GHG Protocol for SMEs: Complete Methodology Guide

For many small and growing businesses (SMEs), understanding greenhouse gas (GHG) emissions reporting can feel like entering a maze of terms, categories, and formulas. The GHG Protocol — the world’s most widely used standard for measuring and managing emissions — is the foundation of both the EU’s ESRS E1 standard and the VSME Standard for voluntary sustainability reporting.

This guide breaks down what the GHG Protocol means in plain language and explains how SMEs can apply it step by step — without consultants or complex software.

What Is the GHG Protocol?

The Greenhouse Gas Protocol (GHG Protocol), developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), provides a global framework for measuring and reporting GHG emissions.

It defines:

• Three “Scopes” of emissions (direct and indirect)
• Standardised methodologies for data collection and calculation
• Rules for transparency and comparability

Under the CSRD and ESRS E1, companies in the EU are expected to follow this structure to ensure consistent reporting across sectors and countries.

Learn how ESRS defines energy and emissions reporting →

The Three Scopes Explained

The GHG Protocol divides emissions into three scopes to capture all sources of impact:

Scope 1 – Direct Emissions

Emissions from sources owned or controlled by your business, such as:

• Company vehicles
• Boilers, generators, or furnaces
• On-site fuel use (e.g. natural gas, diesel)

How to calculate: Fuel used × emission factor (e.g., from DEFRA or IPCC datasets)

Scope 2 – Indirect Energy Emissions

Emissions from purchased energy, primarily electricity, heating, or cooling. These occur off-site but are linked to your operations.

SMEs should calculate both:

• Location-based emissions: using the average grid factor of your country
• Market-based emissions: using data from your specific energy supplier

Understand the difference between location-based and market-based emissions →

Scope 3 – Other Indirect Emissions

All other emissions from your value chain — both upstream and downstream. For SMEs, this is often the largest but most difficult category.

Common Scope 3 examples:

• Purchased goods and services
• Business travel and employee commuting
• Waste and water management
• Distribution and logistics
• Product use and disposal

You may not be able to calculate all categories at once — start with the ones that matter most to your business operations.

Learn how to calculate employee commuting emissions →

Practical Steps for SMEs to Implement the GHG Protocol

1. Define Your Boundaries

Decide which operations, facilities, and activities to include:

• Operational control: emissions from sites you manage day-to-day
• Equity share: proportional emissions from shared ownership structures

For SMEs, the operational control approach is simpler and aligns with VSME guidance.

2. Gather Your Data

Start with what you already have:

• Energy bills (electricity, heating, fuels)
• Travel expense records
• Supplier invoices
• Waste collection receipts

If data is missing, you can estimate using industry averages or published emission factors.

See how to report fuel receipts and invoices for CSRD compliance →

3. Apply Emission Factors

Emission factors convert your data (like litres of fuel or kWh of electricity) into CO₂ equivalent (CO₂e). Use credible, up-to-date sources such as:

• EEA or IPCC factors (EU-wide)
• DEFRA (UK) for transport and fuels
• Your national statistics office for electricity grid factors

4. Calculate and Record

Use simple formulas, for example:

Emissions (tCO₂e) = Activity Data × Emission Factor

Keep all assumptions and data sources documented — this supports auditability and transparency under CSRD.

5. Report and Improve

Once your baseline is established:

• Set reduction targets (e.g., 10% cut in electricity use)
• Track progress annually
• Communicate improvements in your sustainability report

See how to set science-based targets as an SME →

GHG Protocol and the VSME Standard

The VSME Standard (EFRAG, 2024) integrates the GHG Protocol structure into its Basic Module (B3):

• Requires total energy use and GHG emissions
• Encourages calculation of Scope 1 and 2, and optional Scope 3
• Accepts simplified methods where exact data isn’t available

In short, you don’t need to be perfect — just consistent. A small business can start with basic Scope 1 and 2 data and expand over time.

Explore the VSME framework for small businesses →

Common Mistakes to Avoid

Example: SME Emission Calculation

Scenario: A 40-person design agency in Belgium

• Electricity: 30,000 kWh (office)
• Diesel for company van: 1,000 litres
• Business flights: 20 short-haul return trips

Approximate results:

• Scope 1: 2.7 tCO₂e (diesel)
• Scope 2: 6.6 tCO₂e (electricity, location-based)
• Scope 3: 8.4 tCO₂e (flights) Total: 17.7 tCO₂e

This gives a clear baseline and highlights where improvements can be made — for instance, switching to green energy or reducing flights.

Frequently Asked Questions

Do SMEs have to report Scope 3 emissions?

Not yet. Under the VSME Standard, Scope 3 is voluntary, but disclosing it shows maturity and readiness for future CSRD alignment. Start with your largest impact areas, like travel or materials. See our guide on supplier data requests →

How often should GHG data be updated?

Annually is best practice. Align your reporting period with your financial year and keep previous year data for trend comparison.

What tools can SMEs use for GHG calculations?

Start simple — spreadsheets work fine at first. As your data grows, tools like CSRD Pro or national carbon calculators can automate emission factor updates and generate formatted reports.

What if I don’t have complete data?

Estimate conservatively using published factors or similar-year data. Transparency about estimates is better than leaving data out.

Key Terms

• GHG Protocol: Global standard for greenhouse gas accounting
• Scope 1, 2, 3: Emission categories for direct and indirect impacts
• Emission Factor: Conversion value linking activities to CO₂e output
• CO₂e (Carbon Dioxide Equivalent): Standard unit combining all GHGs
• VSME Standard: Voluntary sustainability framework for SMEs, aligned with ESRS

Conclusion

The GHG Protocol is the foundation of every credible sustainability report — including those under CSRD and the VSME Standard. For SMEs, applying it doesn’t have to be complex: start with your energy and travel data, use reliable emission factors, and document everything clearly.

Each year, refine your calculations, include more Scope 3 data, and show measurable progress. That steady, transparent approach is exactly what clients, banks, and regulators are looking for — proof of commitment, not perfection.

Understanding which Scope 3 categories apply to your business is a key step in applying the GHG Protocol. Use our interactive selector to identify which categories are most relevant:

This tool will help you determine which Scope 3 categories you need to focus on based on your business operations and value chain.