Scope 1 and 2 Emissions: A UK SME Guide to Reporting

Once a UK SME has answered one ESG questionnaire, one Carbon Reduction Plan, one SECR disclosure, or one bank sustainability assessment, a pattern becomes obvious: every one of them wants Scope 1 and Scope 2 emissions numbers. Sometimes they ask for a subset of Scope 3 as well.

The scope framework comes from the GHG Protocol Corporate Standard, which is the international standard that underpins almost every corporate emissions reporting regime — UK SECR, PPN 06/21 Carbon Reduction Plans, CDP, EcoVadis, SBTi, CSRD/ESRS, and bank sustainability-linked loan frameworks all rest on the same definitions.

This guide explains what Scope 1 and Scope 2 actually cover, how a UK SME calculates each, what the UK government conversion factors are, and the pitfalls that cause most first-time SME reporters to redo the work.

What are Scope 1 and Scope 2 emissions?

The GHG Protocol splits corporate emissions into three scopes based on source and control.

Scope	What it covers	Typical SME sources
Scope 1 — Direct	Emissions from sources the company owns or controls	Gas boilers, company vehicles, forklift trucks, process emissions, refrigerant leaks
Scope 2 — Indirect (energy)	Emissions from purchased electricity, heat, steam, or cooling consumed by the company	Grid electricity, district heating
Scope 3 — Other indirect	Value-chain emissions the company does not own or control	Business travel, commuting, purchased goods, waste, product use

Scope 1 and 2 together are what people usually mean by an "emissions footprint" when they ask without qualification. They are also the subset that every mandatory UK regime asks for directly.

Scope 1 in detail

Scope 1 captures direct fossil-fuel combustion where the emissions physically leave your site or vehicle. For a typical UK SME, the common sources are:

Stationary combustion

Fuel burned in equipment that does not move:

Natural gas boilers for heating or hot water
LPG or oil heating (less common but still present in rural sites)
Gas-fired process equipment (ovens, kilns, driers)
Backup diesel generators (when actually used, not just on standby)

Mobile combustion

Fuel burned in company-owned or company-leased vehicles:

Fleet vans, cars, lorries (petrol, diesel, LPG)
Forklift trucks (diesel or LPG — electric forklifts move to Scope 2)
Any on-site plant (excavators, telehandlers)

Fugitive emissions

Gases that leak rather than being combusted:

Refrigerant top-ups in air-conditioning and refrigeration (HFCs such as R-410A, R-134a)
Fire-suppression gas refills (where applicable)
SF₆ from high-voltage switchgear (rare in SMEs)

Refrigerant leaks often surprise SMEs — a single 1 kg top-up of R-410A is roughly equivalent to 2.1 tonnes of CO₂e. Two or three top-ups across a year can be material.

Process emissions

Rare in SMEs but relevant in some sectors:

CO₂ from cement manufacturing
Methane from anaerobic digestion
N₂O from chemical processes

If your company has process emissions, you will already know. If you do not know of any, you probably do not have them.

Scope 2 in detail

Scope 2 captures the emissions generated by the power stations and heat sources that produce energy you then consume.

The boundary test: if you pay an electricity or heat bill to a third party, the emissions embedded in that energy are yours under Scope 2. The physical combustion happened at a power station you do not control — but the demand signal is yours.

Scope 2 sources for UK SMEs

Grid electricity (by far the largest for most UK SMEs)
Purchased heat from district heating networks
Purchased steam (rare; mostly industrial)
Purchased cooling from chilled water loops (rare)

Two methods: location-based vs market-based

The GHG Protocol allows two calculation approaches. You should report both where relevant.

Location-based: Uses the grid-average emissions factor for the geography where the electricity was consumed. This is the method SECR (UK mandatory disclosure) uses as primary. You take your kWh × the UK grid average factor (from the UK government conversion factors) = tCO₂e.

Market-based: Reflects the emissions factors of the specific electricity products you have purchased. If you are on a 100% renewable tariff with Renewable Energy Guarantees of Origin (REGOs), your market-based Scope 2 is effectively zero — but only if the REGOs are legitimately matching your consumption. A generic "green tariff" without REGO backing is not Scope 2 zero.

Report both where it matters. SECR expects location-based as the primary disclosure. CDP expects both. A bank sustainability-linked loan questionnaire often asks for both so the bank can test your sustainable-procurement claims.

The REGO and green-tariff nuance UK SMEs miss

A "100% renewable" tariff can mean:

REGO-backed tariff where the supplier has retired REGOs equal to your consumption — Scope 2 market-based is zero (or very close). This is the strongest claim.
REGO-backed tariff where REGOs are bundled at the supplier level but not matched to individual customers — weaker. Check the supplier's fuel mix disclosure.
"Green" tariff where the supplier purchases renewable electricity equal to total demand across all green-tariff customers — weaker still.
"Green" tariff that is essentially marketing with no verifiable renewable backing — Scope 2 market-based is not zero; you still use the grid average.

