What are Scope 3 emissions?

Scope 3 emissions are indirect greenhouse gas (GHG) emissions that occur within an organization's broader value chain, rather than from sources they directly own or control. They are generated by external entities and activities, divided into upstream operations (such as suppliers, business travel, and employee commuting) and downstream operations (such as product use, transport, investments, and end-of-life waste disposal). Because Scope 3 often accounts for more than 70% of a company's total footprint, measuring and managing these emissions is a critical step toward achieving net-zero targets.

Understanding the sources and magnitude of your business' emissions can help you to develop strategies for reducing their environmental footprint and meeting sustainability goals. Get to know how a carbon audit can help you to understand your business' scope 3 emissions and how to reduce them.

What Are Scope 3 Emissions?

Scope 3 emissions are a category of greenhouse gas (GHG) emissions that are indirect and not owned or controlled by the reporting organization. As an example, these may be emissions that can occur in the supply chain, or from the activities of employees such as business travel or commuting. Scope 3 emissions are associated with the activities of:

• Suppliers
• Customers
• Employees
• Other stakeholders that are outside of an organization

The Greenhouse Gas Protocol, a widely used international standard for measuring and managing GHG emissions, defines Scope 3 emissions as "all indirect emissions that occur in the value chain of the reporting company, including both upstream and downstream emissions." This includes emissions from activities such as purchased goods and services, transportation and distribution, waste disposal, and the use of products and services.

Scope 3 emissions are often the largest and most difficult category of emissions to quantify and manage, as they are influenced by a wide range of factors beyond an organization's direct control. However, they are also a significant source of potential emissions reductions - and should be considered in carbon accounting.

What Are Some Examples of Scope 3 Emissions?

To accurately measure your value chain footprint, Scope 3 activities are divided into two distinct operational segments: upstream and downstream activities.

Upstream Scope 3 Activities (Supply Chain & Operations)

Upstream activities refer to the emissions associated with the production and delivery of goods and services that an organization purchases from its suppliers, as well as the immediate operational activities of its employees. These emissions occur outside of an organization's operational boundaries but are linked to its business activities. Examples include:

• Purchased Goods and Services: Emissions generated from the production of products the reporting business bought or acquired in their reporting year. These can include both tangible and intangible products (goods and services). For example, production-related components (such as ingredients and materials) and non-production-related components (such as office supplies and PPE) all count as upstream emissions.
• Business Travel: Emissions generated by employees traveling to and from business meetings, conferences, and events. These emissions are often significant, particularly for organizations with a global presence.
• Employee Commuting: Emissions generated by employees traveling to and from work, either by car or public transportation.

Downstream Scope 3 Activities (Product Lifecycle & Distribution)

Downstream activities refer to the emissions generated by the use, distribution, and eventual disposal of products and services that an organization produces or sells to its customers. These emissions occur outside of an organization's direct control but are associated with its business activities. Examples include:

• Use of Sold Products: Emissions generated by the use of products and services that an organization sells to its customers. For example, the energy and fuel emissions associated with the use of cars, appliances, and electronic devices.
• End-of-Life Treatment of Sold Products: Emissions created by the disposal, recycling, or reuse of products that are produced or sold, such as the emissions generated by electronic waste disposal or the energy consumed during recycling processes.
• Transport and Distribution: Emissions generated by transportation and distribution of products purchased by the company. This can include inbound and outbound logistics, and transportation of materials and goods via air, rail, road, and marine transport. They can also come from storage of purchased products in warehouses, distribution centers, and retail facilities.
• Investments: Emissions associated with the companies or assets that businesses have invested debt or equity into—known as financed emissions. If a business invests in a more energy-efficient product, service, or technology, this can reduce the emissions generated during the use of that product by customers, directly lowering the investing business' carbon output.

Why Is Reducing Scope 3 Emissions Important?

Reducing Scope 3 carbon emissions is an important part of any comprehensive environmental strategy. Managing emissions is not only a question of what is best for the planet but also what makes the best business sense. The primary advantages of reducing your Scope 3 emissions include:

• Financial Risk Mitigation: Reduced financial climate risk faced by exposure to high-emitting suppliers.
• Supply Chain Visibility: Increased transparency and accountability in supply chains.
• Enhanced Relationships: Better relationships with suppliers, partners, and customers due to transparent sustainability collaboration.
• Brand Reputation: Improved brand and public image associated with active, verifiable sustainability efforts.
• Corporate CSR Goals: Enhanced corporate social responsibility (CSR) initiatives.
• Capital & Market Access: Greater access to green certification programs or favorable pricing tiers for those who exceed emission goals relative to their competitors in similar industries or sectors.

Minimum helps organizations measure, report and reduce their emissions across Scope 1, 2 and 3. Speak to one of our experts to learn more.