Scope 1, 2, and 3 Emissions Explained: Differences, Examples, and How to Calculate Them

Carbon Emisions

November, 2026

A company can burn fuel in its own vehicles, buy electricity for its offices, and purchase materials from suppliers. All three activities generate greenhouse gas emissions, but they belong to different accounting categories. Scope 1, 2, and 3 emissions distinguish direct emissions, purchased-energy emissions, and other indirect emissions across a company’s value chain.

Understanding the distinction is essential for building an accurate greenhouse gas inventory. A fuel bill alone does not explain a business’s total climate impact, while a supplier’s emissions report cannot replace records of energy consumed on site. This guide compares the three scopes, shows how to classify difficult cases, and walks through sample calculations for a hypothetical business. It also explains what to report, which data to collect, and how to improve the quality of future inventories.

What Are Scope 1, 2, and 3 Emissions?

The GHG Protocol Corporate Standard separates company-related greenhouse gas emissions according to the relationship between the reporting organization and the source. Scope 1 covers direct emissions from sources it owns or controls. Meanwhile, Scope 2 captures indirect emissions from generating electricity, steam, heating, or cooling that it purchases or acquires and consumes. Scope 3 covers other indirect emissions occurring upstream and downstream in the value chain. With GHG emissions accounting and supply chain sustainability services, such distinctions in corporate contexts become more visible, traceable, and auditable.

Scope	What it covers	Familiar business example	Common evidence
Scope 1	Direct emissions from owned or controlled sources	Diesel consumed by company-operated trucks	Fuel logs, fleet records, refrigerant registers
Scope 2	Indirect emissions from purchased or acquired energy	Electricity used at an office or factory	Electricity bills, meters, supplier contracts
Scope 3	Other indirect upstream and downstream value-chain emissions	Production of purchased steel or outsourced freight	Procurement data, supplier records, transport activity

The US EPA’s inventory guidance provides complementary definitions and activity-level calculation resources. Businesses should document the accounting boundary before assigning every transaction to a scope.

Scope 1 Emissions: Direct Sources Under Business Control

Scope 1 emissions come from sources that are owned or controlled by the reporting company under its selected consolidation approach. Typical sources include fuel combustion in a boiler or generator, fuel used by company-operated vehicles, industrial process reactions, and refrigerant leaks from controlled equipment.

Scope 1 Emissions Examples

Consider a manufacturer that runs a natural-gas boiler, maintains a diesel delivery fleet, and operates cooling equipment. The boiler’s combustion, fleet fuel consumption, and refrigerant leakage can all generate Scope 1 emissions. Their calculation methods differ, even though their scope is the same.

How to Calculate Scope 1 Emissions

For combustion, an activity-based calculation typically combines measured fuel consumption with an appropriate fuel-specific emissions factor. Refrigerants are measured by the mass released and the applicable global warming potential (GWP), with suitable inventory boundaries and treatment of individual gases.

Illustrative Scope 1 calculation: A company-operated fleet consumes 5,000 liters of diesel. Assume a hypothetical, composite factor of 2.65 kg CO2e per liter solely to demonstrate the arithmetic.

5,000 liters × 2.65 kg CO2e/liter = 13,250 kg CO2e = 13.25 tCO2e.

The factor above is an invented teaching input, not an official factor for a country, fuel blend, or year. An actual inventory must use a factor suited to the fuel, source, reporting year, and accounting methodology. See the EPA’s source-specific calculation resources for relevant guidance.

Scope 2 Emissions: Purchased Electricity and Energy

Scope 2 emissions arise from the generation of purchased or acquired electricity, steam, heating, and cooling that an organization consumes. Although the emissions generally occur at the energy producer’s facilities, the purchasing organization accounts for them under Scope 2.

Location-Based Versus Market-Based Scope 2 Emissions

The GHG Protocol Scope 2 Guidance distinguishes two accounting methods. The location-based method reflects average emissions intensity of the grid where electricity is consumed. The market-based method reflects qualifying contractual instruments and supplier information, subject to the guidance’s quality criteria and hierarchy.

