Understanding and managing Scope 3 emissions

For many companies, reporting greenhouse gas (GHG) emissions has become a standard expectation. Yet, a significant portion of a company’s climate impact remains difficult to tackle: Scope 3 emissions. These indirect emissions occur across your value chain, outside your direct control, but they often represent the largest share of your footprint.

Understanding Scope 3 emissions isn’t just about compliance. It’s about taking ownership of your full climate impact, building stronger relationships with suppliers and customers, and preparing for increasingly stringent reporting requirements.

This article explores what Scope 3 emissions are, why they matter, and how you can measure, report, and reduce them. You’ll learn about reporting regulations, calculation methods, best practices, and tools like carbon management software that can support your efforts. Whether you’re just starting or looking to refine your strategy, this guide will help you take the next step.

What are Scope 3 emissions?

Scope 3 emissions come from activities linked to assets the reporting organisation doesn’t own or control, but that it indirectly influences through its value chain.

Scope 1, 2, and 3: the big picture

GHG emissions are typically broken into Scope 1, 2 and 3:

• Scope 1: Direct emissions from company-owned facilities or vehicles.
  
• Scope 2: Indirect emissions from purchased electricity, steam, heat, or cooling.
  
• Scope 3: All other indirect emissions from your value chain—upstream and downstream.

Scope 3 categories (upstream and downstream)

As mentioned, Scope 3 emissions come from a company’s value chain, but a value chain consists of its upstream and downstream activities. The Greenhouse Gas Protocol defines 15 categories of Scope 3 emissions:

Upstream:

• Purchased goods and services
• Capital goods
• Fuel- and energy-related activities
• Upstream transportation and distribution
• Waste generated in operations
• Business travel
• Employee commuting
• Upstream leased assets
  

Downstream:

• Downstream transportation and distribution
• Processing of sold products
• Use of sold products
• End-of-life treatment of sold products
• Downstream leased assets
• Franchises
• Investments
  

Why Scope 3 matters for your company

For most companies, Scope 3 emissions account for over 70% of total emissions. Without addressing them, your decarbonisation strategy will remain incomplete.

Understanding and acting on Scope 3:

• Increases transparency and credibility
• Reduces long-term risks
• Improves relationships with conscious investors and customers

Key drivers of Scope 3 emissions

Every industry has unique Scope 3 emission sources:

• Retail: Emissions from the use and disposal of sold goods
• Manufacturing: High emissions from purchased materials and logistics
• Tech: Data centre energy use and hardware production

Scope 3 reflects shared responsibility. For instance, your suppliers’ energy efficiency or your customers’ product usage directly impacts your emissions. Working collaboratively becomes essential.

Is reporting Scope 3 emissions mandatory? Requirements and regulations

The CSRD and EU requirements

The Corporate Sustainability Reporting Directive (CSRD) requires large companies operating in the EU to disclose greenhouse gas emissions across all three scopes. Scope 3 reporting is mandatory when these emissions are considered material, which is true for most sectors. Companies must also explain their methodology and reduction targets.

The CSRD applies progressively from 2024 onward and covers large listed companies, large non-listed companies, and eventually SMEs with listed securities.

The VSME standard for smaller companies

The Voluntary Sustainability Reporting Standard for SMEs (VSME) offers a simplified framework for small and medium enterprises. While voluntary, it encourages companies to disclose Scope 3 data to anticipate future obligations and meet increasing stakeholder expectations.

National regulations

• France: Companies with more than 500 employees must produce a “bilan d’émissions de gaz à effet de serre” (BEGES). Reporting Scope 3 is optional but encouraged, especially for companies seeking to align with national climate goals.
• Belgium: No national mandatory Scope 3 requirement exists, but Belgian companies under EU law must comply with CSRD obligations.
• Netherlands: The Dutch government strongly promotes complete value chain carbon transparency. While Scope 3 isn’t yet mandatory by national law, companies are expected to prepare for EU-level CSRD compliance.
• Luxembourg: CSRD is fully transposed into national legislation. If material, Scope 3 reporting is expected for large companies.
• United Kingdom: Under the Streamlined Energy and Carbon Reporting (SECR) framework, Scope 3 is not mandatory, but encouraged. The UK also requires climate-related financial disclosures aligned with TCFD, often including Scope 3 elements.

Reporting methodologies

• GHG Protocol: Scope 3 emissions are not mandatory to report under the Corporate Standard but are strongly recommended. The separate Scope 3 Standard provides clear guidance for voluntary disclosures.
• Bilan Carbone® (France): Developed by the Association Bilan Carbone (ABC), this method strongly encourages full Scope 3 assessment, which is essential for a complete carbon footprint.

Reporting practices vary, but the trend is clear: Scope 3 is central to voluntary and mandatory climate disclosures. European companies are advised to integrate Scope 3 early into their strategies to future-proof their climate reporting.

Challenges in Scope 3 data collection

Collecting reliable Scope 3 data is one of the most complex parts of carbon reporting. Common challenges include:

• Lack of primary data: Many companies rely on industry averages or spend-based proxies because supplier-specific data is missing. This reduces accuracy and creates uncertainty.
• Supplier engagement barriers: Suppliers may lack the tools, expertise, or motivation to provide emissions data. Communication gaps, language differences, and limited resources can slow progress.
• Data availability and consistency: Data may be incomplete, outdated, or inconsistent across categories and suppliers. This makes tracking progress and comparing results difficult. Using a centralised platform helps standardise and validate inputs.

