The plain-English explainer
Scope 1, 2 and 3 emissions explained
A company carbon footprint is split into three scopes under the GHG Protocol: Scope 1 is what you burn, Scope 2 is the energy you buy, and Scope 3 is everything else across your value chain. Scope 3 is usually the largest by far, and all three feed directly into ESRS E1 under CSRD. GHG Protocol
TL;DR
- Scope 1: direct emissions from sources you own or control (fuel, vehicles, process, refrigerants).
- Scope 2: indirect emissions from purchased electricity, steam, heating and cooling.
- Scope 3: all other value-chain emissions, 8 upstream and 7 downstream categories. Often 70 to 90 percent of total.
- Scope 2 twice: report both location-based and market-based.
- The maths: emissions = activity data times emission factor.
The three scopes
The GHG Protocol divides a company greenhouse-gas emissions into three scopes so they are counted once and only once. Scope 1 is direct emissions from owned or controlled sources. Scope 2 is indirect emissions from the energy you purchase and consume. Scope 3 is every other indirect emission in your value chain, upstream and downstream. Together they make up your corporate carbon footprint. GHG Protocol Corporate Standard
Scope 1 - direct
Emissions from sources you own or control: fuel burned in boilers and furnaces, company vehicles, on-site process emissions, and fugitive refrigerant leaks.
Scope 2 - purchased energy
Indirect emissions from the electricity, steam, heating and cooling you buy and consume. Reported both location-based and market-based.
Scope 3 - value chain
All other indirect emissions, upstream and downstream, across 15 categories. Usually the largest part of the footprint, often 70 to 90 percent.
The 15 Scope 3 categories
The GHG Protocol Corporate Value Chain (Scope 3) Standard organises Scope 3 into 15 categories: 8 upstream (linked to what you buy and your operations) and 7 downstream (linked to what happens to your products after they leave you). You screen all 15 and report those that are relevant and material. GHG Protocol Scope 3 Standard
Upstream (8)
1. Purchased goods and services
Extraction, production and transport of goods and services a company buys.
2. Capital goods
Emissions from producing the equipment, machinery and buildings you purchase.
3. Fuel- and energy-related activities
Upstream emissions of fuels and energy not already in Scope 1 or 2 (for example extraction and grid losses).
4. Upstream transportation and distribution
Transport and distribution of purchased products between your suppliers and you.
5. Waste generated in operations
Disposal and treatment of waste produced by your operations.
6. Business travel
Employee travel by air, rail, road and hotel stays for business.
7. Employee commuting
Travel between home and work, including any remote-working energy use.
8. Upstream leased assets
Operation of assets you lease in, where not already counted in Scope 1 or 2.
Downstream (7)
9. Downstream transportation and distribution
Transport, distribution, storage and retail of sold products after they leave you.
10. Processing of sold products
Further processing of intermediate products by third parties.
11. Use of sold products
Emissions from customers using your products over their lifetime, often the biggest category.
12. End-of-life treatment of sold products
Disposal and treatment of your products at the end of their life.
13. Downstream leased assets
Operation of assets you own and lease out to others.
14. Franchises
Operation of franchises not already included in Scope 1 or 2.
15. Investments
Financed emissions from equity and debt investments, key for financial institutions.
Scope 2: location-based vs market-based
Scope 2 must be reported two ways. The location-based method multiplies your electricity consumption by the average emission factor for the local grid, reflecting the physical mix where you operate. The market-based method reflects the electricity you contractually buy, so power purchase agreements, renewable certificates and green tariffs reduce it. The GHG Protocol Scope 2 Guidance, and ESRS E1-6, require both. GHG Protocol Scope 2 Guidance
Location-based
Consumption times the average grid emission factor for your region. Reflects the physical grid you draw from, regardless of any green contracts.
Market-based
Reflects the electricity you contractually procure (PPAs, RECs and guarantees of origin, green tariffs, supplier-specific factors). Lets renewable procurement show up.
How the scopes fit ESRS E1 under CSRD
Under CSRD, the scopes are not optional theory: they populate ESRS E1, the climate standard. Disclosure requirement E1-6 asks for gross Scope 1, 2 and 3 and total GHG emissions, with Scope 2 shown both location-based and market-based and Scope 3 across the relevant of the 15 categories. E1-5 covers energy consumption, and the inventory underpins E1-4 targets and the E1-1 transition plan. ESRS E1, Delegated Reg. (EU) 2023/2772
ESRS E1-6 explicitly requires emissions to be measured in line with the GHG Protocol (or ISO 14064-1), so the GHG Protocol is effectively the calculation engine behind CSRD climate reporting. See our GHG Protocol guide for boundaries and inventory steps.
