart meters, energy monitoring software, or accounting systems that can help you pull data automatically.
• Train Your Team: Make sure the people collecting data understand why it's important and how to collect it accurately.

 

Mistake #2: Mixing Up Scopes (Incorrect Categorization)

It's very common for companies to accidentally put emissions into the wrong scope (e.g., putting fuel for company vehicles into Scope 2 instead of Scope 1).

• Why it's a mistake: This makes your report confusing and inaccurate. Investors and stakeholders rely on clear scope definitions to compare companies and understand their direct vs. indirect impacts. Incorrect categorization can hide your true direct emissions or inflate your indirect ones.
• How to Fix It:
• Understand the Definitions (Master the Basics): Go back to the definitions of Scope 1, 2, and 3 and review them carefully.
• Remember: Scope 1 is about what your company directly emits from sources it owns or controls.
• Scope 2 is about the indirect emissions from purchased energy.
• Scope 3 is about all other indirect emissions in your value chain.
• Use the GHG Protocol Guidance: The GHG Protocol website offers very detailed guidance, examples, and tools to help categorize emissions correctly. They even have online courses.
• Seek Expert Advice: If you're unsure, consult with an expert in carbon accounting or a sustainability consultant. It's better to get it right from the start.

 

Mistake #3: Using Wrong or Outdated Emission Factors

Once you have your activity data (e.g., liters of diesel, kWh of electricity), you need to multiply it by an "emission factor" to convert it into CO2 equivalent (CO2e). Using the wrong factors is a major source of error.

• Why it's a mistake: Emission factors vary by region, country, and even year. Using an average global factor when a specific Malaysian factor is available, or using an old factor, will lead to inaccurate results. For example, electricity emission factors change as the grid gets cleaner (more renewable energy).
• How to Fix It:
• Use Country-Specific Factors: Always prioritize emission factors specific to Malaysia. For example, TNB's latest grid emission factor for electricity.
• Use Reputable Sources: Rely on factors from official government bodies (e.g., Ministry of Natural Resources and Environmental Sustainability, Department of Environment, SEDA Malaysia), reputable research organizations, or the GHG Protocol.
• Keep Factors Updated: Emission factors are often updated annually. Make sure you're using the most recent ones for your reporting year.
• Be Transparent: In your report, always state the emission factors you used and their source. This adds credibility.

 

Mistake #4: Ignoring Material Scope 3 Emissions

Many companies focus heavily on Scope 1 and 2 (because they are often easier to measure) and either ignore Scope 3 or only report on a few categories, even if other Scope 3 emissions are much larger.

• Why it's a mistake: For many businesses (especially in service industries, retail, or those with complex supply chains), Scope 3 emissions can account for 70-90% of their total carbon footprint. Ignoring material Scope 3 categories means you're missing the vast majority of your impact, making your report incomplete and potentially misleading. Investors are increasingly asking for more comprehensive Scope 3 data (e.g., under ISSB S2).
• How to Fix It:
• Conduct a Materiality Assessment for Scope 3: This involves identifying which of the 15 Scope 3 categories are most significant to your business's overall footprint. You don't necessarily have to report on all 15 categories, but you must report on the ones that are "material" (most impactful).
• Steps: Map your value chain, engage with suppliers/customers, and estimate emissions for each category to identify the biggest contributors.
• Start with Key Categories: If reporting on all material Scope 3 categories at once is too daunting, start with the most significant ones (e.g., purchased goods and services, business travel, waste generated in operations, employee commuting).
• Engage Your Supply Chain: Scope 3 requires data from others. Start engaging with your key suppliers and asking them for their emissions data or relevant activity data.
• Use Proxies/Estimates (with transparency): Where direct data is unavailable, you can use industry averages or estimates, but always state that you've done so and explain your methodology. The goal is continuous improvement, not immediate perfection.

 

Mistake #5: Lack of Assurance or Verification

Some companies publish their GHG reports without having them independently checked or verified.

• Why it's a mistake: Without independent assurance, your report lacks credibility. Stakeholders (especially investors) might be skeptical of your numbers. It opens you up to accusations of "greenwashing" if your data is later found to be inaccurate. Many regulatory bodies, including Bursa Malaysia under ISSB, are increasingly looking for or requiring some form of external assurance for sustainability reports.
• How to Fix It:
• Consider Third-Party Verification: Engage a qualified, independent third-party assurance provider (e.g., a reputable accounting firm with sustainability expertise, or specialized verification bodies) to review your GHG emissions data and reporting methodology.
• Understand Assurance Levels: There are different levels of assurance (e.g., limited or reasonable). Discuss with your provider what level is appropriate for your first report or for your specific needs.
• Transparency About Assurance: State clearly in your report whether your data has been assured, what level of assurance was obtained, and which firm conducted the verification.
• Benefits of Assurance: It significantly enhances the reliability and credibility of your GHG report, builds investor confidence, and helps you identify areas for improving your data collection processes for future reports.

In summary, accurately reporting your Greenhouse Gas (GHG) emissions across Scopes 1, 2, and 3 is no longer optional for Malaysian businesses; it's a critical component of attracting investors, ensuring regulatory compliance (especially with Bursa Malaysia's ISSB-aligned reporting starting from 2025), and building a credible sustainability profile. This article has highlighted 5 Common Mistakes in GHG Scopes 1, 2, & 3 Reporting (and How to Fix Them): from incomplete data collection and miscategorization to using outdated emission factors, overlooking material Scope 3 emissions, and neglecting third-party assurance. Each mistake undermines the integrity of your report and can lead to missed opportunities or reputational damage. By proactively implementing robust data collection systems, meticulously applying GHG Protocol definitions, using up-to-date and country-specific emission factors, conducting thorough materiality assessments for Scope 3, and pursuing independent verification, your organization can elevate the accuracy and trustworthiness of its carbon footprint reporting. This not only meets evolving stakeholder expectations but also empowers you to make informed decisions for meaningful decarbonization.

Is your company confident that its GHG emissions report is accurate, credible, and truly reflects your environmental impact, especially with the upcoming ISSB reporting requirements in Malaysia? Don't risk making common mistakes that could undermine your sustainability efforts and deter investors. Our team of carbon accounting and sustainability reporting experts can help you navigate the complexities of Scope 1, 2, & 3 reporting, identify and fix common pitfalls, and ensure your data stands up to scrutiny. Let us help you build a robust and impactful GHG inventory that truly demonstrates your commitment to a sustainable future. WhatsApp or call us today at 0133006284 for a strategic consultation.