All about that Scope 1, 2, 3

INTRODUCTION

Scope 1, 2, and 3 emissions are used by companies, governments, investors, and environmental organizations to measure and report greenhouse gas (GHG) emissions across different levels of responsibility. Corporations use them to track their carbon footprint and meet sustainability goals, governments and regulators use these categories to enforce climate policies and reporting standards, and investors assess climate risks and make sustainable investment decisions. Nonprofits, government, and advocacy groups analyze these emissions to hold companies accountable, and increasingly, consumers use this information to support environmentally responsible brands. Currently, this reporting is only available for the U.S. data.

BACKGROUND

The use of Scope 1, 2, and 3 emissions reporting is central to the implementation of California’s climate-disclosure legislation, particularly Senate Bills 253 and 261, as amended by SB 219. These laws require companies with over $1 billion in annual revenue that do business in California to disclose their Scope 1 (direct), Scope 2 (indirect from energy), and eventually Scope 3 (indirect from the value chain) greenhouse gas emissions. The goal is to improve transparency and standardize climate-related disclosures so that investors, consumers, and the public can make better-informed decisions. It also mandates that companies report on climate-related financial risks and the measures they are taking to mitigate them. These disclosures are intended to align with global standards and are part of California’s broader effort to lead on climate accountability and risk management.

Several countries have implemented or proposed greenhouse gas (GHG) reporting programs to enhance corporate sustainability and climate accountability. In Canada, the Greenhouse Gas Reporting Program by Environment and Climate Change Canada mandates reporting of Scope 1 and 2 emissions for facilities emitting 10,000 tonnes or more of CO₂ equivalent annually, with Scope 3 reporting proposed but optional. The UK’s Streamlined Energy and Carbon Reporting (SECR) requires public and private companies with over $636 million in turnover and at least 500 employees—or smaller companies meeting two of three financial criteria—to report Scope 1 and 2 emissions, and Scope 3 if financially material, with implementation expected in 2026. The EU’s Corporate Sustainability Reporting Directive (CSRD) mandates reporting of Scope 1, 2, and 3 emissions for large companies, with new rules applying from the 2024 financial year and reporting required by 2028. In China, the PRC Sustainability Reporting Guidelines require Scope 1 and 2 emissions reporting, with Scope 3 encouraged but not mandatory, for companies listed on the Shanghai Stock Exchange 180, the Star 50 Index, or those dually listed in Chinese Mainland and overseas markets, with reporting beginning in 2025.

SO WHAT DO THEY MEAN?

Scope 1

Scope 1 emissions refer to direct greenhouse gas emissions from owned or controlled sources outside of utility industries, which are categorized under Scope 2 due to their nature as energy providers. Additionally, direct emissions from retail, wholesale, and transportation margins, as well as direct emissions from byproducts production of commodities used in the analysis are excluded, and are considered Scope 3. This nuanced classification ensures that emissions are accurately attributed across the supply chain.

Scope 2

Scope 2 emissions refer to indirect greenhouse gas emissions resulting from the consumption of purchased electricity. These emissions include the environmental impacts of the energy industries, specifically those transmitted through the electricity transmission and distribution systems to the direct industry using the energy. This is made possible through “power series” which teases out further rounds of purchases in the supply chain.  Additionally, Scope 2 encompasses direct emissions from utility industries, as outlined in the GHG Protocol Scope 2 Guidance developed by the World Resources Institute. 

Scope 3

Scope 3 emissions represent the remaining greenhouse gas impacts not captured in Scope 1 or 2, and include a wide range of indirect and induced upstream emissions This category includes all the other upstream supply chain impacts captured in the analysis. For Commodity Output Events, downstream impacts are also captured from the direct emissions from retail, wholesale, and transportation commodity margins. These are the only downstream emissions considered (there are no forward linkages included yet). Additionally, Scope 3 accounts for emissions from water, sewage, and other utility systems, including those related to heating and cooling, as well as emissions from industries that produce a commodity used in the analysis as a byproduct. IMPLAN is still working on building this out further to include the use of “sold products” which means what institutions, including households, actually do once the item is purchased. So if a household purchases gasoline for their car, the use of this is not yet captured.

