Understanding where a company’s carbon emissions come from is the foundation of any credible climate strategy. That is why the Greenhouse Gas (GHG) Protocol divides emissions into three categories: Scope 1, Scope 2, and Scope 3. Together, they provide a complete picture of an organisation’s carbon footprint, from direct operations to impacts across the entire value chain.

Why Emissions Are Classified into Scopes?

Not all emissions are created equal, and not all are under the same level of control. The scope-based approach helps companies:

Identify where emissions actually occur
Clarify responsibility and influence
Prioritise reduction efforts
Meet regulatory and investor disclosure expectations

Most importantly, it prevents companies from focusing only on what is easiest to measure while ignoring the largest sources of impact.

Scope 1 Emissions: Direct Emissions

Scope 1 emissions come from sources that a company owns or directly controls. These are emissions generated on-site or through assets that the organisation operates itself.

Typical Scope 1 sources include fuel combustion in company facilities, boilers, furnaces, and generators, as well as emissions from company-owned vehicles and equipment. If an organisation burns fuel directly, those emissions fall under Scope 1.

Because these emissions are under direct operational control, they are often the first area companies address through efficiency upgrades, fuel switching, or electrification.

Read more: Ørsted: Powering the Global Green Transition

Scope 2 Emissions: Indirect Emissions from Purchased Energy

Scope 2 emissions result from the energy a company buys and consumes. While the emissions physically occur at the power plant or energy source, they are attributed to the organisation because it uses that energy.

This category typically includes purchased electricity, heating, cooling, or steam. Even though Scope 2 emissions are indirect, they are closely tied to business decisions around energy sourcing.

Companies can reduce Scope 2 emissions by improving energy efficiency, switching to renewable electricity, or entering power purchase agreements.

Scope 3 Emissions: Indirect Value Chain Emissions

Scope 3 emissions cover everything else across the value chain. They occur outside a company’s direct operations but are still connected to its activities. For most organisations, Scope 3 represents the largest share of total emissions.

Upstream Scope 3 emissions include purchased goods and services, capital goods, fuel and energy-related activities, transportation and distribution, business travel, employee commuting, and waste generated in operations.

Downstream Scope 3 emissions include emissions from the use of sold products, end-of-life treatment, downstream transportation, leased assets, franchises, and investments.

Although companies do not fully control these emissions, they can influence them through procurement choices, product design, supplier engagement, and customer behaviour.

Why Scope 3 Matters Most?

Many organisations discover that the majority of their carbon footprint sits in Scope 3, sometimes accounting for 70 to 90 percent of total emissions. Ignoring Scope 3 means ignoring the real climate impact of a business.

Regulators, investors, and customers increasingly expect companies to measure, disclose, and act on Scope 3 emissions. Frameworks such as CSRD, ISSB, and science-based targets are accelerating this shift from operational-only reporting to full value chain accountability.

From Measurement to Action

Understanding Scopes 1, 2, and 3 is only the starting point. The real value comes from using this breakdown to guide action.

Scope 1 and 2 reductions often focus on operational efficiency, electrification, and clean energy sourcing. Scope 3 reduction requires collaboration, data transparency, supplier engagement, and long-term changes to business models and products.

Companies that address all three scopes are better positioned to manage climate risk, meet regulatory requirements, and build credible transition plans.

Scopes 1, 2, and 3 are not just accounting categories. They are a lens for understanding responsibility, influence, and impact across modern value chains. As climate disclosure moves from voluntary to mandatory, organisations that grasp this framework early will be better prepared to move from reporting emissions to genuinely reducing them.

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