What Are Scope 3 Emissions and Why Do They Matter?

Scope 3 emissions can represent up to 75% of a company's total carbon footprint. Yet, measuring them is one of the biggest challenges in carbon accounting. As regulations like the Corporate Sustainability Reporting Directive (CSRD) enforce transparency, businesses must adopt robust strategies to reduce their environmental impact. This article explores what Scope 3 emissions are, why they matter, the challenges they present, and how advanced tools like GEMS can simplify the measurement process.

What Are Scope 3 Emissions and Why Do They Matter?

Carbon accounting basics

Greenhouse Gas (GHG) emissions are classified into three scopes as defined by frameworks like the GHG Protocol.

• Scope 1: Direct emissions from sources owned or controlled by a company (e.g., fuel combustion on-site).
• Scope 2: Indirect emissions from the consumption of purchased electricity, steam, heating, or cooling.
• Scope 3: All other indirect emissions occurring across a company’s value chain.

For many businesses, Scope 3 emissions constitute the majority of their carbon footprint, encompassing activities such as upstream manufacturing, downstream product use, employee commuting, and waste management.

The importance of scope 3 emissions

Measuring Scope 3 emissions is essential to understanding the full environmental impact of a business:

• Comprehensive View: It provides a holistic view of a company’s carbon footprint.
• Risk Assessment: Identifying supply chain dependencies and vulnerabilities.
• Regulatory Compliance: Mandatory in many jurisdictions, including under the CSRD and France’s updated GHG reporting rules.

Increasingly, the inclusion of Scope 3 emissions in reporting is no longer optional. It is now mandatory under regulations such as the CSRD in the EU and national decrees like France’s updated greenhouse gas reporting requirements.

Challenges in Measuring Scope 3 Emissions

Common obstacles

Measuring Scope 3 emissions is inherently complex due to its broad scope. Companies often face several challenges:

• Data Gaps and Inconsistencies: Collecting activity data across an extended value chain can be daunting, especially when relying on supplier estimates or outdated emission factors.
• Unclear Boundaries: Determining which activities to include often requires significant interpretation and can lead to either overestimations or omissions.
• Over-reliance on Monetary Data: Using financial records to estimate emissions sacrifices granularity and accuracy.
• Double Counting: When multiple departments or stakeholders report overlapping data, discrepancies arise.
• Stakeholder Engagement: Involving multiple parties across the value chain can delay data collection and lead to inconsistent reporting.

Efficient measurement strategies

To overcome these hurdles, businesses should:

• Define clear objectives for carbon accounting, such as compliance, certification, or transition planning.
• Prioritize emission sources based on their materiality, using sectoral studies and peer benchmarks.
• Establish centralized data collection processes to prevent redundancy and ensure consistency.
• Use a phased approach, focusing on major emission sources initially while setting improvement goals for subsequent years.

GEMS: A Solution to Simplify Scope 3 Measurement

Recognizing the challenges businesses face, our SaaS GEMS is an advanced tool designed to simplify, streamline, and enhance the process of measuring and managing Scope 3 emissions. By addressing the complexities of data collection, processing, and analysis, GEMS provides businesses with actionable insights to drive sustainability efforts. Here are the most important functionalities for:  

Comprehensive database integration for precision

GEMS leverages a vast array of emission factor databases, including EcoInvent, CDP, IEA, and sectoral resources like Agribalyse and Boavizta, to ensure precise carbon footprint assessments. By incorporating supplier-specific data and regional factors, it delivers highly accurate results, streamlining reporting and aligning with global standards like the GHG Protocol.

Guided data collection

GEMS uses intuitive decision trees to guide users through the data collection process. Missing information is supplemented by alternative questions, ensuring accurate emission estimates. The platform also supports bulk data import via customizable Excel templates, minimizing manual entry and optimizing efficiency.

AI-Powered data processing

Artificial Intelligence (AI) integrated into GEMS accelerates data processing and enhances accuracy. It identifies appropriate emission factors, converts raw data into standardized formats, and categorizes purchases with precision. This approach allows companies to focus on actionable insights rather than data wrangling.

Stakeholder engagement via surveys

The platform facilitates comprehensive engagement across the value chain by enabling suppliers and employees to participate in emissions reporting. Surveys are customizable, multilingual, and automatically extrapolate data, ensuring seamless integration into the overall assessment process.

With GEMS, companies can confidently tackle Scope 3 emissions, ensuring compliance with regulations and strengthening their commitment to net-zero goals. This tool is the bridge between aspiration and actionable climate strategies.

Conclusion:

Scope 3 emissions are a critical component of any carbon accounting strategy, offering insights into the broader environmental impact of a company’s operations and supply chain. However, measuring these emissions requires navigating significant complexities. Tools like GEMS not only streamline the process but also provide advanced capabilities for accurate, actionable reporting. By adopting a robust Scope 3 measurement strategy, businesses can drive meaningful climate action while meeting regulatory and stakeholder expectations. For companies looking to take the first step towards comprehensive carbon accounting, GEMS offers the efficiency and precision needed to succeed.