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Scope 1, 2 and 3 Emissions in Pakistan: A GHG Accounting Guide
Scope 1, 2 and 3 Emissions in Pakistan: A GHG Accounting Guide
Written by: Content Team
Reviewed by: Abdul Mannan, CA & California-Licensed CPA
Last reviewed: 4 November 2026
Businesses in Pakistan are facing growing expectations to measure and disclose their greenhouse gas (GHG) emissions. These expectations may come from sustainability reporting requirements, international customers, lenders, investors or export-market regulations. However, many companies are still unsure what Scope 1, 2 and 3 emissions mean, which activities they need to measure, and how to calculate their carbon footprint using business records.
This guide explains the three emissions scopes, Pakistan’s regulatory position, how to calculate a GHG inventory and what businesses should prepare before reporting.
Quick Answer: Scope 1 emissions come from sources a company owns or controls, Scope 2 covers emissions associated with purchased electricity and other acquired energy, and Scope 3 includes other indirect emissions across its value chain. Together, they provide a structured picture of an organisation’s greenhouse gas emissions under the GHG Protocol.
Key Takeaways
- Scope 1 covers direct emissions, Scope 2 covers purchased energy and Scope 3 covers upstream and downstream value-chain emissions.
- Pakistan has adopted IFRS S1 and S2 through a phased SECP reporting framework.
- Exporters may face emissions-data requests even when they are not directly subject to mandatory sustainability reporting.
- Businesses need reliable activity data, appropriate emission factors and documented calculation methods.
- Scope 3 reporting requires value-chain information, not just electricity and fuel bills.
What Is The Difference Between Scope 1, Scope 2 And Scope 3 Emissions?
The three scopes classify emissions according to where they occur and how they relate to a company’s operations.
| Emissions Scope | What It Covers | Examples In A Pakistani Business |
|---|---|---|
| Scope 1 | Direct emissions from sources owned or controlled by the company | Diesel generators, company-owned vehicles, industrial boilers and refrigerant leaks |
| Scope 2 | Indirect emissions from generating purchased or acquired electricity, steam, heating and cooling consumed by the company | Electricity purchased from the national grid |
| Scope 3 | All other indirect emissions across the company's upstream and downstream value chain that are not included in Scope 2 | Purchased raw materials, freight, employee commuting, business travel, waste and use of sold products |
These categories are designed to provide a consistent picture of an organisation’s emissions. They should not be treated as three unrelated calculations: together, they help a company understand emissions from its own operations, energy consumption and wider value chain.
The GHG Protocol’s Corporate Accounting and Reporting Standards provide the foundation for corporate GHG inventories. Its Corporate Value Chain (Scope 3) Standard provides additional guidance for measuring value-chain emissions.
Scope 1: Which Direct Emissions Come From Your Own Operations?
Scope 1 emissions are greenhouse gases released directly from sources owned or controlled by a business.
For a Pakistani manufacturing facility, these may include:
- Stationary fuel combustion: Diesel or gas burned in generators, boilers, furnaces and other equipment.
- Mobile fuel combustion: Petrol or diesel consumed by company-owned or controlled vehicles.
- Industrial process emissions: Greenhouse gases released through manufacturing or chemical processes.
- Fugitive emissions: Refrigerant leakage from air-conditioning and refrigeration systems, or leakage from other equipment.
For example, if a textile factory operates diesel generators during electricity outages, the emissions from burning that diesel are generally classified as Scope 1.
The company should maintain fuel purchase records, generator operating logs, vehicle fuel records and refrigerant servicing information. These records help establish the quantity of fuel or gas consumed and support the emissions calculation.
Scope 2: How Does Purchased Electricity Create Indirect Emissions?
Scope 2 emissions arise from the generation of purchased or acquired electricity, steam, heating and cooling consumed by a company.
The emissions occur at the power-generation facility rather than at the business premises. However, because the company consumes that energy, the associated generation emissions are included in its Scope 2 inventory.
