Why Scope 3 Emissions Are the Next Big Challenge for Eco-Friendly Companies
This has proven to be important because direct emissions, from owned operations (Scope 1) and purchased energy (Scope 2), are the easiest to reduce — almost as if they’re “beginner” or starter activities in the race toward net-zero.
But as regulations become stricter around the world and stakeholders require more transparency, a sleeping giant emerges: Scope 3 emissions.
These indirect emissions along a company’s value chain typically represent 75-95% of its total greenhouse gas (GHG) footprint, and are therefore the largest, yet most difficult to capture target for truly sustainable businesses.
Understanding Scope 3 Emissions
According to the Greenhouse Gas Protocol, the standard for emissions accounting around the world, Scope 3 includes 15 categories of indirect upstream and downstream emissions.
For suppliers, upstream consists of sourcing goods and services as well as the operations of suppliers’ own supply chain.
The downstream part includes customer usage of products, end-of-life treatment and secondary life investments.
In all but a few industries, Scope 3 is much larger than Scopes 1 and 2. According to research by PwC, McKinsey and WEF, these value-chain emissions usually make up 65-95% of a company’s total impact — in many cases around 90% for consumer goods and tech companies.
By contrast, direct operations may only add some 5-10%.
Why Scope 3 Is the Next Big Challenge
Sustainability-minded companies working toward science-based targets or net-zero commitments can’t avoid addressing Scope 3.
The SBTi requests any emissions above 40% of its total to be reported, which is typically the case. But combating it poses distinct challenges:
Complexity and Data Gaps: While Scopes 1 and 2 get information through internal meters and bills, Scope 3 requires data from thousands of suppliers and customers.
The majority of smaller suppliers do not have measurement capabilities, meaning that companies must rely on estimates or averaged to produce sample reports which are inaccurate.
No Direct Control: These emissions take place outside company walls — in supplier factories, customer use or waste streams. They need the ability to influence them, rather than to command.
Changing Standards: 2025 will be a pivotal year. The EU’s Corporate Sustainability Reporting Directive (CSRD) requires large companies to disclose Scope 3 emissions, with implementation in stages from this year.
SB 253 in California, for example, mandates reporting for companies with more than $1 billion in revenue and first calculations must be made using the full year of data from 2025, in 2026.
The U.S. SEC skipped mandatory Scope 3 in its final rules, but state and international pressures are growing.
Resource Burden: Scope 3 accounting is a time consuming and costly process, requiring supply chain mapping, lifecycle assessments and ongoing verification.
Real-world examples highlight the struggle. Consumer goods behemoths like those in the beverage industry get socked with huge downstream emissions related to product cooling and disposal.
Tech companies have high effects from customer energy usage. Even oil and gas companies face challenges with “use of sold products” emissions, in many cases the majority or even vast majority of their own footprint.
Opportunities Amid the Challenges
Sometimes rife with challenges, yet addressing Scope 3 pays dividends. It spurs innovation — such as re-engineering products to curtail use emissions or collaborating on circular economies.
The companies that lead here get competitive benefits: better risk management, stronger relationships with suppliers and appeal to ESG investors.
Tools are improving. Digital platforms, AI-generated estimates and programmes such as the GHG Protocol updates (extending into 2025-2027) present new methodologies.
Smarter companies began with hotspot analysis (concentrating on the 20% of suppliers causing 80% of emissions) and then scaled reductions through incentives and green procurement.
The Path Forward for Eco-Friendly Leaders
With Scope 3, for companies serious about true sustainability it is now no longer optional — but necessary. Disregarding it means risking being accused of greenwashing, regulatory fines and losing market share.
Embracing it, however hard that can be at times, puts brands ahead of the climate game.
With 2025 on the horizon, bringing even tighter regulation and scrutiny around Scope 3 emissions, eco-friendly companies are being forced to evolve once again in order to reap the benefits: invest in data collaboration, set ambitious value chain targets and embed decarbonization into business as usual.
The reward? Not only compliance but resilience in a low-carbon world.
