Scope 1, Scope 2 and Scope 3 Emissions Explained: A 2026 Guide for Indian Companies

Every large Indian company will soon have to answer a version of the same question: where, exactly, do our emissions come from? The GHG Protocol's Scope 1, 2 and 3 framework is how regulators, investors and customers expect that question to be answered in 2026, and it now sits behind SEBI's BRSR Core requirements, the CCTS compliance market and buyer due diligence from exporters' overseas customers. This guide explains what each scope actually covers, why Scope 3 is the hard part, and how an Indian company should start measuring.

Why Scope 1, 2 and 3 Suddenly Matter for Indian Companies

The GHG Protocol, developed by the World Resources Institute, splits a company's emissions into three scopes so they can be measured consistently and compared across companies. It has been the accounting standard for two decades, but it moved from a voluntary ESG exercise to a compliance requirement once SEBI folded scope-based GHG disclosure into BRSR Core and India's Carbon Credit Trading Scheme (CCTS) began setting sector-specific emissions-intensity targets. If your company reports under BRSR, sells into the EU, or is being asked for emissions data by a large customer's procurement team, scope-based accounting is no longer optional.

Scope 1: Direct Emissions You Own or Control

Scope 1 covers greenhouse gases released directly from sources a company owns or operates: fuel burned in boilers and furnaces, diesel gensets, company-owned vehicles, and fugitive emissions such as refrigerant leaks. For a manufacturer this is usually the most straightforward scope to measure, because it comes from metered fuel purchases and equipment specifications rather than estimates. It is also the scope regulators tend to cap or price first, which is why CCTS obligated entities in sectors like cement, steel and aluminium are measured on Scope 1 intensity in the scheme's initial phase.

Scope 2: Indirect Emissions From Purchased Energy

Scope 2 covers emissions from the electricity, steam, heat or cooling a company buys rather than generates itself. Because India's grid is still coal-heavy in most states, Scope 2 is often the single largest line item for offices, IT companies, warehouses and retail chains that have no combustion sources of their own. Companies can report Scope 2 two ways: the location-based method, which uses the average emissions factor of the regional grid, and the market-based method, which reflects actual contracts such as open-access renewable power or green tariffs. Buying renewable energy through a power purchase agreement is one of the few decarbonization levers that shows up directly in a lower Scope 2 number.

Scope 3: The Value Chain Emissions That Dominate the Total

Scope 3 covers everything upstream and downstream of a company's own operations, split across 15 categories defined by the GHG Protocol. For most companies it is also the largest number by far, commonly 70 to 90 percent of the total footprint, which is why regulators and customers are pushing hardest here.

• Upstream: purchased goods and services, capital goods, fuel- and energy-related activities not already in Scope 1 or 2, upstream transportation, waste generated in operations, business travel, employee commuting, and upstream leased assets.

• Downstream: downstream transportation and distribution, processing of sold products, use of sold products, end-of-life treatment of sold products, downstream leased assets, franchises, and investments.

Scope 3 is also the hardest to measure, since most of the data sits with suppliers and customers rather than in a company's own systems. Most Indian companies start with spend-based estimates using emission factor databases, then move category by category toward supplier-specific data as reporting maturity improves.

Why This Matters Now: BRSR Core and FY 2026-27

SEBI's BRSR Core assurance requirement has been rolling out in phases by market capitalization: the top 150 listed companies from FY 2023-24, top 250 from FY 2024-25, top 500 from FY 2025-26, and the top 1,000 listed entities from FY 2026-27. Value chain (Scope 3) disclosure for material suppliers and customers is scheduled to become mandatory with third-party assurance for that same top-1,000 cohort. In practice this means mid-cap companies that were never in scope before are now being asked by their larger customers, who are themselves BRSR-obligated, to supply verified Scope 1, 2 and 3 data as part of the customer's own value-chain reporting. Waiting for your own listing threshold to hit is no longer a safe strategy — the obligation is already arriving through the supply chain. Read our guide to BRSR Core assurance for what the top-500 and top-1,000 phase-ins mean in practice.

How to Get Started With Scope 1-2-3 Accounting

A workable first cycle usually follows the same sequence, regardless of sector:

• Set an organizational and operational boundary (which entities and which scopes/categories are in scope for year one).

• Gather Scope 1 and 2 activity data first — fuel bills, electricity invoices, vehicle logs — since this data already exists internally.

• Estimate Scope 3 using spend-based factors for a baseline year, then prioritize the two or three categories that are likely to be largest (often purchased goods, logistics, and use of sold products) for closer measurement.

• Get the inventory assured or at least reviewed before publishing it externally, since BRSR Core and most customer questionnaires now expect third-party verification.

• Use the baseline to set reduction targets, then use verified carbon credits to address the residual emissions that can't be eliminated in the near term.

This is also where scope-based accounting connects directly to the carbon market: once a company knows its verified residual emissions, it can size a credible offsetting or removal strategy instead of guessing at a round number. Our ESG reporting and BRSR advisory services build exactly this kind of GHG inventory for Indian companies, mapped to BRSR Core and CCTS requirements, and our verified carbon credit portfolio is sized against your actual Scope 1-3 baseline rather than an estimate.

If your company is being asked for Scope 1, 2 or 3 data for the first time — by a regulator, an auditor, or a customer's procurement team — talk to the Csquare team about building a GHG inventory that will hold up to assurance.