Method	Core input	What the result communicates
Location-based	Electricity consumed × relevant grid-average factor	Emissions associated with local electricity generation mix
Market-based	Electricity consumed × applicable contractual or residual-mix factors	Emission attributes associated with qualifying energy purchasing arrangements

A renewable electricity certificate does not automatically justify a zero Scope 2 factor. The instrument must meet relevant quality criteria, and the calculation must account for the applicable residual mix or other eligible information. Where required by the standard, organizations report both methods separately rather than adding them together.

How to Calculate Scope 2 Emissions

Suppose the same hypothetical company uses 120,000 kilowatt-hours (kWh) of purchased electricity during the reporting year. Assume an illustrative grid factor of 0.42 kg CO2e per kWh.

120,000 kWh × 0.42 kg CO2e/kWh = 50,400 kg CO2e = 50.40 tCO2e.

If a properly substantiated market-based factor were hypothetically 0.18 kg CO2e/kWh, the market-based result would be 21.60 tCO2e. These are alternative disclosures for the same electricity consumption. The company must not sum 50.40 and 21.60 tonnes as though they were independent sources.

Scope 3 Emissions: Indirect Value-Chain Activities

Scope 3 covers other indirect emissions that result from a business’s activities but arise from sources it does not own or control, outside Scope 2. Examples include purchased materials, outsourced transportation, business travel, product use, and end-of-life treatment.

The GHG Protocol Corporate Value Chain Standard organizes Scope 3 into 15 upstream and downstream categories. Companies should assess relevant categories rather than automatically limiting analysis to whichever supplier records are easiest to obtain.

How to Calculate Scope 3 Emissions

The calculation method depends on what the activity measures. Common approaches include supplier-specific data, hybrid calculations, physical average-data factors, and spend-based screening. For example, kilograms of purchased material can be multiplied by a relevant cradle-to-gate factor, while transport can use tonne-kilometers and an appropriate freight factor.

For an illustrative material purchase, suppose the company buys 80,000 kg of a component with a hypothetical cradle-to-gate factor of 1.80 kg CO2e/kg. The estimate is 144.00 tCO2e. For external freight, assume 50,000 tonne-kilometers at 0.11 kg CO2e per tonne-kilometer, producing 5.50 tCO2e. For business travel, assume 150,000 passenger-kilometers at 0.10 kg CO2e per passenger-kilometer, producing 15.00 tCO2e.

These three activities total 164.50 tCO2e, but they represent only selected Scope 3 categories. They must not be presented as a complete Scope 3 inventory without screening and accounting for all other relevant categories. All factors in this example are hypothetical.

Scope 1 vs. Scope 2 vs. Scope 3 Emissions: Five Important Differences

1. Where emissions occur: Scope 1 occurs at owned or controlled sources; Scope 2 occurs at suppliers producing acquired energy; Scope 3 is distributed across other value-chain activities.

2. Who holds the data: Operations teams typically hold Scope 1 records; facilities and procurement hold energy records; Scope 3 requires purchasing, logistics, HR, product, and supplier data.

3. How factors are chosen: Fuel and energy factors are usually more standardized; Scope 3 can require sector, product, supplier, or lifecycle-specific factors.

4. How uncertainty arises: Scope 1 and 2 often rely on metered quantities; Scope 3 more often uses estimates and assumptions when primary supplier records are missing.

5. How businesses act: Scope 1 reductions involve operational assets; Scope 2 reductions involve energy efficiency and procurement; Scope 3 action depends on supplier collaboration and product or logistics design.

The scopes also overlap across companies’ separate inventories. A supplier’s Scope 1 emissions may appear in a buyer’s Scope 3 inventory. That is not necessarily an accounting error. However, double counting within the same company’s inventory must be managed through clear boundaries and category rules.

How to Calculate Scope 1, 2, and 3 Emissions: A Worked Business Example

A defensible company-wide estimate starts with organizational boundaries and consistently applied methods. The example below uses one company, a single reporting year, and an operational-control boundary. It assumes that purchased electricity is the only Scope 2 energy source and that the selected Scope 3 activities are measured without overlap.

Step 1: Define Boundaries and Collect Activity Data

Assign ownership of each source. Capture primary records such as fleet fuel invoices, electricity bills, purchase quantities, logistics distances, and business travel bookings. Record units, geography, time periods, and the source of every emission factor.

