Sustainability Questions
Reporting & Legislation
Solutions & Tips
FutureTracker News
All posts

What are Scope 3 Emissions and Why are they so Important?

Dive deep into the world of Scope 3 emissions: the indirect impacts hidden within your company's value chain. Understand, measure, and innovate for a greener future.
TL;DR Embed
TLDR: Scope 3 emissions, representing the indirect emissions within a company's value chain, often constitute the largest part of its carbon footprint, sometimes exceeding 80%. These emissions span 15 categories, from the production of purchased goods and services to the end-of-life treatment of sold products. Understanding and measuring these emissions is crucial for businesses to fully grasp their environmental impact, manage risks, improve efficiency, and foster stakeholder trust.

Business greenhouse gas (GHG) emissions are typically categorised into three scopes: Scope 1, 2, and 3, with Scope 3 emissions often emerging as the most complex and significant portion of a footprint. This article explores how Scope 3 emissions are defined, why they are important, and how your business can start measuring them.

Understanding Scope 3 Emissions

Scope 3 emissions are the indirect emissions related to a company's activities, but not directly produced by it. They occur within the company's broader value chain, including both upstream processes like the creation of materials the company buys, and downstream processes, such as what happens to its products after they're sold.

While measuring Scope 3 emissions is not universally mandatory, and there's no requirement to cover all relevant categories, proactively engaging with these emissions can be significantly beneficial for businesses.

Scope 3 emissions are subdivided into 15 categories:

Purchased Goods and Services: Emissions from the production of goods and services the company buys, e.g., manufacturing of office furniture.
Capital Goods: Emissions from the creation of fixed assets used by the company, e.g., construction of a company facility.
Fuel and Energy-Related Activities: Emissions from the production of fuel and energy the company purchases, excluding emissions reported in Scopes 1 and 2, e.g., extraction of coal for the power the company uses.
Upstream Transportation and Distribution: Emissions from transporting and distributing goods and materials to the company, e.g., shipping of raw materials.
Waste Generated in Operations: Emissions from disposing of waste created in the company's operations, e.g., emissions from landfilling office waste.
Business Travel: Emissions from transportation for business-related activities not owned or controlled by the company, e.g., employee flights for business trips.
Employee Commuting: Emissions from employees traveling to and from work, e.g., employees driving their cars to the office. This category also include the emissions from employees working from home.
Upstream Leased Assets: Emissions from assets leased by the company but not owned, e.g., emissions from a leased manufacturing plant, if not already reported in Scope 1 or 2.
Downstream Transportation and Distribution: Emissions from transporting and distributing the company's sold products, e.g., delivery of products to retailers.
Processing of Sold Products: Emissions from the processing of intermediate products sold by the company, e.g., emissions from a bakery using the company's flour to make bread.
Use of Sold Products: Emissions from the end use of the company's sold products, e.g., emissions from cars the company manufactures when driven by consumers.
End-of-Life Treatment of Sold Products: Emissions from the disposal or recycling of the company's sold products, e.g., emissions from dismantling and recycling electronic devices.
Downstream Leased Assets: Emissions from assets leased out by the company, e.g., emissions from buildings the company owns but leases to others.
Franchises: Emissions from the company's franchised operations, e.g., emissions from a franchisee-operated fast-food outlet.
Investments: Emissions from the operation of investments made by the company, e.g., emissions from a manufacturing facility that the company invests in but does not own or control.

Each category encompasses a broad range of activities, making Scope 3 emissions diverse and expansive.

The Significance of Measuring Scope 3 Emissions

Scope 3 emissions often constitute the largest portion of a company's carbon footprint, sometimes accounting for up to 80% or more of total emissions. Despite being indirect, businesses have considerable influence over these emissions through their choice of suppliers, business practices, and product design. Accurately measuring Scope 3 emissions is crucial for several reasons:

Clear Footprint Understanding

A comprehensive view of Scope 3 emissions allows businesses to fully grasp their environmental impact. This clarity is fundamental because you can't manage what you can't measure.

Risk Management

Identifying and understanding these emissions helps companies manage risks associated with regulatory changes, market volatility, and reputation.

Efficiency and Innovation

By scrutinising their value chain, businesses can uncover opportunities for efficiency improvements and innovative product designs that reduce emissions.

Stakeholder Trust

Transparent reporting of Scope 3 emissions fosters trust among investors, customers, and other stakeholders, increasingly concerned about environmental impact.

FutureTracker: Empowering Businesses in Scope 3 Management

The FutureTracker platform offers sophisticated tools for a detailed assessment of Scope 3 emissions across all major categories. Its user-friendly interface simplifies data collection and analysis, making it accessible for businesses of all sizes and sectors. Furthermore, FutureTracker’s extensive library of data-driven sustainability initiatives offers practical steps businesses can take to reduce their Scope 3 emissions. From supplier engagement strategies to waste reduction, companies can find initiatives that resonate with their specific needs.

If you’d like to learn about how FutureTracker can help your business, book a demo here.

Increase your ESG-IQ!
Get the latest releases and tips, interesting articles, and sustainability news delivered straight to your inbox.
By subscribing, you agree to receive communications from FutureTracker by email
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
More climate insights
View all
More solutions and tips
View all
More reporting and legislation
View all
More news
View all
More FutureTracker news
View all
More client news
View all
More questions answered
View all
Recent articles
View all

Let's get started.