Scope 1 and 2 emissions are the two categories of greenhouse gases your company directly controls or indirectly causes through energy use

Scope 1 emissions come from sources you own or operate — your company vehicles, heating systems, manufacturing equipment, or any combustion that happens on your property. Scope 2 emissions come from the electricity, steam, or heating you buy from outside suppliers. Both are measured in metric tons of carbon dioxide equivalent (CO2e), and most businesses report them together because they represent the emissions your organization can most directly influence.

The distinction matters because it changes who you can pressure to reduce emissions and what levers you actually control. You can replace a company vehicle or upgrade a furnace. You cannot tell your power company to switch to wind turbines — but you can choose a supplier that already has, or install solar panels to reduce what you buy. Understanding which emissions fall into which bucket tells you where to spend money and effort first.

Key Takeaways

  • Scope 1 includes all combustion and emissions from equipment and vehicles your company owns or operates on your property.
  • Scope 2 includes emissions from purchased electricity, steam, and heating — calculated based on your supplier's energy mix, not your own actions.
  • Scope 1 emissions are usually easier to reduce because you control the source directly; Scope 2 reductions depend partly on your supplier's choices.
  • Most emissions reporting frameworks require both Scope 1 and 2, and some customers or investors now ask for them before signing contracts.

What counts as Scope 1 emissions

Scope 1 covers any greenhouse gas released directly from a source your company owns or controls. This includes natural gas burned in your office building's furnace, diesel in your delivery trucks, refrigerant leaks from air conditioning systems, and methane from waste in your landfill. If the combustion or release happens on your property or in equipment you operate, it is Scope 1.

The key word is direct. You measure Scope 1 by tracking fuel purchases, calculating how much carbon each fuel type releases when burned, and adding them up. A manufacturing plant burning coal in its own boiler reports that as Scope 1. A construction company with a fleet of diesel excavators reports their fuel consumption as Scope 1. A hospital with backup generators that run on propane counts that propane as Scope 1.

Scope 1 also includes fugitive emissions — gases that escape unintentionally, like refrigerant leaks or methane from a landfill your company operates. These are harder to measure precisely, but they still count if you own the source.

What counts as Scope 2 emissions

Scope 2 covers emissions from energy you purchase from outside suppliers — almost always electricity, but sometimes steam or chilled water in urban areas. You do not burn the fuel yourself; your utility company does. But because your demand for that electricity caused the utility to generate it, you are responsible for the emissions that generation produced.

The tricky part is that Scope 2 depends on your supplier's energy mix. If your utility generates 60% of its power from natural gas and 40% from wind, your Scope 2 emissions reflect that mix. The same amount of electricity used in a coal-heavy region produces more Scope 2 emissions than the same amount used in a region with mostly hydroelectric power. You calculate Scope 2 by multiplying your electricity consumption (in kilowatt-hours) by your region's emissions factor — a number published by your utility or by regional grid operators.

Some companies also count purchased steam or heating as Scope 2, though this is less common. The principle is the same: you did not burn the fuel, but your purchase caused someone else to burn it.

Why the difference matters for reduction strategies

Scope 1 reductions are usually within your direct control. You can replace a gas furnace with a heat pump, switch a delivery fleet from diesel to electric vehicles, or fix refrigerant leaks. These changes cost money upfront but produce when ready, measurable results that you can verify yourself.

Scope 2 reductions are partly outside your control. You can reduce electricity consumption by upgrading to LED lighting or better insulation — that is entirely your choice. But you cannot unilaterally force your utility to switch to renewable energy. Instead, you can negotiate a contract for renewable energy (called a power purchase agreement), install solar panels on your roof, or switch to a utility that already uses more renewables. Some of these options are expensive; others are not available in your region.

This is why many companies tackle Scope 1 first — the payoff is clearer and the timeline is shorter. But Scope 2 often represents a larger share of total emissions for offices and retail businesses, so ignoring it means missing the bigger opportunity.

