Scope 1: Direct Emissions

Definition: Emissions from sources you own or control.

Examples for SMBs:

• Fuel burned in company-owned vehicles.
  
  

• Natural gas used in on-site boilers or furnaces.
  
  

• Refrigerants from on-site air conditioning or refrigeration systems.
  
  

Why it matters: Scope 1 is often the most visible part of your footprint because it comes directly from your operations. For businesses with vehicles or physical facilities, it can represent a significant share.

Scope 2: Indirect Energy Emissions

Definition: Emissions from the energy you purchase.

Examples for SMBs:

• Electricity used to power your office, warehouse, or production facility.
  
  

• Purchased steam, heating, or cooling.
  
  

Why it matters: Even though you are not burning the fuel yourself, your utility provider is. Scope 2 is important because switching to renewable energy or improving efficiency can quickly reduce costs and emissions at the same time.

Scope 3: Other Indirect Emissions

Definition: All other indirect emissions that occur in your value chain.

Examples for SMBs:

• Employee commuting and remote work energy use.
  
  

• Business travel.
  
  

• Purchased goods and services.
  
  

• Waste generated in operations.
  
  

• Upstream shipping of supplies and downstream shipping of products.
  
  

• End-of-life treatment of products you sell.
  
  

Why it matters: Scope 3 is usually the largest category. For many companies, it makes up 75 to 90 percent of their total footprint. This is also the area where clients often request supplier data, since your Scope 1 and 2 become their Scope 3.

Why Scopes Matter for SMBs

• Clarity. Scopes show you where emissions come from so you know what to focus on first.
  
  

• Client expectations. Large corporations ask suppliers for Scope 3 data because they cannot meet their own targets without it.
  
  

• Compliance. New regulations in the EU and California require Scope 1, 2, and 3 reporting. Even if you are not directly regulated, your clients may be.
  

• Opportunity. Identifying Scope 2 and 3 hotspots can reveal cost savings and competitive advantages, such as lower utility bills or greener supply chain partnerships.
  

Practical Example

Imagine a small food distribution company:

• Its Scope 1 emissions come from fuel used in its delivery vans and refrigerant leaks from cooling systems.

• Its Scope 2 emissions come from the electricity that powers its warehouse.

• Its Scope 3 emissions come from the packaging it purchases, the shipping of products to customers, and employees commuting to work.
  

Understanding these categories helps the company see that while vans are important, most of its footprint comes from Scope 3 activities like packaging and transport. That insight makes it easier to target meaningful improvements.

The Bottom Line

Scopes 1, 2, and 3 are the backbone of modern carbon accounting. They give structure to your sustainability efforts and make your reporting credible to clients, regulators, and investors.

For SMBs, the key is not to be overwhelmed. Start with Scopes 1 and 2 to get a baseline, then gradually expand into Scope 3. Even small steps toward measurement show clients that you are serious, and they prepare your business for the future