When answering an ESG questionnaire, the correct response to "what percentage of your electricity is from renewable sources?" is: "X% REGO-backed" rather than "100% green tariff". Buyers and auditors increasingly ask the follow-up.

UK government conversion factors: the canonical source

The UK government greenhouse gas conversion factors are published annually by the Department for Energy Security and Net Zero (DESNZ), typically in June. They are the expected default for any UK-based emissions reporting and are used across SECR, ESOS, PPN 06/21 Carbon Reduction Plans, and most supplier ESG questionnaires.

The 2025 factor set is the current default as of writing.

What the factors cover:

Fuels — natural gas, LPG, petrol, diesel, aviation fuel, marine fuel — converted from volume or mass to kWh and to kgCO₂e
Electricity — UK grid average, split location-based (full grid) and market-based (residual mix) — kWh to kgCO₂e
Heat and steam — district heating, industrial steam — kWh to kgCO₂e
Transport — road, rail, sea, air — passenger·km or tonne·km to kgCO₂e
Refrigerants — by specific gas type — kg to kgCO₂e (these factors can be 1,000-10,000× compared to CO₂, which is why small leaks are material)
Waste — by waste type and treatment — tonnes to kgCO₂e
Water — supply and treatment — m³ to kgCO₂e

Each factor has a clear scope definition. Using the wrong factor scope (e.g., "well-to-wheel" when the reporting regime expects "tank-to-wheel") is one of the most common first-time-filer errors.

Step-by-step: calculating Scope 1 and 2 for a UK SME

Step 1: Pick the reporting period

Usually your financial year. The period must match the one used in any associated disclosure (SECR filings use the reporting financial year; CDP disclosures match the latest completed financial year).

Step 2: Gather activity data for Scope 1

For each Scope 1 source:

Gas boilers / heating: 12 months of gas bills in kWh. Most bills show kWh; if only m³, convert using the supplier's calorific value.
Company vehicles: Fuel-card data (litres of petrol, diesel, LPG per vehicle) OR mileage logs × miles-per-gallon estimates. Fuel-card data is more accurate.
Forklifts / on-site plant: Delivery notes from your LPG / diesel supplier for the period.
Refrigerant leaks: Service records from your air-con and refrigeration maintenance contractor. Ask for the year's top-up log by gas type and kg.
Generator fuel: Diesel deliveries for backup generators that actually ran during the year.

Step 3: Gather activity data for Scope 2

Electricity: 12 months of electricity bills in kWh. If you have multiple meters, sum them.
Renewable tariff status: For each meter, confirm whether it is REGO-backed. Ask your supplier for a statement.
Heat / steam: If you purchase district heating, 12 months of heat bills in kWh.

Step 4: Apply the conversion factors

For each line:

tCO₂e = activity data (kWh or litres or kg) × conversion factor (kgCO₂e per unit) ÷ 1000

Use the 2025 UK government conversion factors matching the activity (fuel type, electricity method, refrigerant type).

Step 5: Sum by scope

Scope 1 total (tCO₂e) = sum of all stationary combustion + mobile combustion + fugitive + process
Scope 2 location-based total (tCO₂e) = purchased electricity kWh × UK grid average factor
Scope 2 market-based total (tCO₂e) = purchased electricity kWh × supplier-specific factor (zero or near-zero if REGO-backed)

Step 6: Calculate an intensity ratio

Required for SECR, strongly encouraged elsewhere. Common options:

tCO₂e per £M turnover
tCO₂e per FTE employee
tCO₂e per m² floor space (for property-heavy businesses)
tCO₂e per unit of output (for manufacturers)

Pick one and use it consistently year-on-year.

Step 7: Document the methodology

A one-page methodology statement covering:

Reporting period
Organisational boundary (operational control vs financial control)
Calculation standard (GHG Protocol)
Conversion factor source (UK government 2025 set)
Scope 2 method (location-based, market-based, or dual reporting)
Known exclusions and their justification

This goes into SECR, CDP, PPN 06/21 CRP — everywhere. Once written, it is reusable year to year with minor updates.

Free tool: Carbon Footprint Estimator

Our free Carbon Footprint Estimator implements the UK government conversion factor methodology for Scope 1 and Scope 2. Input your annual electricity kWh, gas kWh, fuel volumes, and refrigerant top-ups; get a defensible Scope 1+2 baseline in ~30 minutes of input time.

It is designed to get SMEs to a credible first-estimate number, not to replace a full-scope audit. For SECR or CDP submission, walk the numbers through with your accountant before publication.

