This guide was first published in 2020. It was reviewed and updated by Sustainable Energy First in September 2026.
Businesses are under increasing pressure to reduce their emissions from both stakeholders and compliance requirements. For many organisations, Scope 3 accounts for the majority of emissions, even though it can often feel ‘invisible’. Scope 3 remains one of our most popular topics here on the Energy Advice Hub. That’s why we’re laying out the key things to know about Scope 3 emissions, including what to expect in the future.
What are Scope 3 emissions?
As originally set out by the Greenhouse Gas Protocol, greenhouse gas emissions are divided into three scopes based on where they come from: Scope 1, 2 and 3. Scope 3 emissions are indirect emissions associated with a business’s activities and value chain, but which are not covered by Scope 1 or Scope 2.
That’s in contrast with the direct emissions covered by Scope 1, which might include emissions from a company’s own lorries or a boiler owned and operated by the business. Scope 2 covers indirect emissions from the generation of energy purchased or acquired by a business, such as electricity used for heating or lighting.
Scope 3 covers other indirect emissions across a business’s value chain, including those associated with suppliers, business travel, the use of sold products and waste. That’s why they’re often known as “value chain emissions”.
Some examples of Scope 3 emissions include:
- Purchased goods and services
- Business travel
- Employee commuting
- Use of sold products
- Waste disposal
Why do Scope 3 emissions matter?
Scope 3 emissions often make up the majority of a business’s emissions, although they have historically received less attention than Scope 1 and 2. The proportion varies significantly between businesses and sectors, but for many organisations, Scope 3 represents a substantial share of their overall carbon footprint.
So, while many businesses focus primarily on reporting Scope 1 and 2 emissions, this may mean overlooking a significant proportion of the emissions linked to their business. Understanding emissions across your value chain can help businesses build a more complete picture of their carbon footprint and identify opportunities to reduce emissions.
It’s also worth keeping in mind that the UK has a legally binding target to reach net zero greenhouse gas emissions by 2050, established under the Climate Change Act. The UK has also committed to reducing its greenhouse gas emissions by at least 68% by 2030, compared with 1990 levels.
As the UK continues to work towards these targets, businesses will increasingly come under pressure to reduce their emissions across their value chains. For many organisations, that will mean looking beyond Scope 1 and 2 and taking a closer look at Scope 3.
How does Scope 3 relate to net zero targets and emissions reduction?
Because Scope 3 emissions typically account for a significant proportion of a business’s overall carbon footprint, measuring them can help businesses identify where the majority of their emissions are coming from and how they can be reduced. A credible net zero strategy should consider relevant value chain emissions rather than focusing solely on Scope 1 and 2.
Scope 3 data can also inform practical emissions reduction measures, such as engaging suppliers, changing procurement practices, using lower-carbon materials, or improving logistics. Perfect data isn’t always needed; getting started is better than waiting for perfect data.
However, having a net zero target does not automatically mean that an organisation is legally required to report on all 15 Scope 3 categories. The requirements will depend on the reporting framework and the organisation concerned.
Is it compulsory to report your Scope 3 emissions?
Not for every business. Whether you have to report your Scope 3 emissions will depend on a variety of factors, including the size of your company, your jurisdiction and the specific regulatory, procurement or reporting frameworks that apply to you.
While some large companies are now required to report relevant value-chain emissions, that doesn’t mean other organisations should wait until reporting becomes mandatory. Since this article was first written in 2020, we’ve seen Scope 3 emissions reporting become increasingly important across both mandatory and voluntary reporting frameworks, as well as through procurement and supply chain requirements, and this trend is expected to continue.
For SMEs in particular, the first request for Scope 3 data may come from a customer, tender or supply chain requirement rather than from a regulator. Larger organisations are increasingly asking suppliers for emissions data to help them understand and reduce their own value chain emissions.
This means a business may find itself being asked to calculate Scope 3 emissions or provide a wider GHG inventory, even if it does not have a direct legal obligation to report Scope 3 itself.
