What do Scope 1, 2 and 3 mean? A plain-language guide

Why scopes matter

When people talk about a company’s carbon footprint, they often mean total greenhouse gas emissions expressed as CO₂ equivalents (CO₂e). But not all emissions are the same — they come from different sources and involve very different levels of complexity to measure.

The GHG Protocol Corporate Standard divides emissions into three scopes. Understanding this structure is essential for interpreting any carbon accounting report and for asking the right questions.

Scope 1: Direct emissions

Scope 1 covers emissions from sources owned or controlled by the company:

• Combustion of fuels in company-owned boilers, furnaces, or vehicles
• Process emissions (e.g. from chemical production)
• Refrigerant leaks (fluorinated gases)

These are the most straightforward to measure — the company controls the source and typically has good records of fuel consumption, vehicle mileage, and refrigerant top-ups.

For most service businesses, Scope 1 emissions are relatively small unless they operate a large vehicle fleet or use significant on-site fuel combustion.

Scope 2: Purchased energy

Scope 2 covers indirect emissions from the generation of purchased electricity, heat, steam, or cooling. The emissions physically occur at the power plant or heat source, but are attributed to the purchasing company.

There are two calculation methods:

Location-based: uses the average emission factor for the electricity grid in the country or region where the company operates.

Market-based: uses emission factors from contractual instruments — e.g. if the company has a renewable energy contract, it can claim lower Scope 2 emissions. Both should ideally be reported.

Scope 2 is often the main lever companies act on first — switching to renewable electricity is well understood and relatively easy to verify.

Scope 3: Value chain emissions

Scope 3 is everything else — all indirect emissions across the company’s upstream and downstream value chain.

The GHG Protocol defines 15 Scope 3 categories:

Upstream categories (1–8):

1. Purchased goods and services
2. Capital goods
3. Fuel and energy-related activities not in Scope 1 or 2
4. Upstream transportation and distribution
5. Waste generated in operations
6. Business travel
7. Employee commuting
8. Upstream leased assets

Downstream categories (9–15): 9. Downstream transportation and distribution 10. Processing of sold products 11. Use of sold products 12. End-of-life treatment of sold products 13. Downstream leased assets 14. Franchises 15. Investments

In practice, Scope 3 emissions are typically 70–80% of a company’s total footprint — and sometimes much more. Category 1 (purchased goods and services) is almost always the largest.

Why Scope 3 is hard to calculate

Scope 3 is challenging because the data lies outside the company’s direct control. To calculate Category 1, for example, you need emissions data from suppliers. Most suppliers don’t have this data readily available.

This is why many carbon accounting attempts stop at Scope 1 and 2, or produce Scope 3 estimates that are unreliable or hard to defend.

The most robust approach involves:

• Primary data from key suppliers (actual emissions data or at minimum activity data)
• Spend-based estimates for smaller, less significant suppliers using database emission factors
• Clear documentation of methodology and data quality

What this means when you receive an emissions report

When you receive an emissions report — your own or from a supplier — check:

1. Are all three scopes included? A report covering only Scope 1 and 2 is missing the majority of emissions for most companies.
2. How is Scope 3 estimated? Spend-based estimates are a starting point, not an endpoint. Supplier-specific data gives much more useful results.
3. Is the methodology documented? A report you can’t audit is a report you can’t trust.

A well-made carbon accounting report should answer these questions clearly.