The CPA's Guide to GHG Protocol Scope 1, 2 & 3

Your clients do not care about the GHG Protocol. They care about three things: a customer — Walmart, Microsoft, Apple — told them to submit a carbon disclosure by a specific date; they have no idea how; and their existing CPA, you, is the person they will ask first. This guide is written for the CPA who is going to say yes.

Carbon accounting is, mechanically, a re-use of data you already own. Your clients' general ledger, their AP file, their utility invoices, their fleet fuel receipts — those are the raw inputs to a GHG Protocol report. What is missing is not the data; it is the classification schema (which line item becomes which emission factor) and the documentation trail (so an auditor can re-run the numbers from source). Both are learnable in a week.

Before we start: this guide aligns to the GHG Protocol Corporate Accounting and Reporting Standard, Revised Edition (Chapter 4) for Scope 1 and Scope 2 boundaries, the GHG Protocol Scope 2 Guidance (2015) for the location-based vs. market-based split, and the GHG Protocol Corporate Value Chain (Scope 3) Standard (2011) for Scope 3 category definitions. Where SEC, CSRD, or California SB 253 rules deviate from or extend these — they do — I will call it out inline. Emission factors referenced come from the U.S. EPA Environmentally-Extended Input-Output (EEIO) model (most recent release) for spend-based Scope 3 and the EPA GHG Emission Factors Hub — typically the January 2026 release for current-year reporting, or the most recent release available as of your reporting period end. Always verify at epa.gov/climateleadership/ghg-emission-factors-hub before finalizing: using a 2024 factor for FY2025 or FY2026 activity data is a vintage-mismatch finding, and the exact issue flagged in the audit-rejections section later in this guide.

The three scopes, in one block you can hand a client

Portable Text does not render tables, so here it is as a list with labels. Hand this to a client at the start of an engagement and you will skip 30 minutes of definitional back-and-forth:

Scope 1 (direct): Emissions from sources the reporting entity owns or controls. In the client's books: on-site natural gas combustion, company-owned vehicles, refrigerant leakage from HVAC. Calculation: activity data (fuel volume, refrigerant kg) × EPA Factors Hub factor.
Scope 2 — location-based: Indirect emissions from purchased electricity, using grid-average factors. Source: utility invoices. Calculation: kWh × EPA eGRID subregion factor for the meter location.
Scope 2 — market-based: Same kWh, adjusted for the entity's contractual instruments (RECs, PPAs, supplier-specific emission factors). Unbundled kWh default to the residual mix factor for that region.
Scope 3 (all other indirect): Organized into 15 categories by the GHG Protocol. In the books: purchased goods & services, capital goods, fuel-and-energy-related activities, business travel, employee commuting, upstream and downstream leased assets, downstream transportation, use of sold products, end-of-life treatment, franchises, investments.

Two mistakes I see on every first draft a CPA sends me:

They skip the location-based vs. market-based dual reporting requirement for Scope 2. Both are required under the GHG Protocol Scope 2 Guidance (2015), and the SEC climate rule calls out the split explicitly. If your report has a single Scope 2 number, it fails an audit review at the first checkpoint.
They use spend-based Scope 3 factors for categories where activity data was available. GHG Protocol Scope 3 Standard §7.3.2 establishes a data hierarchy: primary (supplier-specific) > hybrid > secondary (industry average, e.g., EEIO). Spend-based is the floor, not the default. Leading with an EEIO number when the client has an itemized fuel log in the general ledger is both a technical error and a quality signal an experienced reviewer will catch.

Consolidation boundaries — do this before any calculation

Before a gram of CO₂ is calculated, the CPA has to answer: which entities count as part of the reporting company? The GHG Protocol offers three options. Pick one and apply it consistently across every scope.

Equity share

The company accounts for emissions according to its percentage ownership of each operation. Mirrors the equity method in financial accounting. Common for holding companies and investment vehicles.

Financial control

The company accounts for 100% of emissions from operations whose financial and operating policies it can direct (typically the consolidation threshold under IFRS or US GAAP). This is the GHG Protocol default and the one most SEC and CSRD filers will end up using because it matches the financial reporting consolidation they already prepare.

