TL;DR
Scope 3 emissions are indirect Greenhouse gas emissions that occur throughout a company’s value chain, including suppliers, product use, and waste disposal. They often account for the majority of a company’s total emissions. Reducing Scope 3 requires collaboration across the supply chain, especially with suppliers who significantly influence emissions through materials, manufacturing, and logistics. Effective supplier engagement can drive sustainability, meet regulatory expectations, and build long-term business resilience.
Introduction: Understanding Scope emissions
The Greenhouse Gas Protocol categorizes emissions into three “scopes”:
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Scope 1: Direct emissions from owned or controlled sources (e.g., company vehicles, on-site fuel combustion).
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Scope 2: Indirect emissions from purchased electricity, heat, or steam.
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Scope 3: All other indirect emissions in a company’s value chain, including business travel, transportation, product use, and supplier operations.
While Scope 1 and 2 are relatively easier to measure and manage, Scope 3 often represents the majority of a company’s carbon footprint, especially in sectors like manufacturing, retail, and technology.
What exactly are Scope 3 emissions?
Scope 3 emissions are divided into 15 categories, covering upstream and downstream activities. Some key examples include:
| Scope 3 Category | Description |
|---|---|
| Purchased goods and services | Emissions from the production of goods/services bought by the company |
| Capital goods | Emissions from the manufacturing of long-term assets |
| Fuel and energy-related activities | Emissions from production and transport of purchased fuels |
| Upstream transportation | Emissions from transporting purchased goods and services |
| Business travel | Emissions from employee travel (e.g., flights, cars) |
| Use of sold products | Emissions generated when customers use the product |
| End-of-life treatment of sold products | Emissions from product disposal or recycling |
Purchased goods and services often contribute the largest share, especially for companies with complex global supply chains.
Why Scope 3 Matters
1. It’s the largest emission source
Scope 3 accounts for the majority of a companies emissions. Ignoring it means missing the largest decarbonization opportunity.
2. It’s essential for Net-Zero goals
Science-based targets require companies to include Scope 3 in net-zero plans if it makes up more than 40% of total emissions.
3. Regulators and investors expect transparency
Regulations like the EU Corporate Sustainability Reporting Directive (CSRD) demand Scope 3 reporting. Investors are also pressuring firms to address climate risks across the value chain.
4. It reveals supply chain risk
Climate-related disruptions in the supply chain (e.g., water scarcity, raw material shortages) become more visible when Scope 3 is analyzed. This supports better resilience planning and knowing your scope 3 emissions is essential for managing supply chain risk.
Ready to take control of your Scope 3 emissions? Carbon accounting helps you collect, calculate, and report accurate emissions data across your value chain. Automate complex reporting and align with global standards effortlessly.
The supplier link: Why collaborating with suppliers is key
Suppliers-especially Tier 1 and Tier 2-are responsible for much of the upstream Scope 3 emissions. Here’s why partnering with them is critical:
1. They hold the data
Accurate Scope 3 data often lies with suppliers. Estimations using industry averages are common but limit precision. Engaging suppliers enables collection of primary, activity-based emissions data.
2. They control key emissions levers
Suppliers make decisions about materials, production methods, energy sources, and waste practices. Influencing these choices can drastically reduce emissions.
3. They can co-innovate on sustainability
Early engagement fosters innovation in sustainable product design, low-carbon materials, and renewable energy procurement.
4. It enhances supply chain transparency
Regular communication builds trust and helps spot hidden risks, such as suppliers using coal-based electricity or environmentally harmful chemicals.
How to work with suppliers to reduce Scope 3
| Strategy | Description | Benefits |
|---|---|---|
| Supplier sustainability codes | Formalize expectations on emissions, waste, and energy | Sets clear standards |
| Emissions sata collection | Request primary emissions data (e.g., through CDP, EcoVadis) | Improves reporting quality |
| Joint reduction targets | Co-develop emissions reduction goals aligned with SBTi | Aligns incentives |
| Capacity building | Offer training, tools, and funding to improve supplier capabilities | Fosters long-term collaboration |
| Prefer low-carbon Suppliers | Integrate climate performance into procurement decisions | Drives accountability and change |
Common challenges
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Data availability: Many suppliers lack the tools or knowledge to calculate emissions.
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Capacity constraints: SMEs may struggle to invest in low-carbon technologies.
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Misalignment of priorities: Suppliers may prioritize cost over sustainability without incentives.
Solutions to overcome challenges
- Use standardized tools like the GHG Protocol or TCFD guidelines.
- Start with high-impact suppliers and expand gradually.
- Offer incentives such as long-term contracts or co-investments in sustainability improvements.
Read our article about how to involve suppliers in climate action.
Frequently asked questions (FAQ): Scope 3 and Supplier Engagement
What are Scope 3 emissions in simple terms?
They are all indirect emissions not produced by your company directly but occurring across your value chain-from raw material production to product disposal.
Why are Scope 3 emissions hard to measure?
They involve third parties (like suppliers or customers), often across multiple regions with different reporting standards or limited data availability.
Do all companies need to report Scope 3?
Not all, but many large companies and those under regulatory requirements (like the CSRD) must disclose Scope 3. It’s also strongly recommended if it’s a major emissions source.
How can I convince suppliers to participate?
Make it part of procurement policies, offer training, and share cost savings or branding benefits from sustainability improvements.
Is reducing Scope 3 costly?
Not always. Many emissions reductions (e.g., energy efficiency, waste reduction) lead to cost savings and operational resilience.
Conclusion
Scope 3 emissions are a massive, often overlooked contributor to corporate carbon footprints. Addressing them is not just a compliance exercise-it’s a strategic move to build sustainable, transparent, and resilient supply chains. The only effective way to tackle Scope 3 is by working hand-in-hand with suppliers, sharing data, setting joint targets, and co-innovating for a low-carbon future.
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