For example, a Lahore-based office or manufacturing unit that purchases electricity from the national grid reports the associated electricity-generation emissions under Scope 2.
Relevant records include:
- Monthly electricity bills and meter readings.
- Electricity consumption by facility or business unit.
- Purchased steam, heating or cooling records, where applicable.
- Renewable electricity contracts and other relevant contractual instruments.
Companies should distinguish between electricity consumed from the grid and electricity generated and consumed on-site. This distinction is particularly important for businesses using rooftop solar systems.
Scope 3: Why Do Supply Chains And Business Activities Matter?
Scope 3 emissions cover indirect greenhouse gas emissions across a company’s value chain, excluding emissions already reported under Scope 2.
They can occur before a product reaches the business or after it leaves the company’s control. As a result, Scope 3 can involve suppliers, logistics providers, employees, customers, distributors and investments.
Consider a Pakistani garment manufacturer exporting clothing to an international buyer. Its Scope 3 emissions may include:
- Cotton, fabric, dyes and other purchased materials.
- Transportation of raw materials to the factory.
- Waste generated during production.
- Employee commuting and business travel.
- Transportation of finished garments to customers.
- Processing or disposal of sold products, where relevant.
The company may not directly control these activities, but they can still form part of its value-chain emissions.
This is why a GHG inventory should not stop at electricity bills and generator fuel records. Businesses also need to assess which suppliers, products, services and downstream activities contribute to their overall carbon footprint.
Does Your Business Need To Report GHG Emissions In Pakistan?
Not every Pakistani business is automatically subject to the same sustainability disclosure requirements. Applicability depends on the company’s regulatory category, reporting period and the relevant requirements adopted by the Securities and Exchange Commission of Pakistan (SECP).
The SECP adopted IFRS Sustainability Disclosure Standards, including IFRS S1 and IFRS S2, through its phased implementation approach. Companies should assess their eligibility against the applicable SECP notification rather than assume that every listed or unlisted business has identical reporting obligations.
What Are The IFRS S1 And S2 Reporting Phases In Pakistan?
The phased implementation begins with specified listed companies and extends to other eligible entities over subsequent reporting periods.
| Phase | Starting Reporting Period | General Applicability |
|---|---|---|
| Phase I | On or after 1 July 2025 |
Listed companies meeting at least two of the specified higher thresholds |
| Phase II | On or after 1 July 2026 |
Listed companies meeting at least two of the specified second-stage thresholds |
| Phase III | On or after 1 July 2027 |
Remaining listed companies and qualifying non-listed public interest companies, subject to the applicable requirements |
For the first two phases, the SECP framework uses criteria relating to turnover, employee numbers and total assets. The applicable threshold values differ between phases, and the company must assess the required combination of criteria rather than relying on a single measure.
For the exact thresholds, definitions and applicability conditions, consult the SECP’s Adoption of Sustainability Disclosure Standards notification and review HOA’s detailed guide to IFRS S1 and S2 applicability and timelines in Pakistan.
Important: The reporting start date refers to the beginning of the relevant financial reporting period, not simply the date on which the annual report is published. Companies should also verify their regulatory status and the latest applicable SECP requirements before determining their reporting obligations.
What Does IFRS S2 Require Companies To Disclose About GHG Emissions?
IFRS S2 focuses on climate-related risks and opportunities that could reasonably affect an organisation’s prospects, including its cash flows, access to finance or cost of capital.
Its climate-related disclosure requirements include greenhouse gas emissions information. Under the standard, companies are required to disclose absolute gross GHG emissions for the reporting period, classified into Scope 1, Scope 2 and Scope 3.
The disclosures also address the measurement approach, relevant inputs and assumptions, and information about emission factors. Scope 2 disclosures include location-based emissions and information about contractual instruments where relevant.
Companies should understand that IFRS S2 is not simply a requirement to publish a single carbon-footprint figure. It forms part of a broader climate disclosure process covering governance, strategy, risk management, metrics and targets.
Read the official IFRS S2 requirements for the detailed disclosure requirements.
