Scope 3 Emissions: How to Track and Report Your Company’s Impact

What is Included in Scope 3 Emissions?

Scope 3 emissions include all indirect emissions across your organization’s value chain. There are 15 different categories included in Scope 3 emissions. Those categories include:

1. Purchased goods and services
2. Capital goods
3. Fuel- and energy-related activities
4. Transportation and distribution (upstream)
5. Transportation and distribution (downstream)
6. Waste generated in operations
7. Business travel
8. Employee commuting and telecommuting (working remotely)
9. Leased assets (upstream)
10. Leased assets (downstream)
11. Processing of sold products
12. Use of sold products
13. End-of-life treatment of sold products
14. Franchises
15. Investments

According to the Task Force on Climate-Related Financial Disclosures, Scope 3 emissions account for the largest share of most companies’ Greenhouse Gas (GHG) emissions. Not only is Scope 3 information useful for identifying carbon emissions, but it can help organizations find ways to streamline and create more efficient processes along their entire value chain.

3 Common Carbon Accounting Methodologies

There are a few different carbon accounting methodologies your organization can use to measure carbon emissions. There are three main approaches: spend-based methodology, activity-based methodology, and a hybrid methodology.

Spend-Based Methodology

A spend-based carbon accounting methodology (also referred to as consumption-based carbon accounting) measures the greenhouse gases associated with the consumption of goods by your organization. Spend-based carbon accounting takes into account the emissions generated throughout the entire lifecycle of a product or service, including the production, transportation, use, and final disposal.

Calculating carbon emissions with this strategy considers the financial value of a purchased good or service and then multiplies this value by an emission factor. This method provides an estimation per individual financial unit based on estimations and industry standards.

Activity-Based Methodology

An activity-based carbon accounting methodology works by measuring emissions based on an organization’s activities or processes instead of their spending. This is a more granular process in comparison to the spend-based methodology, as it looks at every single activity on an organization’s value chain.

This method requires organizations to record raw data from activities. The more detailed the information, the more accurate the accounting becomes. However, this method is best for calculating Scope 1 and 2 emissions, which can create a challenge for measuring Scope 3 emissions.

Hybrid Methodology

The hybrid methodology combines elements of both spend-based and activity-based accounting, offering a more comprehensive approach to carbon accounting. It allows organizations to track emissions based on financial expenditures while also incorporating specific activity data from their value chain. This dual approach provides greater accuracy in allocating emissions and offers deeper insights into both carbon impacts and financial outflows across a product’s lifecycle.

Reporting Scope 3 Emissions

Once you identify which accounting methodology to use, the next step is to determine which of those emissions fit within the Scope 3 framework. Include these emissions, as well as the emissions within Scope 1 and Scope 2, in your sustainability or annual reports. The more specific you can get with this information, the better. Stakeholders want to see transparency, and the more transparent you are with business practices, the more informed decisions they can make.

How to Measure Scope 3 Emissions FAQ

Why are Scope 3 emissions hard to track?

Scope 3 emissions are challenging to keep track of because this is the largest group of emissions out of the Scope 1, 2, and 3 categories. The other reason is that Scope 3 emissions target indirect emission sources. It’s much more challenging for organizations to calculate emissions when they don’t own the sources. This is why it’s important for organizations to partner with supply chain partners that share similar ecological values or offer insight into their carbon emission minimization strategy.

Can you reduce Scope 3 emissions?

Yes. Reducing Scope 3 emissions requires collaboration with your supply chain partners to drive lower-carbon alternatives and improve efficiencies. One effective approach is leveraging Scope Zero’s Carbon Savings Account (CSA) to engage employees in sustainable choices that reduce emissions associated with commuting, remote work, and business travel. By focusing on emission reduction strategies rather than offsets, your organization can make meaningful progress toward sustainability goals while driving real carbon impact.

Does Net Zero include Scope 3 emissions?

Yes. Net-zero targets include all three scopes of emissions when it comes to carbon neutrality.

Minimize Scope 3 Emissions with Scope Zero

Provide employees with opportunities for financial wellness while minimizing Scope 3 emissions. Schedule a demo to learn how you can measure, reduce, and report Scope 3 work-from-home and commute emissions while reducing spend on sustainability goals.

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