Scope 3: Measure & Reduce Emissions with Ease

Scope 3 emissions include all indirect emissions that occur in a company's value chain, both upstream and downstream, that are not already covered by Scope 1 (direct emissions from owned sources) or Scope 2 (indirect emissions from purchased energy). According to the Greenhouse Gas (GHG) Protocol, the global standard for carbon accounting, these emissions are the most comprehensive and complex to measure.

The GHG Protocol divides Scope 3 into 15 distinct categories to help organizations systematically account for their value chain impact.

Scope 3: Upstream Activities

Upstream Scope 3 emissions stem from activities that occur in a company’s supply chain before its operations, primarily driven by the production and delivery of purchased goods and services.

1. Purchased Goods & Services – Emissions from the production of all products and services a company buys to run its business.

2. Capital Goods – Emissions tied to the manufacturing of long-term assets like buildings, machinery, or equipment.

3. Fuel & Energy-Related Activities – Emissions from the production of fuels and energy purchased by the company, excluding what’s already counted in Scope 1 or 2.

4. Upstream Transportation & Distribution – Emissions from transporting goods between suppliers and the company before the point of sale.

5. Waste Generated in Operations – Emissions from third-party disposal and treatment of waste produced during company operations.

6. Business Travel – Emissions from employee travel for work purposes using vehicles or services not owned by the company.

7. Employee Commuting – Emissions resulting from employees traveling to and from their regular workplace.

8. Upstream Leased Assets – Emissions from the operation of assets the company leases but does not own or control, upstream of its operations.

Scope 3: Downstream Activities

Downstream Scope 3 emissions arise after a product leaves the company, covering how it’s transported, used, and eventually disposed of or financed.

9. Downstream Transportation & Distribution – Emissions from delivering sold products to customers through third-party logistics.

10. Processing of Sold Products – Emissions from customers processing intermediate products sold by the company before final use.

11. Use of Sold Products – Emissions generated during the use phase of the company’s products by end users.

12. End-of-Life Treatment of Sold Products – Emissions from the disposal or recycling of products after their use.

13. Downstream Leased Assets – Emissions from assets owned by the company but leased out and operated by others.

14. Franchises – Emissions from franchise operations not owned by the company but operating under its brand.

15. Investments – Emissions associated with investments the company makes, including equity, debt, and project finance.

Accurately measuring Scope 3 emissions is a challenge for many organizations. Here's what makes it so complex.

Poor Data Quality: Many companies must rely on suppliers to self-report their emissions. This process can lead to major inconsistencies due to different reporting standards, methodologies, and levels of accuracy across the supply chain.

Risk of Double Counting: A common issue arises when one company's Scope 1 or 2 emissions are counted as Scope 3 emissions by another company in the same value chain. Without a centralized system, this can inflate the total reported emissions.

Supply Chain Complexity: Global supply chains involve numerous tiers of suppliers, making it nearly impossible to manually trace the origin and carbon footprint of every component or service.

Once the emissions are measured, your organization can focus on targeted Scope 3 reduction strategies. 

Engage with Suppliers

Work directly with your key suppliers to set shared Scope 3 reduction targets. Incentivize them to 

• adopt more sustainable practices, 
• switch to renewable energy, 
• and improve their own data transparency. 

Collaborative partnerships are the cornerstone of supply chain decarbonization.

Optimize Logistics and Transportation

Analyze your transportation and distribution networks to identify inefficiencies. Strategies can include optimizing shipping routes, consolidating shipments to reduce empty miles, and shifting to lower-emission transport modes like rail or sea freight over air freight.

Promote Sustainable Product Design

Redesign products to be more energy-efficient during use, require fewer carbon-intensive materials, and be easier to recycle at the end of their life. This "eco-design" approach tackles emissions at the source and can create long-term value.