Step 2: Match Each Source to a Relevant Calculation Method

Use the general relationship Emissions (kg CO2e) = Activity data × Applicable emission factor when the factor is expressed in kg CO2e per activity unit. Some sources require additional gas-level calculations, conversions, allocation, or GWP application. The correct method depends on the source and applicable guidance.

Step 3: Calculate, Convert, and Reconcile

Source	Scope	Activity × illustrative factor	Result (tCO2e)
Company-operated diesel fleet	1	5,000 L × 2.65 kg CO2e/L	13.25
Purchased electricity, location-based	2	120,000 kWh × 0.42 kg CO2e/kWh	50.40
Purchased components	3	80,000 kg × 1.80 kg CO2e/kg	144.00
Third-party freight	3	50,000 tonne-km × 0.11 kg CO2e/tonne-km	5.50
Employee business travel	3	150,000 passenger-km × 0.10 kg CO2e/passenger-km	15.00
Illustrative subtotal		Selected sources only	228.15

The 228.15 tCO2e subtotal uses location-based Scope 2. With the alternative illustrative market-based Scope 2 result, the comparable subtotal would be 199.35 tCO2e. Neither figure represents a verified, comprehensive corporate footprint. Other material Scope 1, 2, and 3 sources may still be missing.

Step 4: Explain the Boundaries, Not Just the Totals

A credible reporting table states which sources were included, whether Scope 2 is location-based or market-based, the emission factor dataset and vintage, whether estimates were used, and which categories remain incomplete. Otherwise, readers may mistake a partial operational screening exercise for a complete corporate inventory.

How to Build an Accurate Scope 1, 2, and 3 Emissions Inventory

A six-step inventory workflow:

1. Set the boundary. Document organizational consolidation choices, facilities, leased assets, and reporting dates.

2. Map emission sources. Identify fuel, process, purchased energy, and relevant value-chain activities; assign data owners.

3. Collect and validate activity data. Reconcile meters and invoices, check units, remove duplicates, and document missing periods.

4. Select defensible emission factors. Match factors to activity, country, time period, greenhouse gases covered, and lifecycle boundary.

5. Calculate and review. Reconcile against financial and operating data; conduct exception checks and document uncertainty.

6. Report and improve. Present scope-level results, dual Scope 2 figures where relevant, assumptions, exclusions, and a data improvement plan.

Common Classification and Measurement Mistakes to Avoid

Confusing an Energy Bill with Direct Emissions

Purchased grid electricity generally belongs in Scope 2 even though the company uses the electricity on its premises. Fuel burned in its own controlled generator, by contrast, can be Scope 1.

Classifying Outsourced Freight Without Checking Contracts

Transportation performed by a third-party carrier is typically Scope 3 for the purchaser of transport services; its specific category depends on where the service fits in the value chain and who purchases it. Owned or controlled fleets may be Scope 1 instead.

Treating Renewable Energy Procurement as a Blanket Zero

A market-based claim requires qualifying instruments and appropriate factor treatment. Location-based emissions should still be calculated where dual reporting applies.

Assuming Estimates Equal Reductions

A lower spend-based factor or a new supplier dataset can change the reported total without any real operational decarbonization. Explain methodological changes separately from activity changes. Leverage decarbonization strategy services for precision.

Ignoring Value-Chain Gaps

Scope 3 screening should include relevant upstream and downstream categories, even when early estimates have limited precision. Build a plan to replace high-impact estimates with better information over time.

How Should Businesses Report Emissions Across All Three Scopes?

An effective inventory report should identify its reporting entity and period, consolidation approach, included and excluded sources, calculation methodologies, source datasets, and results in tonnes of CO2 equivalent. Disclose Scope 1, Scope 2, and Scope 3 separately and explain major changes from the previous year.

For Scope 2, present location-based and market-based values as separate results where the GHG Protocol’s dual-reporting requirements apply. For Scope 3, show applicable categories and describe data quality and estimation methods. Avoid reducing every result to a single unexplained total.