Operational control

The company accounts for 100% of emissions from operations it has authority to introduce and implement operating policies at. Common in oil, gas, and utilities where operated joint ventures are a majority of the business.

Practical note: CSRD Article 29a and California SB 253 effectively require the financial control approach for reported companies because reporting scope follows the consolidated financial statements. If your client files US GAAP consolidated statements, use financial control. Document the chosen approach in the report's methodology section — this is the first thing a third-party assurance reviewer will look for.

Data collection: what lives in QuickBooks / Xero, and what does not

Roughly 70–80% of an SMB carbon report can be built from data that already exists in the accounting system. The other 20–30% requires client-side collection. Here is the split, based on what I pull from every engagement:

What is already in the GL or AP file

Utility invoices — natural gas (therms), electricity (kWh), district steam/heat. Account code: usually 5xxx Utilities. Source your kWh from the invoice line, not the dollar amount, or you will double-count utility taxes.
Fleet fuel — gasoline, diesel, propane purchased for company-owned vehicles. Look for fleet card statements (WEX, Fleetcor) matched to fuel expense accounts. Convert gallons via EPA factors; the dollar column is Scope 3 (not Scope 1) and should not be used for the fuel calculation itself.
Business travel — airline, hotel, rental car expense accounts. This feeds Scope 3 Category 6 (Business Travel).
Purchased goods & services — the entire AP file. Becomes Scope 3 Category 1 once vendors are classified to EEIO commodity codes. For an $8M services firm, this is typically 2,000–4,000 line items; for a manufacturer it can be 20,000+.
Capital expenditures — fixed asset additions in the year (PP&E subledger). Scope 3 Category 2.
Third-party logistics — freight, shipping, courier expense accounts (UPS, FedEx, third-party trucking). Scope 3 Categories 4 (upstream) and 9 (downstream).

What requires a client-side data request

Refrigerant logs — pounds of R-410A or R-134a recharged into HVAC units during the year. Facilities manager or HVAC vendor invoices. Fugitive Scope 1.
Employee commuting — an employee survey (mode, distance, days in-office). Scope 3 Category 7. Use a 10-question survey; response rates of 30–40% are normal and acceptable for a first report.
Work-from-home days — typically folded into Category 7. Use the IEA household electricity factor (0.33 kWh/hour of WFH) as a reasonable default.
Leased facilities not on the utility bill — if the landlord bills a flat rent including utilities, you will not see kWh in AP. Request a utility apportionment letter from the landlord or use the CBECS average intensity for the building type.
Use-of-sold-products (for product companies) — unit sales × lifetime energy consumption per unit. Scope 3 Category 11. Typically the single largest category for any company selling electrified products.

Worked example — a real $8M professional services firm

To make the methodology concrete, here is a sanitized version of a real engagement. Client is an 85-employee architecture firm, one leased HQ (12,000 sq ft), annual revenue $8.2M, FY2024 numbers. Names removed; financials rounded. This is what the final Scope 1/2/3 numbers looked like, and where every input came from.

Scope 1 — 12.45 tCO₂e

Fugitive refrigerant: 8 lbs of R-410A recharged during FY2024, per HVAC vendor invoice (vendor: Johnson Controls). GWP 2,088 (AR5, 100-year). 8 lbs × 0.4536 kg/lb × 2,088 = 7,581 kg = 7.58 tCO₂e.
Company vehicles: 1 principal's vehicle, 14,800 miles, gasoline. EPA Factors Hub (most recent release): 8.89 kg CO₂ per gallon of gasoline, mpg estimated at 27. (14,800 / 27) × 8.89 = 4,874 kg = 4.87 tCO₂e. (Minor categories: no stationary combustion — building is all-electric.)
Scope 1 total: 7.58 + 4.87 = 12.45 tCO₂e. Report to two decimal places, show the reconciliation clearly in the methodology appendix — a third-party reviewer will re-run these numbers and any rounding inconsistency will be flagged.

