As businesses worldwide ramp up their carbon reduction commitments, emissions accounting has become a critical focus. While Scope 1 and Scope 2 emissions—those from direct company operations and purchased electricity—are relatively straightforward to measure and report, Scope 3 emissions remain the most challenging.
Scope 3 emissions encompass indirect emissions that occur throughout an organisation’s entire value chain, from suppliers and logistics to product use and disposal. They often represent the largest share of a company’s total carbon footprint, sometimes accounting for more than 90% of overall emissions.
So why is Scope 3 so difficult to measure? And how can businesses ensure they track it accurately? This article explains what scope 3 emissions are and its 15 categories, what make them so difficult to measure, and what you can do to measure it right.
What Are Scope 3 Emissions?
The Greenhouse Gas (GHG) Protocol, the leading framework for carbon accounting, categorises corporate emissions into three scopes:
- Scope 1: Direct emissions from sources owned or controlled by the company (e.g., company-owned vehicles, on-site fuel combustion).
- Scope 2: Indirect emissions from purchased electricity, steam, heating, or cooling.
- Scope 3: All other indirect emissions that occur throughout the company’s supply chain and product lifecycle.
The 15 Categories of Scope 3 Emissions
The GHG Protocol divides Scope 3 emissions into 15 categories across upstream and downstream activities:
Upstream Activities (Before a Product or Service Reaches You)
- Purchased goods and services – Emissions from the production of raw materials, components, or services purchased by the company.
- Capital goods – Emissions from the production of long-term assets like buildings, machinery, and equipment.
- Fuel- and energy-related activities – Emissions from extraction, production, and transportation of fuels and electricity not included in Scope 1 or 2.
- Upstream transportation and distribution – Emissions from suppliers transporting materials to the company.
- Waste generated in operations – Emissions from waste disposal and treatment in landfills, incineration, or recycling.
- Business travel – Emissions from flights, hotels, and rental cars used for business trips.
- Employee commuting – Emissions from employees commuting to and from work.
- Upstream leased assets – Emissions from assets leased by the company but not included in Scope 1 or 2.
Downstream Activities (After a Product or Service Leaves Your Company)
- Downstream transportation and distribution – Emissions from shipping products to customers.
- Processing of sold products – Emissions from further processing of a company’s products before they reach the end consumer.
- Use of sold products – Emissions generated when customers use a company’s product (e.g., energy consumption of appliances).
- End-of-life treatment of sold products – Emissions from disposal, recycling, or incineration of sold products.
- Downstream leased assets – Emissions from buildings, vehicles, or equipment leased to others.
- Franchises – Emissions from franchise operations not owned by the reporting company.
- Investments – Emissions from a company’s financial investments and portfolio holdings.
Why Does Scope 3 Matter?
Scope 3 emissions are critical for businesses to track because they:
- Often represent the majority of a company’s total carbon footprint (sometimes 80-90%).
- Influence investor decisions and compliance with global ESG reporting standards.
- Help identify major emissions hotspots for cost savings and reduction opportunities.
- Strengthen brand reputation by demonstrating transparency and accountability.
However, tracking and reducing Scope 3 emissions is extremely challenging—let’s explore why.
Why Are Scope 3 Emissions So Hard to Measure?
1. Lack of Direct Control Over Emissions
Scope 3 emissions occur outside a company’s direct operations, making it difficult to collect reliable data. Businesses must rely on suppliers, customers, and external partners to provide accurate emissions data, which varies widely in quality and consistency.
2. Complex, Multi-Tier Supply Chains
A single product can have hundreds or thousands of suppliers across multiple tiers—many of whom lack emissions data or do not track carbon footprints at all. For example, a company that assembles electric vehicles must account for emissions from battery suppliers, mining operations, metal processing, transportation, and manufacturing partners.
3. Lack of Standardised Data & Reporting
Many suppliers do not have verified emissions data, and industry reporting standards are not yet fully harmonised across regions. Businesses must often estimate emissions using secondary data, industry averages, or spend-based calculations, which reduce accuracy.
4. Dynamic Business Operations
Supply chains are constantly evolving, with new suppliers, materials, and processes. A change in suppliers or production methods can alter emissions profiles, making it challenging to maintain up-to-date data.
5. Different Reporting Requirements
Global sustainability frameworks—including the GHG Protocol, Science-Based Targets initiative (SBTi), EU CSRD, and ISSB standards—each have slightly different methodologies for measuring and reporting Scope 3 emissions, adding further complexity.
How to Get Scope 3 Emissions Right
Despite these challenges, businesses can take strategic steps to improve the accuracy of their Scope 3 emissions reporting.
1. Engage Suppliers for Primary Data
- Work directly with suppliers to collect actual emissions data instead of relying on industry averages.
- Provide training and support to help suppliers improve their carbon tracking.
- Incorporate sustainability criteria into supplier contracts and procurement policies.
2. Use Carbon Accounting Software
- Automate emissions tracking with carbon accounting platforms that integrate with supply chain data.
- Leverage AI and machine learning to improve data quality and identify trends.
- Choose software that aligns with GHG Protocol and global ESG reporting standards.
3. Improve Data Collection & Methodology
- Use a hybrid approach: Collect supplier-specific data where possible and supplement with industry benchmarks when needed.
- Regularly update emissions factors and use location-based or activity-based calculations for more precision.
4. Set Clear Scope 3 Reduction Targets
- Align Scope 3 goals with Science-Based Targets (SBTi) and net-zero strategies.
- Implement supplier engagement programs to encourage carbon reductions.
- Promote low-carbon product design, sustainable sourcing, and circular economy initiatives.
5. Verify & Report Transparently
- Conduct third-party audits to verify Scope 3 data.
- Ensure emissions disclosures meet regulatory and ESG reporting frameworks (CSRD, ISSB, TCFD).
- Be transparent about limitations and areas for improvement in reporting.
Final Thoughts: Scope 3 is the Future of Carbon Accounting
As corporate sustainability expectations evolve globally, accurate Scope 3 reporting is becoming non-negotiable. Companies that master value chain emissions tracking will gain a competitive edge, reduce climate-related risks, and meet growing investor and regulatory demands.
While measuring Scope 3 emissions is challenging, businesses that engage suppliers, leverage technology, and integrate sustainability into procurement strategies will be best positioned for success.
Looking to improve your Scope 3 measurement? Explore how NetNada’s carbon accounting software can help streamline supplier engagement, emissions tracking, and ESG reporting compliance. Contact us today for a demo.
