Scope 1, 2 and 3: A Practical Guide to Your First Emissions Inventory

TL;DR: An emissions inventory adds up your greenhouse-gas emissions in tonnes of CO2e, split into Scope 1 (direct), Scope 2 (purchased energy) and Scope 3 (everything else in your value chain). Start with a clear boundary, a base year and the activity data you already have. Measure first; offset what is left, not the other way round.

Before a company retires a single credit, it needs a number to retire against. That number comes from an inventory, and building one is less mysterious than it sounds. This guide covers the GHG Protocol's corporate approach, which most reporting frameworks build on, and the ISO 14064-1 standard, which describes how to quantify and report at organisation level.

The basic equation

Every line in an inventory follows the same pattern:

emissions = activity data multiplied by an emission factor

Activity data is what you did: litres of diesel burned, kilowatt-hours of electricity bought, kilometres flown, kilograms of waste landfilled.
An emission factor converts that activity into kilograms of CO2e. Factors come from published sources such as national inventories, the IPCC, or energy suppliers.

Sum the results, convert to tonnes, and you have a footprint. Most of the work is collecting activity data honestly, not the arithmetic.

Step 1: Choose your boundary

Decide which parts of the business are in scope. The GHG Protocol offers two consolidation approaches.

Operational control: include operations you control, even if you do not own them outright.
Financial control or equity share: include operations by financial control or by your ownership share.

Pick one, write it down, and apply it consistently. A common mistake is changing the boundary from year to year, which makes trends meaningless.

Step 2: Set a base year

A base year is the reference point you compare against. Choose a recent year for which you have reliable data. If your company changes materially, for example through an acquisition, you recalculate the base year using agreed rules so that comparisons stay fair. Document it; it is a key ISO 14064 expectation.

Step 3: Understand the three scopes

Scope 1: direct emissions

Emissions from sources you own or control:

Fuel burned in company boilers, generators or furnaces
Fuel used in company-owned vehicles
Process emissions from manufacturing
Fugitive emissions, such as refrigerant leaks from cooling equipment

Refrigerants deserve special attention. Small leaks of high-warming-potential gases can add up to more than you would expect, so keep service records.

Scope 2: purchased energy

Indirect emissions from the electricity, steam, heat or cooling you buy. The emissions physically occur at the power plant, but they are caused by your demand.

The GHG Protocol asks for two views:

Location-based: uses the average emission factor of the grid where you consume electricity.
Market-based: reflects the specific contracts and certificates you hold, such as a supplier-specific factor or renewable energy certificates.

Report both when you can. For a company in mainland China, check which grid factors current official guidance recommends, because grid averages differ by region and are updated over time.

Scope 3: the value chain

Everything else: the emissions upstream and downstream from your activities. The protocol groups them into fifteen categories. Examples include:

Purchased goods and services
Business travel and employee commuting
Upstream transport and distribution
Waste generated in operations
Use of sold products and end-of-life treatment

For many service and retail businesses, Scope 3 is the largest part of the footprint and also the hardest to measure, because the data sits with suppliers and customers. Do not let that stop you from starting.

Step 4: Collect data, starting with what is easy

You do not need perfection on day one. A sensible sequence:

Utility bills for Scope 2.
Fuel purchase records and fleet logs for Scope 1.
Travel bookings for business travel in Scope 3.
Spend data by category as a rough proxy for purchased goods.
Supplier-specific data later, as relationships mature.

Spend-based estimates are coarse, but they are a legitimate screening tool to find where the big emissions hide. Replace them with activity-based or supplier-specific data over time for your most significant categories.

Step 5: Record your assumptions

Keep, for every number: the source of the activity data, the emission factor and its origin, the year the factor refers to, and any gaps or estimates. This is what makes an inventory auditable. The Carbonized emissions tracker stores the factor used on each record so that later factor updates do not silently rewrite history, which is the same principle applied in a small tool. It uses rounded public averages as defaults, so replace them with official or supplier-specific values before relying on the output in a formal report.

Step 6: Check quality and prepare for verification

ISO 14064-1 emphasises data quality, uncertainty and a clear report. A useful readiness checklist includes: boundary defined, base year set, sources quantified, data quality and uncertainty documented, report prepared, and a third-party verification if you need external assurance. Carbonized's credit assessment page offers a self-assessment checklist along these lines. It is a planning aid and explicitly not a certification.

Common pitfalls

Double counting between scopes. One company's Scope 3 is another company's Scope 1. That is expected across organisations, but within your own inventory make sure an item appears in only one category.
Mixing units. Litres versus cubic metres, kWh versus MWh. Write units next to every number.
Using stale factors. Grid factors in particular change. Note the factor year.
Skipping small sources, then forgetting why. If you exclude something, document the reason and an estimate of how small it is.
Offsetting before reducing. A credit does not shrink the inventory; it is a separate claim. Cut what you can first.

From inventory to action

Once you have a total, the useful questions change:

Where are the biggest sources, and what would reduce them?
What is a realistic target, and by when?
After reductions, what residual might you neutralise with credits, and of what quality?

For that last step, our post on what a carbon credit actually is explains what to look for, and retirement explains how a claim is finalised. Carbonized's assessment calculator compares your tracked emissions with the eligible credits you hold and shows a shortfall or surplus, though it only plans and does not move any credits. For a practical walkthrough of buying and retiring, see the buy credits guide and retire credits guide.

Takeaway

A first inventory does not need to be perfect; it needs to be consistent, documented and improved each year. Define a boundary, pick a base year, gather the easy data, flag what is estimated, and be open about the gaps. That honest number is the only sound starting point for any climate claim.