Can Companies Use The Scope 3 Transition Relief Under IFRS S2?
IFRS S2 provides optional transition relief for certain first-year reporting requirements. One of these allows an entity not to disclose Scope 3 emissions in its first annual reporting period applying the standard.
This is a temporary first-year relief, not a permanent exemption from Scope 3 reporting. Businesses should therefore use the available preparation period to identify relevant value-chain activities, engage suppliers and establish data collection processes.
The IFRS Foundation’s transition guidance explains the available reliefs and their application.
Do Non-Listed Pakistani Businesses Also Need To Measure Their Carbon Footprint?
A business that does not fall within the mandatory reporting requirements may still need emissions information for commercial or operational reasons.
For example, an international buyer may ask a Pakistani supplier to provide information about factory electricity consumption, fuel use, production emissions or the carbon footprint of supplied products. Banks, investors and business partners may also request climate-related information as part of their assessment processes.
For exporters and suppliers, a customer’s reporting requirements can create a practical need for GHG accounting even when the business is not directly covered by the SECP’s mandatory reporting phases.
Does The EU CBAM Affect Pakistani Exporters?
The European Union’s Carbon Border Adjustment Mechanism (CBAM) is relevant to Pakistani businesses exporting certain covered goods to the EU.
The mechanism addresses the embedded emissions associated with selected imported products. Its definitive regime began on 1 January 2026 and currently covers goods in six sectors:
- Cement
- Iron and steel
- Aluminium
- Fertilisers
- Electricity
- Hydrogen
Textiles and garments are not among these six currently covered sectors. Therefore, Pakistani textile exporters should not assume that their products are directly subject to CBAM simply because they export to the EU.
However, textile and other exporters may still receive emissions-data requests from international customers under separate supply-chain, procurement or sustainability reporting requirements.
It is also important to distinguish between a corporate GHG inventory and product-level embedded-emissions calculations. A company-wide Scope 1, 2 and 3 inventory does not automatically fulfil every product-specific or CBAM reporting requirement.
For current coverage and regulatory developments, consult the European Commission’s CBAM guidance.
How Do You Calculate Scope 1, 2 And 3 Emissions?
The basic calculation approach is to multiply activity data by an appropriate emission factor.
GHG Emissions = Activity Data × Emission Factor
Activity data measures the quantity of an activity that produces emissions. An emission factor converts that activity into an estimated quantity of greenhouse gas emissions.
The calculation must use a suitable factor, consistent units and a clearly defined reporting boundary. Results are commonly expressed in tonnes of carbon dioxide equivalent (tCO₂e), which accounts for the different global warming effects of greenhouse gases.
How To Calculate Scope 1 Emissions From Diesel Consumption
A company operating a diesel generator can estimate its direct emissions using the amount of diesel consumed and an appropriate diesel emission factor.
For example:
- Record the total litres of diesel consumed by the generator during the reporting period.
- Identify the appropriate emission factor for diesel combustion.
- Multiply the fuel consumption by the selected factor.
- Convert the result into the required emissions unit, such as tonnes of CO₂e.
- Document the source, year and unit of the emission factor.
The same general approach applies to other direct fuel-consuming equipment and company-controlled vehicles, using the relevant activity data and emission factors.
A company should not use an arbitrary factor simply because it is available online. The factor must be appropriate for the fuel, geography, calculation method and reporting requirements.
Which Records Should Pakistani Businesses Collect For Scope 1 Emissions?
Useful records include:
- Diesel, petrol and gas purchase invoices.
- Generator fuel consumption logs.
- Vehicle fuel and mileage records.
- Boiler and furnace operating records.
- Refrigerant purchase, maintenance and leakage records.
- Production process data where process emissions occur.
Finance teams can help reconcile fuel purchases and expenses with operational records. However, accounting expenditure alone may not establish the actual quantity consumed. Where possible, businesses should use physical consumption data supported by invoices, meter readings and operational logs.
What Is The Difference Between Location-Based And Market-Based Scope 2 Emissions?
