Carbon Accounting: Scope 1, 2 & 3 Explained

Carbon Offsetting & Verified Credits
Posted on 10/16/25
Carbon Accounting: Scope 1, 2 & 3 Explained

Carbon accounting groups greenhouse gas emissions into Scope 1, Scope 2, and Scope 3 so organizations can measure, manage, and reduce their total footprint consistently. Scope 1 covers direct emissions from owned or controlled sources, Scope 2 covers indirect emissions from purchased energy, and Scope 3 covers all other indirect emissions across the value chain. This guide clarifies each scope, lists the 15 Scope 3 categories, and shows how to prioritize reductions—plus where the free Coffset Carbon Footprint Calculator can support baselining and action planning.

scope 1 2 3 Explained

Why scopes matter

Clear scope boundaries prevent double counting, align teams on responsibility, and enable credible target‑setting and disclosure. The scopes framework comes from the Greenhouse Gas Protocol and underpins widely used guidance from the US EPA and its Scope 3 Inventory Guidance.

Scope 1: direct emissions

Scope 1 includes emissions from sources owned or controlled by the organization. Common examples:

  • Stationary combustion: boilers, furnaces, onsite CHP.
  • Mobile combustion: company‑owned vehicles, construction equipment.
  • Process emissions: chemical processes, cement calcination.
  • Fugitive emissions: refrigerant leaks, methane from equipment.

Scope 1 is typically calculated from fuel use, process data, and leak rates using standard factors, and is often the most straightforward to measure accurately.

Scope 2: purchased energy

Scope 2 includes indirect emissions from the generation of purchased electricity, steam, heating, or cooling consumed by the organization. Best practice is to disclose:

  • Location‑based emissions (grid average), and
  • Market‑based emissions (reflecting contractual instruments such as green tariffs or EACs/RECs).

Reduction levers include efficiency, load management, onsite solar, green tariffs, and PPAs.

Scope 3: value‑chain emissions

Scope 3 covers all other indirect emissions in the value chain, upstream and downstream. For many organizations, Scope 3 is the largest share and the hardest to quantify. The GHG Protocol defines 15 categories to structure accounting and avoid double counting, supported by the official Scope 3 Calculation Guidance and the technical PDF for methods and formulas, Technical Guidance for Calculating Scope 3 Emissions.

The 15 Scope 3 categories

  • Purchased goods and services
  • Capital goods
  • Fuel‑ and energy‑related activities (not in Scope 1 or 2)
  • Upstream transportation and distribution
  • Waste generated in operations
  • Business travel
  • Employee commuting
  • Upstream leased assets
  • Downstream transportation and distribution
  • Processing of sold products
  • Use of sold products
  • End‑of‑life treatment of sold products
  • Downstream leased assets
  • Franchises
  • Investments

The EPA’s Scope 3 Inventory Guidance provides practical screening steps, method choices (spend‑, distance‑, fuel‑based), and factor sources to get started and improve quality over time.

Data quality and methods

  • Start broad, then deepen: Use spend‑based screening to identify hotspots, then upgrade to activity data (kg, kWh, km) as supplier engagement grows.
  • Govern factors: Track region‑specific factors and versions; document changes annually.
  • Engage suppliers: Harmonize questionnaires, request primary data in material categories, and share methods to improve consistency.
  • Prevent double counting: Apply the Protocol’s category rules and boundaries consistently across entities and products. For a structured approach, see the Scope 3 Calculation Guidance and EPA’s pages above.

How scopes map to action

  • Scope 1: Fuel switching, process optimization, leak detection and repair (LDAR), fleet electrification.
  • Scope 2: Efficiency, demand management, onsite solar, PPAs/green tariffs, high‑quality certificates.
  • Scope 3: Supplier standards, low‑carbon materials, circular design, logistics optimization, product efficiency and end‑of‑life, portfolio decarbonization. A helpful primer on scoping and category relevance is the EPA Scope 3 Inventory Guidance.

Common pitfalls and how to avoid them

  • Blurry boundaries: Define organizational and operational boundaries, and which facilities/assets are in scope.
  • One‑and‑done inventories: Update annually; record factor versions and methodological changes.
  • Ignoring market‑based Scope 2: Report both location‑ and market‑based values and disclose contract quality.
  • Scope 3 “black box”: Start with a relevance screen; pick material categories; don’t delay reductions while waiting for perfect data. See the GHG Protocol diagram of scopes.

Opinion: Treat scopes like a quarterly roadmap

Scopes are a map, not the journey. The most effective teams pick two high‑leverage moves per quarter (for example, a market‑based Scope 2 shift and one material Scope 3 category with strong supplier influence), execute them fully, and only then add more. This cadence keeps momentum high and results measurable.

Learn More

To take the next step on your low-carbon journey, try the free Coffset Carbon Footprint Calculator to establish a precise baseline and identify your top opportunities for impact. After reducing what you can, offset the rest with verified projects that accelerate climate solutions. Explore more of our resources to stay informed: What Is a Carbon Footprint?, What Is Carbon Offsetting?, Reduce vs Offset: Why Both Matter. Each guide helps you cut emissions credibly while building lasting habits for a net-zero future.

FAQs – Scope 1, 2, 3 Explained

What’s the difference between Scope 1, Scope 2, and Scope 3?
Scope 1 is direct emissions from owned/controlled sources; Scope 2 is indirect emissions from purchased energy; Scope 3 includes all other indirect value‑chain emissions. See the EPA overview and the GHG Protocol diagram.

What are the 15 Scope 3 categories?
They span upstream and downstream activities such as purchased goods/services, capital goods, logistics, use of sold products, and end‑of‑life. See the Scope 3 Calculation Guidance and the technical PDF.

Do I need both location‑based and market‑based Scope 2 figures?
Yes. Reporting both improves decision quality and transparency—see the EPA Scope 1 & 2 guidance.

How should data quality improve over time?
Start with screening and spend‑based factors, then move to activity and supplier data in material categories, documenting factor versions and method changes. Refer to the EPA Scope 3 guidance and GHG Protocol Scope 3 guidance.

Sources