Scope 1, 2, and 3 emissions form the foundation of corporate carbon accounting. Defined by the GHG Protocol, these three scopes classify greenhouse gas emissions by their source , from direct combustion on-site to the furthest reaches of your value chain. Understanding each scope is essential for accurate measurement, credible reporting, and effective decarbonisation planning.
What are the three emission scopes?
The GHG Protocol Corporate Standard divides emissions into three scopes to ensure complete and transparent accounting without double counting between companies.
| Scope | Definition | Examples |
|---|---|---|
| Scope 1 | Direct emissions from owned or controlled sources | Company vehicles, on-site boilers, fugitive refrigerant leaks |
| Scope 2 | Indirect emissions from purchased energy | Electricity, district heating, steam, cooling |
| Scope 3 | All other indirect emissions in the value chain | Purchased goods, business travel, employee commuting, product use, end-of-life |
Together, these three scopes capture a company’s total climate impact. For most companies, Scope 3 represents 70–90% of total emissions , making it both the hardest to measure and the most important to address.
Scope 1: direct emissions
Scope 1 covers all direct GHG emissions from sources the company owns or controls. These are the emissions you produce on your own premises or through your own assets.
Sources
- Stationary combustion: Natural gas boilers, diesel generators, furnaces
- Mobile combustion: Company-owned vehicles (cars, trucks, forklifts)
- Process emissions: Chemical reactions in manufacturing (cement clinker, steel production)
- Fugitive emissions: Refrigerant leaks from HVAC systems, methane from pipelines
How to calculate
Scope 1 calculations follow a straightforward formula:
Emissions = Activity data × Emission factor
For example, if your fleet consumed 50,000 litres of diesel:
- Activity data: 50,000 litres
- Emission factor: 2.68 kg CO₂e per litre (DEFRA 2024)
- Result: 134,000 kg CO₂e = 134 tCO₂e
Data sources
- Fuel purchase records and invoices
- Fleet management systems (GPS tracking, fuel cards)
- Refrigerant service logs
- Process monitoring systems
- Utility bills for on-site fuel
Tips for accuracy
- Track fuel by type (diesel, petrol, natural gas, LPG) , each has a different emission factor
- Include refrigerant top-ups, which are often overlooked but have very high global warming potential
- Use national emission factors where available; fall back to DEFRA or EPA factors
Scope 2: purchased energy
Scope 2 captures indirect emissions from the generation of purchased electricity, heat, steam, and cooling consumed by the company. You do not produce these emissions directly, but your energy consumption causes them.
The two methods
The GHG Protocol requires companies to report Scope 2 using two approaches:
| Method | How it works | When to use |
|---|---|---|
| Location-based | Grid average emission factor for your region | Default method; reflects physical reality |
| Market-based | Factor from your specific energy contract | When you have renewable energy certificates, PPAs, or green tariffs |
Both must be reported. A company buying 100% renewable electricity shows zero market-based Scope 2 but still reports the location-based figure.
How to calculate
Location-based: Electricity (kWh) × Grid emission factor (kg CO₂e/kWh)
Example: 1,000,000 kWh × 0.233 kg CO₂e/kWh (Spain 2024) = 233 tCO₂e
Market-based: Electricity (kWh) × Supplier-specific factor (from guarantee of origin, residual mix, or contractual instrument)
Data sources
- Electricity and gas utility bills (monthly or quarterly)
- Energy management systems
- Renewable energy certificates (GOs, RECs)
- Power purchase agreements (PPAs)
- District heating and cooling contracts
Tips for accuracy
- Obtain actual consumption data rather than estimates based on floor area
- Request supplier-specific emission factors for market-based accounting
- Account for transmission and distribution losses if your reporting boundary requires it
- Track electricity separately from other energy carriers
Scope 3: value chain emissions
Scope 3 is where complexity , and climate impact , escalates. It covers all indirect emissions not included in Scope 2 that occur in your value chain, both upstream and downstream.
