Explainer
Scope 1, 2 and 3 are how the GHG Protocol sorts a company’s greenhouse gas emissions. Here is what each scope covers, the fifteen scope 3 categories, how to measure them and which UK rules ask for which.
By Christopher Fagan, Managing Partner, PEF Consulting Partners
The Greenhouse Gas Protocol, the standard most companies and regulators use, splits emissions into three scopes. Scope 1 covers direct emissions from sources you own or control. Scope 2 covers emissions from the electricity, steam, heat and cooling you buy. Scope 3 covers every other emission in your value chain, upstream and downstream.
| Scope | What it covers | Examples |
|---|---|---|
| Scope 1 | Direct emissions from owned or controlled sources | Gas boilers, company vehicles, refrigerant leaks, process emissions |
| Scope 2 | Indirect emissions from purchased energy | Electricity, heat, steam and cooling bought from others |
| Scope 3 | All other indirect emissions in the value chain | Purchased goods, business travel, commuting, waste, transport, use of sold products |
Scope 2 is normally reported two ways. The location based method uses the average emissions of the grid where the electricity is used. The market based method uses the emissions of the electricity you have contracted for, for example a renewable tariff backed by certificates. The GHG Protocol is revising its scope 2 guidance after a consultation that closed in January 2026, with a revised standard not expected for some time, so check the latest position before you set targets on it.
| Upstream | Downstream |
|---|---|
| 1. Purchased goods and services | 9. Downstream transportation and distribution |
| 2. Capital goods | 10. Processing of sold products |
| 3. Fuel and energy related activities | 11. Use of sold products |
| 4. Upstream transportation and distribution | 12. End of life treatment of sold products |
| 5. Waste generated in operations | 13. Downstream leased assets |
| 6. Business travel | 14. Franchises |
| 7. Employee commuting | 15. Investments |
| 8. Upstream leased assets |
For most businesses scope 3 is the largest part of the footprint, and category 1, purchased goods and services, is usually the biggest single item.
| Requirement | Who it applies to | Scopes covered |
|---|---|---|
| SECR | Quoted companies, and large unquoted companies and LLPs | Scope 1 and 2 with energy use; scope 3 is voluntary |
| Carbon reduction plans (PPN 006) | Suppliers bidding for central government contracts over £5 million a year | All scope 1 and 2, plus scope 3 categories 4, 5, 6, 7 and 9 |
| UK SRS under FCA rules | Listed companies, comply or explain, for periods from 1 January 2027 | Scope 1, 2 and 3, with first year relief on scope 3 |
| CSRD and ESRS | Larger EU groups and some non EU groups, after the 2026 simplification | Scope 1, 2 and 3 where material |
For the CSRD position after the 2026 changes, see the CSRD timeline after the omnibus.
Scope 3 data comes from suppliers and customers, so it is estimated at first and improved over time. Focus on the categories that matter most to your footprint and your customers, ask your largest suppliers for their own emissions data, and document your method so the numbers can be assured later.
Related reading: business carbon footprint calculator, the carbon reduction plan template, carbon accounting and reporting in the UK, SECR reporting, the Science Based Targets initiative explained.
Scope 1 is what you burn or release directly, scope 2 is the energy you buy, and scope 3 is everything else in your value chain, from what you buy to how customers use and dispose of what you sell.
Not under SECR, where they are voluntary. They are required for the five categories in carbon reduction plans for large central government contracts, for listed companies reporting against UK SRS from 2027 on a comply or explain basis, and for companies in scope of CSRD.
The emissions from making the goods you buy, the flights your staff take, your staff commuting to work, and the fuel your customers burn using the products you sell.
Start with spend by category multiplied by spend based emission factors, then improve the biggest categories with activity data, such as tonnes or kilometres, and with emissions data from your suppliers.
If you need a footprint that will stand up to a tender, a lender or an assurer, we can help you get the boundaries, data and method right first time.