The One-Minute Summary
Scope 3 emissions are all the indirect emissions in your value chain - everything from your suppliers' operations to how customers use and dispose of your products. They typically represent 70-90% of a company's total carbon footprint.
Yes, they're complex to calculate. No, you can't ignore them under CSRD. The good news: perfect data isn't required, and there are practical shortcuts for SMBs.
The Pizza Restaurant Analogy
Imagine you run a pizza restaurant:
- Scope 1: Gas burned in your ovens (direct emissions)
- Scope 2: Electricity for your lights and fridges (energy you buy)
- Scope 3: Everything else - growing the tomatoes, making the cheese, delivering pizzas, customers driving to pick up orders, throwing away the boxes
Scope 3 is the whole story beyond your four walls.
The 15 Categories of Scope 3
Upstream (Before Your Operations)
Category 1: Purchased Goods & Services
- Raw materials, ingredients, components
- Example: Steel for manufacturing, coffee beans for café
Category 2: Capital Goods
- Equipment, buildings, vehicles
- Example: New machinery, computers, company cars
Category 3: Fuel & Energy Activities
- Upstream emissions from fuel/electricity
- Example: Extracting oil that becomes your gasoline
Category 4: Transportation & Distribution (Upstream)
- Shipping from suppliers to you
- Example: Trucks bringing inventory to warehouse
Category 5: Waste from Operations
- Disposal and treatment of your waste
- Example: Landfill emissions from your trash
Category 6: Business Travel
- Employee flights, hotels, rental cars
- Example: Sales team flying to conferences
Category 7: Employee Commuting
- Daily travel to/from work
- Example: Staff driving to office
Category 8: Leased Assets (Upstream)
- Assets you lease and operate
- Example: Leased warehouse, equipment
Downstream (After Your Operations)
Category 9: Transportation & Distribution (Downstream)
- Shipping products to customers
- Example: Delivery trucks to retailers
Category 10: Processing of Sold Products
- When others process your products
- Example: Milk processor using your raw milk
Category 11: Use of Sold Products
- Emissions when customers use products
- Example: Electricity to run appliances you sell
Category 12: End-of-Life Treatment
- Disposal of your products
- Example: Landfill emissions from packaging
Category 13: Leased Assets (Downstream)
- Assets you own but others operate
- Example: Buildings you lease to tenants
Category 14: Franchises
- Operations of your franchisees
- Example: McDonald's franchise locations
Category 15: Investments
- Emissions from investments/financing
- Example: Portfolio companies' emissions
Which Categories Matter for Your Business?
Almost Everyone Has These:
- Purchased goods & services (Category 1)
- Business travel (Category 6)
- Employee commuting (Category 7)
- Waste (Category 5)
Industry-Specific Priorities:
Manufacturing:
- Purchased goods (huge)
- Transportation & distribution
- Use of sold products
- End-of-life treatment
Services/Office:
- Purchased services
- Business travel (often biggest)
- Employee commuting
- Capital goods (IT equipment)
Retail:
- Purchased goods for resale
- Transportation both ways
- Customer travel to stores
How to Calculate (The Practical Way)
Step 1: Start with Spend-Based Method (Quick & Dirty)
How it works: Multiply spending by emission factors Formula: $ spent × kg CO2 per $ = emissions
Example:
- Spent $100,000 on office supplies
- Factor: 0.5 kg CO2 per $
- Emissions: 50,000 kg CO2
Pros: Quick, uses existing financial data Cons: Not very accurate
Step 2: Upgrade to Activity-Based (Where Possible)
How it works: Use actual consumption data Formula: Quantity × emission factor = emissions
Example:
- Purchased 1,000 kg of steel
- Factor: 2.5 kg CO2 per kg steel
- Emissions: 2,500 kg CO2
Pros: More accurate Cons: Requires more data
Step 3: Engage Suppliers (For Material Items)
Ask top suppliers for:
- Their Scope 1 & 2 emissions
- Emissions allocated to your purchases
- Their calculation methodology
Start with your top 10 suppliers by spend.
The SMB Shortcut Method
Focus on the 80/20 Rule
Step 1: Identify top five Scope 3 categories by rough estimation Step 2: Focus detailed calculations there Step 3: Use estimates for the rest
Quick Estimation Tools:
- EPA's Simplified GHG Calculator (free)
- GHG Protocol Scope 3 Evaluator (free)
- Carbon Trust SME Tools (free basics)
When to Use Estimates:
- Initial baseline year
- Minor categories (less than 5% of total)
- When supplier data unavailable
- For future projections
Real Example: Marketing Agency (50 employees)
Their Scope 3 Breakdown:
- Purchased services (IT, software): 35 percent
- Employee commuting: 25 percent
- Business travel: 20%
- Capital goods (computers): 10%
- Office supplies: 5 percent
- Other: 5 percent
Data Collection Approach: Step 1: Surveyed employees on commuting (got 80% response) Step 2: Pulled travel data from expense system Step 3: Used spend-based for IT services Step 4: Got actual data from computer supplier Step Five: Estimated the rest
Total time invested: 2 weeks part-time Result: Credible baseline for CSRD
Common Challenges & Solutions
"Our suppliers won't share data"
- Start with largest suppliers
- Use industry averages
- Add requirements to new contracts
- Join industry initiatives for collective asking
"The calculations are too complex"
- Use free tools initially
- Consider hiring consultant for baseline
- Improve accuracy over time
- Document assumptions clearly
"We don't have historical data"
- Start measuring now
- Use estimates for past
- Focus on trends going forward
- Be transparent about limitations
"It's too expensive to measure"
- Many free tools available
- Cost drops significantly year 2+
- Consider it investment in risk management
- Often finds cost savings too
Your 60-Day Scope 3 Action Plan
Week 1-2: Map Your Value Chain
- List all Scope 3 categories
- Rough estimate which matter
- Identify data sources
Week 3-4: Collect Easy Data
- Business travel records
- Waste management reports
- Major supplier invoices
- Employee commute survey
Week Five-Six: Calculate & Refine
- Use online tools for calculations
- Document all assumptions
- Identify biggest emissions sources
Week 7-8: Engage & Improve
- Contact top suppliers
- Set reduction targets
- Plan better data for next year
- Create monitoring system
Red Flags to Avoid
❌ Don't claim zero - Everyone has Scope 3 ❌ Don't exclude without justification - Document why categories don't apply ❌ Don't use outdated factors - Emission factors change yearly ❌ Don't forget uncertainty - Acknowledge data limitations ❌ Don't work alone - You need procurement, finance, operations
Quick Wins for Reduction
Option 1: Switch to local suppliers (less transport) Option 2: Encourage remote work (less commuting) Option 3: Choose low-carbon materials (aluminum vs steel) Option 4: Optimize packaging (less waste) Option Five: Select green logistics (rail vs air)
The Bottom Line
Scope 3 emissions are complex but not impossible. Start with estimates, focus on your biggest categories, and improve each year. CSRD accepts good faith efforts with clear documentation over perfect data.
Remember: Everyone struggles with Scope 3. Showing progress and transparency matters more than precision in year one.