Companies may encounter two approaches when measuring Scope 2 emissions: location-based and market-based accounting.
| Method | How It Works | What It Represents |
|---|---|---|
| Location-Based | Uses average emissions from the electricity grid where consumption takes place | The emissions intensity of the local electricity system |
| Market-Based | Uses qualifying contractual information and supplier-specific emission factors, where available | The emissions attributes associated with the electricity a company purchases |
The location-based method reflects the average emissions intensity of the relevant grid. The market-based method considers contractual instruments and other qualifying information about the electricity supplied to the company.
Under IFRS S2, companies are required to disclose location-based Scope 2 emissions and provide information about relevant contractual instruments. The GHG Protocol’s Scope 2 Guidance provides further detail on the two approaches.
Which Electricity Emission Factor Should Businesses In Pakistan Use?
A grid emission factor represents the greenhouse gas emissions associated with generating a unit of electricity. It is a key input when calculating location-based Scope 2 emissions.
Pakistani businesses should select a factor that is appropriate for the reporting period, geographic boundary, electricity source and applicable reporting framework. They should also document the factor’s source, publication year, units and calculation methodology.
There is no sound basis for treating an old academic estimate, a third-party electricity dashboard and an official reporting factor as interchangeable.
If a suitable Pakistan-specific factor is unavailable, the company should document the limitation, explain the selected methodology and disclose relevant assumptions. It should not present an estimate as an official national factor without evidence.
Does Installing Solar Power Reduce A Company’s Scope 2 Emissions?
Solar power can reduce a company’s reliance on grid electricity. Where solar electricity is generated and consumed on-site, it is generally not treated as purchased electricity in the company’s Scope 2 calculation.
However, the company should maintain separate records for:
- Electricity purchased from the grid.
- Electricity generated by its solar system.
- Solar electricity consumed on-site.
- Electricity exported to the grid, where applicable.
The business should also apply the relevant accounting rules to any renewable electricity contracts or certificates it uses. Installing solar panels does not automatically mean that every electricity-related emissions figure becomes zero.
Which Scope 3 Emissions Categories Matter Most For Pakistani Businesses?
The GHG Protocol divides Scope 3 emissions into 15 categories. Companies should assess the relevance of these categories to their activities and value chains rather than assume that every category has equal importance.
Which Scope 3 Categories Should Manufacturers And Exporters Prioritise?
For many Pakistani manufacturers and exporters, the following categories may be important:
| Scope 3 Category | Typical Business Activity | Example |
|---|---|---|
| 1. Purchased goods and services | Raw materials and services purchased from from suppliers | Cotton, yarn, fabric, dyes, packaging and chemicals |
| 2. Capital goods | Equipment and assets purchased by the business | Machinery, production equipment and factory infrastructure |
| 3. Fuel- and energy-related activities | Upstream emissions associated with purchased fuels and energy not included in Scope 1 or 2 | Extraction and transportation of fuels |
| 4. Upstream transportation and distribution | Movement of purchased materials to the company | Freight from suppliers to a factory |
| 5. Waste generated in operations | Treatment and disposal of operational waste | Textile waste, packaging and wastewater treatment |
| 6. Business travel | Employee travel for business purposes | Domestic and international flights |
| 7. Employee commuting | Travel between employees' homes and workplaces | Daily transport to a factory or office |
| 8. Downstream transportation and distribution | Movement of products after they leave the reporting company | Export freight and distribution |
| 9. Processing of sold products | Further processing by customers | Processing of intermediate textile materials |
| 10. Use and end-of-life treatment of sold products | Emissions arising from product use and disposal | Relevant product washing, energy use or disposal activities |
The remaining categories include upstream and downstream leased assets, franchises and investments. Their relevance depends on the company’s business model, ownership arrangements and value-chain relationships.
A textile exporter, for example, may prioritise purchased materials, upstream freight, production waste and downstream logistics. A bank or financial institution may need to assess financed emissions associated with its lending and investment activities.
