Importance of Scope 3 Emissions

For most organizations, Scope 3 emissions represent the largest share of total greenhouse gas (GHG) emissions, often accounting for the majority of climate impact across the value chain. These emissions occur upstream and downstream of a company’s direct operations and include activities such as purchased goods and services, transportation, product use, and investments.

Because of their scale, excluding Scope 3 emissions from a greenhouse gas inventory typically results in a materially incomplete view of an organization’s climate impact. Without visibility into value-chain emissions, organizations are limited in their ability to identify meaningful reduction opportunities and develop effective decarbonization strategies.

The current state of Scope 3 reporting

Despite their significance, Scope 3 emissions remain underreported. According to CDP’s 2023 climate disclosure data, only 41% of more than 23,000 disclosing organizations reported at least one Scope 3 emissions category. This gap persists even as corporate climate commitments continue to increase.

As a result, a substantial portion of corporate climate impact remains unmeasured and undisclosed, even when Scope 3 emissions are likely to be material. In many cases, organizations publicly disclose climate targets without reporting the full value-chain emissions needed to assess progress toward those targets.

Why Scope 3 is becoming increasingly important

Expectations around Scope 3 emissions are rising as reporting frameworks, disclosure platforms, and target-setting initiatives converge:

• The GHG Protocol Corporate Value Chain (Scope 3) Standard defines Scope 3 accounting as a core component of a complete corporate GHG inventory.
• The Science Based Targets initiative (SBTi) requires companies to include Scope 3 emissions in target-setting when they represent 40% or more of total emissions, which applies to most organizations.
• Global disclosure standards increasingly expect Scope 3 transparency, including requirements under the International Sustainability Standards Board (ISSB) through IFRS S2 – Climate-related Disclosures.

Together, these developments signal that Scope 3 emissions are no longer optional or supplementary. They are becoming a critical input to credible climate reporting, target-setting, and transition planning.

Risks of not measuring Scope 3 emissions

Failing to measure Scope 3 emissions can introduce several risks:

• Incomplete understanding of climate impact
  Without Scope 3 data, organizations lack visibility into emissions that often dominate their footprint, limiting effective prioritization and reduction efforts.
• Misalignment with reporting and target-setting expectations
  Excluding material Scope 3 emissions may prevent organizations from meeting the requirements of standards, investors, and regulators.
• Reduced credibility with stakeholders
  As scrutiny of climate disclosures increases, omitting Scope 3 emissions can undermine trust and lead to misunderstandings about the true scale of an organization’s impact.
• Missed business and risk insights
  Scope 3 data often reveals exposure to supply chain disruption, regulatory change, and shifting customer preferences—risks that may remain unmanaged without value-chain emissions visibility.

Lesson takeaway

Measuring Scope 3 emissions is essential for understanding an organization’s full climate impact, meeting evolving disclosure and target-setting expectations, and supporting informed, decision-useful climate strategies. As standards and regulations continue to mature, Scope 3 emissions are becoming a foundational element of credible corporate climate action.