How Do Semiconductor Chips Contribute to Your Scope 3 Emissions?

As the backbone of modern technology, semiconductor companies play a pivotal role in a wide array of industries. However, this critical role comes with significant environmental responsibilities, particularly in the context of carbon emissions. In this article, we dive into what’s driving the focus on emissions from manufacturers, why it matters, and why companies need to start thinking about them across their entire supply chain. 

GHG Protocols and the Concept of Scopes

First published in September 2001, the Greenhouse Gas (GHG) Protocol is an accounting tool that allows organizations, governments, and agencies to draw on a standardized document when measuring and mandating reporting for carbon emissions. While the GHG Protocol has played an important role in institutionalizing carbon emissions reporting throughout the world, it has been equally influential for the unique mechanics of the framework it initially published over two decades ago. The GHG Protocol introduced the concept of “scopes” as a way to measure a company’s carbon footprint. There are three different scopes in the protocol’s accounting and reporting standard, and each represents a discrete category of GHG emissions that companies are directly or indirectly connected to. 

Scope 1 covers all the GHG emissions a company releases into the atmosphere with its own property, vehicles, and equipment. These are known as “direct emissions.” Scope 2 is slightly more nuanced, and includes all emissions caused by the energy a company purchases from the electric grid. The emissions categorized in scope 2 are released by power plants and other facilities that power the grid, and are therefore referred to as “indirect emissions.” Finally, scope 3 covers all other indirect emissions that can be traced back to the company. This encompasses all upstream and downstream activities, a broad spectrum that ranges from the emissions caused by raw material extraction and related transportation to greenhouse gases released from use of the company’s product and its end-of-life management processes.

Why Calculating Scopes 1, 2, and 3 Emissions Is Increasingly Mission-Critical for Businesses

Long a largely hypothetical set of categories for measuring an organization’s carbon footprint, the GHG Protocol and its three scopes are gaining increasing levels of traction within regulatory bodies across nations and continents. Just since 2023, a raft of environmental regulations that draw on the GHG Protocol have been either formally adopted or entered into force, including the Corporate Sustainability Reporting Directive (CSRD); the Corporate Sustainability Due Diligence Directive (CSDDD); and the Security and Exchange Commission’s (SEC) new climate-related disclosure requirements (which were finalized in March but currently face a flurry of legal challenges). 

Because of the speed with which these directives are being developed, finalized, and entering into force, manufacturers are under mounting pressure to start calculating their scopes 1, 2, and 3 emissions. Recent studies cogently demonstrate just how pronounced the shift toward emissions reporting has been over the past few years. 

A survey conducted by MSCI, a New York-based financial firm, found that over two-thirds of publicly listed companies are disclosing their scope 1 and/or scope 2 emissions as of May 2024, a 20% jump from 2023 figures. A 2023 study by the Boston Consulting Group (BCG), meanwhile, showed that over half of the organizations surveyed were carrying out “partial measurement” and reporting on scope 3 emissions, an increase of nearly 20 percentage points from 2021. Studies like these are communicating a powerful point. While major government regulations mandating emissions reporting are being rolled out at a gradual, methodical pace, there’s a growing impetus on businesses to start calculating and disclosing their carbon footprint now. And while this trend once primarily emphasized scopes 1 and 2 emissions, scope 3 is rapidly catching up.

Measuring scopes 1 and 2—often collectively referred to as “operational emissions”—may be a relatively straightforward project. But calculating scope 3, or a company’s “supply chain emissions,” is an unwieldy, logistically daunting undertaking that requires businesses to identify some of the most energy-intensive materials and parts that go into their products. For many industries, that means becoming familiar with the sprawling, multifaceted carbon footprint of what is likely their most technologically advanced component: semiconductors. 

