Introduction

The report presents a framework to help companies account for and report Scope 3 greenhouse gas (GHG) emissions—those indirect emissions that occur throughout a company’s value chain. These emissions often represent the largest portion of a company’s carbon footprint and are crucial for identifying reduction opportunities. The standard complements the GHG protocol corporate accounting and reporting standard by offering additional guidance for Scope 3 emissions. It includes 15 distinct categories grouped into upstream and downstream activities.

Business goals

A Scope 3 inventory enables businesses to identify emissions “hot spots”, manage risk, and uncover cost and efficiency opportunities. The inventory supports planning for future regulations and reputational expectations, and can help identify market shifts favouring low-emissions products. It is also a foundation for setting reduction targets and tracking progress. Companies can use Scope 3 data to engage suppliers and customers on emissions performance and improve transparency through public reporting.

Summary of steps and requirements

Scope 3 accounting follows an 11-step process, starting with defining business goals and ending with public reporting. Key requirements include applying principles of relevance, completeness, consistency, transparency, and accuracy. Companies must account for all Scope 3 categories unless exclusions are justified. Reporting should include emissions data by category, base year details, calculation methodologies, and data sources.

Accounting and reporting principles

GHG reporting should be relevant for internal and external decision-making, complete with disclosure of exclusions, consistent over time, transparent in assumptions and methodologies, and accurate enough to inform decisions. Trade-offs may exist between completeness and accuracy, and companies are advised to improve data quality over time.

Identifying scope 3 emissions

Scope 3 emissions encompass 15 categories, including purchased goods, capital goods, transport, business travel, use of sold products, and end-of-life treatment. These are divided into upstream and downstream activities. Companies must determine organisational boundaries using one of three approaches: equity share, financial control, or operational control. Emissions are categorised to avoid double counting and ensure comprehensive value chain coverage.

Setting the scope 3 boundary

Companies must account for all Scope 3 emissions, following minimum boundary requirements. Biogenic CO₂ emissions should be reported separately. Activities may be excluded if justified and disclosed. Exclusion criteria include emissions size, influence, stakeholder relevance, and sector guidance. Companies are encouraged to map their value chain and use screening methods to determine material categories.

Collecting data

Data collection should focus on the most material categories. Companies may use primary data (supplier-specific) or secondary data (industry averages). A four-step process is recommended: prioritise activities, select data, fill data gaps, and improve quality over time. Examples show that purchased goods and services often contribute the majority of Scope 3 emissions—Kraft Foods reported over 90% of its total emissions were Scope 3, with 70% from purchased goods.

Allocating emissions

When a company shares resources across multiple outputs, emissions must be allocated using consistent and justifiable methods. These include physical allocation (e.g., by mass or energy content) and economic allocation (e.g., by revenue). The choice depends on data availability and relevance.

Setting a GHG reduction target and tracking emissions over time

Companies setting Scope 3 reduction targets must select a base year, establish a recalculation policy, and track performance consistently. Recalculation is required when structural or methodological changes affect comparability. Public reporting must provide context for emissions changes.

Assurance

Although not mandatory, third-party assurance can improve the credibility of Scope 3 disclosures. Assurance providers should evaluate data quality, calculation methods, and adherence to principles.

Reporting

Public disclosures must include total emissions per category, base year data, data sources, calculation methods, and any biogenic CO₂ emissions. Companies should clearly state all exclusions with justification and describe efforts to improve data and reduce emissions. Reporting enables stakeholders to assess corporate performance, risks, and environmental impact.