The full category descriptions and calculation guidance are available in the GHG Protocol’s Scope 3 Standard.
How Can Companies Collect Scope 3 Data From Suppliers?
Scope 3 measurement often requires information from organisations outside the reporting company’s direct control. Supplier engagement is therefore an important part of the process.
Businesses can begin by identifying major suppliers and requesting relevant information, such as:
- Material quantities supplied.
- Product-specific emissions data, where available.
- Production or energy information relevant to supplied goods.
- Transportation distance and mode.
- Existing environmental or GHG disclosures.
Where supplier-specific information is unavailable, companies may need to use secondary data, industry averages or estimation methods permitted by the relevant framework.
The method, assumptions, data quality and limitations should be documented. An estimate should never be presented as supplier-verified data.
What Are Businesses Discussing About GHG Accounting On Reddit?
Online discussions about greenhouse gas accounting highlight practical challenges that organisations encounter when collecting, managing and reporting emissions data. Several Reddit discussions focus on supplier engagement, data quality and maintaining reliable records.
- Why Are Suppliers Not Responding to Carbon Data Requests?
In a discussion in r/SupplyChainLogistics, a participant described difficulties getting suppliers to respond to carbon-data requests. The discussion raises questions about simplifying supplier requests and making emissions information easier to provide.
Read the original Reddit discussion.
- Why Is Scope 3 Data Collection Difficult for Businesses?
A discussion in r/EHSProfessionals describes difficulties with incomplete spreadsheets, conflicting vendor information and requests for supporting documentation.
Read the original Reddit discussion.
- How Do Businesses Manage Carbon Accounting Records?
A discussion in r/carbonaccounting highlights challenges involving supplier information, consistent emission factors and maintaining an audit trail.
Read the original Reddit discussion.
These examples represent individual discussions and opinions. They should not be interpreted as representative research or evidence of how all businesses operate.
How Can A Pakistani Business Prepare Its First GHG Emissions Inventory?
A reliable GHG inventory requires a defined boundary, consistent data collection, appropriate emission factors and documented review procedures.
The following process provides a practical starting point.
Step 1: Define Which Operations And Entities Are Included
Determine which facilities, subsidiaries, business units and activities are included in the inventory.
The company should select and document an appropriate organisational boundary approach, such as equity share, financial control or operational control, in line with the applicable framework.
This step is important for businesses operating multiple factories, offices, warehouses or subsidiaries.
Step 2: Select The Reporting Period And Base Year
Align the GHG inventory with the company’s reporting requirements. Record the reporting period and establish a base year where required for tracking emissions performance.
If the company changes its organisational boundary, business structure or calculation methodology, it should assess whether base-year recalculation is necessary under the chosen framework.
Step 3: Identify Emission Sources Across All Three Scopes
Prepare a list of relevant sources:
- Scope 1: Fuel combustion, company vehicles, industrial processes and refrigerant leakage.
- Scope 2: Purchased electricity and other acquired energy.
- Scope 3: Purchased materials, logistics, waste, employee commuting, business travel and other relevant value-chain activities.
This source register helps the company identify data owners and avoid overlooking material activities.
Step 4: Collect Activity Data From Finance And Operations Teams
GHG accounting depends on operational information, but much of that information is already maintained within business systems.
For example:
| Scope 3 Category | Typical Business Activity | Example |
|---|---|---|
| 1. Purchased goods and services | Raw materials and services purchased from from suppliers | Cotton, yarn, fabric, dyes, packaging and chemicals |
| 2. Capital goods | Equipment and assets purchased by the business | Machinery, production equipment and factory infrastructure |
| 3. Fuel- and energy-related activities | Upstream emissions associated with purchased fuels and energy not included in Scope 1 or 2 | Extraction and transportation of fuels |
| 4. Upstream transportation and distribution | Movement of purchased materials to the company | Freight from suppliers to a factory |
| 5. Waste generated in operations | Treatment and disposal of operational waste | Textile waste, packaging and wastewater treatment |
| 6. Business travel | Employee travel for business purposes | Domestic and international flights |
| 7. Employee commuting | Travel between employees' homes and workplaces | Daily transport to a factory or office |
| 8. Downstream transportation and distribution | Movement of products after they leave the reporting company | Export freight and distribution |
| 9. Processing of sold products | Further processing by customers | Processing of intermediate textile materials |
| 10. Use and end-of-life treatment of sold products | Emissions arising from product use and disposal | Relevant product washing, energy use or disposal activities |
Finance teams can support the process by reconciling purchases and expenses. Operations and procurement teams are equally important because they hold the underlying activity data.
