Scope 3 is the part of a carbon inventory most companies get wrong, and the part regulators and target-setting bodies now look at first. It sits outside your walls, spread across suppliers, logistics providers, customers and investees, and it cannot be metered. The GHG Protocol states that Scope 3 emissions "can represent the largest source of emissions for companies". ESRS E1 says the same in regulatory language: for many undertakings, Scope 3 "may be the main component of their GHG inventory".

This guide covers Scope 3 end to end: the 15 categories, the upstream and downstream split, which ones you must report, which method applies to each, how to get usable data out of suppliers, and what the CSRD and the SBTi expect. Every point traces back to the GHG Protocol Scope 3 Standard, its Technical Guidance, ESRS E1 or the SBTi criteria.

Table of contents

What Scope 3 emissions are

Scope 3 covers all indirect greenhouse gas emissions, other than those from purchased energy, that occur in a company's value chain, upstream and downstream. It is the third of the three scopes defined by the GHG Protocol, developed by the World Resources Institute and the World Business Council for Sustainable Development.

The scopes are separated by the degree of control the reporting company has over the emitting source:

  • Scope 1: direct emissions from owned or controlled sources. On-site combustion, owned vehicles, process emissions, refrigerant leakage.
  • Scope 2: indirect emissions from the generation of purchased electricity, steam, heat and cooling.
  • Scope 3: every other indirect emission in the value chain, from the extraction of purchased raw materials to the disposal of sold products.

Two properties make Scope 3 different in kind, not just in size. The data belongs to someone else, so the inventory depends on what third parties will share. And the same tonne of CO2e is counted by more than one company: your category 1 is your supplier's Scope 1 and 2. That overlap is expected, because each company reports its own boundary rather than a share of a global total.

Scope 3 is measured in tonnes of CO2 equivalent (tCO2e), aggregating the six gases the Standard requires in the value chain: CO2, methane, nitrous oxide, HFCs, PFCs, SF6. Biogenic CO2 is excluded from the scopes and reported separately.

Upstream and downstream: the split that drives everything

The Standard groups the 15 categories into two blocks. Upstream emissions (categories 1 to 8) come from goods and services the company buys, before they reach it. Downstream emissions (categories 9 to 15) occur after the sale.

The distinction determines the lever you can pull:

  • Upstream reduction runs through procurement: supplier selection, specifications, contract clauses, engagement programmes. You have commercial leverage over a finite list of counterparties.
  • Downstream reduction runs through product design and customer behaviour: efficiency in use, recyclability, take-back schemes, franchise standards, portfolio allocation. You have design control but almost no operational control.

It also determines data availability. Upstream data can be requested contractually. Downstream data has to be modelled from assumptions about lifetime, usage and end-of-life pathways, which is why downstream categories carry wider uncertainty.

The 15 Scope 3 categories of the GHG Protocol

The Standard defines 15 categories, each with a minimum boundary listed in table 5.4, plus optional emissions a company may add. In the rare cases where an activity fits none of them, the Standard asks for it to be reported separately as an "other" Scope 3 activity.

Upstream

  • Purchased goods and services. Cradle-to-gate emissions of everything bought in the reporting year. Usually the largest upstream category.
  • Capital goods. Machinery, buildings, vehicles, IT infrastructure. Not depreciated, counted in full in the year of acquisition.
  • Fuel- and energy-related activities not included in Scope 1 or Scope 2. Upstream emissions of the fuels and electricity you consume, plus grid losses.
  • Upstream transportation and distribution. Inbound freight and third-party logistics paid for by the company.
  • Waste generated in operations. Third-party treatment and disposal of waste and wastewater from your own operations.
  • Business travel. Employee travel in vehicles not owned or operated by the company, plus hotel stays where accounted for.
  • Employee commuting. Home-to-work travel in third-party vehicles, and, where relevant, teleworking energy use.
  • Upstream leased assets. Assets leased in as lessee, when not already inside Scopes 1 and 2.

Downstream

  • Downstream transportation and distribution. Outbound transport, distribution and storage of sold products, paid for by someone else.
  • Processing of sold products. Further processing of intermediate products by downstream manufacturers.
  • Use of sold products. The use phase over the expected lifetime, split into direct use-phase emissions, for products consuming energy or containing greenhouse gases, and indirect ones.
  • End-of-life treatment of sold products. Disposal and treatment of sold products and their packaging.
  • Downstream leased assets. Assets owned by the company and leased out to third parties.
  • Franchises. Franchisee Scope 1 and 2 emissions, reported by the franchisor.
  • Investments. Equity, debt, project finance and managed assets, allocated in proportion to the share held. Dominant for banks, insurers and asset managers.