The Ubiquity of Semiconductors in Scope 3 Emissions 

Before delving into the carbon footprint of semiconductors, it’s worth taking a moment to contextualize just how prevalent and indispensable microchips are to a cross-section of industries. Once understood chiefly as critical components for consumer electronics and major fulcrums for the revolutionary emergence of smartphones, semiconductors now play an integral—though often invisible—role in a slew of large, influential sectors.

• Consumer Electronics: Microchips and the millions and even billions of transistors that are built on them are essential to everything from laptops and smartphones to televisions, cameras, and video game consoles. 

• Home Appliances: We don’t always think of household appliances as technological hardware. But modern refrigerators, microwaves, washing machines, and air conditioners all rely on microchips to provide the sophisticated functionalities that are largely standard today. 

• Aerospace and Defense: The national security implications of semiconductors may sometimes be hyperbolized in political rhetoric. Nevertheless, their importance to defense agencies is real, and legitimately founded in the reality of contemporary warfare. The world’s most advanced nations rely on semiconductors for radar systems, satellite communications, network infrastructure, and surveillance hardware. Equally important, microchips are essential to a wide range of cutting-edge military aircraft—including the most powerful fighter jets—and precision-guided munitions (PGM, also known as smart weapons). 

• Automotive: Amid the Internet of Things (IoT) revolution, few sectors have embraced and been subsequently transformed by smart technology as much as the automotive industry. In 2010, cars typically had between 30 and 100 semiconductors. Less than 15 years later, that figure has increased ten- or even twentyfold. Many estimates now suggest there are around 1,500 or more microchips in the average vehicle manufactured today. And as cars grow more and more sophisticated in their safety features, connectivity with infrastructure, and autonomous driving capabilities, the demand for semiconductors is all but guaranteed to grow. According to market research firm Mordor Intelligence, the automotive semiconductor market is projected to expand at a compound annual growth rate (CAGR) of over 11% over the remainder of the decade. 

Because of their ever-expanding reach and utility, semiconductors have rapidly become a key component in a wide range of technology, hardware, and other commodities being manufactured by the above industries. As a result, microchips are part of the scope 3 emissions for those products. These chips are highly complex, energy-intensive components, and these sectors are using thousands upon thousands of them to manufacture their laptops, smart appliances, automobiles, and data infrastructure. As regulations continue to expand and GHG reporting becomes standardized across governments and business sectors worldwide, it’s in the interest of original equipment manufacturers (OEMs) to start familiarizing themselves with the carbon footprints of these critical parts.  

Calculating the Carbon Footprint of the World’s Top Semiconductor Fabrication Sites

To begin conceptualizing the carbon emissions that are released during the semiconductor manufacturing process, a reasonable place to start is with the emissions reporting for the world’s largest and most successful foundry. Taiwan Semiconductor Manufacturing Company (TSMC) enjoys a market share that hovers just below 60%, and annual revenue of around $70 billion.

To get a sense of the carbon footprint of the company’s manufacturing processes, we looked at emissions reporting data for some of the firm’s most productive fabs. We referenced CDP, a nonprofit global disclosure platform that many of the world’s top corporations use to report on environmental impacts, to access this data. (Z2Data uses data from the CDP disclosure system for some of its tools and databases.) Below, we outline the scope 1 and scope 2 emissions for three of TSMC’s highest-capacity fabs. 

TSMC Fab 14A

Part of one of TSMC’s 12-inch “GIGAFAB” facilities, 14A is located in the Southern Taiwan Science Park in Tainan. According to the climate-change related disclosures TSMC submitted through CDP, the scope 1 emissions for Fab 14A were 269,594 metric tons C02e (equivalent) for the year 2023. The fab’s scope 2 emissions (location-based) for that year were 1,161,949 metric tons C02e.

TSMC Fab 15B

Another fabrication plant located within a larger GIGAFAB, 15B is based in the Central Taiwan Science Park in Taichung City. This plant’s scope 1 emissions, as reported to CDP, were 192,298 metric tons C02e for 2023. Its location-based scope 2 emissions, meanwhile, clocked in at 1,706,148 during that year. 

