Scope 1, 2 and 3 emissions explained (with small business examples)
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"Scopes" are how businesses sort their greenhouse gas emissions into three groups. The idea comes from the GHG Protocol, the global standard almost every carbon calculation uses.
Once you see the pattern it's simple: Scope 1 is what you burn, Scope 2 is the energy you buy, and Scope 3 is everything else in your value chain.
The short version
- Scope 1: fuel you burn yourself — gas boilers, company vans and cars.
- Scope 2: electricity (and heat or steam) you buy.
- Scope 3: everything else — what you buy, business travel, commuting, waste, how customers use your products.
- Start with Scope 1 & 2. They're easy to measure from your bills and they're what customers ask for first.
Scope 1: what you burn
Scope 1 is emissions from sources your business owns or controls. For most small businesses that means:
- Gas, oil or LPG burned in your boiler
- Diesel and petrol in company-owned or leased vehicles
- Refrigerant gases leaking from fridges, freezers or air conditioning
Scope 2: the energy you buy
Scope 2 is emissions from generating the electricity (and any heat or steam) you buy. The emissions happen at the power station, but they're caused by your use.
Location-based vs market-based
Scope 2 can be calculated two ways, and good practice is to report both:
- Location-based uses the average emissions of the electricity grid where you are.
- Market-based reflects the tariff you actually buy. If you're on a certified renewable tariff (backed by REGOs in Great Britain), your market-based figure can be much lower.
Scope 3: everything else
Scope 3 covers emissions in your value chain that you don't directly control. The GHG Protocol splits it into 15 categories. The ones that matter most for small businesses are usually:
- Purchased goods and services — what you buy, from stock to software
- Business travel — trains, flights, hotels
- Employee commuting — how staff get to work
- Waste — what happens to the rubbish you produce
- Transport and distribution — deliveries in and out, if you pay for them
- Use of sold products — for example, the energy your products use once customers have them
For most businesses, Scope 3 is the biggest part of the footprint — often by a long way. It's also the hardest to measure, because it relies on data from other organisations.
Which should a small business measure first?
- Scope 1 & 2 first. They come straight from your bills, they're what most customers ask for, and they're where you have the most control.
- Then the obvious Scope 3 categories. Business travel, commuting and waste are a good next step. If you're bidding for central government contracts, a Carbon Reduction Plan asks for specific Scope 3 categories.
- Then your supply chain. Start with simple spend-based estimates and improve them with supplier data over time.
You can get a Scope 1 & 2 estimate in a few minutes with Granular's free tool. Here's a step-by-step guide to doing it from your bills.
Work out your carbon footprint now
Enter a year of energy and fuel figures and get a Scope 1 & 2 estimate in minutes. Save it each year to track your progress.
Open the free carbon estimator →Frequently asked questions
What is the difference between Scope 1 and Scope 2?
Scope 1 is emissions from fuel your business burns directly, like gas in a boiler or diesel in company vans. Scope 2 is emissions from producing the electricity (and heat or steam) your business buys.
Is electricity Scope 1 or Scope 2?
Bought electricity is Scope 2. If you generate your own electricity by burning fuel on site, that fuel is Scope 1. Solar panels on your roof produce no emissions when generating.
Do small businesses have to report Scope 3?
Not usually by law. But large customers and some public tenders ask for selected Scope 3 categories, so it's worth starting once your Scope 1 & 2 figures are in place.
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Official sources
- GHG Protocol — Corporate Standard (opens in a new tab)
- GOV.UK — Environmental reporting guidelines (opens in a new tab)
This guide is educational and not legal advice. Thresholds are simplified and rules change, so always confirm with the official source or an adviser.
Keep reading
- E3 min readHow to calculate your small business's carbon footprint from your billsTurn a year of energy and fuel bills into a Scope 1 & 2 carbon figure, with a worked example.
- E3 min readCarbon Reduction Plans for public sector contracts (PPN 006) explainedWhen UK government tenders need a Carbon Reduction Plan, what goes in it, and how to write one.
- ESG3 min readWhat is ESG? A plain-English guide for small businessesThe three letters everyone uses, explained in plain English — and what they actually mean for a business your size.