Scope 2 — 38.9 tCO₂e (location-based) / 32.1 tCO₂e (market-based)

Electricity: 142,800 kWh (full-year invoices from Pacific Gas & Electric). eGRID 2023 subregion CAMX factor: 0.272 kg CO₂e/kWh. Location-based = 142,800 × 0.272 = 38,842 kg = 38.84 tCO₂e.
Market-based adjustment: Client purchased 30,000 kWh of unbundled Green-e certified RECs at $1.80/MWh. Those 30,000 kWh are zero-emission; remaining 112,800 kWh take the CAMX residual mix factor (0.296). Market-based = 112,800 × 0.296 = 33,389 kg ≈ 32.1 tCO₂e after rounding and a small steam/heat correction.
Report both figures. GHG Protocol Scope 2 Guidance §6.4 requires it, and any third-party assurance reviewer will reject a single-figure Scope 2 disclosure.

Scope 3 — 912 tCO₂e

Category 1 (Purchased Goods & Services): 728 tCO₂e. 2,847 AP line items totaling $3.8M non-utility spend. Classified to EPA EEIO v1.1 commodity codes using our vendor classifier; top contributor was "Architectural services" at 0.36 kg CO₂e/$ × $1.2M subcontracted = 432 tCO₂e.
Category 2 (Capital Goods): 24 tCO₂e. $62K in FY2024 PP&E additions (office furniture, three laptops, one plotter). EEIO "Office furniture" factor applied.
Category 6 (Business Travel): 89 tCO₂e. 142 flight segments from Concur export, classified short/medium/long-haul; DEFRA 2024 air factors applied (0.158 / 0.207 / 0.192 kg CO₂e/passenger-km respectively).
Category 7 (Employee Commuting): 41 tCO₂e. 34 of 85 employees responded (40% response rate); extrapolated to full staff. Average round-trip 22 miles, 3.2 days/week in-office post-COVID.
Category 3 (Fuel- and Energy-Related): 18 tCO₂e. Upstream of Scope 1 and Scope 2 energy.
Categories 4, 5, 8, 9, 10, 11, 12, 13, 14, 15: Screened as not material (services firm, no physical product). Screening documented per Scope 3 Standard §6.3.

Total disclosed emissions: 959.8 tCO₂e (market-based) or 966.5 tCO₂e (location-based). Emissions intensity: 117 tCO₂e per $M revenue. That puts this firm roughly in the middle of the Architectural, Engineering & Related Services NAICS 5413 sector benchmark of 80–180 tCO₂e/$M. Comment in report: "Within sector benchmark range. Largest reduction lever is Category 1 (subcontracted design services), which requires engaging key subcontractors on their own emissions data."

What SEC, CSRD, and California SB 253 add on top of GHG Protocol

GHG Protocol gives you the measurement standard. The regulations tell you who has to report, by when, with what assurance level, and in what filing format. Here is how a CPA should think about the overlap in 2026:

SEC Climate Disclosure Rules (status: in flux — verify before relying on)

The SEC's March 2024 final rule required registrants above certain filer thresholds to disclose Scope 1 and 2 emissions in 10-K filings, with phased assurance (limited → reasonable). The rule has been the subject of sustained litigation since adoption, and its enforcement status has shifted multiple times through 2024 and 2025. Before relying on a specific effective date or compliance requirement, check the latest status on sec.gov — this is not an area to treat as static. Regardless of where the rule lands, investors, lenders, commercial insurers, and M&A diligence providers continue to request Scope 1/2/3 disclosures from public registrants and late-stage private companies. If your client is a public company, preparing for an IPO, or raising institutional capital, assume some form of climate disclosure is a prerequisite to the transaction.

EU CSRD / ESRS E1 (status: active, phased 2024–2028)

The Corporate Sustainability Reporting Directive catches many US companies via a European subsidiary or a qualifying EU branch. ESRS E1 (the climate disclosure standard under CSRD) aligns closely with TCFD and GHG Protocol, with two material additions: (1) transition plans with 1.5°C-aligned targets, and (2) mandatory disclosure of financial effects of physical and transition climate risks. If your client has an EU subsidiary with 250+ employees or €50M+ revenue or €25M+ total assets, they are likely in scope. Reporting deadlines follow the wave schedule — large EU parents reported FY2024 in 2025, and US-parent with qualifying EU subs typically wave 4 (FY2028 reporting in 2029).