For a group with several legal entities, this split interacts with the consolidation approach chosen for Scopes 1 and 2, as covered in our guide to carbon accounting for corporate groups.

Which categories you actually have to report

A common misreading is that all 15 categories must be quantified. Section 6.2 requires companies to "account for all scope 3 emissions as defined in this standard and disclose and justify any exclusions". Exclusions are permitted. Silent exclusions are not.

Table 6.1 gives seven criteria for identifying relevant activities:

  • Size: contributes significantly to total anticipated Scope 3 emissions.
  • Influence: there are reductions the company could undertake or influence.
  • Risk: contributes to risk exposure, regulatory, supply chain, product, litigation or reputational.
  • Stakeholders: deemed critical by customers, suppliers, investors or civil society.
  • Outsourcing: previously in-house, or typically in-house among sector peers.
  • Sector guidance: identified as significant by sector-specific guidance.
  • Other: any additional criterion set by the company or its sector.

Only the first is about tonnage. A category can be small and still relevant because it carries risk, because stakeholders care, or because it is where your influence sits. A screen based on volume alone fails review.

Calculation methods, category by category

Appendix D of the Technical Guidance lists, for every category, the accepted methods with their formulas, the activity data and the emission factors needed. The closer the data is to the actual activity, the better.

Categories 1 and 2 (purchased goods and services, capital goods) share four methods:

  • Supplier-specific: quantity purchased times a supplier-specific product emission factor, when the supplier has a reliable cradle-to-gate inventory, product footprint or internal LCA.
  • Hybrid: allocated Scope 1 and 2 emissions of the tier 1 supplier, plus material inputs, inbound transport of those inputs and the supplier's waste outputs, with secondary factors filling the gaps.
  • Average-data: mass or units purchased times a cradle-to-gate factor per unit of mass or per reference unit.
  • Spend-based: amount spent by product type times a cradle-to-gate factor per unit of economic value.

Category 3 uses a supplier-specific or average-data method, with one formula worth memorising: the upstream fuel emission factor equals the life cycle factor minus the combustion factor. For purchased electricity, the upstream factor subtracts transmission and distribution losses as well, but only where those losses are already included in the life cycle factor.

The other categories follow the same logic with their own method sets:

  • 4 and 9, transportation and distribution: fuel-based, distance-based or spend-based, plus a site-specific or average-data method for the storage leg.
  • 5, waste: supplier-specific from the treatment provider's allocated emissions, waste-type-specific (tonnage times a factor for the waste type and route), or average-data across routes.
  • 6, business travel: fuel-based or distance-based, with no spend-based method, only fallback formulas deriving fuel use from fuel spend or from distance travelled, and hotel nights as an optional term.
  • 7, employee commuting: fuel-based, distance-based or average-data, the last extrapolating distances and modal split from a survey sample.
  • 8 and 13, leased assets: asset-specific, computing Scope 1 and 2 per asset, lessor-specific for category 8 and lessee-specific for category 13, or average-data. For unmetered leased space, the Guidance gives an allocation formula based on floor area, occupancy rate and building energy use.
  • 10, processing of sold products: site-specific, summing fuel, electricity, refrigerant, process and waste emissions downstream, or average-data on the mass sold.
  • 11, use of sold products: direct use-phase emissions multiply total lifetime expected uses, units sold in the period, energy per use and the energy factor. Expected lifetime and usage intensity dominate the result and must both be documented.
  • 12, end-of-life: waste-type-specific. Mass of sold products and packaging, times the share treated by each route, times the factor for that route.
  • 14, franchises: franchise-specific, summing each franchise's Scope 1 and 2, with the same floor-area allocation for unmetered buildings, or average-data.
  • 15, investments: investment-specific for equity, project-specific for project finance, average-data on investee revenue times a sector factor, weighted by the share of equity or total project cost.

The choice of emission factor matters as much as the method. If the difference between a physical and a monetary factor is not obvious to your team, start with our explainer on emission factors.

Primary data or secondary data: how to choose

The Technical Guidance defines primary data as data from specific activities within the company's value chain, and secondary data as data that is not. Industry averages, published databases, government statistics, financial data and proxy data are all secondary.

When requesting data from a supplier, the Guidance ranks specificity from best to weakest: product-level, then activity-, process- or production-line-level, then facility-level, then business-unit-level, then corporate-level. Ask for the highest level the supplier can produce and record which one you obtained: that record supports your data-quality disclosure later.

On the secondary side, prefer databases that are internationally recognised, government-provided or peer-reviewed, and select them using the data-quality indicators of section 7.3 of the Standard: technological, temporal and geographical representativeness.

