Scope 3 Emissions: Why They Matter and How to Start Measuring Them

The Three Scopes of GHG Emissions

The GHG Protocol Corporate Standard classifies a company's greenhouse gas emissions into three scopes:

• Scope 1 — Direct: Emissions from sources owned or controlled by the company (boilers, furnaces, company vehicles, process emissions)
• Scope 2 — Indirect (energy): Emissions from purchased electricity, steam, heat, or cooling consumed by the company
• Scope 3 — Value chain: All other indirect emissions from activities upstream and downstream of the company's own operations

For most industrial companies, Scope 3 accounts for 70–90% of total emissions — yet it receives the least attention in early-stage carbon accounting. Ignoring it means presenting a fundamentally incomplete picture to investors, customers, and regulators.

The 15 Categories of Scope 3

The GHG Protocol Scope 3 Standard defines 15 upstream and downstream categories. The most material for Indian manufacturers are typically:

Upstream (most common for manufacturers)

• Category 1 — Purchased goods & services: Emissions from producing raw materials, components, and services you buy — often the single largest Scope 3 category
• Category 4 — Upstream transportation: Freight emissions from suppliers to your factory gate
• Category 5 — Waste generated in operations: Disposal of manufacturing waste by third parties

Downstream (most common for consumer goods / chemicals)

• Category 11 — Use of sold products: Emissions generated when customers use your products (e.g., energy consumed by an appliance over its lifetime)
• Category 12 — End-of-life treatment: Emissions from disposal or recycling of your products at end of life

Why Scope 3 Is Now Unavoidable

• BRSR Core: SEBI requires disclosure of Scope 3 emissions for top-listed companies, particularly Category 1 (purchased goods) and Category 11 (use of products)
• SBTi validation: Companies seeking SBTi validation must address Scope 3 if it exceeds 40% of total emissions — which it almost always does
• Global buyers: Companies supplying to European or US multinationals are increasingly asked for supplier Scope 3 data as part of value chain due diligence
• CDP disclosure: CDP's Supply Chain programme asks large companies to report Scope 3 and engage suppliers on emissions reduction

How to Start: A Practical 4-Step Approach

• Step 1 — Materiality screening: Identify which of the 15 categories are likely to be significant for your business. A 2-day desk-based screening is sufficient to prioritise
• Step 2 — Data collection: For each material category, gather activity data — purchase spend, tonnage of raw materials, freight tonne-km, waste quantities
• Step 3 — Emission factors: Apply published emission factors from the GHG Protocol, IPCC, DEFRA, or CPCB's national inventory where available. For Cat 1, supplier-specific data is preferred but spend-based factors are acceptable initially
• Step 4 — Reduce and report: Identify the top 3 categories by magnitude and set reduction initiatives. Report in your BRSR or sustainability report with the methodology disclosed

Common Pitfalls

• Using spend-based emission factors without disclosing the limitation — BRSR auditors flag this as inadequate
• Double-counting: Scope 3 Category 3 (fuel and energy related) should not include Scope 1 and 2 already reported
• Omitting leased assets that are material to operations
• Not disclosing the base year, methodology, and data quality for each Scope 3 category