What Is Scope 1 and Scope 2 Emissions? A Plain-English Guide for Singapore Businesses

Why the Jargon Exists: A Brief History

The Scope 1/2/3 framework comes from the Greenhouse Gas Protocol, published in 2001 by the World Resources Institute and the World Business Council for Sustainable Development. It was designed to give organisations a consistent, comparable way to account for their greenhouse gas emissions — much like how GAAP standardises financial accounting.

The GHG Protocol became the global standard because it solved a real problem: without a common framework, every company was measuring its "carbon footprint" differently, making comparisons meaningless. If Company A includes their fleet vehicles but Company B does not, their reported numbers are not comparable even if their operations are identical.

Since 2001, the GHG Protocol has been incorporated into multiple other frameworks. ISO 14064 (the international standard for GHG accounting) is aligned with it. IFRS S2 — the climate disclosure standard published by the International Sustainability Standards Board in June 2023 — uses the Scope 1/2/3 architecture as its foundation. SGX's sustainability reporting guidelines, which require listed companies to disclose Scope 1 and Scope 2 from FY2025, reference GHG Protocol methodology. When you see "Scope 1 and 2" in any sustainability context today, you are almost always looking at the GHG Protocol framework.

Scope 1: Your Direct Emissions

Scope 1 covers greenhouse gas emissions from sources that your organisation owns or directly controls. The key word is "direct" — the combustion or release happens on your premises or in your equipment.

For Singapore businesses, Scope 1 typically includes:

Company-owned or leased vehicles. Any petrol, diesel, or CNG fuel burned in vehicles your company owns or has operational control over. This includes delivery trucks, company cars, forklifts, and motorcycles. You quantify this from fuel purchase records or mileage logs combined with vehicle-type emission factors.

On-site generators and equipment. Diesel generators used for backup power or construction, LPG or natural gas burners in kitchens or manufacturing, propane in heating or processing equipment. These are calculated from fuel purchase quantities and combustion emission factors.

Refrigerant leaks (fugitive emissions). This one catches many businesses off guard. Air conditioning systems — particularly older or poorly maintained ones — can leak refrigerants like HFCs (hydrofluorocarbons). HFCs have global warming potentials hundreds to thousands of times higher than CO2. If your AC service records show refrigerant top-ups, that refrigerant had to go somewhere, and it counts as a Scope 1 emission. Quantity from service records, multiplied by the relevant GWP factor.

Industrial processes (relevant to manufacturing and food production). Any chemical or physical process that releases GHGs as a byproduct — for example, fermentation in food/beverage, or certain chemical reactions in manufacturing.

Scope 2: Your Electricity

Scope 2 covers indirect emissions from the generation of electricity, heat, steam, or cooling that you purchase and consume. For nearly all Singapore businesses, this means electricity purchased from SP Group (or an Open Electricity Market retailer).

The logic is: you did not burn any fuel yourself, but you paid for electricity that was generated — mostly from natural gas power plants in Singapore — and that generation process emitted greenhouse gases. Scope 2 lets those emissions be attributed to the consumer, not just the generator.

Singapore's grid emission factor. To convert kilowatt-hours of electricity into tonnes of CO2 equivalent, you multiply by Singapore's grid emission factor, published annually by the Energy Market Authority (EMA). The 2023 grid emission factor was approximately 0.4233 kg CO2e per kWh. This factor changes each year as Singapore's energy mix evolves — the transition from older oil-fired plants to more efficient gas turbines, and eventually to solar and imported clean energy, will gradually reduce it. Always use the EMA factor for the relevant reporting year, and document which version you used.

Location-based vs. market-based. There are two methods for calculating Scope 2, and the difference matters. The location-based method uses the average grid emission factor for Singapore — the EMA figure. The market-based method uses an emission factor specific to your electricity contract: if you have purchased Renewable Energy Certificates (RECs) or signed a green tariff, you can claim a lower emission factor reflecting the renewable content of your contract. If you have not purchased any RECs, your market-based and location-based figures are identical. IFRS S2 and GRI both ask companies to disclose both methods where data is available.

What Scope 3 Is (And Why Most SMEs Can Set It Aside for Now)

Scope 3 is the catch-all category for all other indirect emissions in your value chain — everything that does not fit in Scope 1 or 2. It has 15 sub-categories, ranging from purchased goods and services (upstream) to the use of your products by customers and end-of-life disposal (downstream).

Scope 3 is notoriously difficult to measure because it requires data from third parties — your suppliers, your logistics providers, your customers. This is why most sustainability frameworks phase it in gradually. Under SGX's requirements, Scope 3 reporting is expected to be introduced progressively from FY2030 for larger listed companies.

