Building your first GHG inventory: Scope 1, 2 and 3 explained

A corporate greenhouse gas (GHG) inventory is a structured account of the greenhouse gases an organisation emits over a defined period, usually a calendar or financial year, organised into Scope 1, Scope 2 and Scope 3. It is built using recognised standards, mainly the GHG Protocol Corporate Standard and ISO 14064-1, so that results are consistent, comparable and verifiable. A first inventory sets the baseline for reduction targets, ESG disclosure and climate strategy.

This article walks through the main steps, the decisions that shape the result and the pitfalls that most often cause rework.

Why build an inventory now

Investors, lenders, customers and regulators increasingly ask for emissions data. In Saudi Arabia, the Saudi Exchange ESG Disclosure Guidelines encourage listed companies to report on environmental metrics including emissions, and the Kingdom’s ambition to reach net zero by 2060, alongside the Saudi Green Initiative, is shaping expectations across supply chains. Internationally, IFRS S2 and GRI reporting rely on robust GHG data. An inventory is the foundation for all of these.

Step 1: Set organisational boundaries

Decide which entities and facilities are included and how their emissions are consolidated. The GHG Protocol offers two broad approaches:

• Control approach (operational or financial): report 100 percent of emissions from operations you control
• Equity share approach: report emissions in proportion to your ownership share

Choose one approach, apply it consistently across the group and document the reasons. Joint ventures, leased assets and outsourced operations need particular attention.

Step 2: Set operational boundaries and scopes

Identify the emission sources within your boundary and assign them to scopes.

Scope	What it covers	Typical sources	Typical data
Scope 1	Direct emissions from owned or controlled sources	Fuel combustion in boilers, furnaces and generators; company vehicles; process emissions; refrigerant leaks	Fuel invoices and meter readings, fleet fuel cards, refrigerant top-up records
Scope 2	Indirect emissions from purchased energy	Purchased electricity, district cooling, steam	Utility bills, sub-meter data, supplier information
Scope 3	Other indirect emissions across the value chain	Purchased goods and services, capital goods, transport, waste, business travel, commuting, use and end of life of sold products	Procurement spend, supplier data, travel records, logistics data

The GHG Protocol divides Scope 3 into 15 categories, upstream and downstream. A screening exercise to estimate which are significant is the practical starting point.

Include the main greenhouse gases relevant to your activities, typically carbon dioxide, methane, nitrous oxide and, where present, hydrofluorocarbons and other fluorinated gases, expressed as carbon dioxide equivalent (CO2e).

Step 3: Collect activity data

Activity data describes the quantity of activity that causes emissions: litres of diesel, kilowatt-hours of electricity, kilograms of refrigerant, tonne-kilometres of freight. Practical advice for a first inventory:

• Start with what finance and procurement already hold: invoices and payment records are often the most complete sources
• Prefer physical quantities over spend where available
• Record the source, period and owner of every data point
• Identify gaps and document how they were estimated

Step 4: Select emission factors

Emission factors convert activity data into emissions. Use factors that are recognised, current and appropriate to the location and activity, for example national or grid-specific factors for electricity where available, and internationally recognised factor sets for fuels and Scope 3 categories. Record the source, version and year of every factor, and use the same global warming potential values consistently.

For Scope 2, the GHG Protocol describes location-based and market-based methods. Report on the basis required by your chosen framework and document the approach.

Step 5: Calculate, review and document

Calculate emissions by scope, source and facility. Then review: compare with any previous estimates, check for outliers and test a sample of calculations end to end. Document everything in an inventory management plan or methodology note:

• Boundaries and consolidation approach
• Sources included and excluded, with reasons
• Data sources, assumptions and estimation methods
• Emission factors and global warming potentials used
• Base year and recalculation policy
• Roles, responsibilities and review steps

Common pitfalls

• Choosing boundaries informally, then finding they cannot be applied consistently across the group
• Missing small but material sources such as refrigerant leaks or backup generators
• Double counting between scopes, for example on-site generation reported in both Scope 1 and Scope 2
• Using outdated or inappropriate emission factors without recording their source
• Relying on one person’s spreadsheet with no documentation, which makes the inventory impossible to verify or repeat
• Changing methods year to year without recalculating the base year

Verification readiness

Third-party verification under ISO 14064-3 or equivalent assurance standards gives stakeholders confidence in reported figures. Even if verification is planned for a later year, build readiness in from the start:

• Every figure traces back to a source document
• Calculations are transparent and reproducible
• Assumptions and estimates are documented and justified
• Internal review is evidenced
• Data controls and version history are in place
• Base year and recalculation policy are defined

From inventory to targets

Once the baseline is established, the inventory becomes the basis for identifying reduction opportunities, setting targets and tracking progress. Energy efficiency, fuel switching, renewable electricity, refrigerant management and supplier engagement are common levers. Aligning targets with Saudi Arabia’s 2060 net-zero ambition and with investor expectations gives them strategic relevance.

How Selorin can help

Selorin’s GHG and carbon accounting service supports organisations in setting boundaries, collecting data, calculating emissions and documenting the methodology, and connects to our ESG advisory and net-zero advisory work when the inventory feeds disclosure or target setting. Starting with a short boundary and data review is a practical way to scope the first inventory.