What is Scope 1, 2 & 3?
The GHG Protocol Corporate Accounting Standard & Value Chain Boundaries
Developed jointly by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the GHG Protocol Corporate Standard is the universal benchmark for greenhouse gas accounting. It categorizes all corporate emissions into three distinct scopes: direct on-site emissions (Scope 1), purchased electricity and utilities (Scope 2), and broader supply chain and product usage impacts (Scope 3).
Scope 1: Direct Greenhouse Gas Emissions
Scope 1 emissions originate directly from sources owned or physically controlled by the reporting organization:
- Stationary Combustion: Burning fossil fuels (diesel, natural gas, coal, furnace oil) in on-site boilers, furnaces, kilns, and diesel generators.
- Mobile Combustion: Burning petrol or diesel in company-owned delivery fleets, corporate vehicles, forklifts, or heavy site machinery.
- Process Emissions: Chemical reactions occurring during industrial manufacturing (e.g., calcination of limestone in cement production or chemical refining).
- Fugitive Emissions: Unintentional releases such as refrigerant leakage (HFCs) from commercial HVAC systems, cold storage, and gas pipelines.
Refrigerant Warming Hazard
Common synthetic refrigerants like R-410A have Global Warming Potentials thousands of times greater than CO₂. A leak of just 1 kg of R-410A releases the climate warming equivalent of over 2,000 kg of CO₂.
Scope 2: Indirect Energy Emissions & Dual Reporting
Scope 2 accounts for greenhouse gas emissions resulting from the generation of purchased electricity, steam, heating, or cooling consumed by your facilities. Under the GHG Protocol Scope 2 Guidance, enterprises must perform dual reporting:
- Location-Based Method: Reflects the average greenhouse gas intensity of the physical power grid where consumption occurs (e.g., India's CEA national grid emission factor of ~0.71 kg CO₂e/kWh).
- Market-Based Method: Reflects emissions from the specific electricity contracts an organization has entered into—such as Green Energy Open Access, on-site solar PPAs, or Renewable Energy Certificates (RECs).
Why Dual Reporting Matters
Dual reporting ensures transparency. A company purchasing 100% solar power can claim zero market-based Scope 2 emissions, but must still disclose its location-based grid footprint to reflect the physical electrical infrastructure it relies upon.
Scope 3: The 15 Value Chain Categories
Scope 3 encompasses all indirect emissions across an organization's upstream and downstream value chain. For most enterprises, Scope 3 accounts for 70% to 90%+ of total climate impact:
- Upstream Categories (1-8): Purchased goods & services (raw materials), capital goods (machinery, buildings), fuel- and energy-related activities, upstream logistics & distribution, operational waste disposal, business travel (flights, trains), employee commuting, and upstream leased assets.
- Downstream Categories (9-15): Downstream transportation & warehousing, processing of sold intermediate products, use phase of sold goods, end-of-life treatment of sold products, downstream leased assets, franchises, and corporate investments (financed emissions).
| Emission Scope | Ownership & Control | Typical Share of Footprint | Primary Data Source |
|---|---|---|---|
| Scope 1 (Direct) | Owned or controlled by company | 10% – 25% | Fuel purchase bills, generator logs, refrigerant top-ups |
| Scope 2 (Electricity) | Indirect; generated off-site | 10% – 20% | Monthly electricity utility bills & PPA contracts |
| Scope 3 (Value Chain) | Indirect; outside direct control | 70% – 90% | Supplier invoices, freight bills, travel records, BOM data |
Key Strategic Takeaways
The GHG Protocol divides corporate emissions into Scope 1 (Direct), Scope 2 (Purchased Energy), and Scope 3 (Value Chain).
Scope 2 requires dual reporting: location-based grid averages and market-based renewable contracts.
Scope 3 spans 15 distinct categories and represents the vast majority of total enterprise climate impact.
Large corporations cannot reach net zero without requiring emissions data from their supply chain vendors.
EnviroWealth automates the calculation of all three scopes using localized Indian and international emission factors.
Automate Your Scope 1, 2, and 3 Accounting
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