Step 5: Apply Suitable Emission Factors And Calculate tCO₂e
Match each activity to an appropriate emission factor. Check that the factor uses compatible units and represents the relevant activity and reporting period.
Maintain a calculation record showing:
- Activity data and its source.
- Emission factor and its source.
- Calculation method.
- Units and conversion assumptions.
- Estimation methods and limitations.
This documentation makes the inventory easier to review, update and explain.
Step 6: Review, Reconcile And Document The Results
Before reporting emissions, review the calculations for missing information, inconsistent units, duplicate entries and unsupported assumptions.
Compare the results with operational and financial records where appropriate. Assign responsibility for preparing, reviewing and approving the inventory.
A documented GHG inventory provides a stronger basis for sustainability disclosures, customer requests, emissions-reduction planning and future reporting periods.
Can Accounting And ERP Systems Support GHG Accounting?
Yes. Accounting software and ERP systems can provide useful source data for a corporate GHG inventory, particularly where purchasing, fuel expenses, utility bills, inventory and logistics are recorded consistently.
However, financial records alone do not automatically produce a complete or verified GHG inventory. A payment entry may show how much a business spent on fuel, for example, but it may not show the exact quantity consumed.
Businesses should connect financial records with operational evidence such as meter readings, fuel logs, production data and supplier information.
A structured bookkeeping and accounting system can support reliable recordkeeping and reconciliation. Companies should also establish clear responsibilities between finance, procurement, operations and sustainability teams.
What Are The Most Common Mistakes In GHG Accounting?
Businesses preparing their first greenhouse gas inventory should avoid these common errors:
- Counting only electricity and fuel: This overlooks relevant Scope 3 emissions across the value chain.
- Using inconsistent emission factors: Factors from different years, locations or methodologies may not be comparable.
- Confusing spending with consumption: Financial expenditure does not always establish the physical quantity of an activity.
- Ignoring organisational boundaries: Omitting facilities or inconsistently treating subsidiaries can distort the inventory.
- Treating estimates as verified data: Estimated figures should be clearly identified, supported and documented.
- Double-counting emissions: Companies should apply the scope definitions and category boundaries consistently.
- Waiting until year-end to contact suppliers: Scope 3 data collection can take time and should begin early.
- Treating a carbon footprint as a complete IFRS S2 disclosure: GHG figures are only one part of broader climate-related reporting.
A consistent methodology and documented data trail are essential for producing information that can be reviewed and relied upon.
What Should Pakistani Companies Do Next To Prepare For GHG Reporting?
The first step is to determine whether the company falls within the applicable SECP sustainability disclosure requirements. The next is to understand which emissions sources are relevant to its operations and value chain.
Companies should not wait until a reporting deadline or customer request to begin collecting information. Fuel consumption, electricity use, supplier purchases, freight and waste records should be organised throughout the year.
For businesses not yet subject to mandatory reporting, an initial GHG assessment can still help identify data gaps, understand operational emissions and respond more effectively to buyer or investor requests.
A practical starting point is to assess reporting applicability, define the organisational boundary and prepare a three-scope data register. This creates a documented foundation for calculating Scope 1, Scope 2 and Scope 3 emissions and improving the quality of future sustainability disclosures.
Businesses reviewing their wider financial reporting processes can also explore HOA Chartered Accountants’ audit and assurance services to understand how structured financial records, internal controls and reporting processes support reliable business information.
Frequently Asked Questions