Fab 10 (also known as TSMC China Company Limited)

One of TSMC’s three fabrication facilities operated outside of Taiwan, TSMC China Company Limited is a wholly owned subsidiary that manufactures 8-inch wafers. Fab 10 was directly responsible for releasing 187,181 metric tons C02e during 2023 (scope 1 emissions), while its location-based scope 2 emissions were 311,638 metric tons C02e.

The Scale of Semiconductor Emissions in Context

Emissions reporting figures can often feel like massive, largely abstract numbers lacking any helpful surrounding framework. To contextualize the carbon footprint of the TSMC fabs discussed above, let’s look at the scope 1 emissions reporting for a few large, recognizable OEMs. In 2023 the BMW Group, which manufactures vehicles under the brands BMW, Rolls-Royce, and Mini, reported total scope 1 emissions of 694,057 metric tons CO2e. The company’s scope 2 emissions for 2023 were 1,187,339 metric tons CO2e. Another useful example is the Chinese technology company Lenovo, currently the world’s largest PC manufacturer. In 2023, Lenovo reported direct emissions of 6,303 metric tons C02e. Its scope 2 emissions for the year, meanwhile, were 202,440 metric tons C02e. 

The carbon emissions released by a single TSMC fab—Fab 14A—was nearly 40 percent of the total scope 1 emissions for the BMW Group, a major multinational corporation with annual revenue in excess of $170 billion. The comparison with Lenovo is even starker: the Co2 emissions for each of the individual fabs discussed above easily dwarfs those of the computer manufacturer, in terms of both scopes 1 and 2. 

The carbon footprint of semiconductor manufacturers like TSMC matters for OEMs and other companies that use chips because the expectations for calculating and reporting scope 3 emissions are rapidly evolving. Every year, the percentage of organizations that are disclosing their scope 3 emissions is increasing, and those percentages are actively shaping the way that shareholders, consumers, and other key stakeholders perceive the importance of those reporting efforts. Eventually, the majority of manufacturers are going to have to account for the carbon footprints of the semiconductor devices they incorporate into their products. 

Why Tracking Sustainability Metrics Is a Matter of When, Not If

Concrete accountability mechanisms are looming in the form of the aforementioned environmental regulations, including the CSRD, the CSDDD, and the SEC’s climate-related disclosure requirements. Suffice it to say, the scope and prevalence of these reporting directives are only going to expand in the years to come. 

But the public perception and reputational implications of organizations’ carbon footprints may matter even more. A 2021 PwC survey found that over three quarters of consumers would cease doing business with a company that they felt was neglecting ESG principles. As the level of awareness surrounding scopes 1, 2, and 3 emissions grows, OEMs are going to face increasing scrutiny for their reliance on semiconductors being manufactured by foundries with staggering GHG emissions. Over time, such supply chain relationships could be perceived as not only unsustainable but even irresponsible—especially in an era where large corporations are making public commitments to achieve climate neutrality in the near future. In the court of public opinion, the stakes attached to scope 3 emissions are already palpable, and they’re only going to escalate further from here. 

What’s Your Supply Chain’s Environmental Impact?

For OEMs and other related businesses interested in getting a stronger sense of their scope 3 emissions and the environmental impact of their supply chains, supply chain risk management (SCRM) platform Z2Data can serve as a critical resource. Drawing on comprehensive data collection and unique proprietary algorithms, the platform’s Compliance Manager tool provides estimates of the C02 emissions of millions of components, including both semiconductor devices and interconnect, passive, and electromechanical (IP&E) parts. 

In addition, the tool carries out extensive compliance analyses on products, bills of materials (BOMs), and approved vendor lists (AVLs) that cover RoHS, REACH, China RoHS, California Prop 65, and a range of other major environmental directives. To learn more about Z2Data and the ways it can benefit your business’s compliance, supply chain visibility, and risk management, visit the website or schedule a demo.