Invest in Renewable Energy

Encourage or co-invest in renewable energy projects within your supply chain. This not only reduces the carbon footprint associated with your purchased goods but also helps build a more resilient and sustainable energy infrastructure for your partners.

Reporting Scope 3 emissions is increasingly becoming a mandatory requirement for regulatory compliance, not just a voluntary act of transparency. Businesses must adhere to established global standards to meet legal obligations and stakeholder expectations.

Key frameworks and regulations include:

Corporate Sustainability Reporting Directive (CSRD): This European Union regulation mandates that large companies report on their sustainability impacts, including detailed Scope 3 emissions data.

GHG Protocol: This remains the most widely used international accounting standard, providing the framework and categories for calculating and reporting all three scopes of emissions.

CDP (formerly Carbon Disclosure Project): This global non-profit runs a disclosure system where companies and cities report their environmental impacts, with Scope 3 emissions being a key component of their questionnaires. 

Investing in robust Scope 3 management delivers significant business advantages beyond environmental responsibility. 

Enhanced Brand Reputation: Demonstrating a commitment to reducing value chain emissions builds trust with customers, employees, and the public, positioning your brand as a sustainability leader.

Increased Investor Confidence: Sustainability-focused investors are increasingly scrutinizing companies' carbon footprints. Transparent and comprehensive emissions reporting can attract investment and improve performance in ESG ratings.

Stronger Consumer Loyalty: Consumers are progressively favoring brands that align with their values. A clear commitment to eco-conscious practices can drive sales and foster long-term loyalty.

Future-Proofing the Business: By addressing supply chain risks and complying with emerging regulations, companies can build a more resilient and competitive business model for the future.

Ready to go beyond the basics? Discover more on Scope 3 in these expert posts: The Role of Technology in Scope 3 Emissions Tracking and Transparency, Why Scope 3 Emissions Matter for Your Brand.

Advanced carbon accounting solutions such as carbmee EIS™ are essential for overcoming the complexities of Scope 3 emissions tracking and management. 

Automate what slows you down: Carbmee’s platform connects directly with your ERP and procurement systems to automatically collect supplier activity data—no more manual spreadsheets, no more errors.

Trust your data, every time: With AI-powered analytics and intelligent data validation, you get consistent, accurate emissions data—even when supplier input is incomplete—fully aligned with GHG Protocol standards.

Turn complexity into action: Gain full visibility into your carbon hotspots across Scope 3. carbmee helps you pinpoint where to reduce emissions and equips your team with the insights and tools to engage suppliers effectively.

Book a free demo with one of our experts and take the first step towards reducing Scope 3 today!

What Is the Difference Between Scope 1, 2, and 3 Emissions?

Scope 1 covers direct emissions from sources your company owns or controls (e.g., factory smokestacks, company vehicles). Scope 2 covers indirect emissions from purchased electricity, steam, heating, and cooling. Scope 3 includes all other indirect emissions from your value chain.

Why Is Scope 3 so Difficult to Measure?

Scope 3 is difficult to measure because it relies on large volumes of data from external sources across the entire value chain, such as suppliers and customers, which the reporting company does not directly control.

What Is an Example of Scope 3?

An example of Scope 3 is the emissions generated from producing the raw materials you purchase from a supplier (Category Scope 3.1: Purchased Goods and Services). Another is the emissions from customers using your sold products (Category 11: Use of Sold Products).

Why Do Scope 3 Emissions Matter for Net-Zero Goals?

Scope 3 emissions often account for the majority of a company’s total carbon footprint, making them critical to any credible net-zero strategy. Without measuring and reducing these indirect emissions, efforts limited to Scope 1 and 2 fall short of real climate impact.

How Does the CSRD Impact Scope 3 Reporting?

The Corporate Sustainability Reporting Directive (CSRD) makes Scope 3 reporting mandatory for many EU and non-EU companies operating in the region. It requires detailed, audited disclosure of value chain emissions, elevating Scope 3 from a voluntary practice to a legal compliance issue.