Every greenhouse gas inventory — whether for AASB S2 compliance, a voluntary framework, or a client requirement — is built on the same three-category structure: Scope 1, Scope 2, and Scope 3 emissions. Understanding what goes in each category is the foundation of any credible emissions report.

The GHG Protocol framework

The Scope 1/2/3 structure comes from the GHG Protocol Corporate Accounting and Reporting Standard, first published by the World Resources Institute and World Business Council for Sustainable Development. AASB S2 and Australia’s National Greenhouse Accounts (NGA) methodology are both built on this framework.

Scope 1 — Direct emissions

Scope 1 covers greenhouse gas emissions from sources that are owned or controlled by your organisation.

Common examples:

Combustion of fuel in owned or leased vehicles (cars, trucks, heavy equipment)
Combustion of gas or LPG in on-site boilers, heaters, or process equipment
Fugitive emissions from refrigerants in HVAC systems
Process emissions from industrial operations (cement, chemicals, waste)
Diesel or petrol in generators at owned or controlled sites

In Australian construction and infrastructure, Scope 1 typically includes mobile plant (excavators, cranes, trucks) and site facilities (generators, site offices). These emissions are calculated by multiplying the quantity of fuel consumed by the relevant NGA emission factor for that fuel type.

How it’s calculated: Litres of fuel × NGA emission factor (kg CO₂e per litre) = tonnes CO₂e

Scope 2 — Indirect emissions from purchased energy

Scope 2 covers indirect emissions from the generation of electricity, heat, or steam purchased and consumed by your organisation.

You don’t produce these emissions directly — they occur at the power station — but you create the demand for them.

Common examples:

Electricity used at office buildings, factories, retail sites, or construction facilities
Purchased steam or heat used in industrial processes

AASB S2 requires disclosure of Scope 2 emissions using two methods:

Location-based: Uses the average grid emission factor for the region where electricity is consumed. In Australia, this means the state-level grid factor from the NGA Factors (e.g., Victoria has a higher factor due to brown coal; Western Australia differs due to its isolated grid).

Market-based: Uses emission factors from instruments like Power Purchase Agreements (PPAs), Renewable Energy Certificates (RECs), or GreenPower. If you’ve purchased accredited renewable electricity, your market-based Scope 2 can be substantially lower than location-based.

Both figures are required — they serve different purposes for different stakeholders.

Scope 3 — Value chain emissions

Scope 3 is everything else: indirect emissions that occur in your upstream or downstream value chain but are not owned or directly controlled by you.

The GHG Protocol organises Scope 3 into 15 categories:

Upstream (examples):

Purchased goods and services (emissions from materials you buy — concrete, steel, fuel you don’t burn yourself)
Business travel (flights, accommodation)
Employee commuting
Capital goods
Waste generated in operations

Downstream (examples):

Use of sold products
End-of-life treatment of sold products
Downstream transport and distribution

For a construction company, Scope 3 Category 1 (purchased goods and services) is typically the largest — embodied carbon in materials like concrete, steel, and glass can dwarf the Scope 1 and 2 footprint of site operations.

Scope 3 under AASB S2: Reporting is required eventually, but transition relief allows most entities to omit Scope 3 in their first year of mandatory reporting. It must be included from year two onwards for Group 1, and from year two or three for Groups 2 and 3.

Australian emission factors: the NGA Factors

In Australia, the authoritative source for emission factors is the National Greenhouse Accounts (NGA) Factors, published annually by the Department of Climate Change, Energy, the Environment and Water (DCCEEW).

The NGA Factors provide emission intensities for:

Electricity generation by state and territory (grid factors)
All common fuel types (diesel, petrol, LPG, natural gas, coal, aviation fuel)
Other energy sources

The factors are updated annually to reflect changes in the grid mix and fuel compositions. Using an outdated factor — even from the prior year — can introduce material error into reported figures and may be flagged by an assurance provider.

Why Scope matters for your data collection

The practical implication of the three scopes is that your data collection strategy needs to cover very different source types:

Scope	Data source	Who owns it
Scope 1	Fuel records, meter readings, refrigerant logs	Fleet, facilities, operations
Scope 2	Utility invoices, NMI data, PPA documentation	Accounts payable, facilities
Scope 3	Supplier invoices, spend data, travel records	Procurement, finance, HR

Getting Scope 1 and 2 right is where mandatory reporting begins. Getting Scope 3 right is where the operational challenge escalates significantly.

Ayika helps you capture and structure Scope 1 and 2 data from the source — invoices, meter readings, fuel records — so your emissions calculations are traceable and assurance-ready. See how it works.

Scope 1, Scope 2 and Scope 3 Emissions Explained for Australian Businesses