Organizations may use this information and related carbon data solutions for voluntary sustainability reports, customer requests, climate targets, or disclosures under applicable regulations. However, the GHG Protocol is an accounting framework, not a universal legal mandate. Exact regulatory obligations depend on jurisdiction, organization size, sector, and effective dates.

When data supports clear hotspots, emissions measurement can inform a broader climate strategy and decarbonization program.

Conclusion: Turn Scope 1, 2, and 3 Emissions Into Actionable Data

Understanding Scope 1, 2, and 3 emissions begins with one question: who owns or controls the source, and how does the reporting business relate to the activity? That classification determines which data to collect, which calculation method to apply, and how to disclose the result.

The calculation itself may be simple, but a useful inventory needs defensible boundaries, current emission factors, transparent assumptions, and a plan to close data gaps. Businesses that build those controls can move beyond annual reporting to more reliable operational and supplier decisions.

Explore SG Analytics’ GHG emissions accounting services to understand how structured emissions measurement can support your next stage of reporting and decarbonization planning.

Frequently Asked Questions About Scope 1, 2, and 3 Emissions

What is the main difference between Scope 1, Scope 2, and Scope 3 emissions?

Scope 1 measures direct emissions from sources the company owns or controls. Instead, Scope 2 measures indirect emissions from purchased electricity, steam, heating, and cooling. Scope 3 covers other indirect emissions along the upstream and downstream value chain. The reporting company’s accounting boundary determines which scope applies to an activity.

How do you calculate Scope 1 emissions for a business?

Identify direct emission sources such as fuel combustion, process reactions, and refrigerant leakage. Collect activity data and apply source-specific emission factors and, where needed, gas-level GWP conversions. Check that the factors and source units match, then report the total as tCO2e with assumptions and boundaries documented.

Are purchased electricity emissions Scope 1 or Scope 2?

Purchased electricity consumed by a business generally creates Scope 2 emissions, even when the electricity powers equipment at a company-controlled facility. Fuel combusted in a company’s own controlled power generator may instead create Scope 1 emissions. Purchased electricity may require both location-based and market-based Scope 2 calculations.

How are Scope 3 emissions different from Scope 2 emissions?

Scope 2 specifically captures generation of acquired electricity, steam, heating, or cooling consumed by the reporting organization. Scope 3 captures other indirect emissions from value-chain activities, including purchased products and contracted freight. The distinction prevents purchased-energy generation from being classified under the broader value-chain category.

Can a company calculate a total footprint without Scope 3 emissions?

A company can calculate a Scope 1 and 2 subtotal, but it should not label that subtotal a complete value-chain footprint. The relevance and reporting requirements for Scope 3 depend on the inventory objective, applicable standard, and regulatory requirements. A thorough screening exercise identifies which additional categories need assessment.

Why can Scope 2 results differ between the location-based and market-based methods?

Location-based accounting uses average electricity grid emissions where energy is consumed. Market-based accounting uses qualifying contracts and related emission attributes. Their results can differ without implying that electricity consumption changed. Companies should keep the methodologies and underlying instruments transparent.

What records should a small business collect first?

Start with fuel invoices, vehicle mileage and fuel data, electricity bills, refrigerant service records, purchasing records, and logistics invoices. These make it possible to establish the organizational boundary and identify major sources. Add supplier-specific information progressively, prioritizing material activities where estimates create high uncertainty.

How can SG Analytics help companies calculate emissions across all three scopes?

SG Analytics supports GHG inventory development through organizational boundary mapping, activity data collection, emission factor selection, calculations, and reporting documentation. Its proven GHG emissions inventory and accounting capabilities address Scope 1, dual-method Scope 2, and relevant Scope 3 categories.

Does SG Analytics support location-based and market-based Scope 2 accounting?

Yes. SG Analytics describes dual-method Scope 2 accounting within its published GHG inventory offering, including grid-factor mapping and evaluation of qualifying electricity procurement information. Organizations still need to confirm that contractual instruments meet the relevant GHG Protocol quality criteria before making market-based claims.

How can SG Analytics connect emissions inventories with climate reporting and reduction planning?

SG Analytics combines GHG data preparation, documentation, and analytics to support reporting and decision-making. Its carbon data solutions can complement inventory development by improving the consistency of underlying emissions information and enabling clearer analysis of priority sources.