Simplifying carbon reporting: how to report scope 1, 2 and 3 emissions in three steps to compliance

Carbon reporting, also known as Greenhouse gas (GHG) reporting, is increasingly part of wider sustainability reporting and ESG reporting frameworks. It is certainly no longer something you can leave at the bottom of the to-do list. Regulations are tightening, stakeholders are asking tougher questions, and businesses are being judged on transparency as much as on financial performance. The GHG Protocol – the most widely used international framework – breaks emissions down into three categories: 

1. Scope 1: Direct emissions from sources you own or control, such as boilers, furnaces, company vehicles, or chemical processes. 
2. Scope 2: Indirect emissions from purchased energy – electricity, heating, cooling, or steam. 
3. Scope 3: All other indirect emissions – from your supply chain, business travel, employee commuting, and even the end-of-life treatment of your products. 

If you are operating in the UK, frameworks like the Streamlined Energy and Carbon Reporting (SECR) scheme already require certain organisations to report their emissions. Globally, new rules like the EU’s Corporate Sustainability Reporting Directive (CSRD) and the upcoming UK SRS are pushing for broader, more detailed disclosures, including Scope 3. Whether you are a multinational or an SME, it is becoming increasingly likely that you will need to comply sooner rather than later. 

This article will walk you through what Scopes 1, 2, and 3 really mean for your business, where the challenges lie, and how you can approach compliance in a way that adds value rather than simply ticking a box. 

Why this matters now 

You are not just reporting for the sake of regulation. The shift to low-carbon operations is tied to brand trust, investor confidence, and even market access. Here is why tackling your emissions reporting should be high on your agenda: 

• Regulatory expansion: Regulators are expanding requirements under frameworks like CSRD, the EU Taxonomy, and double materiality principles – with scope 3 reporting becoming mandatory in more regions. 

• Investor and consumer pressure: Stakeholders want verifiable, transparent disclosures. 

• Risk management: Climate change is already affecting supply chains, insurance, and asset values. 

• Competitive advantage: A credible sustainability track record can win contracts and customers. 

• Better reporting is better understanding: This gives us insight into the future state of the planet, is better for business, and better for us all.  

The risk of not engaging? Beyond fines and reputational damage, you risk falling behind in markets where sustainability performance is now a selection criterion. 

The challenges of Scope 1, 2, and especially Scope 3 

Most organisations can get a handle on Scope 1 and 2 relatively quickly. You already know your utility bills, you track company vehicle fuel use already, and you have control over your sites. 

However, Scope 3 is different. Measuring it means looking at: 

• Purchased goods and services 
• Transportation and distribution (both upstream and downstream) 
• Waste from operations 
• Business travel and commuting 
• Product use and end-of-life treatment 

The challenge is that much of this data sits outside your direct control. It might sit with suppliers, customers, and logistics partners. As Deloitte notes, “measuring and reporting these emissions pose significant challenges due to their sources lying beyond a company’s operational reach.” 

From a data perspective, the hurdles include: 

• Inconsistent formats from suppliers 
• Missing or incomplete data points 
• Systems that cannot integrate external inputs 
• The need for verification and audit readiness 
  

Two sides of the coin: the benefits and the burdens 

When you go beyond compliance, emissions data can provide many benefits and even become a business asset, including: 

• Finance and risk: Anticipated climate-related financial risks align with investor-grade standards like CSRD and IFRS. 
• Operations: Identifying inefficiencies, optimising resource use, and reducing costs benefit the business effectiveness. 
• Supply chain: Strengthening resilience and collaborating with suppliers on reductions creates new opportunities to innovate and do things better. 
• Strategy: Spotting opportunities for new sustainable products and services could be potentially good for business. 
• Talent and brand: Attracting employees and customers who value purpose-driven organisations. 

Whilst robust emissions reporting underpins climate transition plans, sustainability audits, and broader impact measurement initiatives, getting access to emissions data can also bring along some burdens to be realistic about:  

• Collecting quality data from across a supply chain takes time and resources. 
• Reporting systems require integration with existing IT and operational tools. 
• Standards evolve, meaning your reporting processes will need to adapt. 
• There is reputational risk if data is misinterpreted or used to overstate progress. 
  

Approaches to getting it done 

Depending on your starting point, you might: 

• Select an end-to-end reporting solution and feed in your data. Platforms like Microsoft Sustainability Manager can centralise Scope 1, 2, and 3 information. 
• Build a data accelerator using your own capabilities or with partners, focusing on Scope 3 data ingestion and supplier integration. 
• Leverage procurement data as a starting point – many suppliers now provide emissions data through APIs or sustainability reports. 

Whichever route you choose, the key steps are: 

• Identify what data you need for each scope category. 
• Collect and standardise the data so it meets GHG Protocol requirements. 
• Report and act – use the results to set reduction targets and track progress. 
  

Real-world use case 

LUT University in Finland examined ways to improve Scope 3 data quality as part of its carbon neutrality strategy. The work highlighted that supplier engagement was essential and that data quality improved significantly when procurement teams worked closely with sustainability experts. 

We have seen similar results when working with clients using tools to gather supply chain data. The biggest leap forward often comes when organisations move from static annual reports to dynamic data systems that feed into multiple business areas – finance, operations, and marketing alike. 

NashTech’s client experience shows that real progress comes from moving beyond static annual reports to dynamic data systems that support sustainability, finance, operations, and marketing. As ESG reporting advances, integrating real-time data and encouraging cross-functional collaboration are key to meeting new standards. Leveraging existing knowledge in a sustainability strategy yields tangible results, and NashTech’s broader data expertise can support this process.  

What this means for you 

If you are just starting out: 

• Begin with Scopes 1 and 2 – build your internal data processes first. 
• Map your Scope 3 categories and identify where the biggest data gaps are. 
• Engage suppliers early – make sustainability reporting part of contract terms. 

If you are already reporting: 

• Look for opportunities to use emissions data beyond compliance – for risk modelling, product innovation, and brand storytelling. 
• Consider AI-driven tools for identifying missing data and integrating disparate sources. 
• Review your systems’ ability to adapt to new reporting requirements. 
  

Future trends to watch 

Expect to see closer integration of carbon data into ESG reporting and circular economy strategies, alongside lifecycle assessments of products and services. Also, be ready to embrace: 

• AI-assisted reporting: Agentic AI and machine learning will increasingly automate data gathering, standardise formats, and adapt to regulatory changes in real time. 
• Integrated ESG platforms: Expect more unified systems that link carbon data to financial and operational performance. 
• Regulation without borders: Even if your operations are domestic, you may be asked to comply with standards from other jurisdictions in your supply chain. 

Final takeaway 

Scope-based carbon reporting is becoming a core part of doing business, not just a compliance exercise. While Scope 1 and 2 can be tackled with internal data, Scope 3 demands collaboration, integration, and often a rethink of your data architecture. The effort is worth it: robust GHG data can support risk management, operational efficiency, innovation, and brand value – all while keeping you ahead of tightening regulations. 

Your next step is to treat emissions data as a strategic asset. Build the systems, processes, and partnerships you need now, so that when regulations shift – and they will – you are ready to respond with confidence and credibility.