Where your Scope 1 and 2 numbers get asked for

Once calculated, the same two numbers show up in every one of these:

Requester	Format expected	Frequency
SECR in Directors' Report	kWh + tCO₂e + intensity ratio, location-based	Annual
PPN 06/21 Carbon Reduction Plan	tCO₂e by scope, baseline + current year	Annual (if bidding government contracts)
CDP Climate / Supply Chain questionnaire	tCO₂e by scope, both Scope 2 methods, intensity ratio	Annual
EcoVadis assessment	tCO₂e by scope, often just Scope 1+2	Every 1-3 years per customer
Supplier ESG questionnaires (generic)	Usually kWh and tCO₂e figures, sometimes just percentage renewable	Ad hoc, multiple per year
ESOS Phase 3 audit	kWh activity data across significant energy use	Once per four-year phase
Bank sustainability-linked loan questionnaires	tCO₂e by scope plus trajectory	Usually one-off at loan origination, then annual
SBTi validation	tCO₂e by scope with methodology	If pursuing SBTi target validation

Calculating once and storing the result as structured, versioned data is how SMEs stop re-doing the arithmetic every time a new questionnaire arrives. That is the core problem AnswerVault is built to solve.

Common mistakes UK SMEs make on Scope 1 and 2

Using out-of-date conversion factors — the UK government publishes new factors every June; prior-year factors should only be used for the year they applied to.
Not separating location-based and market-based Scope 2 — if you have any REGO-backed supply, both methods are expected.
Forgetting refrigerant leaks — small kg numbers multiply by huge global warming potentials; a missed R-410A top-up of 2 kg = 4.2 tCO₂e omitted.
Double-counting company travel — if mileage claims from employee-owned vehicles sit in Scope 3, they should not also appear in Scope 1 fuel. Pick one category.
Treating generator fuel as always Scope 1 — correct only if the generator actually ran and burned fuel during the reporting year. Unused backup fuel inventory does not emit.
Missing tenant/sub-tenant electricity — if you rent a serviced office and your landlord bills electricity as part of the rent, you still need to estimate your share. Ask the landlord for the apportionment.

FAQ

Do I need to calculate Scope 3? Not mandatorily for SECR, which only requires Scope 1, Scope 2, and a narrow Scope 3 subset (business travel in employee-owned vehicles). PPN 06/21 requires a slightly wider Scope 3 subset. CDP strongly encourages full Scope 3 but does not require it at basic disclosure level. For most UK SMEs, start with Scope 1 and 2 and expand Scope 3 gradually — our guide on Scope 3 supplier engagement covers what your customers will ask for.

Are DEFRA conversion factors the same as the UK government factors? Yes, historically. The factors were published by DEFRA up to 2023 and are now published by DESNZ (Department for Energy Security and Net Zero). The methodology is continuous. "DEFRA conversion factors" and "UK government conversion factors" refer to the same data set.

Do I need to get my numbers externally verified? Not for SECR or PPN 06/21. External verification (via an accredited body against ISO 14064-3) is encouraged by CDP scoring and required by some specific buyer programmes, but it is not a general UK statutory requirement.

What about office-only businesses? Office-only SMEs typically have very small Scope 1 (just heating if the office has its own gas boiler — often zero if landlord-heated) and modest Scope 2 (electricity for lighting, computers, servers). Business travel can then dominate the total. The scopes still apply; the numbers are just smaller.

What is the difference between CO₂ and CO₂e? CO₂ is carbon dioxide only. CO₂e (carbon dioxide equivalent) expresses all greenhouse gases on a common CO₂ scale using each gas's global warming potential (e.g., 1 kg of methane = ~28 kg CO₂e over 100 years). All UK reporting uses CO₂e, not CO₂.

The takeaway for UK SME sustainability leads

Scope 1 = fuels you burn. Scope 2 = energy you buy.
Use the UK government conversion factors (2025 set is current) for everything.
Report Scope 2 location-based as primary, market-based as supplementary.
Refrigerant leaks are small in kg but large in tCO₂e — check the service log.
The same Scope 1 and 2 numbers get asked for by SECR, CDP, EcoVadis, PPN 06/21, bank loans, and every supplier ESG questionnaire. Calculate once, store as structured facts, reuse everywhere.

That last point is the core idea behind AnswerVault. Start a 14-day free trial — 40 starter ESG facts preloaded, including a Scope 1/Scope 2 data template structured for reuse.

Sources

Greenhouse Gas Protocol — Corporate Accounting and Reporting Standard
UK government greenhouse gas conversion factors for company reporting
UK government greenhouse gas reporting: conversion factors 2025
UK Government Environmental Reporting Guidelines
SI 2018/1155 — SECR Regulations
Science Based Targets initiative
This article provides general guidance for UK SMEs starting emissions reporting. It is not accounting or audit advice. For statutory submission, numbers should be reviewed with your accountant and, where warranted, externally verified.