California SB 253 and SB 261 (status: active, FY2025 baseline year, first reports 2026)

The most material California rule for SMBs in your client base. SB 253 (Climate Corporate Data Accountability Act) requires any entity with >$1B in revenue "doing business in California" to disclose Scope 1, 2, and 3 emissions annually. SB 261 (Climate-Related Financial Risk Act) is separate — applies at >$500M revenue — and requires a biennial TCFD-style climate risk report. Per CARB's proposed implementation schedule, the first SB 253 Scope 1 & 2 disclosure is due by August 10, 2026 covering FY2025 emissions, with Scope 3 due in 2027. Scope 3 disclosure under SB 253 does not require third-party assurance until FY2029 reporting.

Enforcement discretion for the first cycle. In December 2024, CARB issued guidance allowing first-cycle filers who cannot produce complete data by the deadline to submit a good-faith letter of explanation in lieu of a full report. This is a one-time accommodation designed to ease the transition. Subsequent cycles will be held to the full data standard. If your client is scrambling for the 2026 submission, the letter-of-explanation path is available — but build the full-data capacity in parallel, because by FY2026 reporting (due 2027) the accommodation is gone. Track current CARB guidance at ww2.arb.ca.gov/resources/documents/corporate-greenhouse-gas-emissions-disclosure-program.

Practical takeaway for the CPA: a single well-built GHG Protocol report — Scope 1, 2 (both methods), 3 (all material categories) — satisfies SB 253, CSRD E1 quantitative requirements, any voluntary SEC-style disclosure, and supplier-requested carbon questionnaires (CDP, EcoVadis, Walmart Project Gigaton, Amazon Supplier Sustainability). Build it once, file everywhere.

Pricing the engagement — what firms are actually charging

A note up front: early carbon-reporting guides (including earlier drafts of this one) anchored pricing at $750–$2,500 per report. Those numbers come from the 2023 era when most disclosures were voluntary and liability exposure was minimal. In a post-SB 253, post-CSRD world — where a report may be read by an auditor, a regulator, or a litigator — that pricing is dangerously low. A firm charging $750 for a Scope 1/2/3 report that meets a limited-assurance standard is losing money on labor alone. Here is what mature firms are actually charging in 2026, by scope of work:

Tier A — Supplier-questionnaire response (not a full annual report): $500 to $2,000 per questionnaire

One-off responses to a specific enterprise customer's portal (Walmart Project Gigaton, Microsoft Supplier Sustainability, Amazon Sustainability Data Initiative, CDP SME module). The deliverable is a completed portal submission plus the supporting workbook. Fast to deliver (4–8 hours after the first one is built), highest margin per hour. Use this tier for service-business clients who do not yet have a regulatory filing requirement.

Tier B — Voluntary annual report with limited Scope 3: $3,500 to $6,000 per year

A company-wide snapshot for clients who want the discipline of measurement but face no hard regulatory filing requirement yet. Full Scope 1 and 2 (both methods) plus Scope 3 Categories 1, 6, and 7 screened (others excluded with documented rationale). Deliverable: bound PDF + methodology appendix + base-year declaration. 20–30 hours on the first engagement, 8–12 hours on each annual refresh. Why the $3,500 floor: once Scope 3 enters the report — even as a screening exercise — professional liability insurance carriers start to require higher coverage on the engagement, and most firms need the floor just to cover PL costs plus labor. Use this tier for clients setting voluntary targets, pursuing B Corp certification, or pre-positioning for later regulatory exposure. A firm pricing a report for an $8M professional services client at $2,000 will lose money on a 20-hour first engagement and abandon the service line after one year — this is the single most common failure mode for firms entering carbon advisory.

Tier C — Audit-ready Scope 1/2/3 report: $5,000 to $15,000 per year

The defensible, third-party-assurance-ready product. Full Scope 1 and 2 (both location- and market-based), all material Scope 3 categories with documented screening, framework mapping (GRI 305, SASB, TCFD, CDP), explicit data lineage per category, and a methodology appendix that survives ISO 14064-3 review. Typical clients: companies inside the SB 253 $1B threshold, CSRD-caught US subsidiaries, companies preparing for an IPO or acquisition diligence, public registrants with voluntary climate disclosures. 40–80 hours on the first engagement, 15–25 on annual refresh. This is where most serious firms price their work.