For an SME starting its sustainability reporting journey, the advice is straightforward: get Scope 1 and 2 right first. Build the evidence discipline and the calculation methodology. Scope 3 will follow, but it is a different beast that requires supply chain collaboration and estimation methodologies that go well beyond a utility bill audit.

There is one important Scope 3 connection SMEs should understand even now: your Scope 1 and 2 data is your clients' Scope 3. When a listed company asks you for your emissions data, they are collecting Scope 3 Category 1 (Purchased Goods and Services). Your clean, documented Scope 1+2 calculation directly enables their disclosure.

From Bill to tCO2e: The Calculation Methodology

Let us walk through how you actually go from a document you already have to a carbon number you can report.

Step 1: Collect your activity data. This is the physical quantity of energy or fuel consumed. For Scope 2: pull 12 months of SP Group utility bills and extract total kWh consumed per month. For Scope 1 vehicles: pull fuel purchase records (litres of petrol or diesel). For Scope 1 generators: fuel consumption logs or purchase invoices.

Step 2: Select the right emission factor. An emission factor converts a physical quantity into a CO2 equivalent figure. For Singapore electricity, use the EMA's published grid emission factor for your reporting year. For fuel combustion (petrol, diesel, LPG), use emission factors from the IPCC (as published in the GHG Protocol documentation) or Singapore-specific factors where available. Emission factors must be documented — which version, from which source, for which year.

Step 3: Apply the global warming potential (GWP). Not all greenhouse gases have the same warming effect as CO2. The GHG Protocol uses GWP values from the IPCC to convert different gases (methane, N2O, HFCs) into CO2 equivalent. For a typical SME focusing on electricity and fuel, most of this is handled within the emission factors themselves.

Step 4: Sum and document. Add up Scope 1 and Scope 2 tonnes of CO2 equivalent. Critically: keep the underlying evidence — the bills, the logs, the factor sources — in an organised, retrievable format. This is not just good practice; it is what an assurance provider or a client's procurement team will ask to see.

Common Mistakes and Misconceptions

Having helped businesses work through their first sustainability reports, a few errors come up repeatedly. Knowing them in advance saves significant rework.

"We offset our emissions, so we are net zero." Carbon offsets are a valid tool, but they do not change your Scope 1 and Scope 2 figures. Offsets are disclosed separately, after your gross emissions. You report your actual emissions, and then separately note any offsets or removals. Saying you are "carbon neutral" because you bought offsets without disclosing your gross number is misleading under every major reporting standard.

"We only need to report electricity because that's our biggest source." Materiality thresholds exist, and for an office-based business, Scope 1 may genuinely be near zero. But you still need to formally assess whether Scope 1 sources exist, and document your conclusion. "We assessed our Scope 1 sources and concluded they are not material" is a valid disclosure. Silently omitting Scope 1 without documenting the assessment is not.

Confusing location-based and market-based Scope 2. If you have purchased RECs or a green tariff, your market-based Scope 2 will be lower than your location-based figure. But you must disclose both. Using only the market-based figure (which looks better) without showing the location-based comparison is not compliant with IFRS S2 or GRI 305.

Using outdated emission factors. Singapore's grid emission factor changes annually. Using a 2020 factor for your 2024 reporting year is a methodological error. Always match the factor year to the reporting year.

What Singapore Requires and When

The Singapore regulatory timeline for emissions disclosure is structured and phased. Here is the current picture:

FY2025 (reporting in 2026): All SGX Main Board and Catalist-listed companies must disclose Scope 1 and Scope 2 emissions in their annual sustainability report. This is mandatory, not voluntary. The methodology must align with GHG Protocol or an equivalent standard recognised by SGX.

FY2027: IFRS S2 climate disclosures are expected to come into scope for larger SGX-listed companies, introducing more structured requirements around scenario analysis, transition plans, and climate-related risk quantification.

FY2029: External limited assurance on Scope 1 and Scope 2 disclosures becomes mandatory for SGX-listed companies. This is the point at which the evidence chain behind your emissions data — not just the numbers — gets formally audited.

FY2030: Scope 3 disclosures are expected to be phased in for larger SGX-listed companies, which is what creates the downstream pressure on SME suppliers to have their own Scope 1+2 data ready.

For unlisted Singapore SMEs, no mandatory timeline currently applies — but the commercial and grant-programme incentives to start early are strong. The EnterpriseSG SME Sustainability Reporting Programme (up to 50% co-funding) is the mechanism to get started at reduced cost while the grant window remains open.

The right tool for this job is a combination of structured evidence collection, version-controlled emission factors, and a disclosure-ready report output. VerityOS is built specifically to give Singapore businesses that infrastructure — making Scope 1 and 2 reporting something your existing team can own, rather than an annual engagement you have to outsource from scratch. Explore what this looks like for companies at different stages of the sustainability reporting journey.