To effectively tackle and reduce greenhouse gas (GHG) emissions, companies need to have a comprehensive understanding of the origins of these emissions. 

It is also important for companies to understand the regulations and standards surrounding emissions, what is expected of your organisation and what you can do to stay ahead of the developing legislative landscape.

In this article, we hope to demystify Scope 3 emissions, dissecting what exactly that refers to and taking a look at the regulations that are making Scope 3 emissions reporting compulsory.

What do we mean by Scope 3 Emissions?

The Greenhouse Gas Protocol classifies climate-warming gas emissions into three specific scopes. 

Scope 1: This refers to direct emissions that occur from any sources owned or controlled by a company, such as emissions from combustion in plants.

Scope 2: This refers to indirect emissions that come from the electricity purchased and consumed by a company.

Scope 3: This is more complex than the first two, and refers to all other indirect emissions produced throughout a company’s value chain. This includes emissions linked to the use of the product being sold and the production of any purchased materials.

Scope 3 emissions result from the operations and activities of a company, but occur from sources that are not controlled or owned by said organisation. It covers all sources of emissions that aren’t a part of Scope 1 and 2.

Scope 3 emissions can account for the large majority of a company’s total carbon footprint, although this does vary sector to sector. For different companies, emissions can fall under different scopes. For example, the Scope 1 emissions of a power plant are the Scope 2 emissions of the consumers that use the energy produced there.

Essentially, Scope 3 emissions represent the indirect environmental footprint that is created by a company’s supply chain.

Identifying Scope 3 emissions

Scope 3 emissions occur both upstream and downstream of any value chain. Upstream emissions can include the GHG emitted from:

  • Purchased goods & services
  • Capital goods 
  • Fuel-and-energy related activities 
  • Upstream transportation and distribution 
  • Waste generated in operations 
  • Business travel 
  • Employee commuting 
  • Upstream leased assets

Downstream emissions can include: 

  • Downstream transportation and distribution 
  • Processing of sold products 
  • Use of sold products 
  • End-of-life treatment of sold products 
  • Downstream leased assets 
  • Franchises 
  • Investments 

Why does measuring Scope 3 matter?

Scope 3 emissions, and the process of recording and reporting on them, are important because they allow your company to undertake a comprehensive carbon footprint assessment.

Because Scope 3 emissions capture the entire value chain, including the operations of the supply chain, companies can gain a clear understanding of their environmental impact beyond their own activities. 

This emission data gives insight into areas of high GHG emissions, highlighting potential opportunities for improvement for a company’s sustainable practices. It means companies can make more informed decisions that positively impact the environment, and mitigate any possible environmental risks. 

Measuring Scope 3 emissions also helps in meeting investor expectations, and demonstrating a commitment to ESG to stakeholders. It is also important in meeting regulatory requirements, as the introduction of the CSRD and the ESRS mandate the reporting of emissions across the supply chain.

There are several other reasons why it’s crucial to be measuring and reporting on your Scope 3 emissions:

  • Identifying sustainability leaders in the supply chain.
  • Supplier engagement with sustainability initiatives.
  • Informing emissions reduction decisions across the supply chain.
  • Encouraging innovation to create products and processes that are more energy-efficient.
  • Creating opportunities to transition away from fossil fuel-related operations.
  • Improving company reputation through information sharing and reporting. 
  • Climate risk management and resilience.
  • Stakeholder engagement and transparency.
  • Accessing funding and meeting investor expectations.
  • Contributing to global climate goals.

By embracing the measurement and disclosure of value chain emissions, businesses can drive positive change, enhance stakeholder engagement, manage climate risks, attract responsible investment, and contribute to global climate goals. 

Reporting on Scope 3 emissions are crucial to building a more sustainable future for businesses and the planet, and it’s important now more than ever with mandatory regulations that require the measuring of emissions in the value chain.

What is the ESRS and how does it relate to Scope 3?

The introduction of the EU’s Corporate Sustainable Reporting Directive (CSRD) has expanded the need to report Scope 3 emissions. Large companies operating in the EU will have to report these emissions from this year; for non-EU companies in the value chain, reporting starts in 2026.

To help organisations comply with the CSRD, the EU Commission created the European Sustainability Reporting Standards (ESRSs) which detail how companies must report on sustainability risks and impacts in order to follow regulations.

The ESRS requires businesses to report on the potential risks and benefits related to social and environmental issues, as well as the effects of their operations on society and the environment. This puts Scope 3 emissions at the forefront of the standard.

In total, there are 12 ESRS standards that outline the reporting requirements for the CSRD. The standards are divided into two ‘cross-cutting’ standards and 10 ‘topical’ standards.

The topical standards provide a specialised framework for disclosure in specific ESG areas. These standards play a crucial role in allowing companies to assess and demonstrate their sustainability practices, improving the detail and significance of their reports. 

The environmental category of the topical standards is directly focused on the impact of a company’s operations on the environment, and that includes the impact of emissions.

ESRS E1 Climate change: relating to the development of a climate transition plan and information such as greenhouse gas, energy consumption, and climate adaptation.

ESRS E2 Pollution: relating to water, air, and soil, as well as other substances of concern. 

ESRS E3 Water and marine resources: relating to water consumption and their impacts on marine resources.

ESRS E4 Biodiversity and ecosystems: relating to biodiversity and the impact on ecosystems.

ESRS E5 Circular economy: relating to resource use — specifically the inflows and outflows of resources – and how the company plans to minimise waste while maintaining material value.

The ESRS requires data to be collected, analysed and reported for each of these individual standards across the value chain. Scope 3 emissions are a crucial part of the information the ESRS is measuring, with E1 specifically referring to GHG data being a part of the requirement, and E5 looking at resource use across the supply chain.

The ESRS is the first regulation to mandate the reporting of Scope 3 emissions, attempting to standardise the disclosure of Scope 3 and create consistent data throughout the global value chain. 

While the complexity of the value chain, and the challenge of collecting reliable and accurate data on Scope 3 emissions remains, the ESRS encourages companies to develop the sustainable initiatives to adapt to these regulatory changes, and build not just a sustainable business, but a sustainable future.

How Convene can help you with the ESRS and Scope 3 Emissions

In the current ESG landscape, it is essential to understand and oversee your organisation’s greenhouse gas emissions across the entire value chain. Reporting on Scope 3 reveals valuable information about emission hotspots, facilitates better decision-making, and builds trust with stakeholders. 

By adopting a proactive stance on Scope 3, you position yourself favorably in a market that increasingly values transparency and environmental accountability.

The ESRS is a crucial milestone in the EU’s progress towards a more sustainable corporate environment. Adapting to these regulations involves more than just meeting requirements; it requires businesses to revolutionise their approach towards sustainability.

One way to be proactive is to invest in systems that can make the process of data collection and ESG reporting much simpler. Preparing for the ESRS and Scope 3 emissions is a lot easier when you have the support of ESG software.

This is where Convene comes in.

We have developed our own ESG reporting tool: Convene ESG.

Convene ESG provides an end-to-end platform to collect data, track progress, compare with peers, align with frameworks and produce ESG reports.

With our new supplier module specifically built to meet the ESRS requirements, we’re here to ensure your organisation is ready for ESRS reporting.

We want to ensure efficiency, compliance, and strategic ESG insight, with automated and centralised supplier data collection and pre-built forms that simplify Scope 3 data collection.

We also have upcoming capabilities like AI-driven benchmarking and custom questionnaires to address unique ESG goals.

In order to ensure you maximise your ESG potential in 2025, choose a sustainable future with Convene ESG.