In the most basic way, we have Scope 1 as the Direct emissions from owned or controlled sources, Scope 2 as the Indirect emissions from purchased energy use, and Scope 3 as the supply chain Indirect as well as Induced Impacts.

USE CASES

As climate reporting regulations tighten across the globe, companies are increasingly required to disclose their full emissions profile. In the U.S., publicly traded companies must report Scope 1 and 2 emissions under the SEC’s climate disclosure rule, and Scope 3 if deemed material or included in public climate targets. Large companies, both domestic and international, may also face comprehensive Scope 1, 2, and 3 reporting requirements based on size or revenue thresholds. In Europe, the Corporate Sustainability Reporting Directive (CSRD) mandates climate-related disclosures for EU-based firms and non-EU companies with significant operations in the region. Even privately held or mid-sized businesses aren’t exempt. Suppliers to regulated companies may be asked to provide emissions data to support Scope 3 reporting. Meanwhile, federal contractors and grant recipients in the U.S. should prepare for stricter sustainability requirements, as proposed rules would require major contractors to disclose Scope 1–3 emissions and set climate targets.

Scope 1, 2, and 3 emissions data can be used by a variety of audiences to evaluate GHG emissions and their impacts at the community level. This helps companies align their sustainability initiatives with global policies and reporting standards, as well as to quantify their GHG emissions tied directly to their economic activity. Individual businesses can use this new data to compare their GHG emissions relative to other businesses in their industry within a region. For example, economic developers can compare the emissions for various firms and industries when making location decisions. While one firm may bring in more jobs, it might also be detrimental to the environment. This data can also be used to explore GHG emissions of future projects within a company and any long-term climate impacts, as well as assessing current emissions through a contribution analysis. 

REGION DETAILS

Clicking into Region Details > Multipliers > Summary Multipliers > Power Series shows the first three rounds of the Indirect Summary Multipliers by Industry. The same can be found under Detailed Multipliers, which requires a choice of Industry to examine. Note that the Detailed Power Series Multipliers are what allow IMPLAN to estimate the Scope 1, 2, and 3 emissions. Specifically, the round 2 Power Series Multipliers allow us to identify the direct purchases of electricity from the energy producing Industries (Scope 2).

You can also find Scope 1 Global Warming Potential in Region Details > Environmental > Damages from Greenhouse Gases.

RESULTS

Results on the Environmental Tab > Damages from Greenhouse Gases show the Global Warming Potential (GWP) by Direct, Indirect, and Induced Impact. They also show the Global Warming Potential by Scope 1, 2, and 3. Notice that the totals for both of these tables match.

DATA DETAILS

IMPLAN uses EPA data to get direct/Scope 1 ratios for all industries in various greenhouse gas (GHG) types then using ReCiPe data to convert those GHGs to Global Warming Potential carbon dioxide equivalent kilograms GWPs. IMPLAN uses the impact results to derive indirect and induced impacts and the associated emissions for Scope 2 and Scope 3.

Damage Ratios used in IMPLAN to convert GHGs to CO2 Equivalent (compared to IPCC AR6)

Economic Impacts in IMPLAN are bound within the region selected in an analysis, and therefore the associated GHG emissions impacts are also bound to the selected geographic region. To capture the environmental impact associated with production activity across the nation, an analysis should be set up as a national impact (using MRIO). There are no GHG damages captured in the Results for production associated with the economic impact that occurs outside of the region(s), such as emissions embodied in foreign imports. However, any US owned and operated transportation emissions are included in a national model.

RELATED ARTICLES

Using Environmental Data

¹ Ratios were used from ReCiPe because ratios are available for all GHGs available in IMPLAN.

Written August 5, 2025