Scope 1, 2, and 3 Emissions, Explained: The GHG Protocol Categories Behind Every ESG Report
Scope 1, 2, and 3 emissions cover direct output, purchased energy, and value-chain footprint, as defined in the GHG Protocol’s 15 Scope 3 categories.
Scope 1, 2, and 3 are the three emissions categories defined by the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, the framework published jointly by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) that underpins most corporate climate disclosure worldwide. Scope 1 covers direct emissions from sources a company owns or controls, Scope 2 covers indirect emissions from purchased electricity, steam, heat, or cooling, and Scope 3 covers all other indirect emissions across a company’s value chain. The distinction determines what a company must measure, and increasingly what it must disclose, under frameworks including the EU’s Corporate Sustainability Reporting Directive (CSRD) and the Science Based Targets initiative (SBTi).
What is Scope 1?
Scope 1 emissions are direct greenhouse gas emissions “from sources that are controlled or owned by an organization,” according to the US Environmental Protection Agency (EPA), which bases its guidance on the GHG Protocol. Typical Scope 1 sources include fuel burned in company-owned boilers and furnaces, and fuel burned in company-owned vehicles. A manufacturer’s on-site gas-fired kiln and a delivery company’s owned truck fleet are both Scope 1 sources.
What is Scope 2?
Scope 2 emissions are indirect emissions “associated with the purchase of electricity, steam, heat, or cooling,” per EPA guidance. These emissions physically occur at the power plant or utility that generates the energy, not at the reporting company’s site, but they are counted against the company because they result from its energy purchasing decisions.
The GHG Protocol’s Scope 2 Guidance, published in January 2015, set out two calculation methods that must both be reported side by side: the location-based method, which uses the average emissions intensity of the grid where consumption occurs, and the market-based method, which reflects emissions from the specific electricity contracts a company has purchased, including renewable energy certificates and power purchase agreements. The GHG Protocol opened a public consultation on updates to the Scope 2 Guidance running from October 20, 2025, to January 31, 2026, indicating the dual-reporting approach is under active review.
What is Scope 3, and what are its 15 categories?
Scope 3 covers indirect emissions that occur in a company’s value chain but outside its own operations and energy purchases — both upstream, from suppliers, and downstream, from the use and disposal of what it sells. The GHG Protocol’s Corporate Value Chain (Scope 3) Standard, released in 2011, divides Scope 3 into 15 categories.
The eight upstream categories are: purchased goods and services; capital goods; fuel- and energy-related activities not already counted in Scope 1 or 2; upstream transportation and distribution; waste generated in operations; business travel; employee commuting; and upstream leased assets.
The seven downstream categories are: downstream transportation and distribution; processing of sold products; use of sold products; end-of-life treatment of sold products; downstream leased assets; franchises; and investments.
For most companies outside heavy industry, Scope 3 accounts for the largest share of total emissions, because it captures supplier manufacturing and the energy consumed when customers use a sold product — categories 1 and 11 in the list above — rather than a company’s own facilities or purchased power.
Why the distinction matters for reporting requirements
The EU’s European Sustainability Reporting Standards, specifically ESRS E1 under the CSRD, require companies within its scope to disclose emissions across all three scopes, broken down by location-based and market-based Scope 2 accounting, alongside emissions intensity per unit of net revenue. The Omnibus simplification package, launched by the European Commission in February 2025, reduced the number of companies required to report under CSRD and narrowed some disclosure requirements, though the underlying scope definitions used for those that remain in scope are unchanged.
The Science Based Targets initiative applies a materiality threshold rather than requiring Scope 3 targets from every company: a near-term target must cover Scope 3 if Scope 3 represents 40% or more of a company’s combined Scope 1, 2, and 3 emissions — a threshold SBTi says captures “the vast majority of companies.” Under the SBTi Net-Zero Standard, Scope 3 targets are mandatory regardless of that threshold. SBTi reports that 96% of the near-term targets it has validated include a Scope 3 component.
What remains unresolved
Scope 3 data quality remains the most-cited limitation across corporate emissions reporting: because most Scope 3 categories rely on estimates from suppliers or customers rather than direct measurement, figures are less precise than Scope 1 or Scope 2 totals. The GHG Protocol has not published a revised Corporate Value Chain (Scope 3) Standard since 2011, though it has signaled, through its ongoing Scope 2 consultation and prior public statements on Scope 3 methodology challenges, that further guidance updates are under consideration.
Sources: Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, US Environmental Protection Agency, Scope 2 Guidance, Corporate Value Chain (Scope 3) Standard, Science Based Targets initiative
Featured image: photo by David McElwee on Pexels (free Pexels license).
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I specialize in sustainability education, curriculum co-creation, and early-stage project strategy. At WINSS, I craft articles on sustainability, transformative AI, and related topics. When I’m not writing, you’ll find me chasing the perfect sushi roll, exploring cities around the globe, or unwinding with my dog Puffy — the world’s most loyal sidekick.
