Scope 1, 2 and 3 in Five Minutes, Explained with a Pizza

"Scope 1 is direct emissions, Scope 2 is indirect… is that right?" "Scope 3 is so broad we gave up." These terms come up every time ESG or carbon neutrality is discussed, and then turn vague the moment you have to explain them to your board or a customer. The problem is that in 2026 what global buyers ask for is not Scope 1 and 2 but the whole picture, Scope 3 included. Today we will settle Scope 1, 2 and 3 completely, using a single pizza.

First, the big picture

There is a standard the whole world uses to measure carbon emissions: the GHG Protocol. It is an international standard created jointly by WRI (the World Resources Institute) and WBCSD (the World Business Council for Sustainable Development), and most large global companies report their emissions on this basis.

The GHG Protocol divides carbon emissions into three Scopes.

• Scope 1 — what we emitted directly
• Scope 2 — what came from the electricity and steam we used
• Scope 3 — every other emission connected to our business

There is one reason for dividing it this way: to make clear who is responsible. The easiest way to get a complicated classification straight is to compare it with something familiar, so imagine our company is a pizza shop.

Scope 1 — "the smoke from the oven in the shop"

The pizza shop runs its own oven and bakes pizzas. The gas oven gives off smoke (carbon). We turned the gas on, and we let the smoke out. These are direct emissions, 100% our responsibility.

Real examples

• Burning city gas in a factory boiler
• Diesel used by delivery trucks
• LPG for forklifts
• Process gases released during production

Scope 2 — "the electricity that went into the shop's lights"

The lights and refrigerators that keep the pizza shop running work on electricity. We did not make that electricity; a power station made it from coal, gas, nuclear or renewables. But we bought it and used it. The reason the power station released carbon is that our shop used electricity.

So Scope 2 is emissions we did not create but did cause.

Real examples

• Electricity supplied by KEPCO
• Steam and hot water from the district heating company
• Chilled water supplied from outside

Scope 3 — "every chain connected to that one pizza"

This is where the scope widens sharply. Think about how many people, companies and vehicles are involved before one pizza reaches a customer.

Before it arrives at the shop (upstream)

• Carbon released when the cheese plant processed the milk
• Carbon released when the flour mill ground the wheat
• Carbon released shipping the tomatoes in from overseas
• The transport staff used to get to work
• Emissions from the plants that made the disposable boxes and napkins

After it leaves the shop (downstream)

• The rider delivering it by motorcycle
• The customer reheating it in a microwave at home
• The process of disposing of the leftovers

All of this carbon is Scope 3.

Why Scope 3 matters most

If you take a company's total carbon emissions as 100%, the split comes out roughly as follows, depending on the sector.

The emissions we see with our own eyes are only 20–30% of the total. The remaining 70–80% arise in the supply chain, in transport, in use and in disposal. That is how you reach the conclusion that genuine carbon neutrality is impossible without managing Scope 3.

The 15 Scope 3 categories — too many?

The GHG Protocol breaks Scope 3 down into 15 categories. The number looks large, but it is nothing more than the pizza analogy split into before the pizza is made (upstream) and after (downstream).

The "core Scope" differs by sector

No company manages every category as though it mattered equally, because where the carbon mostly comes from differs by sector.

Which categories you have to manage first depends on the sector you are in.

So where do small and mid-sized manufacturers start?

One important point here. You do not have to measure all of Scope 3 at once. The GHG Protocol accepts this reality too. Even among large global companies, few can measure all 15 categories perfectly. The order recommended for small and mid-sized manufacturers is as follows.

"Why are they asking our company for Scope 3 data?"

There is a situation people at small and mid-sized manufacturers meet often. One day a large customer suddenly asks them to submit Scope 3 data. Here is why.

From the large company's point of view, buying the parts and materials a supplier makes falls under its own Scope 3 Category 1 (purchased goods and services). In other words, our company's emissions have to appear as a line in the large company's carbon report.

If we do not know our own emissions, the large company cannot write its report. That is why the request arrives. And these requests will become more numerous, more frequent and stricter, because most large global companies are moving towards making Scope 3 disclosure mandatory by 2030.

Three things you gain by starting to manage Scope 3

1. Keeping the customer — submitting Scope 3 data is becoming a condition of doing business. Companies that prepare ahead survive in the supply chain; those that do not get pushed out.
2. Finding cost-reduction opportunities — the measuring process reveals where energy and resources are being wasted. Real cost savings come with it: more efficient raw material input, optimised transport routes, less waste.
3. Attracting ESG investment and finance — companies that handle ESG disclosure systematically are better placed to attract green finance and ESG funds. Financial gains follow, such as preferential interest rates and access to new investors.

Today in summary

• Scope 1 — what we burned directly (the oven smoke)
• Scope 2 — the electricity and steam we used (the shop lights)
• Scope 3 — everything else connected to our business (the whole chain behind one pizza)

Scope 1, 2 and 3 look complicated at first, but at bottom they are a classification system for dividing up responsibility for who emitted how much and where. Remember the pizza shop and you have it — the oven smoke, the shop lights, and every chain behind one pizza. Next time a customer asks for Scope 3 data, or your board asks about carbon reporting, think back to these three.