What Are Scope 3 Emissions and Why Do They Matter?

Understanding the Three Scopes of Emissions

The Greenhouse Gas Protocol–a globally recognised standard for measuring and managing emissions–divides emissions into three distinct scopes:

Scope 1: Direct Emissions

These are emissions generated directly by an organisation. They come from sources owned or controlled by the business, such as fuel combustion in company-owned vehicles, emissions from on-site manufacturing, or industrial processes. These are the emissions over which organisations have the most control.

Scope 2: Indirect Energy Emissions

Scope 2 covers emissions from the energy an organisation purchases and uses. This includes electricity, steam, heating, and cooling. While indirect, these emissions are often easier to calculate because energy providers typically supply this data.

Scope 3: Value Chain Emissions

Encompassing the largest and most complex set of emissions, Scope 3 includes all other indirect emissions across an organisation’s supply chain. This can range from the emissions generated by suppliers and transportation to the carbon footprint of customers using the organisation’s products.

What Are Scope 3 Emissions?

Scope 3 emissions represent the largest share of emissions for most organisations, yet they are the hardest to measure and reduce due to their complexity and reliance on third-party data. They cover 15 distinct categories that span both upstream and downstream activities:

Understanding these categories is essential for organisations to identify where they can have the most impact. While upstream activities often involve collaboration with suppliers, downstream emissions may require rethinking product design, customer engagement, or end-of-life solutions.

Why do Scope 3 emissions matter?

While Scope 3 reporting isn’t yet universally mandated, evolving regulations and growing stakeholder expectations are rapidly bringing it into focus. This article explores what Scope 3 emissions are, how to measure them, and how Zevero can help overcome key challenges.

Scope 3 regulations

Regulations mandating Scope 3 reporting are advancing at different paces across regions. In the UK, for example, Scope 3 reporting is largely voluntary except for companies impacted by the Carbon Border Adjustment Mechanism (CBAM), which focuses on ‘direct and indirect’ emissions. However, the upcoming UK Sustainability Reporting Standards (UK SRS) are expected to include Scope 3, signalling imminent change.

In the EU, the Corporate Sustainability Reporting Directive (CSRD) requires large entities to report Scope 3 emissions, starting in January 2023 and phasing in through 2028. This will affect nearly 50,000 EU-based companies, as well as some non-EU entities meeting specific criteria.

Other regions making progress include:

• California, with the Climate Corporate Data Accountability Act (SB 219), phasing Scope 3 reporting in from 2025.
• Australia, where mandatory climate disclosures will require Scope 3 from the second reporting year, with liability starting in 2028.
• Singapore, where the SQX Climate Disclosure Rule will initially prioritise large entities, with further implementation plans under review.

It’s worth mentioning that some regions are hesitating over Scope 3 inclusion. For example, the U.S. SEC Climate Disclosure Rule initially proposed the inclusion of Scope 3 emissions, but the Final Rule released in March 2024 excluded them. This decision has sparked federal lawsuits, with critics arguing that the rule does not go far enough to address climate transparency. As a result, implementation has been temporarily paused for further review.

Stakeholder expectations

Beyond regulation, stakeholder pressure is accelerating the adoption of Scope 3 reporting. Investors, consumers, industry peers, and governments are increasingly demanding the integration of Scope 3 into corporate strategy. Standards like SBTi and TCFD have long positioned Scope 3 as essential to best practice.

Together, regulatory requirements and stakeholder expectations are making Scope 3 emissions a cornerstone of corporate sustainability strategies.

Opportunities in Addressing Scope 3 Emissions

The opportunities unlocked by measuring Scope 3 emissions are vast, extending well beyond the immediate benefit of reduced regulatory risk. By diving into value chain emissions, organisations can uncover actionable insights that drive innovation, improve operational efficiency, and enhance their sustainability credentials. 

