Scope 3 Emissions: What Industrial Buyers Need to Report
Scope 1 and 2 cover what you burn and the power you buy. Scope 3 asks you to account for your suppliers and your customers.
What the three scopes cover
The GHG Protocol divides emissions into three scopes. Scope 1 is direct emissions from sources a company owns or controls, and Scope 2 is emissions from purchased electricity, heat and steam. Both concern things the company measures or is billed for.
Scope 3 is everything else in the value chain, which the Protocol's Scope 3 standard divides into fifteen categories. For an industrial buyer the heavy ones are usually purchased goods and services, capital goods, transportation, and the use of sold products.
Who has to report it
Requirements vary and have been changing, so the position below is a general guide and each company should confirm its own obligations.
Exhibit 1: How major disclosure frameworks treat Scope 3 emissions.
| Framework | Treatment of Scope 3 | Who it reaches |
|---|---|---|
| GHG Protocol | Defines the categories and calculation methods; voluntary in itself | The accounting basis most other frameworks refer to |
| ISSB climate standard | Asks for Scope 3 disclosure, with transition reliefs | Companies in jurisdictions that adopt it |
| EU CSRD and its reporting standards | Scope 3 reported where material | Companies in scope in the EU, and their suppliers indirectly |
| Canada and the United States | Rules have been proposed, paused or narrowed at different times | Check current federal, provincial and state requirements |
Even where no rule applies directly, large customers may ask, because a buyer reporting its own Scope 3 needs data from its suppliers, and that request travels down the chain.
The data problem
Most industrial buyers start with very little, since suppliers range from those with verified product footprints to those who have never measured anything. A first inventory therefore leans on estimates.
- Spend-based: multiply spend in a category by an industry-average emission factor. Quick and coarse.
- Activity-based: multiply quantities purchased, such as tonnes of steel, by a factor for that material. Better.
- Supplier-specific: use data from the supplier for the product you bought. Best, and hardest to get.
Starting with averages is acceptable and the Protocol allows for it, provided the report says so and the company has a plan to improve.
One category at a time
Trying to perfect all categories at once stalls. A screening pass will show that one or two account for most of the footprint, and that is where effort belongs.
Within those categories, a handful of suppliers usually dominates, and they should be approached directly. Ask what they measure, in what format, and whether it has been verified, then build supplier-specific data for them first and leave the long tail on averages.
The inventory states, for each category, which method was used and what share of the figure rests on supplier data, and that share rises each year for the categories that matter.
Whatever method is used must be documented well enough to be checked, as explained in building an ESG reporting program that survives assurance. Extending equipment life is one way to cut the capital goods category, discussed in circular economy principles for industrial equipment.
Key takeaways
- Run a spend-based screening across your purchases to see which categories are likely to dominate.
- Confirm with counsel which disclosure rules apply to you and to your major customers.
- Ask your top suppliers in the largest category what emissions data they already produce.
- Record the method and emission factors you used, so next year’s figure can be compared.
Start your Scope 3 inventory
We can screen your purchasing for the categories that matter most and set up a method for collecting supplier data.
Building an ESG Reporting Program That Survives Assurance
An assurance provider does not read your sustainability story. It picks a number and asks where it came from.
Decarbonization Roadmaps for Asset-Heavy Operators
A target for 2040 seems to require no decision until 2039. Equipment replacement cycles say otherwise.
Circular Economy Principles for Industrial Equipment
Refurbished and remanufactured equipment can match new on performance for many categories. Most procurement processes never give it the chance.