Scope 3 emissions—those that occur in a company’s value chain, including both upstream and downstream activities—often account for more than 80% of a company’s total carbon footprint. Under new regulatory frameworks like the CSRD and the SEC climate disclosure rules, reporting on Scope 3 is becoming mandatory.

The Scope 3 Challenge

Unlike Scope 1 (direct emissions) and Scope 2 (purchased electricity), Scope 3 emissions are inherently difficult to measure because they rely on data from third-party suppliers, customers, and logistics providers. Many companies lack visibility into these external processes.

Step 1: Mapping the Value Chain

The first step in Scope 3 reporting is to map out your entire value chain. Identify all 15 categories of Scope 3 emissions as defined by the GHG Protocol. Determine which categories are relevant and material to your business operations. Common major categories include purchased goods and services, business travel, and the use of sold products.

Step 2: Supplier Engagement

You cannot accurately measure Scope 3 without engaging your suppliers. Start by requesting primary data from your top Tier 1 suppliers. Many ESG software platforms now offer supplier portals that allow vendors to directly input their carbon data, streamlining the collection process.

Step 3: Utilizing Spend-Based and Average-Data Methods

While primary supplier data is the gold standard, it is rarely possible to get 100% coverage immediately. In the interim, use spend-based calculations (estimating emissions based on financial spend using industry averages) or average-data methods. As your ESG maturity grows, gradually replace these estimates with primary data.

Conclusion

Tackling Scope 3 is a multi-year journey. By implementing robust carbon accounting software and proactively engaging your supply chain, you can stay ahead of the regulatory curve and uncover hidden efficiencies within your operations.