Environmentally-extended input-output (EEIO) data deserves its own warning. Advantages: complete economic coverage, simple to apply, low data burden. Disadvantages: broad sector averages that miss non-homogeneous sectors, a linear assumption between monetary and environmental flows yielding indicative results only, and inability to distinguish two products of different price in one sector. Spend-based estimates are excellent for screening and useless for tracking progress: a supplier who halves their emissions changes nothing in a spend-based figure.

Collecting emissions data from suppliers

Supplier data collection is where Scope 3 programmes stall. Four rules make it survivable.

Start from the screening, not from the supplier list. The Technical Guidance uses a coffee company: ten suppliers covering 85 percent of purchased beans are engaged with primary data, the rest uses secondary factors, and the result is extrapolated to 100 percent.

Ask for a defined object. "Send us your carbon footprint" produces a corporate number you cannot allocate. Ask for a cradle-to-gate product footprint on a named reference, or for allocated Scope 1 and 2 emissions relating to what you bought, plus the bill of materials and waste outputs for the hybrid method.

Anticipate depth. Tier 1 suppliers often cannot answer without their own suppliers, as we detail on tier 2 and tier 3 supplier emissions. When a supplier cannot answer at all, the fallback is the invoice, a method covered in invoice data extraction for carbon accounting.

Track the share of primary data. The Standard requires you to report, per category, the percentage of emissions calculated from supplier or value chain partner data.

Building the inventory in six steps

  • Map the value chain, attaching each flow to one of the 15 categories.
  • Screen all 15 categories with spend-based or EEIO estimates. Ranking, not precision.
  • Apply the seven relevance criteria, justifying every exclusion in writing.
  • Choose a method per category and record the boundary, data sources and factor set.
  • Collect and calculate, moving the heaviest categories from secondary to primary data.
  • Report and set a base year: emissions by category, exclusions, methods, data quality, share of primary data, recalculation policy.

Five mistakes that break a Scope 3 inventory

  • Excluding without disclosing. An undocumented exclusion is a conformance failure, not a scoping decision.
  • Deducting supplier reductions directly. A supplier's decarbonisation reaches you through an updated emission factor or updated primary data, never through a subtraction applied to your total.
  • Staying on spend-based data for material categories. Acceptable for screening, unable to show progress, since a monetary factor moves with price rather than performance.
  • Ignoring the minimum boundary. Mixing required and optional emissions across years destroys comparability, and the SBTi refuses optional-boundary reductions as a way to meet its threshold.
  • Forgetting biogenic CO2. Excluded from the scopes and reported separately, under the Standard and under ESRS E1.

What CSRD and ESRS E1 require on Scope 3

Disclosure Requirement E1-6 requires an undertaking to disclose, in tonnes of CO2eq, its gross Scope 1, Scope 2, Scope 3 and total GHG emissions. Paragraph 51 specifies that the Scope 3 disclosure covers each significant category, meaning each category that is a priority for the undertaking. Paragraph 53 adds an intensity indicator: total emissions per net revenue.

Application Requirement AR 46 sets the method and points straight back to the GHG Protocol. An undertaking must consider the principles and provisions of the GHG Protocol Scope 3 Standard, version 2011. Commission Recommendation (EU) 2021/2279 and the relevant requirements of EN ISO 14064-1:2018 are an option it may add, not an alternative it may substitute. It must screen total Scope 3 emissions across the 15 categories using appropriate estimates, then identify and disclose its significant categories from the magnitude of estimated emissions and the other criteria of the Standard: financial spend, influence, related transition risks and opportunities, stakeholder views. Financial institutions must additionally consider PCAF.

Three obligations in AR 46 are easy to miss:

  • Significant categories must be updated every year on current activity data, and the full inventory refreshed at least every three years, or sooner on a significant change in circumstances.
  • The undertaking must disclose the percentage of emissions calculated using primary data from suppliers or other value chain partners.
  • For each significant category, it must disclose the boundaries considered, the calculation methods and tools applied, and the categories included and excluded with justification.

A phase-in exists: undertakings or groups not exceeding, on their balance sheet dates, an average of 750 employees during the financial year, on a consolidated basis where applicable, may omit the Scope 3 and total emissions datapoints for the first year of preparation of their sustainability statement.

What SBTi requires on Scope 3

The SBTi Corporate Near-Term Criteria, version 5.3.1 of April 2026, set three thresholds that decide whether Scope 3 enters a validated target.

  • C4. If relevant Scope 3 emissions are 40 percent or more of total Scope 1, 2 and 3 emissions, they must be included in near-term science-based targets. Companies selling or distributing natural gas or other fossil fuels must set a separate target on use of sold products regardless of that share.
  • C5. No more than 5 percent of the Scope 3 inventory may be excluded, and no more than 5 percent of combined Scope 1 and 2 emissions.
  • C6. Near-term reduction, supplier engagement or customer engagement targets must collectively cover at least 67 percent of reported and excluded Scope 3 emissions, against the minimum boundary of each category.

