What carbon accounting across Scopes 1, 2 and 3 actually involves

Carbon accounting is the process of identifying, quantifying and reporting a company's greenhouse gas emissions using a standardised methodology, typically the GHG Protocol Corporate Standard. Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from purchased energy. Scope 3 covers all other indirect emissions across the value chain, from raw material extraction through to end-of-life disposal. For most companies, Scope 3 accounts for the majority of their total footprint, often more than 70 percent, which is why an emissions inventory that stops at Scope 2 is increasingly viewed as inadequate.

Why it's harder in practice than it looks

Scope 3 data quality is a persistent and significant problem

Scope 3 requires data from suppliers, customers, logistics providers, and asset operators who have their own varying approaches to emissions measurement. Most companies start with spend-based estimates using industry-average emission factors, which provide a high-level picture but are too inaccurate for credible target-setting or reporting against SBTi or CSRD requirements. Transitioning to activity-based or supplier-specific data requires sustained supply chain engagement and can take years.

Methodology choices have significant implications for comparability

Decisions about emission factor sources, market-based versus location-based Scope 2 accounting, organisational boundaries, and Scope 3 category inclusion all affect the total figure materially. Companies that make these choices without documented rationale face challenges at assurance and when benchmarking against peers or disclosing under CSRD or TCFD.

Avoiding double counting in Scope 3 is technically demanding

Several Scope 3 categories overlap between buyer and seller, Category 11 (use of sold products) for a manufacturer is Scope 1 or 2 for their customer. Without clear boundary-setting and consistent methodology, inventories systematically over- or under-count, undermining the credibility of reduction targets.

Annual recalculation and base year adjustments are commonly mishandled

When companies make acquisitions, disposals or significant operational changes, the GHG Protocol requires a base year recalculation. Many companies either fail to do this or do it inconsistently, producing trend data that is not meaningful. Investors and assurance providers are increasingly scrutinising year-on-year comparisons for exactly this reason.

Emissions from leased assets and outsourced activities are often missed

The treatment of leased buildings, outsourced manufacturing, franchised operations and company car versus grey fleet emissions is frequently inconsistent or incomplete. These omissions may seem minor in isolation but can represent substantial percentages of total footprint for asset-light businesses.

What good looks like

A credible carbon inventory is built on a documented methodology aligned to the GHG Protocol, with clear organisational and operational boundary decisions, primary or activity-based data for the highest-impact Scope 3 categories, a documented approach to Scope 2 market-based accounting including REGOs or GO certificates, and a base year with a recalculation policy. The inventory is reviewed by an external assurer, covers all material Scope 3 categories with an explanation of any exclusions, and is produced consistently year-on-year so that trends are meaningful. Target-setting against SBTi or net zero frameworks follows directly from this verified baseline.

When to bring in external support

Building a Scope 3 inventory from scratch is the most common trigger for seeking external support. Supplier engagement programmes, emission factor selection, boundary decisions, and assurance readiness all benefit from specialists who have built inventories across multiple sectors and understand what regulators and investors expect to see.

Leafr's network includes carbon accounting specialists with GHG Protocol expertise across financial services, manufacturing, retail and food sectors, including projects for companies such as Melrose Plc and Cargill. Engagements typically start within 48 hours and can be structured to deliver an assurance-ready inventory on a defined timeline.

Frequently asked questions

What is carbon accounting and why do companies need it?

Carbon accounting is the systematic measurement and reporting of an organisation's greenhouse gas emissions. Companies need it to understand their climate impact, set credible reduction targets, comply with regulatory disclosure requirements including CSRD and SECR, and satisfy investor and customer expectations. Without a baseline inventory, emissions reduction claims are unverifiable.

What is the difference between Scope 1, Scope 2 and Scope 3 emissions?

Scope 1 emissions are direct, from combustion in company-owned or controlled equipment, vehicles, or processes. Scope 2 emissions are indirect, from the generation of purchased electricity, heat or steam. Scope 3 covers all other indirect emissions across the value chain, organised into 15 categories covering upstream activities (procurement, travel, capital goods) and downstream activities (use of sold products, end-of-life treatment, investments).

How accurate are Scope 3 emissions estimates?

Scope 3 accuracy depends heavily on the data collection method used. Spend-based methods using industry-average emission factors are considered low accuracy and are generally suitable only for initial screening. Activity-based methods using actual consumption data or supplier-specific factors are substantially more accurate and are required for SBTi target validation and CSRD disclosure. Most companies operate with a mix of both, improving data quality over time for the most material categories.

What is the difference between market-based and location-based Scope 2 accounting?

Location-based Scope 2 reflects the average emissions intensity of the electricity grid where the company is located. Market-based Scope 2 reflects the emissions intensity of the specific electricity the company has contractually procured, which may differ if the company holds renewable energy certificates (REGOs in the UK, GOs in Europe). Both figures must be disclosed under GHG Protocol and most regulatory frameworks, including SECR and CSRD.

Which Scope 3 categories do most companies undercount?

The most frequently underestimated or omitted categories are Category 11 (use of sold products, particularly relevant for electronics, appliances and fuels), Category 15 (investments, critical for financial institutions), Category 3 (fuel- and energy-related activities not in Scope 1 or 2), and Category 7 (employee commuting, particularly for hybrid working). Companies in professional services also commonly undercount Category 6 (business travel) and Category 1 (purchased goods and services).

Does carbon accounting need to be independently assured?

CSRD requires third-party assurance of sustainability data including greenhouse gas emissions for in-scope companies. Many investors and frameworks, including CDP, SBTi and TCFD, also encourage or require assurance. Even where not mandatory, independent assurance improves data quality, surfaces errors, and provides credibility to public commitments.

How often should a carbon inventory be updated?

Most companies produce an annual carbon inventory aligned to their financial reporting year. When significant changes occur, mergers, acquisitions, disposals, major operational changes, or significant methodology improvements, a base year recalculation is required under the GHG Protocol to ensure year-on-year comparisons remain meaningful. The recalculation policy and triggers should be documented in the company's methodology statement.