Scope 1, 2 and 3 emissions explained
Last updated: 18 August 2026
Every carbon inventory built to the GHG Protocol — the global standard NetNada aligns with — sorts emissions into three scopes. The scopes answer one question: how directly is your organisation responsible for the emission? Understanding them helps you set your emissions boundary, collect the right data, and read your dashboards with confidence.
The three scopes in plain terms
| Scope | What it covers | Everyday examples |
|---|---|---|
| Scope 1 | Direct emissions from sources you own or control. | Gas burned in your boiler, diesel in a generator, fuel in company vehicles, refrigerant leaking from your air conditioning. |
| Scope 2 | Indirect emissions from purchased energy — primarily electricity. | The electricity powering your offices, warehouses and equipment. |
| Scope 3 | All other indirect emissions across your value chain, upstream and downstream. | Goods and services you buy, business travel, employee commuting, waste, freight, and the use of products you sell. |
Scope 2: location-based vs market-based
The GHG Protocol requires purchased electricity to be reported two ways. Location-based uses the average emissions of the grid where you operate — a Sydney office uses NSW grid factors, regardless of your contracts. Market-based reflects your specific purchasing choices, such as GreenPower, renewable energy certificates or onsite solar, which can reduce your market-based Scope 2 significantly. NetNada calculates both figures from the same electricity data, so you always have the number your reporting framework asks for.
The 15 Scope 3 categories
Scope 3 is divided into 15 categories. The first eight are upstream — emissions from what your organisation buys and consumes. The last seven are downstream — emissions from what you sell, lease or invest in.
| # | Category | Upstream / Downstream | Example |
|---|---|---|---|
| 1 | Purchased goods and services | Upstream | Office supplies, IT hardware, consulting fees |
| 2 | Capital goods | Upstream | New machinery, vehicles, building fit-outs |
| 3 | Fuel- and energy-related activities | Upstream | The 'well-to-tank' cost of producing the fuel and electricity you use |
| 4 | Upstream transportation and distribution | Upstream | Freight you pay for on goods you buy |
| 5 | Waste generated in operations | Upstream | Landfill, recycling and compost from your facilities |
| 6 | Business travel | Upstream | Flights, hotels, taxis, trains |
| 7 | Employee commuting | Upstream | Staff travelling between home and work |
| 8 | Upstream leased assets | Upstream | Energy used in a leased office where the landlord pays the bill |
| 9 | Downstream transportation and distribution | Downstream | Deliveries of your sold products to customers |
| 10 | Processing of sold products | Downstream | Energy a customer uses to turn your materials into finished goods |
| 11 | Use of sold products | Downstream | Electricity or fuel your products consume over their lifetime |
| 12 | End-of-life treatment of sold products | Downstream | Disposal or recycling of your products |
| 13 | Downstream leased assets | Downstream | Energy used by tenants in a building you own |
| 14 | Franchises | Downstream | Energy and fuel used across franchised locations |
| 15 | Investments | Downstream | Your share of the emissions of companies you invest in |
Activity data vs spend data
Most Scope 3 categories accept two kinds of input. Activity data is measured in physical units — litres of fuel, kilowatt-hours, kilometres travelled, tonnes of waste. Spend data is the dollar amount on an invoice, converted to emissions using economy-wide averages for that spending category.
Activity data is more accurate because it reflects what actually happened, not what an average business would emit for that spend. Spend-based estimates carry materially higher uncertainty — commonly cited at plus or minus 30% or more — so use them as a starting point and replace them with physical data wherever feasible.
How the scopes show up in NetNada
- Emissions boundary — When you set up your boundary, you answer questions about your operations. Your answers switch the relevant scopes and categories on or off for the reporting period.
- Data tasks — Each included category generates data-collection tasks in the Emissions Task Manager, broken down by facility, so you always know what to upload and where.
- Dashboards — The GHG Emissions Dashboard presents your results by scope and category, and Scope 2 shows both the location-based and market-based figures.
- Reports — Carbon reports present your inventory in the scope and category structure that frameworks like AASB S2, Climate Active and CDP expect.