How emissions are measured and reported

Both Scope 1 and 2 are measured in metric tons of CO2 equivalent (CO2e). This unit lets you add up different gases — methane, nitrous oxide, refrigerants — by converting each to the warming effect of an equivalent amount of carbon dioxide. A metric ton is 1,000 kilograms, or about 1.1 short tons.

For Scope 1, you gather fuel receipts or meter readings, look up the emissions factor for each fuel type (published by the EPA and other agencies), and multiply. If your company burned 10,000 gallons of diesel last year, and diesel produces about 10.15 kg of CO2 per gallon, your Scope 1 from that fuel alone is about 101.5 metric tons.

For Scope 2, you get your annual electricity bill, find your utility's emissions factor (usually in pounds of CO2 per megawatt-hour), and multiply. If you used 500,000 kilowatt-hours and your grid's factor is 400 pounds of CO2 per megawatt-hour, your Scope 2 is roughly 90 metric tons.

Most companies use standardized frameworks to may support consistency. The Greenhouse Gas Protocol is the most widely used; it defines exactly which emissions go in each scope and how to calculate them. Many states and some countries now require or recommend reporting under this framework.

Who asks for Scope 1 and 2 data

Investors increasingly request Scope 1 and 2 emissions data before deciding whether to fund or partner with a company. Large customers — especially in retail, automotive, and technology — now ask suppliers to report these numbers as a condition of doing business. Some states require certain industries to disclose emissions publicly.

If you are a small business, you may not face this pressure yet. But if you supply to larger companies, work in a regulated industry, or want to market yourself as sustainable, you should expect the request. Having the numbers ready — even if they are not perfect — shows you take the question seriously.

Financial institutions also use Scope 1 and 2 data to assess climate risk. A company with high emissions and no reduction plan may face higher insurance costs or difficulty securing loans. Conversely, a company with a credible plan to reduce emissions may find financing easier.

Common mistakes when calculating Scope 1 and 2

The most common error is forgetting to include all sources. Companies often remember their main office building but forget satellite locations, company vehicles parked at employees' homes, or equipment leased to other sites. If you own or operate it, it counts — even if it is not at headquarters.

Another mistake is double-counting. If you buy electricity from a utility and also have solar panels, you should not count the solar output as both Scope 1 (from your panels) and Scope 2 (from the grid). You count what you actually used from each source.

A third error is using outdated emissions factors. These change as power grids shift toward renewables. Using last year's factor when this year's is lower makes your emissions look worse than they are. Most utilities publish updated factors annually.

Finally, some companies confuse Scope 2 with Scope 3. Scope 3 includes all other indirect emissions — employee commutes, business travel, supply chain emissions, and waste. Scope 2 is only purchased energy. This distinction matters because Scope 3 is much larger for most businesses but also much harder to measure and control.

Frequently Asked Questions

Do I have to report Scope 1 and 2 emissions?

It depends on your industry, location, and size. Some states require it; most do not yet. But if you work with large customers, seek investment, or operate in a regulated sector like utilities or manufacturing, you should expect the request. Reporting is increasingly standard practice even where not legally required.

Which scope is usually bigger for most businesses?

For offices and retail, Scope 2 (purchased electricity) is usually larger. For manufacturing, transportation, and agriculture, Scope 1 (direct combustion) is often bigger. The answer depends entirely on your business model and energy sources.

Can I reduce Scope 2 emissions without changing my utility?

Yes. Reducing electricity consumption through efficiency upgrades — LED lighting, better insulation, efficient equipment — lowers Scope 2 directly. Installing solar panels also reduces what you buy from the grid. You do not need to switch utilities to make progress.

What is the difference between Scope 2 and Scope 3?

Scope 2 is only purchased electricity, steam, and heating. Scope 3 includes everything else indirect — employee commutes, business travel, supply chain emissions, and waste. Scope 3 is usually much larger but much harder to measure and control.

How often should I recalculate my emissions?

Most companies report annually to match their financial year. You should recalculate at least once a year using current emissions factors, especially for Scope 2, since grid composition changes. If you make major operational changes mid-year, recalculating helps you track progress.