What are Scope 1, 2, and 3 emissions?
The Greenhouse Gas Protocol (GHG Protocol), jointly developed by WRI (World Resources Institute) and WBCSD (World Business Council for Sustainable Development) since 1998, is the global standard for corporate emissions accounting. It classifies emissions into three scopes: Scope 1 (direct), Scope 2 (purchased energy), and Scope 3 (other indirect emissions in the value chain). The Corporate Standard and Scope 3 Standard are the primary GHG Protocol documents; a major update is in progress for 2025-2026.
Scope definitions
- Scope 1 — Direct emissions: from owned or controlled sources — combustion in boilers/furnaces/vehicles, process emissions, fugitive emissions (refrigerants, methane leaks).
- Scope 2 — Indirect from purchased energy: electricity, steam, heating, cooling. Two reporting methods: location-based (grid average) and market-based (contracted instruments like RECs/GOs).
- Scope 3 — Other indirect: 15 categories spanning upstream (purchased goods, capital goods, fuel and energy related, transport, waste, business travel, employee commuting, leased assets) and downstream (transport, processing, use of sold products, end-of-life, leased assets, franchises, investments).
Why Scope 3 is the new frontier
For most companies, Scope 3 represents 70-95% of total emissions — particularly Categories 1 (purchased goods/services), 11 (use of sold products), and 15 (investments, for financial institutions). Scope 3 reporting is now mandated under CSRD’s ESRS E1, SEC climate rule (litigation pending), CDP, and major procurement programmes. SBTi Net-Zero Standard requires Scope 3 targets when Scope 3 ≥40% of total.
Scopes in contracts and reporting
The scope taxonomy hardened into legal text: TSRS/CSRD reports disclose by scope with assurance attached, lenders write scope-based KPIs into sustainability-linked facilities, and large customers flow Scope 3 data duties into supply contracts — a Turkish manufacturer’s emissions becoming its EU client’s reporting input. The discipline points: an organisational boundary decision (operational control versus equity share) made once and kept consistent, Scope 2 dual reporting (location- and market-based) where renewable certificates are claimed, and Scope 3 category mapping with documented estimation methods — the area where restatements concentrate. Contract clauses requesting “emissions data” should specify scopes, methodology and verification level; vague drafting produces numbers no one can defend.