Scope 1, 2 and 3 emissions explained for small businesses

Scopes are not three levels of importance. They describe where an emission occurs in relation to your organisation: directly in operations you own or control, at the generator of energy you buy, or elsewhere in your wider value chain.

First draw the reporting boundary

You cannot classify every source correctly until you have decided what the reporting organisation includes. The GHG Protocol Corporate Standard describes equity-share, financial-control and operational-control approaches. None is automatically right for every organisation.

For a straightforward independent business, the boundary may simply cover the sites, equipment and vehicles it operates. Groups, joint ventures, franchises, leased assets and shared premises need more care. The same boiler, van or rented office can be treated differently depending on the chosen boundary and contractual control.

Record the approach, sites, reporting period, assumptions and exclusions. Consistent treatment over time matters more than forcing an uncertain item into a scope without explaining the decision.

Scope 1: sources you own or control

Scope 1 covers direct greenhouse gas emissions from operations inside your boundary. Common small-business examples include:

• Natural gas or LPG burned in a boiler you control.
• Petrol or diesel used in company-controlled vehicles.
• Fuel used in freight vehicles operated by the business.
• Refrigerant leaked from controlled air-conditioning, refrigeration or heat-pump equipment.
• Process emissions, where the business carries out an emitting industrial process.

Useful records include energy bills, fuel cards, mileage or fleet reports, delivery notes and refrigerant service or top-up logs. A battery-electric vehicle has no tailpipe fuel-combustion emission; the electricity used to charge it needs separate treatment and must not be counted twice.

Scope 2: purchased electricity and energy

Scope 2 covers emissions released when another organisation generates electricity, steam, heating or cooling that your business purchases and consumes. The emission occurs at the generator, but it is attributed to the energy user.

The GHG Protocol Scope 2 Guidance distinguishes two methods:

• Location-based: uses the average emissions intensity of the electricity grid in a defined location.
• Market-based: uses qualifying supplier or contractual information associated with the electricity purchased.

A tariff marketed as green does not, by itself, establish an appropriate zero factor. Keep the contractual evidence, check the applicable quality criteria and retain the location-based result alongside any supported market-based figure. Electricity transmission and distribution losses sit in Scope 3 category 3 rather than Scope 2.

Scope 3: the rest of the value chain

Scope 3 covers other indirect emissions caused by the organisation’s activities but occurring at sources it does not own or control. The GHG Protocol groups these into 15 mutually exclusive categories:

• Upstream: purchased goods and services; capital goods; fuel- and energy-related activities; upstream transport and distribution; waste generated in operations; business travel; employee commuting; and upstream leased assets.
• Downstream: transport and distribution; processing of sold products; use of sold products; end-of-life treatment; downstream leased assets; franchises; and investments.

For many small businesses, practical starting points include purchased goods and services, courier or haulier activity, waste, business travel, employee commuting and upstream electricity-related emissions. A full Scope 3 assessment should consider all 15 categories, even when several are genuinely not applicable.

Common activities and their likely treatment

These are common treatments, not a substitute for checking the boundary. Leased vehicles, landlord-provided energy, rented premises and unusual freight contracts can change the answer. Carbon Verify has supported whole-vehicle and shipment-weight × distance methods; neither turns a parcel count or delivery charge into a measured footprint. Use a suitable carrier or separate calculation where the built-in method does not fit. Check the current calculation coverage before entering freight.

How the calculation works

Activity data might be litres of fuel, kilowatt-hours, kilograms of refrigerant, passenger-kilometres, tonnes of waste or money spent. The result is normally expressed as tonnes of carbon dioxide equivalent, written tCO₂e, so different greenhouse gases can be combined using their relative warming effects.

Use measured physical activity or supplier-specific data where it is suitable and available. Spend-based methods can be useful for initial Scope 3 screening, but they estimate industry averages rather than a particular supplier's emissions. They need a documented factor source, data year, unit, purchase type and price basis. The annual UK Government activity factors and the separate Defra spending multipliers are different datasets; avoid copying a factor from an undated example or assuming its publication year is its price year.

A full footprint is not the same as the PPN 006 subset

The 15 Scope 3 categories describe the value chain; they are not all automatically required in every report. Under PPN 006, the defined Carbon Reduction Plan subset is categories 4, 5, 6, 7 and 9, alongside Scope 1 and Scope 2. That subset should not be described as the universal definition of Scope 3.

