Scope 1, 2 and 3 emissions, explained for SMEs

If you are preparing a Carbon Reduction Plan for a public-sector bid, the first thing you have to do is sort your emissions into three groups: Scope 1, Scope 2 and Scope 3. The labels come from the Greenhouse Gas Protocol, the accounting standard that almost every carbon report in the UK is built on. They sound technical, but the idea behind them is simple. They separate the emissions you cause directly from the ones you cause by buying energy, and from the ones that happen up and down your supply chain.

Getting the boundaries right matters, because PPN 006 asks for all of Scope 1, all of Scope 2, and a named subset of Scope 3. Put an activity in the wrong bucket and your totals will not add up the way an assessor expects. Here is what belongs where.

Scope 1: emissions you produce directly

Scope 1 covers the greenhouse gases released by sources your business owns or controls. If you burn a fuel on site or in a vehicle on your books, it is Scope 1. Typical sources for a small or medium business are:

• Natural gas or heating oil burned in your own boilers and heaters.
• Petrol and diesel used by cars and vans the company owns or leases.
• Fuel for on-site plant and machinery, generators or forklifts.
• Refrigerant gases that leak from air-conditioning and cooling units.

A useful test: if you can point at the thing doing the burning and it belongs to you, the emissions are yours to report under Scope 1. Refrigerants deserve a special mention because nothing is burned at all: a slow leak of R410A from an office air-conditioning unit carries roughly two thousand times the warming effect of the same weight of CO2, so even a small top-up recorded on a maintenance invoice is worth reporting.

Scope 2: emissions from the energy you buy

Scope 2 covers the emissions created when someone else generates the electricity, heat or steam that you purchase and use. You do not burn anything yourself, but a power station somewhere did it on your behalf, so the emissions still count as yours.

For most SMEs, Scope 2 is almost entirely purchased electricity: lighting, computers, machinery, electric vehicle charging at your premises. If you buy heat or steam from a district network, that sits here too. The amount you report depends on how much you use and how clean the grid was when you used it, which is why the figures move year to year even if your consumption stays flat.

Scope 3: emissions across your value chain

Scope 3 is everything else: the emissions that happen because of your business but from sources you do not own. The GHG Protocol splits it into fifteen categories, which is why Scope 3 has a reputation for being enormous and hard to measure. PPN 006 keeps it manageable by asking only for the categories that most suppliers can reasonably calculate:

• Business travel in vehicles you do not own, such as flights, rail and staff mileage claims.
• Employee commuting, the daily journeys your staff make to and from work.
• Waste generated in operations, including what goes to landfill, recycling and incineration.
• Upstream transportation and distribution, the movement of goods you buy in.
• Downstream transportation and distribution, the movement of goods you sell on.

You are not expected to account for every last category in your first plan. Report the required ones honestly, note where data is estimated, and you have met the requirement. Guessing wildly or leaving a required category blank is what causes problems later. Our guide to Scope 3 for small businesses works through each required category with the data sources an SME actually has.

What this looks like for your kind of business

The definitions are easier to apply when you see them mapped onto a familiar business. Four common SME shapes:

Two patterns are worth noticing. First, the same activity moves scope depending on ownership: a delivery in your own van is Scope 1, the same delivery by a courier is Scope 3 downstream transport. Second, for service businesses Scope 1 can genuinely be zero or near zero; that is a perfectly acceptable thing to report, stated plainly, rather than something to pad.

A quick classification test

When you are unsure where an activity belongs, ask three questions in order:

• 1. Do we burn the fuel ourselves, in something we own or lease? Yes: Scope 1. This covers boilers, company vehicles, plant and generators, plus refrigerant leaks from your own units.
• 2. If not, is it energy we buy through a meter or contract? Yes: Scope 2. Purchased electricity, heat and steam, wherever it powers your operations.
• 3. Otherwise, does it happen because of our business? Yes: Scope 3. Then pick the category: whose journey, whose waste, whose lorry.

Worked through the awkward cases: a company van is Scope 1, but an employee’s own car on a mileage claim is Scope 3 business travel, because you do not own the vehicle. Electricity for charging an electric company car at your office is Scope 2; the same car charged at the employee’s home on a reimbursed tariff is usually reported as Scope 3. Waste is Scope 3 even though it starts on your premises, because the emissions happen at the landfill or incinerator, which someone else operates. Commuting is Scope 3 because you neither own the vehicles nor direct the journeys, yet the journeys only exist because people work for you.

How the numbers are actually worked out

Under the bonnet, every one of these figures follows the same pattern. You take a piece of activity data, for example kilowatt hours of electricity, litres of diesel or miles driven, and you multiply it by a conversion factor that turns that activity into a quantity of carbon dioxide equivalent, written as tCO2e.

The conversion factors are not something you invent. The government publishes a fresh set every year through DESNZ and DEFRA, the UK Government GHG Conversion Factors for Company Reporting. Using the current official set is what makes your numbers defensible. It is also the part people get wrong most often, either by using an out-of-date factor or by mixing up units.

This is the reason Carbon Sorted computes every figure for you against the current factors rather than asking you to do the arithmetic. You answer plain questions about your energy, travel and waste, and the calculation engine produces the totals. The narrative around them is drafted using your company voice settings, but the numbers themselves are never written by an AI.

Common mistakes to avoid

• Putting purchased electricity under Scope 1. Electricity you buy is Scope 2, always.
• Forgetting refrigerant leaks. Small in volume, but they carry a high carbon weight.
• Leaving a required Scope 3 category blank instead of estimating it and saying so.
• Reusing last year’s conversion factors. Recalculate against the current set each time.
• Reporting company vehicles and grey-fleet mileage in the same bucket. Owned vehicles are Scope 1; staff using their own cars is Scope 3 business travel.
• Counting commuting as business travel. They are separate Scope 3 categories, and PPN 006 asks for both.

Frequently asked questions

Where this fits into your plan

Once your emissions are sorted into the three scopes and totalled, they become the baseline and current-year figures at the heart of your Carbon Reduction Plan. Everything else in the plan, the targets you set and the projects you commit to, is measured against those numbers. If you want to see how the scopes slot into the wider document, read our guide to the mandatory sections of a PPN 006 plan, follow the full step-by-step writing guide, or start a plan from the compliant template and let the figures compute themselves.