Calculation methodologies

The standard calculation method is: Emissions = Activity Data × Emission Factor.

Physical data is the most accurate method of collecting data. However, suppliers might not always have physical data available. That’s why carbon reporting allows different data collection methods:

• Spend-based method: This method uses financial data (e.g., € spent on paper or services) and applies average emission factors per euro spent. It is useful for quick estimates but less accurate.
• Activity-based method: This method relies on specific physical data, such as kilograms of raw materials or kilometres travelled. It improves precision but requires more detailed inputs.
• Hybrid method: This method combines spend- and activity-based approaches. Most companies start with spend-based data and refine high-impact categories with activity-based data as they improve data quality.

The goal is to have as much physical data as possible, so when you tackle scope 3 categories, start by trying to gather physical data for the categories that contribute the most to your carbon report.

Tools and platforms to support your work

Choosing the right tools can make Scope 3 data management and reporting more efficient and accurate. Key functionalities to look for include:

• Carbon management software: Platforms like Tapio help centralise data, automate calculations, and visualise emissions across all categories.
  
• Automation and real-time visualisation: Dynamic dashboards allow for real-time updates, enabling faster decision-making and more transparent communication of results.
  
• Collaboration features: Effective tools should support both internal teams and external consultants. Useful capabilities include:
  • Supplier portals
  • Reduction scenario modelling
  • Exportable reports

Engaging your suppliers and stakeholders

To effectively manage Scope 3 emissions, you’ll need strong collaboration across your value chain. Engaging suppliers and stakeholders early makes data collection more reliable and reduction efforts more impactful.

• Start with key suppliers: Focus your efforts on the suppliers with the biggest impact on your footprint. Their cooperation will offer the most value.
  
• Support and educate: Share clear training resources and tools to help suppliers understand what data is needed and how to report it. Simplifying the process boosts participation.
  
• Offer incentives: Recognise and reward suppliers who provide accurate data or commit to reduction targets. This can be through visibility, preferred supplier status, or co-branded sustainability communications.
  
• Align on reduction targets: Encourage suppliers to set their targets or align with recognised frameworks like the Science Based Targets initiative (SBTi). This creates shared accountability across your chain.
  
• Foster shared responsibility: Frame emissions tracking as a joint effort to drive efficiency, innovation, and competitiveness—not just a compliance burden. A collaborative mindset strengthens relationships and results.

Strategies to reduce Scope 3 emissions

Reducing Scope 3 emissions requires design, procurement, logistics, and financial strategies. Here are some effective levers companies can use:

• Optimise procurement and product design: Choose low-carbon materials wherever possible. Redesign products for energy efficiency, durability, and modularity to extend lifespan and reduce downstream emissions
  
• Adopt circular economy and sustainable logistics practices: Implement repair, reuse, and recycling schemes to reduce end-of-life emissions. Select transport providers that offer low-emission or carbon-neutral delivery options.
  
• Use internal carbon pricing: Introduce an internal cost per tonne of CO₂e emitted to influence purchasing and investment decisions. This helps prioritise suppliers, materials, or designs with lower climate impact.

These strategies cut emissions and drive innovation, reduce resource dependency, and enhance your brand’s environmental credibility.

How to get started today

Starting your Scope 3 journey can feel overwhelming, but breaking it into practical steps helps build momentum. Here’s how to begin:

• Build internal capacity: Train your teams on carbon accounting basics to ensure a shared understanding of Scope 3 principles. Assign clear responsibilities for each emission category to improve ownership and follow-through
• Choose the right tools: Use carbon management platforms that scale with your organisation and support collaboration with suppliers and consultants
• Communicate transparently: Start reporting even if your data isn’t perfect. Share what you know, explain any gaps, and outline how you plan to improve over time

These early steps create a strong foundation for more advanced data collection, reduction efforts, and regulatory alignment.

Conclusion

Scope 3 emissions can feel overwhelming, but they’re also an opportunity. They reveal the full story of your impact and allow you to shape a truly sustainable value chain.

Companies that lead on Scope 3 today gain a competitive edge in compliance, trust, innovation, and resilience, whether starting with simple spend-based estimates or building a complete value chain strategy. Taking the first step matters.

Use the tools, frameworks, and partnerships available to you. Be transparent. Engage your suppliers. Invest in data. The journey may be complex, but the reward is long-term climate and business health.

Ready to start measuring and reducing your Scope 3 emissions? Let’s make it actionable.

FAQs: Scope 3 emissions

What are examples of Scope 3 emissions?
Examples include business travel, purchased goods, employee commuting, product use, and supplier manufacturing emissions.

Are Scope 3 emissions mandatory to report?
Yes, under EU CSRD and UK SECR. It’s increasingly expected in other regions, especially for companies with science-based targets.

How do I start calculating Scope 3 emissions?
Start with the GHG Protocol categories. Use spend-based data initially, then refine with activity-based data where available.

Which tools can help with Scope 3 reporting?
Carbon management platforms like Tapio, CDP questionnaires, and GHG Protocol calculators are valuable tools.

Can I reduce Scope 3 emissions without complete control over suppliers?
Yes. You can collaborate with suppliers, redesign products, change procurement policies, and offer customer incentives.

Your turn

🌱 What’s your biggest challenge in tackling Scope 3 emissions? We’d love to hear from you. Contact us to discuss how we can help you tackle your Scope 3 emissions challenges—or share this article with your network to keep the conversation going.

Tapio is a carbon management software that allows companies and consultants to calculate and reduce carbon emissions.