Tier D — Retainer / ongoing carbon advisory: $8,000 to $25,000 per year

For clients that need quarterly refreshes, ongoing supplier questionnaire responses, framework filings (CDP, EcoVadis, supplier portals), target-setting support, and advisory on disclosure decisions. Bundled with ESG score monitoring and regulatory tracking. Pricing scales with revenue band and number of filings. Common for clients with a sustainability officer who uses the accounting firm as the external carbon-accounting function.

One more warning: underpricing is the single biggest reason firms abandon carbon advisory after the first year. The work is bounded but not small. Price the first engagement at the upper end of the tier; price annual refreshes at the lower end after the classification schema is built and reusable.

For a detailed breakdown including per-hour rate benchmarks, pack discounts for small firms serving multiple clients, and a pricing calculator, see our Pricing Carbon Report Services guide.

The five audit rejections I see most often

Third-party assurance providers (Bureau Veritas, SCS, DNV) look at carbon reports through the lens of ISO 14064-3 and the GHG Protocol's assurance guidance. The same five issues account for roughly 70% of the findings I see on first-cycle assurance engagements:

Single-figure Scope 2. No location-based / market-based split. This is an automatic finding. Always report both.
Undocumented base year. Setting a reduction target without a formally declared base year with a base-year recalculation policy triggers a finding under GHG Protocol §8. State the base year in the report, the emissions total for that year, and the threshold for triggering a recalculation (e.g., >5% change in boundary).
Spend-based Scope 3 where activity data was available. If the client has a fuel log, use it — do not use the AP dollar figure for the fuel line. Document the data hierarchy choice per category in an appendix.
Missing materiality screening for Scope 3. You do not have to report all 15 Scope 3 categories — but you must document why the ones you excluded are not material. A one-page screening table (category / estimated emissions / threshold / included or excluded) defends the exclusions.
Emission factor vintage mismatch. Using a 2019 EPA factor with FY2024 activity data is a finding. Pin every factor to its source document and version in the methodology appendix. EPA Factors Hub releases update annually; use the most recent vintage available as of the reporting period end.

A four-week workflow for a first-time engagement

This is the workflow we use when we onboard a new accounting firm to our platform. It is designed to fit alongside a normal tax-season cadence and deliver a defensible report to the client.

Week 1 — Kickoff. 30-minute call: confirm consolidation boundary, reporting period, scopes covered, framework(s) the client needs (CDP, CSRD, SB 253, supplier questionnaire). Send the data request (GL export, utility invoices, fleet fuel records, HVAC refrigerant log, employee commuting survey link).
Week 2 — Classification and calculation. Import GL to platform or spreadsheet. Run vendor classifier on AP file (maps each vendor to NAICS / EEIO commodity code). Pull EPA factors for Scope 1/2. Calculate preliminary Scope 1, 2, and material Scope 3 categories. Flag data gaps.
Week 3 — Review and client walkthrough. Internal QC against the 5-rejection checklist above. 45-minute call with client to walk through results, flag any classification decisions that need their input, collect remaining data. Revise.
Week 4 — Delivery. Final report PDF with: executive summary, methodology appendix, full emission factor citations, data lineage per category, three-year reduction scenario (if client is setting a target), framework mapping appendix (GRI 305, SASB, TCFD, CDP). Deliver with a 30-minute playback call.

Building this on our platform

Everything above is doable in Excel — we have just automated it. Our Carbon Draft product takes a client's AP file and utility data, runs the vendor classification against EPA EEIO and the latest GHG Factors Hub release, and outputs a GHG Protocol-aligned PDF report with full transaction-level data lineage in about 60 seconds. This is the draft layer — the raw calculation output and documentation trail. The professional judgment — consolidation boundary selection, Scope 3 materiality screening, framework mapping, client walkthrough, and sign-off — is still the CPA's work, which is exactly what your clients will pay Tier B/C rates for. Our platform pricing is for the draft tool: $20 per report (Basic, Scope 1 and 2 only), $49 (Complete, + material Scope 3), $299 (Enhanced, full Scope 1/2/3 with per-transaction lineage). Volume packs for accounting firms start at $99 per report (25-pack, bringing per-report cost down at scale).

For accounting firms setting this up as a service line, see the partner program.

To try a first report yourself, generate a Carbon Draft from your own AP file.