Calculation basics
The core formula is simple: emissions = activity data times emission factor. You multiply each activity (litres of fuel, kWh of electricity, tonnes of material purchased, kilometres travelled) by an appropriate emission factor from a credible source such as DEFRA, the IEA, the EPA or EXIOBASE for spend-based Scope 3, then convert all gases to CO2 equivalent and sum by scope and category.
- Activity-based data (physical quantities) is more accurate and preferred where available.
- Spend-based data (money spent times a spend factor) is a practical screening method for large Scope 3 categories early on.
- Document factor sources and versions, and keep an audit trail; CSRD requires limited assurance.
Want a quick estimate before you build a full inventory? Use the emissions calculator.
Rule of thumb
Standards in flux
By the numbers
The scopes in figures
Scopes: direct, purchased energy, and value chain.
Scope 3 categories: 8 upstream and 7 downstream.
Typical share of total footprint sitting in Scope 3.
Scope 2 reported location-based and market-based under ESRS E1-6.
FAQ
People also ask
What is the difference between Scope 1, 2 and 3 emissions?
Scope 1 is direct emissions from sources a company owns or controls, such as fuel burned in boilers, furnaces and company vehicles. Scope 2 is indirect emissions from purchased energy: electricity, steam, heating and cooling the company buys. Scope 3 is all other indirect emissions across the value chain, both upstream and downstream, and is usually the largest share of the footprint.
What are the 15 Scope 3 categories?
The GHG Protocol splits Scope 3 into 15 categories: 8 upstream (purchased goods and services; capital goods; fuel- and energy-related activities; upstream transport and distribution; waste; business travel; employee commuting; upstream leased assets) and 7 downstream (downstream transport and distribution; processing of sold products; use of sold products; end-of-life treatment; downstream leased assets; franchises; investments).
What is the difference between location-based and market-based Scope 2?
Location-based Scope 2 multiplies your electricity consumption by the average emission factor for the local grid, reflecting the physical grid mix. Market-based Scope 2 reflects the electricity you contractually buy (power purchase agreements, renewable energy certificates, green tariffs, supplier-specific factors). The GHG Protocol Scope 2 Guidance and ESRS E1-6 require you to report both.
Are Scope 3 emissions mandatory under CSRD?
Yes, for material categories. ESRS E1-6 requires gross Scope 1, 2 and 3 and total GHG emissions, with Scope 3 covering the relevant of the 15 categories. ESRS phase-in reliefs let first-year reporters and smaller companies omit Scope 3 initially, and the revised ESRS reduces the burden, but Scope 3 remains central because it is usually the bulk of the footprint.
How do you calculate Scope 1, 2 and 3 emissions?
The core formula is emissions = activity data times emission factor. Multiply each activity (litres of fuel, kWh of electricity, tonnes purchased, km travelled) by an appropriate emission factor (for example DEFRA, IEA, EPA or EXIOBASE) to get tonnes of CO2 equivalent, then sum by scope and category. Document your factor sources and versions for assurance.
Why is Scope 3 usually the largest?
Because it captures the whole value chain, not just the company itself. For most businesses, emissions embedded in purchased goods and services, in the use of sold products, and in transport and investments far exceed direct fuel and purchased energy. Scope 3 commonly represents 70 to 90 percent of a company total footprint.
What is Scope 4?
Scope 4, or avoided emissions, is not part of the GHG Protocol corporate inventory. It describes emissions reductions that occur outside a product life cycle as a result of using that product (for example a video call avoiding a flight). It can be reported separately for context but must never be netted against Scope 1, 2 or 3.
This is guidance, not legal advice
Sources
- [1]GHG Protocol Corporate Accounting and Reporting Standardretrieved 8 Jun 2026
- [2]GHG Protocol Corporate Value Chain (Scope 3) Standardretrieved 8 Jun 2026
- [3]GHG Protocol Scope 2 Guidance (location- and market-based)retrieved 8 Jun 2026
- [4]Delegated Regulation (EU) 2023/2772 (ESRS Set 1, incl. ESRS E1)retrieved 8 Jun 2026
- [5]European Commission: consultation on the revised ESRS (6 May 2026)retrieved 8 Jun 2026
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