What are scope 3 emissions? 

Please note: This article is for educational purposes only. It does not replace official GHG Protocol guidance or professional carbon reporting advice.

Scope 3 emissions account for up to 88% of all business emissions, making them the largest and most complex category for organisations to manage. Unlike Scope 1 and 2, these emissions originate outside a company’s direct control, spanning the entire value chain from suppliers to customers.

Contents

1. What are Scope 3 Emissions?
2. Why Reduce Scope 3 Emissions?
3. How to Tackle Scope 3 Emissions
   1. Measuring Scope 3 Emissions
   2. Reducing Scope 3 Emissions
   3. Monitoring Scope 3 Emissions
4. Challenges and Solutions
5. Category 1: Purchased Goods and Services
6. Category 2: Capital Goods
7. Category 3: Fuel and Energy Related Activities
8. Categories 4 & 9: Upstream and Downstream Transportation and Distribution

What are Scope 3 Emissions?

Carbon emissions arising because of activities from assets not owned or controlled by the reporting organisation are termed Scope 3 emissions. These are also known as value chain emissions, as they result from a company’s activities that enhance a product’s value as it moves along the supply chain.

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Why Reduce Scope 3 Emissions?

As responsible businesses strive to take impactful climate action, managing and reducing Scope 3 value chain emissions has become imperative. Capital markets now face growing climate-related risks, and investors are placing major focus on greenhouse gas emissions — increasingly including Scope 3. Ignoring these emissions exposes organisations to both financial and reputational risk.

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How to Tackle Scope 3 Emissions

Measuring Scope 3 Emissions

Businesses should begin with a thorough assessment of their value chain to identify the main sources of Scope 3 emissions, the best opportunities to lower them, and the categories most relevant to their business objectives. From there, use the GHG Protocol’s guides for calculating Scope 3 emissions for each category type.

Reducing Scope 3 Emissions

Scope 3 emissions can be decreased through supply chain communication, reporting requirements, and increased transparency. Practical steps include collecting data on Scope 3 emissions, supporting suppliers in their sustainability journey, encouraging employees to use sustainable transportation, and making products and packaging recyclable where possible.

Monitoring Scope 3 Emissions

• Set near and long-term targets in line with SBTi (Science Based Targets Initiative).
• Set up a Carbon Reduction Plan (CRP) in accordance with PPN 06/21, highlighting Emission Reduction Targets and Carbon Reduction Projects.
• Create a plan of action with reminders and milestones to achieve your carbon reduction goals.
• Raise awareness of the importance of curbing Scope 3 emissions across your organisation.

There are four key steps to an effective Scope 3 emissions reduction strategy: screen and prioritise; acquire data; refine supplier base; and set targets, monitor, and audit.

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Challenges and Solutions

Scope 3 emissions make up 65–95% of most companies’ carbon impact, yet they remain difficult to estimate, track, and report. Common challenges include:

• Poor data quality and availability across the supply chain.
• Diversity of disclosure standards that require expert knowledge and consistent updating.
• Difficulties engaging stakeholders across the value chain to obtain emissions data.
• Resource limitations that restrict a company’s capacity to measure and report.

Solutions include:

• Developing a systematic data collection methodology to help businesses of all sizes measure and calculate emissions.
• Creating a supplier engagement programme in collaboration with procurement teams to streamline sustainability data sharing.
• Implementing a Vendor Code of Conduct as a pledge to ethical and sustainable supply chain practices.
• Expanding the availability of life cycle assessment (LCA) databases to improve estimation accuracy.
• Simplifying reporting procedures and harmonising standards across sectors.
• Training auditors in Scope 3 emissions accounting to improve compliance and stakeholder confidence.

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Category 1: Purchased Goods and Services

All upstream emissions from the production of products purchased or acquired by the reporting company in the reporting year. This includes both goods (tangible) and services (intangible). The key challenge is the access to and quality of supplier-specific data.

Managing and Reducing Strategies

• Purchase products with a lower carbon footprint, such as those made from recycled or substituted raw materials.
• Reduce the amount of goods purchased and cut waste during production to make better use of resources.
• Collaborate with suppliers to identify emission hotspots and implement sustainable practices.
• Adopt circular procurement practices that eliminate waste and close material and energy loops in supply chains — including suppliers that offer take-back programmes, remanufactured goods, or recycled materials.
• Include circularity-related metrics in supplier scorecards and RFP standards, such as product lifespans, utilisation rates, and percentage of recycled content.

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Category 2: Capital Goods

All upstream cradle-to-gate emissions from the production of capital goods purchased or acquired by the reporting company. Capital goods include equipment, machinery, buildings, facilities, and vehicles. The manufacturing and production sector accounts for one-fifth of global carbon emissions and 54% of the world’s energy usage, making this a significant category for many organisations.

Managing and Reducing Strategies

• Supplier engagement: Engage with suppliers to help them set their own emissions targets and source materials in an energy-efficient, resource-aware way.
• Sustainable procurement: Choose materials with smaller carbon footprints, select energy-efficient machinery, and prioritise suppliers who follow eco-friendly practices.
• Product lifecycle and design: Choose products designed for long lifespans to reduce the need for frequent replacement.
• Energy efficiency improvements: Retrofit existing equipment with energy-efficient components or invest in newer, more efficient machinery across all property, plant, and equipment.

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Category 3: Fuel and Energy Related Activities

All emissions related to the production of fuels and energy purchased and consumed by the reporting company that are not included in Scope 1 or Scope 2. This category includes upstream emissions of purchased fuels and electricity, transmission and distribution losses, and generation of purchased electricity sold to end users. The key challenge is the availability, accuracy, and transparency of data regarding energy spent in manufacturing.

Managing and Reducing Strategies

• Reduce energy use overall, which in turn reduces well-to-tank emissions and transmission and distribution losses.
• Replace carbon-intensive fuels with lower-carbon alternatives.
• Increase onsite renewable energy production.
• Decarbonise electricity by connecting renewable energy sources to existing networks.
• Invest in low-carbon technologies, such as network cables with lower transmission losses.
• Offer energy efficiency programmes to customers and operations teams.

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Categories 4 & 9: Upstream and Downstream Transportation and Distribution

Emissions that occur from the transportation and distribution of products in vehicles and facilities not owned or controlled by the reporting company. Upstream activities cover T&D of purchased products between tier 1 suppliers and the company’s own operations. Downstream activities cover T&D of sold products, including retail and storage.

Managing and Reducing Strategies

• Reduce the distance that must be travelled and ship larger quantities at once to create fewer trips.
• Switch to low or zero emission vehicles, including electric vehicles (EVs).
• Set up a carpool scheme and encourage cycling to work.
• Service your car fleet regularly and check tyre pressure consistently.
• Avoid unnecessary business travel.
• Use an IT system to collect primary data from internal sources and transport providers about inbound and outbound journeys, vehicle types, fuel types, and shipment weights.
• Apply a three-part approach to logistics decarbonisation: Avoid unnecessary transport; Shift to alternative modes such as rail; Improve by using lowest-emission fuels available.

Companies should cover well-to-wheel emissions in their target boundary when setting Scope 3 T&D-related emissions reduction targets. Collaboration across the transport sector is key to accurate measurement and long-term reduction.

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