The responsibility of companies for greenhouse gas emissions: Direct (scope 1) and indirect (scope 2 and 3) emissions under the law
Research project
The climate crisis is one of the greatest challenges of our time. With the greenhouse gas emissions that they create, companies contribute significantly to this crisis. Legal responses adopted in various countries attempt to address this issue through a variety of approaches: (a) emissions trading, (b) emissions reporting, (c) climate transformation plans, (d) climate judgments, (e) climate-related claims under competition law, and (f) sustainability initiatives and standards. This array of mechanisms shows that the greenhouse gas responsibility of companies is recognized, but there is disagreement about how far this responsibility extends. Should regulations encompass only the direct emissions of a company (scope 1 emissions) or also the indirect emissions of a company’s customers and suppliers (scope 2 and 3 emissions)?
Indirect emissions account for the majority (around 75 per cent) of total emissions attributable to companies and are addressed, for example, in emissions trading schemes (ETS II and CBAM) and reporting requirements (CSRD and CSDDD). As regards the international discussion, it seems appropriate that these emissions be covered by regulatory regimes. There are various arguments in favour of such an approach:
- Complete climate footprint: Only by including indirect emissions can a company's actual climate footprint be measured, evaluated, and compared.
- Prevention of carbon leakage: Without responsibility for indirect emissions, companies could outsource emission-intensive processes to third parties and thus circumvent climate targets.
- Climate cooperation: Taking indirect emissions into account encourages companies to support each other in reducing emissions and to lower the emissions of consumers.
- Legal consistency: Parallel regulations—such as the polluter-pays-principle under environmental law and responsibility for human rights violations under supply chain law—show that it is possible to hold companies legally responsible for the actions of third parties within their value chain.
While one can legitimately point to the theoretical difficulty of attributing responsibility for third-party behaviour, the high costs of investigation, and the limited scope of influence, such counterarguments do not outweigh the advantages of including indirect emissions. Overall, a diversified approach to corporate emission responsibility—with graduated recognition of indirect emissions—is appropriate. Such a gradation can be achieved through best-effort rather than performance obligations, through a focus on the central sources of emissions, and through industry-specific regulations. Measures of such nature would ensure pragmatic but effective responses of companies to the climate crisis.