• Enhanced brand reputation
  Proactively addressing indirect emissions demonstrates a company’s commitment to tackling climate change, appealing to climate-conscious customers, investors, and partners.
• Improved resilience
  Building transparency across the value chain helps companies anticipate and mitigate risks, manage disruptions, and adapt to regulatory changes more effectively.
• Cost savings
  Scope 3 data often reveals inefficiencies within the supply chain. For example, optimising logistics or reducing waste can lead to significant cost reductions while lowering emissions.
• Stronger Partnerships
  Collaborating with suppliers to reduce emissions strengthens relationships and encourages innovation across the value chain.

The Challenges of Scope 3 Measurement

Despite its benefits, managing Scope 3 emissions is inherently complex because it depends on external data from suppliers, partners, and customers. Common challenges include:

1. Data Collection‍

Gathering data across multiple regions, industries, and suppliers is resource-intensive and prone to inconsistencies. Many organisations rely on estimates or industry averages, which can compromise accuracy.

2. Knowledge Gaps

Many teams lack the expertise to understand and act on Scope 3 data, especially when it involves complex methodologies like lifecycle assessments or supply chain analyses.

3. Boundary Ambiguity

Deciding which emissions to include and how to allocate responsibility for shared emissions (e.g., supplier and customer emissions) can be subjective and require clear boundaries.

While these challenges may seem daunting, they are surmountable with the right tools and strategies. Tackling these barriers is essential for achieving a credible and impactful sustainability strategy.

How to Measure Scope 3 Emissions: A Practical Framework

While the process may seem daunting, a structured approach can simplify Scope 3 measurement, breaking it down to make it more manageable. We recommend starting with the following steps: 

‍Step 1: Identify and prioritise high-impact emission sources.
Certain Scope 3 activities are more critical to address than others, simply because they account for a larger share of greenhouse gas emissions. Prioritising high-impact areas is a vital first step. These priority areas will vary depending on the nature of your business.

Step 2: Engage suppliers for accurate data.
Work with suppliers to improve data quality and transparency. Collaborative relationships are essential for achieving reliable emissions data.

Step 3: Set science-based targets.
By adhering to the Science-Based Targets initiative’s recommended decarbonisation pathway, organisations can ensure targets are both science-based and realistic. Materiality assessments, material changes, supplier partnerships, and process improvements are all key strategies for staying on track with targets.

Step 4: Track progress and report transparently.
Regularly monitoring progress enables businesses to track achievements and identify areas for improvement along the way. Align reporting with recognised standards like TCFD to build trust with stakeholders and enable benchmarking amongst peers.

Each step in this process is a building block toward meaningful emissions reduction, fostering accountability and continuous progress.

How Zevero Simplifies Scope 3 

Zevero offers comprehensive support across all four steps in Scope 3 measurement, providing organisations with the tools and insights required to tackle these emissions (as well as Scope 1 and 2) accurately. By addressing common challenges, Zevero simplifies the process and ensures a seamless, science-aligned approach to Scope 3 management.

Seamless data collection 

Our integrations connect with systems like Xero, Shopify, QuickBooks, and Unleashed to ensure accurate and granular data collection. 

Reduced complexity

Zevero’s AI-powered carbon modelling helps simplify complex Scope 3 calculations. 

By automating emission calculations, we reduce the time spent on data processing by up to 90%.

Hotspot identification

Once the data is in, the platform will identify emissions hotspots, enabling strategic, methodical prioritisation. It will also match your data with the correct emissions factor, pulling from best-in-class emission databases for precise measurement.

Target setting‍

With the help of Zevero’s in-house sustainability experts you can set science-based targets, track KPIs, and identify pathways to reduce your emissions. 

Transparent reporting and tracking

Intuitive dashboards provide insights into your progress, ensuring alignment with global frameworks like GHG Protocol, TCFD, and SBTi.

Scope 3 emissions are no longer an afterthought—they’re a critical component of any organisation’s climate strategy. By addressing these emissions proactively, companies can not only meet regulatory requirements but also unlock new opportunities for innovation, efficiency, and growth. At Zevero, we simplify Scope 3 measurement, reduction, and reporting, empowering you to take meaningful climate action.

Ready to start your Scope 3 journey?

Contact us today to learn how we can help your organisation take a crucial step toward effectively managing carbon emissions.