What are scope 1, 2, and 3 emissions?

The three scopes come from the Greenhouse Gas Protocol. Added together they give a company its total carbon footprint. Scope 3 is normally the largest of the three, at roughly 70 to 90% of the total for most companies, and the hardest to measure because the data sits with suppliers and customers.

Scope 1, 2 and 3 emissions at a glance

• Scope 1, direct emissions. Fuel burned on site, refrigerant leaks, emissions from manufacturing processes, fuel burned in owned or leased vehicles.
• Scope 2, purchased energy emissions. Electricity, steam, heating and cooling bought from a utility or supplier.
• Scope 3, value chain emissions. The 15 categories that sit upstream and downstream of the company, including purchased goods and services, transport paid for but not operated, waste, business travel, commuting, use of sold products and investments.

How did Scope 1, 2, and 3 carbon emissions come to be?

Scope 1, 2, 3 emissions were developed by the Greenhouse Gas Protocol (GHGP), which is a global standard for measuring and managing climate-warming greenhouse gas emissions. Today the GHG Protocol, which is primarily led by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), supplies the world’s most widely used greenhouse gas accounting standards.

Since measuring an entity’s carbon footprint is complex, the GHG Protocol corporate standard breaks it down into three major “buckets” or scopes:

• Scope 1: direct emissions
• Scope 2: indirect purchased energy emissions
• Scope 3: indirect value chain emissions

When added together, Scope 1 2 and 3 emissions give a reporting entity their total greenhouse gas emissions measurement. Keep reading to learn about the scopes in greater detail.

Scope 1 – Direct Emissions

Scope 1 consists of direct emissions from company-owned or controlled sources. Any ghg emissions created at or by company-owned facilities, equipment, and vehicles fall under Scope 1. Operations that are owned or controlled by a company directly fall under Scope 1.

One category of on-site activity that drives up Scope 1 emissions is Industrial Processes, which release emissions during on-site manufacturing. There’s an incredibly wide array of these production processes, and they can involve physical, chemical, electrical, and mechanical steps.

A second example is combustion, which is typically split into stationary and mobile combustion. Mobile Combustion is quite literally emissions caused by combustion for transportation. Even though electric vehicles are on the rise, most organizations still rely on the fuel combustion of diesel to powers their trucks and company-owned vehicles. And, as you might guess from the name, Stationary Combustion occurs in stationary, on-site locations and releases emissions when burning fuel for activities, like boilers and turbines.

Scope 1 emissions also include Fugitive Emissions, also known as “unintended” emissions. Fugitive emissions can be hard to track and often go unnoticed, but they’re critical to monitor because they typically involve potent greenhouse gases, like refrigerant gases, which are hundreds of thousands of times worse for the climate than carbon dioxide. For example, in the US, grocery stores leak an average of 25% of their refrigerants every year.

Scope 2 – Purchased Energy Emissions

These are indirect emissions generated from energy purchased or acquired by the reporting company. The most common type of Scope 2 emissions is purchased electricity (sometimes also called acquired electricity depending on how it’s paid for). But don’t forget, purchased energy can also include steam, heat, and cooling.

Nearly 40% of emissions come from energy generation, so Scope 2 emissions are a very important lever to manage when reducing emissions. One way to reduce your scope 2 emissions is to simply reduce your company’s energy consumption. Another way is to adjust the carbon intensity of your energy source.

Interestingly, a company’s Scope 2 emissions are highly dependent on how their energy is generated before it arrives on-site. For example, in California, 59% of electricity comes from renewable or zero-carbon sources; whereas, in Texas, 36% of electricity comes from renewables. That means, you can consume the same amount of purchased electricity in both states and have a lower carbon footprint in California.

Scope 2 is also reported two ways. The location-based method uses the average emissions of the grid the site sits on. The market-based method uses the contracts a company has signed, such as a renewable energy tariff or renewable energy certificates. Most disclosure frameworks ask for both numbers. Gravity’s utility bill management reads consumption straight off the bills so both figures come from the same source data.

Scope 3 – Value Chain or Indirect Emissions

For many companies, the majority of their emissions live outside of their direct operations. This is where Scope 3 comes into play. Scope 3 emissions are all of the other indirect emissions outside of purchased or acquired energy, which is measured in Scope 2. Commonly known as value chain or supply chain emissions, Scope 3 emissions are the indirect ghg emissions released by upstream and downstream partners in order to serve your business. In other words, they are the indirect emissions released by your company’s customers and suppliers in the course of their dealings with your company.