The 15 categories
The GHG Protocol defines 15 Scope 3 categories:
Upstream (your suppliers)
- Purchased goods and services
- Capital goods
- Fuel- and energy-related activities (not in Scope 1 or 2)
- Upstream transportation and distribution
- Waste generated in operations
- Business travel
- Employee commuting
- Upstream leased assets
Downstream (your customers)
- Downstream transportation and distribution
- Processing of sold products
- Use of sold products
- End-of-life treatment of sold products
- Downstream leased assets
- Franchises
- Investments
Not all categories are relevant to every company. A screening exercise identifies which are material.
Calculation methods
Scope 3 offers several calculation approaches, ordered from most to least accurate:
| Method | Description | Accuracy |
|---|---|---|
| Supplier-specific | Actual emission data from your suppliers | Highest |
| Hybrid | Combines supplier data with secondary factors | High |
| Average-data | Industry average emission factors per unit purchased | Medium |
| Spend-based | Monetary spend × emission factor per euro/dollar | Lowest |
Most companies start with spend-based calculations for a quick baseline, then improve data quality over time by engaging key suppliers.
The biggest categories
For most companies, three categories dominate Scope 3:
- Category 1 , Purchased goods and services: Often 40–60% of total Scope 3. Requires procurement data (spend or quantity by category).
- Category 11 , Use of sold products: Critical for energy-consuming products (vehicles, electronics, machinery).
- Category 4 , Upstream transportation: Significant for companies with global supply chains.
Tips for accuracy
- Start with a screening to identify your top 3–5 categories by magnitude
- Use spend-based as a baseline, then progressively switch to supplier-specific data
- Engage your top 20 suppliers , they typically represent 80% of procurement emissions
- For business travel, use booking system exports (distance and class data)
- For employee commuting, use anonymised surveys with distance and transport mode
Putting it all together: your total carbon footprint
A complete carbon footprint combines all three scopes into a single inventory, reported in tonnes of CO₂ equivalent (tCO₂e).
Typical emission profile
| Company type | Scope 1 | Scope 2 | Scope 3 |
|---|---|---|---|
| Office-based services | 5% | 10% | 85% |
| Manufacturing | 20% | 15% | 65% |
| Heavy industry | 35% | 10% | 55% |
| Retail | 3% | 12% | 85% |
Reporting requirements
Under the CSRD, companies must disclose emissions across all three scopes as part of ESRS E1 (Climate change). This includes:
- Gross Scope 1, 2, and 3 emissions in tCO₂e
- Scope 2 reported under both location-based and market-based methods
- Material Scope 3 categories with methodology descriptions
- Year-on-year comparisons against a base year
- Reduction targets aligned with science-based pathways
The SBTi requires Scope 3 targets when Scope 3 exceeds 40% of total emissions , which applies to the majority of companies.
Common mistakes
Incomplete Scope 3 screening
Skipping the screening and only calculating the “easy” categories (business travel, commuting) while ignoring purchased goods , typically the largest source , dramatically underestimates total emissions.
Mixing location and market-based Scope 2
Reporting only market-based Scope 2 (especially when it looks favourable due to renewable energy purchases) without the location-based figure violates GHG Protocol requirements.
Using outdated emission factors
Emission factors change annually as energy grids evolve. Using factors from three years ago introduces significant inaccuracies , especially for Scope 2 in countries with rapidly decarbonising grids.
Ignoring organisational boundaries
Whether you use financial control, operational control, or equity share approach matters. Define and document your consolidation approach before calculating anything.
How Dcycle simplifies emission calculation
Dcycle’s carbon footprint platform automates data collection and calculation across all three scopes:
- 200+ integrations pull data directly from ERPs, utilities, fleet systems, and travel platforms
- Automated emission factors , always current, region-specific, and GHG Protocol-aligned
- Scope 3 screening tool identifies material categories based on your industry and spend profile
- Supplier engagement portal for collecting primary data from key suppliers
- CSRD-ready output with ESRS E1 datapoint mapping and XBRL tagging
Request a demo to see how Dcycle can automate your carbon footprint calculation across all three scopes.