A customer, reporting framework or consultant may ask for broader coverage. Always follow the specific requirement and explain material exclusions. See PPN 006 explained if a tender has requested a Carbon Reduction Plan.

How Carbon Verify fits

Carbon Verify starts in Standard CRP · PPN 006: Scope 1 and Scope 2 sources plus categories 4, 5, 6, 7 and 9, with the required plan information. Common inputs cover gas, vehicles, electricity, business travel, waste, wastewater and commuting. Optional Other fuels, Other refrigerants or gases released and Other purchased energy panels remain part of Standard when relevant; they are not wider-scope extras.

For shared-load deliveries, Shipment weight and distance estimates supported freight from your goods' weight and transport distance, not an entire vehicle journey. Choose category 4 for transport you buy, including outbound delivery you pay for, or category 9 for after-sale distribution you do not pay for. Do not also include the same journey in whole-vehicle or separately calculated records.

A suitable supplier or separate calculation can be recorded for a source not already included. Scope 1, Scope 2 and categories 4, 5, 6, 7 and 9 are active in Standard; other Scope 3 categories are active only in Extended. The figure must match the exact reporting period and boundary, with its source, method, evidence and a no-double-counting confirmation. This is a way to record documented emissions, not independent verification of the calculation. See how to record a separate figure.

Turn on Extended footprint for selected purchases, water supply, detailed UK hotel inputs, optional electricity losses and disclosures, intensity measures, optional credits and other Scope 3 category figures. Its 15-category assessment helps record wider relevance and coverage; it does not calculate emissions by itself or establish a complete inventory. Both modes keep the Evidence Pack, saved projects and personalised outputs at the same price.

In Extended, the guided purchases route supports separately billed legal services, accountancy, bookkeeping and tax advice, and IT consultancy or bespoke development services. Choose the purchase type, spending period and cost in pounds sterling excluding VAT; Carbon Verify selects the documented factor and adjusts the price basis where published ONS data are available. An advanced own-factor route remains available for suitable documented factors.

Guided purchases use Defra's 2023 industry averages, not supplier measurements. Legal and accountancy share a combined price-index proxy. A period total is assumed to be spent evenly across that period unless a specific spending quarter is chosen; unavailable price data leave the record pending. Hardware, software licences, capital assets and bundled bills are not automatically included in the service categories. A limited purchases estimate is not a complete Scope 3 inventory or evidence that an individual supplier is low carbon. See the records checklist and purchases methodology and limitations.

Purchased goods and services sit outside the Standard CRP subset unless the buyer requests wider coverage. Additional entries remain saved if you switch back to Standard, but are excluded from its active totals and reports. Changing coverage requires a fresh review of baseline comparability and approval; the checks do not imply that every value-chain source has been calculated.

Purchased heat and steam can use the published UK CHP-average method only where it fits the actual supply. It is not a universal heat or cooling factor; better supplier information should be used where suitable, and cooling needs a documented separate emissions figure. Biomass combustion still has Scope 1 methane and nitrous oxide; biogenic CO₂ and non-Kyoto gas components are disclosed separately from the CRP total, not deducted as credits.

The calculator does not work out every industrial process or value-chain source automatically. Unlisted sources and complex electricity, electric-vehicle or lease arrangements may need a separate calculation or professional review. The early source-coverage check helps identify those cases. A working draft remains possible, but unresolved required sources prevent a final conformity declaration. Carbon Verify does not independently verify your boundary, source records or completeness.

After reviewing the sources and coverage, stage 6, Reduction plan, records targets, measures and genuine approval. All documents are generated in stage 7, Check & download: the main CRP and Evidence Pack, with drafts and the optional separate Carbon Footprint Statement in closed explainers. The Statement is not the declaration within the CRP; that declaration and approval remain part of the plan where required.

Keep each organisation's working separate

Once you start entering figures in Carbon Verify, check the organisation and period in the project bar. Keep the scope decisions, evidence references and assumptions in that organisation's own .carbonverify project file. Save before switching, and use New project for a different organisation. The project guide explains how to save, reopen and move the editable work; the documents guide explains which outputs to share.