The GHG Protocol defines 15 unique categories within Scope 3 emissions:

• Purchased goods and services – All of the cradle-to-gate emissions of tangible or intangible goods and services purchased by the reporting company count here.
• Capital goods – Capital goods are often referred to as PP&E or fixed assets. They sometimes look similar to purchased goods, so companies need to make sure not to double count.
• Fuel- and energy-related activities – These are any remaining fuel or energy-related emissions not already counted in Scope 1 or Scope 2.
• Upstream transportation and distribution – Many organizations own or lease vehicles, but companies often use third-party transportation and distribution too. Those emissions count here.
• Waste generated in operations – What’s the volume of waste generated on-site? What does your waste disposal program look like?
• Business travel – How often are employees traveling for work? Do company employees use air travel?
• Employee commuting – Are employees walking to work, working from home, riding a bike?
• Upstream Leased Assets – Even if you don’t outright own operations, assets and equipment that you lease and use need to be considered in your Scope 3 emissions inventory.
• Downstream transportation and distribution – Emissions related to retail and storage of a products sold count here.
• Processing of sold products – If you sell to an intermediary (like a manufacturer) and your products are processed before being sold to the end user, then there are likely emissions caused by the processing of your sold products.
• Use of sold products – Some end products directly consume energy. For example, a lightbulb requires electricity to turn on and an airplane requires aviation fuel to fly. Other products indirectly require energy. For example, a t-shirt cleaned in a washer and dryer and a carrot stored in a fridge both indirectly required some energy use.
• End-of-life treatment of sold products – What happens to your products at the end of their life? Are they recycled? Are they compostable? Or do they end up in a landfill? This can be challenging to track, but counts here.
• Downstream leased assets – Unlike upstream leased assets, these are assets that you own but lease to others.
• Franchises – This is only relevant if you license out or operate a franchise model.
• Investments – Many businesses, even outside of financial institutions, make direct investments and those investments’s emissions are called financed emissions. When it comes to scope 3 emissions reporting, it’s important to measure the indirect impact of the investments that you support

Scope 3 emissions are important because they are a source of significant carbon emissions. The average company’s supply chain emissions are 5.5x higher than their direct emissions. Industrial supply chains alone are responsible for over 40% of all GHG emissions.

“Up to 90% of all total emissions are considered Scope 3.” Carbon Trust

Scope 3 emissions are also complicated. Although 58% of Fortune 500 companies reported a plan to achieve net zero by 2050. Only a small group of those companies include Scope 3 emissions in those net zero plans. Our Scope 3 emissions guide works through the categories one at a time, including which data to ask suppliers for first.

Examples of Scope 1, 2 and 3 emissions

The same activity can fall in a different scope depending on who owns the asset. These examples cover the cases people most often get wrong.

Scope 1 examples

• Natural gas burned in a boiler at a plant the company operates.
• Diesel burned in trucks the company owns or leases.
• Refrigerant leaking from company-owned chillers or supermarket cases.
• Process emissions from cement, steel, chemical or glass production.

Scope 2 examples

• Electricity bought from the grid to run machinery, lighting and offices.
• Purchased steam used in manufacturing.
• District heating or chilled water bought from a supplier.

Scope 3 examples

• Steel, packaging or components bought from suppliers.
• Freight moved by a third-party carrier.
• Employee flights, hotel stays and commuting.
• Electricity a customer uses to run a product the company sold.
• Landfill emissions from products at end of life.

What's the Difference between Upstream and Downstream?

It’s easy to get confused here. These terms refer to different parts of a company’s supply chain. Upstream activities are activities that bring inputs or materials closer to the reporting company. So for example, a restaurant’s upstream partner might be a farm providing arugula for salads. Downstream activities take a finished product away from the reporting company and closer to the end user.

Which scopes does your company have to report?

Which scopes are mandatory depends on where a company operates and how large it is.

• California SB 253 requires companies doing business in California with more than $1 billion in annual revenue to report Scope 1 and 2 for reporting year 2026 and Scope 3 for 2027, with third-party verification. See our SB 253 solution.
• The EU's CSRD requires Scope 1, 2 and 3 under ESRS E1, alongside a transition plan and climate risk disclosures. See our CSRD solution and the CSRD reporting guide.
• The UK's SECR requires Scope 1 and 2 plus UK energy use in the annual report, and encourages Scope 3. See the SECR guide.
• CDP, SBTi and customer questionnaires all ask for all three scopes. Large customers increasingly pass their own Scope 3 targets down to suppliers as data requests.

How to Measure Scope 1, 2, 3 Emissions

Measuring your carbon footprint is the first step in any sustainability or ESG journey. The work breaks into four steps:

1. Set the boundary. Decide which legal entities, sites and leased assets are inside the inventory, and pick a base year.
2. Collect activity data. Fuel and refrigerant records for Scope 1, utility bills and meter data for Scope 2, spend and supplier data for Scope 3.
3. Apply emission factors. Convert each activity into tonnes of CO2 equivalent using published factors, and keep the factor version attached to the number.
4. Report and check. Produce the inventory in the format each framework asks for, with evidence a verifier can follow back to the source document.

Gravity does this work in one place. Carbon accounting handles boundaries, factors and calculations, utility bill management pulls Scope 2 data off bills and utility APIs, and the Gravity Agent chases supplier data for Scope 3. If you are starting from scratch, our carbon accounting guide covers the fundamentals.

Reach out to our team today to learn how we can help you measure your GHG emissions.