Where businesses may encounter Scope 3 emissions requirements
Framework/mechanism | Requirement type | Who it applies to | Scope 3 position | Current status |
Statutory reporting | Quoted companies and qualifying large unquoted companies/LLPs | For unquoted companies, limited Scope 3 reporting includes relevant business travel. For quoted companies, mandatory emissions reporting covers Scope 1 and 2 | Mandatory for organisations in scope | |
Statutory reporting | Certain large companies/LLPs and relevant listed entities | Climate-related disclosures may include Scope 3 emissions where relevant. This does not create a blanket requirement to report to all Scope 3 categories | Mandatory for organisations in scope | |
UK SRS S1 & S2 (UK Sustainability Reporting Standards) | Sustainability reporting framework | Currently available to organisations voluntarily | UK SRS is a broader sustainability reporting framework. Scope 3 is explicitly covered with S2 as part of its climate-related disclosures | Currently voluntary; future mandatory requirements are under consideration |
Public procurement | Suppliers bidding for relevant central gov’t contracts above £5m/year | Increasingly requires suppliers to report Scope 1, 2 and relevant Scope 3; broader requirements are planned from 2027 | Mandatory for suppliers in scope | |
Statutory reporting | Organisations within the relevant EU reporting scope | CSRD establishes the sustainability reporting requirements, while ESRS provides the standards used by in-scope companies. These include relevant value-chain Scope 3 disclosures | Requirements apply according to the relevant EU scope and reporting timetable | |
UK CBAM (UK Carbon Border Adjustment Mechanism) | International trade requirement | Businesses importing specified goods | Not a Scope 3 reporting framework, but requires emissions data for certain imported goods and therefore overlaps with Scope 3 data collection | Mandatory from 1 January 2027 for in-scope sectors and goods |
Voluntary framework | Organisations voluntarily setting science-based net zero targets | Scope 3 requirements form part of the target-setting framework, with proposed changes expected to broaden requirements for corporate companies. | Voluntary framework; requirements are being updated. | |
CDP (formally Carbon Disclosure Project) | Voluntary disclosure | Organisations responding to CDP questionnaires | Requests information on value-chain emissions including Scope 3 | Voluntary disclosure framework |
While this is not an exhaustive list of Scope 3 frameworks and requirements, it highlights the growing relevance of Scope 3 reporting across statutory reporting, public procurement, international requirements and voluntary or market frameworks.
It also shows why there is no single answer to the question of whether Scope 3 reporting is “mandatory”. Understanding and measuring Scope 3 emissions is increasingly important as reporting requirements evolve and businesses face increasing pressure from customers, investors, supply chains and other stakeholders.
The benefits of Scope 3 calculation extend beyond preparing for future requirements. Research from the UK government has highlighted potential benefits, including improved transparency, enhanced reputation, and a greater ability to identify and mitigate emissions.
What categories of Scope 3 emissions are there?
The Greenhouse Gas (GHG) Protocol, is the internationally recognised standard for measuring greenhouse gas emissions. It splits Scope 3 emissions into two broad categories: upstream (from your suppliers) and downstream (from the use or disposal of products and services sold by your business). These are further divided into 15 distinct categories.
Upstream Scope 3 emissions
- Category 1 – Purchased goods and services
- Category 2 – Capital goods
- Category 3 – Fuel- and energy-related activities (not included in Scope 1 or 2)
- Category 4 – Upstream transportation and distribution
- Category 5 – Waste generated in operations
- Category 6 – Business travel
- Category 7 – Employee commuting
- Category 8 – Upstream leased assets
Downstream Scope 3 emissions
- Category 9 – Downstream transportation and distribution
- Category 10 – Processing of sold products
- Category 11 – Use of sold products
- Category 12 – End-of-life treatment of sold products
- Category 13 – Downstream leased assets
- Category 14 – Franchises
- Category 15 – Investments
The Greenhouse Gas Protocol website has much more information on how to define emissions in these categories and where to set the boundary that marks them out as part of a specific company’s value chain.
How do you measure your company’s Scope 3 emissions?
First, you need to identify the emissions sources in your company’s value chain, both upstream and downstream, then decide which of the 15 categories set out by the Greenhouse Gas Protocol they fall into. From there, you can start gathering the relevant data and calculating the associated emissions.
All this is a lot easier said than done, despite the detailed and helpful guidance from the GHG Protocol. The best way to start measuring your company’s Scope 3 emissions is to seek expert help. The experts at Sustainable Energy First, for example, will start by mapping your company’s unique emissions profile, showing exactly where emissions are being generated in its value chain.
Some businesses, rather than engaging outside help straight away, will gather the information they need and put it into the right format in-house, but then ask a specialist organisation to verify their calculations. The feedback from this process can be particularly valuable if you’re concerned you may have made mistakes or if a reporting requirement is new to your business.
What’s on the horizon for Scope 3 emissions reporting?
As you’ve seen, Scope 3 emissions are becoming increasingly relevant across statutory reporting, public procurement and voluntary frameworks.
In 2027, we will start to see initiatives such as the UK CBAM come into effect, alongside other supplier requirements such as Carbon Reduction Plans.
There are also changes ahead for voluntary frameworks. The upcoming SBTi Corporate Net-Zero Standard v2.0 is expected to broaden Scope 3 expectations for companies, while the approach for SMEs remains optional but recommended.
Businesses may also see more customers using supplier engagement targets to ask suppliers to set science-based targets by a certain date, or specifying target-setting expectations within contracts.
This means Scope 3 emissions are likely to become an increasingly important part of how businesses understand and manage their wider supply chains, rather than something that can be considered separately from day-to-day business activities.
With that in mind, companies that start preparing to measure and report their Scope 3 emissions now will be better placed to respond to changing requirements, as well as increasing pressure from customers, suppliers and other stakeholders.
If you’re looking to understand and reduce your Scope 3 emissions across your supply chain, get in touch for a no-obligation chat with the team at Sustainable Energy First.
