Scope 1, 2 and 3 emissions explained simply

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

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 — the power station does — 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 the contractual instruments your company has procured — renewable energy certificates (RECs), guarantees of origin (GOs), or power purchase agreements (PPAs) — to reflect the actual source of electricity you are claiming. If you have signed a PPA with a wind farm, your market-based Scope 2 may be close to zero even if the grid in your location is carbon-intensive.

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 typically the largest category for most businesses, often representing 70–90% of total emissions.

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, which came into force for large EU companies in 2026, requires disclosure of material Scope 3 categories. The SEC climate disclosure rules require disclosure of Scope 3 if material or if included in a net zero target. Ignoring Scope 3 is increasingly not an option for any publicly accountable organisation.

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.

Data hierarchy

Start with spend-based estimates where you must, but replace them over time with quantity-based data, supplier-specific data and product-level lifecycle data. The goal is not a perfect footprint on day one. The goal is a footprint that becomes decision-useful.

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 most businesses, Scope 3 is 70–90% of the total. CSRD now requires material Scope 3 disclosure for thousands of companies.