Scope 1, 2 and 3 emissions explained simply

Scope 1, 2, and 3 are how businesses categorise their emissions under the Greenhouse Gas (GHG) Protocol, the global standard for corporate carbon accounting. Understanding the difference is the starting point for any serious net zero or ESG (environmental, social and governance) reporting effort.

For a practical route through value-chain emissions, use our Scope 3 emissions guide, which links the basics to small and medium-sized enterprise (SME) reporting, business footprinting, reduction plans and ESG evidence. For the accounting rules behind the scopes, read our GHG Protocol explainer.

Scope 1: direct emissions

Scope 1 covers emissions from sources that a company owns or controls directly. If you burn gas to heat your offices, that is Scope 1. If your company owns vehicles that run on petrol or diesel, those are Scope 1. Industrial combustion in manufacturing, refrigerants that leak from owned equipment, and process emissions from chemical reactions are all Scope 1.

Scope 1 is generally the easiest category to measure because it requires data from sources you control: utility bills, fuel purchase records and process monitoring data.

Scope 2: purchased energy emissions

Scope 2 covers emissions from the generation of electricity, heat, steam or cooling that a company purchases and uses. Your business does not generate these emissions directly, but because you are the reason that energy was generated, the GHG Protocol assigns those emissions to you.

Scope 2 can be calculated two ways. The location-based method uses the average emissions intensity of the grid where you consume electricity. The market-based method uses contractual instruments your company has procured, such as renewable energy certificates, guarantees of origin or power purchase agreements, to reflect the electricity source you are claiming. Companies should explain which method is being used in targets and reports.

Scope 3: value chain emissions

Scope 3 covers all other indirect emissions across a company's value chain, both upstream in your supply chain and downstream in the use of your products. Scope 3 is often the largest category for many businesses, although the exact share depends heavily on sector and business model.

Why Scope 3 is hard - and why it matters

Measuring Scope 3 requires data from suppliers, customers and logistics providers who may not measure or disclose their emissions at all. Many businesses start with spend-based estimates, applying an emissions factor per pound spent in each category, and refine over time as supplier-specific data becomes available.

CSRD (Corporate Sustainability Reporting Directive) and ESRS (European Sustainability Reporting Standards) require in-scope companies to assess and disclose material value-chain emissions where relevant. UK disclosure expectations based on ISSB (International Sustainability Standards Board) and climate-risk reporting shaped by TCFD also push companies toward stronger Scope 3 evidence, while US federal climate disclosure has been subject to legal and policy uncertainty. California's SB 253 and SB 261 climate disclosure laws are another reason large companies and their suppliers need more defensible Scope 3 data. The practical message is still clear: ignoring Scope 3 is increasingly difficult for any publicly accountable organisation or supplier to large customers.

How to calculate each scope

The basic calculation is simple: activity data multiplied by an emissions factor. The difficulty is choosing activity data that is specific enough to be useful. A gas bill, mileage log or kWh electricity record is stronger than a broad estimate based on spend. Supplier-specific data is stronger than an industry average. A good carbon footprint improves over time as the data gets more specific.

Which Scope 3 categories matter most?

Not every Scope 3 category will be material for every business. A software company may find that cloud services, purchased goods, business travel and employee commuting dominate. A retailer may need to focus on purchased goods, packaging, freight and product use. A manufacturer may have material purchased materials, capital goods, logistics, product use and end-of-life emissions.

The practical approach is to screen all 15 GHG Protocol Scope 3 categories once, identify the categories that are likely to matter, and then concentrate better data collection on those areas. This avoids wasting time measuring immaterial categories in detail while the largest emissions remain estimated.

Common mistakes in Scope 1, 2 and 3 reporting

The first mistake is double counting or missing organisational boundaries. A business should define whether it is using an operational control, financial control or equity share approach, then apply that boundary consistently.

The second mistake is reporting only Scope 1 and 2 while making broad net zero claims. For many businesses, Scope 3 represents the majority of emissions, so excluding it can make a climate claim misleading.

The third mistake is mixing location-based and market-based Scope 2 without explaining the difference. Both figures can be useful, but readers need to know which one is being used in targets and comparisons.

The fourth mistake is treating emissions factors as permanent. Grid factors, supplier footprints and lifecycle data change over time. A carbon footprint should be recalculated with current factors and a clear methodology note.

The Carbon Workbench Business Carbon Footprint tool walks through Scope 1, 2 and 3 calculation step by step, including guidance on which Scope 3 categories are likely to be material for different business types.

Key takeaway

Scope 1 is what you burn. Scope 2 is the energy you buy. Scope 3 is everything else: your supply chain, business travel, employee commuting, and the emissions embedded in what customers do with your products. For many businesses, Scope 3 is the majority of the footprint. In-scope CSRD and ESRS reporters need to assess material value-chain emissions, and suppliers may still face Scope 3 data requests even when they are not directly required to publish a CSRD report.

Scope 1, 2 and 3 FAQ

Can a business report Scope 1 and 2 only?

It can start there, but broad climate claims usually need Scope 3 consideration. For many companies, Scope 3 is the largest part of the footprint and excluding it can make a claim misleading.

What is the best first Scope 3 category to measure?

Start with the category likely to be most material for your business model. For services businesses that may be travel and purchased services. For retailers it may be purchased goods and logistics. For manufacturers it may be materials, energy-related activities and product use.

How accurate does the first footprint need to be?

The first footprint should be transparent rather than perfect. Document the data sources, assumptions and emissions factors, then improve the most material categories over time.

Useful source links

• GHG Protocol Corporate Standard
• GHG Protocol Scope 3 Standard
• UK government conversion factors for company reporting
• Scope 3 emissions for SMEs

Tool via The Carbon Workbench