Criterion R2 closes a loophole: targets on optional Scope 3 emissions, outside a category's minimum boundary, are encouraged but cannot count towards the 67 percent threshold. And since the threshold is computed on reported plus excluded emissions, a thin inventory does not make the target easier to reach.

These criteria sit alongside the Corporate Net-Zero Standard version 1.3.1. The SBTi has published version 2.0 of that Standard, but states that a company setting targets in 2026 should do so under version 1.3.1, validation under version 2.0 opening in early 2027.

How Kabaun handles Scope 3

Kabaun is a carbon management platform built on the GHG Protocol methodology, covering Scopes 1, 2 and 3 and the 15 standardised categories. It handles the parts of this guide that are mechanical rather than judgemental.

Data comes in through CSV and Excel import with column mapping, manual entry, or the REST API and ERP connectors, with an ETL pipeline for heterogeneous sources. Every data point keeps a traceable source, attached evidence and a full audit trail. Supplier collection runs on automated data requests with response tracking and reminders. Emission factors come from public databases integrated into the platform, including direct integration with the ADEME Base Carbone, with custom sector factors under administrator validation. Uncertainty intervals follow GHG Protocol recommendations. Reporting covers CSRD and ESRS E1, and reduction targets can be tracked, including SBTi-aligned trajectories. Klem, the embedded AI layer, handles invoice OCR, accounting line categorisation and anomaly detection at import, each action validated by the user.

To see how it applies to your value chain, talk to us.

FAQ: Scope 3 emissions

What are Scope 3 emissions in simple terms?

Scope 3 emissions are all indirect greenhouse gas emissions in a company's value chain other than emissions from purchased energy. They cover what the company causes without owning the source: the production of what it buys, the freight it does not operate, the use and disposal of what it sells, and what it finances. The GHG Protocol organises them into 15 categories, 8 upstream and 7 downstream.

What is the difference between upstream and downstream Scope 3?

Upstream emissions, categories 1 to 8, occur before the company receives a good or service: supplier production, inbound freight, energy production losses, waste treatment, business travel, commuting, leased assets held as lessee. Downstream emissions, categories 9 to 15, occur after the sale: outbound freight, processing by industrial customers, use of sold products, end-of-life, assets leased out, franchises, investments. The split sets the lever, procurement upstream and product design downstream.

Do I have to report all 15 Scope 3 categories?

No. The GHG Protocol requires you to account for all Scope 3 emissions and to disclose and justify any exclusion. Categories that are not relevant can be excluded, provided the exclusion is stated and justified in the public report. Relevance is assessed against seven criteria: size, influence, risk, stakeholders, outsourcing, sector guidance and any additional criterion the company sets.

How do you calculate Scope 3 emissions?

Every calculation multiplies activity data by an emission factor, but the accepted method differs by category. Purchased goods allow supplier-specific, hybrid, average-data and spend-based methods. Transport allows fuel-based, distance-based and spend-based. Leased assets and franchises use asset-specific or average-data. Appendix D of the Technical Guidance gives the formula for each of the 15 categories.

Is spend-based Scope 3 data good enough?

Good enough to screen and rank categories, not good enough to steer reductions. Spend-based factors come from environmentally-extended input-output models, which the Technical Guidance describes as indicative only, unable to distinguish products of different value within a sector. Material categories should move to activity-based or supplier-specific data.

Is Scope 3 mandatory under the CSRD?

Yes, through ESRS E1. Disclosure Requirement E1-6 paragraph 44 requires gross Scope 3 emissions in tonnes of CO2eq, and paragraph 51 the breakdown by significant category. Undertakings or groups not exceeding an average of 750 employees during the financial year may omit those datapoints for the first year of preparation of their sustainability statement.

How much Scope 3 does the SBTi require you to cover?

Under the Corporate Near-Term Criteria 5.3.1, Scope 3 must be included in near-term targets when relevant Scope 3 emissions represent 40 percent or more of total Scope 1, 2 and 3 emissions. Targets must then cover at least 67 percent of reported and excluded Scope 3 emissions, and no more than 5 percent of the inventory may be excluded.

Is double counting between companies a problem in Scope 3?

No. Your category 1 emissions are your supplier's Scope 1 and 2, and both report them in their own inventory. Value chain accounting is not designed to sum to a global total without overlap, so the duplication is expected. What the Standard prevents is double counting inside a single inventory, which is why each category has a minimum boundary.

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