Scope 3 Emissions

Scope 3 Emissions: The Complete Guide for Businesses

Sustainability reporting has moved from a voluntary exercise to a regulatory and strategic necessity. While organizations have long tracked their direct (Scope 1) and energy-related (Scope 2) emissions, the real challenge—and opportunity—lies in Scope 3 emissions. These account for the majority of a company’s carbon footprint and are increasingly the focus of regulators, investors, and stakeholders. 

This guide explains what Scope 3 emissions are, why they matter, and how businesses can measure, manage, and report them effectively.  

What are Scope 3 emissions?

Scope 3 emissions are all indirect greenhouse gas (GHG) emissions that occur across a company’s value chain but are not directly produced by the company itself. 

• Scope 1: Direct emissions from owned or controlled operations (e.g., factory fuel use, company vehicles). 

• Scope 2: Indirect emissions from purchased energy (e.g., electricity, heating). 

• Scope 3: All other indirect emissions in the value chain, both upstream (suppliers) and downstream (customers). 

Examples of Scope 3 include emissions from business travel, purchased goods, transportation of products, use of sold products, and product disposal.  

How do Scope 3 emissions affect the carbon footprint of a company?

For most businesses, Scope 3 emissions make up 70–90% of their total carbon footprint. This means that even if a company achieves efficiency improvements in its operations (Scope 1 and 2), its broader climate impact often remains largely untouched. 

• Automotive industry: The majority of emissions come from fuel burned when customers drive vehicles (downstream Scope 3). 

• Retail and FMCG: Most emissions arise from supply chains—sourcing, production, packaging, and distribution (upstream Scope 3). 

• Technology companies: Significant emissions come from data centers, device use by customers, and end-of-life disposal (both upstream and downstream Scope 3). 

In short, Scope 3 determines whether a company can credibly meet its net-zero commitments. 

What are upstream and downstream emissions?

Scope 3 emissions are divided into upstream and downstream categories: 

• Upstream emissions: Indirect emissions from suppliers and production-related activities before a product reaches the company. 

• Example: Raw material extraction, manufacturing of purchased goods, supplier energy use. 

• Downstream emissions: Indirect emissions that occur after the product leaves the company. 

• Example: Distribution, product use, disposal, and recycling. 

This distinction is crucial because it helps businesses identify whether emissions reduction requires supplier engagement (upstream) or product innovation (downstream). 

What are the 15 categories of Scope 3 emissions?

The GHG Protocol Corporate Value Chain (Scope 3) Standard defines 15 categories of Scope 3 emissions. These categories capture all possible indirect emissions across a company’s value chain: 

Upstream (before the product reaches the company): 

1. Purchased goods and services 
2. Capital goods 
3. Fuel- and energy-related activities not included in Scope 1 or 2 
4. Upstream transportation and distribution 
5. Waste generated in operations 
6. Business travel 
7. Employee commuting
8. Upstream leased assets

Downstream (after the product leaves the company):

1. Downstream transportation and distribution
2.  Processing of sold products
3. Use of sold products
4. End-of-life treatment of sold products
5. Downstream leased assets
6. Franchises
7. Investments 

Not every category applies to every business, but collectively they provide a standardized framework for accounting. 

Why is it necessary to measure Scope 3 emissions?

Measuring Scope 3 emissions is critical for several reasons: 

1. Regulatory compliance
   The EU’s CSRD mandates Scope 3 disclosure for large companies.
   India’s BRSR Core framework also emphasizes supply chain emissions.
   IFRS S2 and SEC proposals are pushing global alignment. 
2. Investor trust
   Investors increasingly evaluate companies on the credibility of their net-zero pathways. Without Scope 3 data, claims fall short. 
3. Risk management
   Supply chain disruptions, carbon taxes, and reputational risks are tied to Scope 3. Transparent measurement mitigates these risks. 
4. Opportunities for innovation
   By analyzing Scope 3 data, companies can redesign products, reduce lifecycle emissions, and gain a competitive advantage. 

What is the GHG Protocol for Scope 3?

The GHG Protocol Corporate Value Chain (Scope 3) Standard, published in 2011, provides the most widely used methodology for measuring and reporting Scope 3 emissions. 

Key features: 

• Defines the 15 categories of Scope 3. 

• Offers guidance on boundary setting, data quality, and reporting. 

• Aligns with global disclosure frameworks like CDP and SBTi. 

• Ensures comparability across industries and geographies. 

This standard is the global benchmark for Scope 3 carbon accounting and is recognized by regulators, investors, and sustainability professionals worldwide.  

Challenges in measuring Scope 3 emissions

Despite its importance, Scope 3 accounting is difficult due to: 

• Data gaps: Many suppliers lack reliable emissions data. 

• Double counting: Emissions may appear in multiple organizations’ reports. 

• Supplier engagement: Smaller suppliers often lack capacity for detailed disclosures. 

• Variability: Different geographies and industries report differently, complicating benchmarking.

Best practices for managing Scope 3 emissions

Businesses can address Scope 3 challenges with a structured approach: 

• Prioritize material categories – Focus first on categories contributing the highest emissions. 
• Engage suppliers – Build long-term partnerships, provide training, and request standardized disclosures. 
• Adopt hybrid methods – Use a mix of spend-based and activity-based data for balance between coverage and accuracy. 
• Benchmark progress – Track performance annually and align with science-based targets (SBTi). 
• Collaborate across value chains – Work with industry peers to standardize reporting expectations. 

How technology enables Scope 3 management?

Manual spreadsheets are no longer sufficient. Digital sustainability platforms make Scope 3 accounting more accurate and efficient by: 

• Automating data collection from suppliers, ERP systems, and procurement workflows. 

• Applying emission factors for activity-based and spend-based methods. 

• Using AI/ML for data validation, anomaly detection, and predictive insights. 

• Generating audit-ready reports aligned with GHG Protocol, CSRD, BRSR, IFRS S2, and GRI. 

• Facilitating supplier collaboration to improve data quality over time. 

The future of Scope 3 emissions

Looking ahead, Scope 3 will be the centerpiece of sustainability action: 

• Mandatory regulations will make Scope 3 disclosure unavoidable for large and mid-sized companies. 

• Investor pressure will demand credible, science-based Scope 3 reduction pathways. 

• Technology will enable real-time Scope 3 visibility, shifting from lagging reports to proactive management. 

• Innovation will flourish as companies redesign products and business models for low-carbon value chains. 

Conclusion

Scope 3 emissions are the most complex part of a company’s carbon footprint, but also the most impactful. Without addressing Scope 3, no business can credibly claim progress toward net zero. The challenge is significant, but with the right framework, data strategy, and technology, companies can turn Scope 3 reporting into a driver of efficiency, resilience, and long-term value creation. 

How can your business take control of Scope 3 emissions with Credibl? 

Scope 3 is complex, but with the right platform it doesn’t have to be overwhelming. Credibl helps businesses: 

• Collect supplier data at scale with automated workflows. 

• Calculate Scope 3 emissions across all 15 categories using hybrid accounting methods. 

• Identify high-impact hotspots and model reduction pathways. 

• Generate audit-ready Scope 3 disclosures aligned with CSRD, BRSR Core, IFRS S2, GRI, and the GHG Protocol. 

• Engage suppliers directly to improve data quality and drive collaborative climate action. 

Ready to simplify Scope 3 reporting and unlock real sustainability impact? Discover how Credibl can help.