Scope 3 Emissions: Overview & Calculation

Overview

Scope 3 emissions are indirect emissions that occur in a company's value chain. For most companies, Scope 3 represents the largest portion of their carbon footprint—often 80-90%—making it critical for comprehensive climate action.

What Are Scope 3 Emissions?

Categories (GHG Protocol)

Upstream (Categories 1-8)

1. Purchased goods: Extraction, production of purchased materials
2. Capital goods: Manufacturing of capital equipment
3. Fuel & energy: Upstream activities for purchased energy
4. Upstream transport: Transportation and distribution
5. Waste generated: Waste disposal and treatment
6. Business travel: Employee business travel
7. Employee commuting: Employee commuting to/from work
8. Upstream leased: Assets leased from others

Downstream (Categories 9-15)

9. Downstream transport: Transportation of sold products
10. Processing: Processing of sold products
11. Use: Use of sold products by consumers
12. End-of-life: Treatment of sold products at end of life
13. Downstream leased: Assets leased to others
14. Franchises: Operations of franchises
15. Investments: Equity investments

Why Scope 3 Matters

Business Case

• Materiality: Often 80%+ of emissions
• Risk: Supply chain disruption, regulation
• Opportunity: Innovation, competitive advantage
• Stakeholders: Investors, customers, regulators

Regulatory Pressure

• CSRD: Scope 3 reporting required
• SEC: Climate disclosure proposal
• EU: Value chain due diligence

Calculation Methods

Primary Methods

Steps to Calculate

1. Map value chain: Identify all activities
2. Select methods: Appropriate for each category
3. Collect data: Supplier surveys, spend data
4. Apply factors: Emission factors
5. Calculate: Sum emissions

Data Collection

Primary Data

• Direct supplier engagement
• Product-level data
• Primary activity data

Secondary Data

• Industry averages
• Published emission factors
• Database estimates

Data Quality

• Consider uncertainty
• Document assumptions
• Prioritize material categories

Reduction Strategies

Upstream

• Supplier engagement and decarbonization
• Sustainable procurement
• Product design for lower impact
• Logistics optimization

Downstream

• Product efficiency standards
• Customer education
• Take-back programs
• Circular business models

Practical Guidance

Getting Started

1. Screen: Which categories are material?
2. Prioritize: Focus on biggest sources
3. Collect data: Start with available data
4. Engage suppliers: Build capacity
5. Set targets: Science-based where possible
6. Report: Disclose publicly

Key Challenges

• Data availability and quality
• Supply chain complexity
• Allocation issues
• Changing suppliers

Key Takeaways

• Scope 3 is typically the largest emission category
• Critical for net-zero strategies
• Data quality improving but challenging
• Supplier engagement essential
• Regulatory requirements increasing
• Must be included in SBTi targets