28For most businesses, Scope 3 emissions are the single largest source of carbon emissions. According to several studies they contribute 70-90% to overall organisational carbon footprint. Relative to Scope 1 and 2, Scope 3 is more difficult to measure and quantify because it involves a large number of data points, which are dispersed among suppliers, businesses, and different business systems.
Understanding Scope 3 is particularly relevant for companies with global supply chain operations, particularly for those with substantial exposure to China or Asia. As a result, understanding Scope 3 is becoming increasingly important to make evidence-based decisions, create credible decarbonisation plans and meet regulatory expectations.
What Are Emissions Scopes and How Are They Defined
What are the 3 scopes of emissions? The global standard for carbon accounting, the GHG Protocol Corporate Standard, categorise emissions into three groups:
- Scope 1 or Direct emissions cover emissions from sources a company owns or controls, such as onsite fuel combustion or company vehicles.
- Scope 2 or Indirect energy emissions arise from purchased electricity, steam, heating, or cooling.
- Scope 3 or other indirect emissions capture both upstream and downstream activities, which are classified in 15 categories, covering the full value chain.
Upstream categories include:
• Purchased goods and services
• Capital goods
• Fuel- and energy-related activities
• Upstream transportation and distribution
• Waste generated in operations
• Business travel
• Employee commuting
• Upstream Leased assets
Downstream categories include:
• Transportation and distribution
• Processing of sold products
• Use of sold products
• End-of-life treatment
• Downstream Leased assets
• Franchises
• Investments
Each company must use double materiality to determine which categories are significant in financial and environmental terms.
Why Scope 3 Is Critical for Sustainability Leaders
1.Scope 3 Drives Strategic Climate Action
Due to their size, Scope 3 emissions are the most significant part of any corporate GHG inventory. Without understanding them, organisations cannot identify emissions hotspots, identify suppliers responsible for the largest share of emissions and therefore they cannot build credible decarbonisation pathways, set decarbonisation targets or identify transition risks.
2.CSRD Elevates Scope 3 From “Nice to Report” to Mandatory Disclosure
Under CSRD and ESRS E1, companies must disclose material Scope 3 emissions, justify the methodology used, and demonstrate how their reported emissions align with climate transition plans. This elevates Scope 3 reporting from voluntary to mandatory disclosure.
CSRD requires:
• Double materiality assessment
• Transparent methodologies and data sources
• Evidence for estimates, assumptions, and boundaries
• Increasingly assurable (audited) emissions data
This raises the bar for accuracy and documentation.
3.Transforming Supply-Chains
By engaging with suppliers, companies can more actively reduce their emissions across their supply chain.
This enables:
• More strategic procurement decisions
• Supplier-level benchmarking
• Identification of hotspots and cost-saving opportunities
• Partnerships that reduce both carbon and operational waste
4.Scope 3 Reductions Drive Commercial Advantage
Customers, investors, and value-chain partners increasingly expect organisations to have a good understanding of Scope 3. Companies that build strong capabilities strengthen:
• Market credibility
• Access to capital
• Competitiveness in procurement tenders
• Supply-chain resilience
Why Measuring Scope 3 Emissions Is So Difficult
Even the most advanced companies face challenges:
1.Limited Supplier Data
Most suppliers, especially SMEs, lack the capacity and ability to provide any kind of emissions data, let alone high-quality one. This is particularly true in regions where carbon disclosure is still emerging.
2.Variable Emission Factors
Generic international databases frequently diverge from real-world regional conditions.
Carbonstop’s analysis has shown discrepancies of 20–200% between global averages and actual China-specific emission factors.
3.Inconsistent Methodologies
Companies often combine spend-based estimates, industry averages, and primary data without a clear methodology for ensuring consistency or quality controls. This leads to inconsistencies that undermine audit readiness.
4.Large, Distributed Value Chains
Global production and extensive supplier networks create complexity for organisations to collecting, consolidating, and verifying standardised data to ensure it is robust.
Without the right systems, reporting is slow, manual, and prone to error.
Best Approaches for Managing and Reducing Scope 3 Emissions
A robust programme for measuring and managing Scope 3 is based on the following pillars.
1.Build Supplier Engagement Programs
Companies must collaborate with suppliers to improve data provision and speed up the submission of accurate primary data, provide guidance, and encourage adoption of efficient production processes that also reduce emissions.
2.Prioritise Primary Data Where It Matters Most
A pragmatic approach is to deploy a tiered data strategy:
• Use regional or industry data for broad coverage
• Focus primary data collection on key suppliers that are responsible for the majority of emissions.
3.Integrate Scope 3 Into Product Design & Procurement
Embedding carbon into sourcing and product development supports long-term reductions.
4.Use Scenario Analysis and Digital Tools
Scenario modelling allows companies to evaluate the impact of different reductions strategies, and helps identify the most cost-effective investment decisions.
How Carbonstop Helps Organisations Master Scope 3 Emissions
Carbonstop’s enterprise carbon management platform is designed to meet the data-intensity and compliance demands of Scope 3 reporting.
Our Key strengths include:
1.China-Specific Emission Factors for providing Accurate insights
Using accurate, location specific emissions factors is essential for companies sourcing or manufacturing in China. Many emissions datasets do not cover these emissions, which makes results inaccurate and inappropriate for making decarbonisation decisions.
2.AI-Enabled Data Validation
Embedded AI in tools automatically flags anomalies, gaps, and data that exceed expected values by a large margin. This improves the reliability of data provided by suppliers.
3.Supplier Engagement Workflows
Digital software tools help suppliers submit data more efficiently and effectively.
4.Audit-Ready CDP, CSRD reports
Every dataset, assumption, and calculation is stored in an auditable structure ready for assurance reviews.
5.Scenario Modelling and Planning Tools
Our tools enable companies to model decarbonisation pathways, identify interventions and prioritise high-impact ones.
Together, these capabilities reduce the manual burden of Scope 3 reporting while improving transparency, accuracy, and decision quality.
The Future of Scope 3 Reporting
Expectations around Scope 3 reporting will continue to expand as CSRD introduces assurance requirements, global disclosures are harmonised and companies demand more granular data from their suppliers.
Organisations that invest now in high-quality systems will reap the benefits of obtaining more accurate data more efficiently and engage suppliers. They will be best positioned to meet regulatory expectations, reduce costs and unlock potential strategic benefits.
Take Control of Your Scope 3 Emissions
Carbonstop provides the tools and expertise companies need to build robust Scope 3 measurement and reduction programmes.
Contact Carbonstop to learn how we support accurate data collection, supplier engagement, and audit-ready disclosures.
