Reporting Scope 3 emissions: Key frameworks and standards

More and more purchasers, regulators, investors and consumers are seeking information about companies’ Scope 3 emissions — typically the largest area of most organizations’ carbon impact. This data is key to understanding the carbon footprint of products or services, and assessing climate-related risks. 

Companies are stepping up and starting to report and address their Scope 3 emissions. But it can be confusing to understand exactly what needs to be reported and how, given the range of reporting frameworks and the difficulties involved in sourcing data about supply chain emissions. 

So what are the key requirements for Scope 3 reporting?

Select a framework, standard or regulation below to see what's required, and get in touch with CarbonChain for help calculating your Scope 3 emissions for carbon reporting.

Go to:

1. GHG Protocol
2. GRI (Global Reporting Initiative)
3. TCFD (Task Force on Climate-related Financial Disclosure)
4. ISSB (International Sustainability Standards Board)
5. EcoVadis
6. CDP
7. SASB (Sustainability Accounting Standards Board)
8. SBTi (Science Based Targets initiative)
9. California SB 253 and SB 261
10. CSRD (EU Corporate Sustainability Reporting Directive)
11. CBAM (EU Carbon Border Adjustment Mechanism)
12. US Federal Suppliers Climate Risk and Resilience Rule
13. US Securities and Exchange Commission (SEC) climate disclosure rules 
14. EU CBAM
15. UK Streamlined Energy and Carbon Reporting (SECR)
    

Recap: What is Scope 3?

The three scopes of emissions in an organisation's carbon footprint are:

Scope 1 = direct GHG emissions from owned or controlled sources
Scope 2 = indirect emissions, from the generation of purchased electricity, heat and steam
Scope 3 = all other indirect emissions in the value chain (upstream and downstream), including: purchased goods & services; capital goods; fuel & energy-related activities; transportation & distribution; leased assets; employee commuting; business travel; waste from operations; processing & use of products, investments & franchises. 

GHG Protocol

The widely accepted GHG accounting and reporting international standard, which underpins many of the other frameworks and standards listed on this page. 

The key elements of the GHG Protocol’s reporting requirements are as follows:

• Report all GHG emissions in metric tons of carbon dioxide equivalent (CO₂e), with all gases itemized in the calculation (if the breakdown is available to the reporting company)
• Report Scope 3 GHG emissions intensity metrics (all Scope 3 activities)
• Report base year selection, with rationale
• Report any reductions in absolute emissions and emissions intensity since the base year
• Adhere to 5 guiding principles: relevance, completeness (including justifying any exclusions), consistency, transparency and accuracy

Exclusions
For corporate carbon accounting, an emissions source can be excluded if the source is deemed "not relevant" typically using the 5 relevance criteria of: materiality; influence; stakeholder; risk; outsourcing.

For product carbon accounting, attributable emissions sources can be excluded if ALL of the following are true: data gap exists because primary or secondary data cannot be collected; extrapolated and proxy data cannot be determined to fill the gap; an estimation determines that the data is insignificant. 

Resources:
Full method for creating a complete Scope 3 GHG emissions inventory*
Accompanying technical guidance to calculating Scope 3 emissions*

*These calculation standards are for full corporate Scope 3 emissions inventories. For product-specific carbon accounting and reporting, see the GHG Protocol Product Standard. Like the Scope 3 Standard, it takes a value chain (or 'life cycle') approach to GHG accounting and was developed simultaneously. 

GRI (Global Reporting Initiative)

A key standard setter for sustainability development reporting (including economic, environmental and social impacts). A common format for companies’ self-published annual sustainability reports.

The GRI’s requirements for reporting GHG emissions are based on the GHG Protocol. This means:

• Companies should report indirect (Scope 3) GHG emissions, both upstream and downstream;
• Organizations extracting and producing oil, gas and coal are expected to report emissions from the combustion of their productions, and take actions to reduce those emissions;
• Companies must provide reasons for excluding any Scope 3 data, and are expected to only exclude such data in exceptional cases. The GRI accepts the following reasons for exclusion:
• Legal prohibitions;
• Confidentiality constraints;
• Information unavailable / incomplete (in this case, the organization must specify exactly which entities, sites, geographic locations have data that is missing and cannot be reported). 

Resources:
GRI Standards

TCFD (Task Force on Climate-related Financial Disclosures)

The widely used framework for climate-related disclosures, aligned with the CDP climate change questionnaire.

The TCFD recommendations are designed to support a company’s integration of climate change within their existing business processes including risk management, business strategy development, governance and metrics and targets. The metrics and target recommendations strongly encourage the disclosure of Scope 3 GHG emissions and risks, because this is an important metric of an organization’s exposure to climate-related risks and opportunities. 

The TCFD recommends that companies disclose Scope 3 emissions where they form a significant portion (i.e. 40% or more) of their overall GHG emissions.

Resources:
Recommendations of the Task Force on Climate-related Financial Disclosures
Guidance to Implementing TCFD Recommendations

ISSB (International Sustainability Standards Board)

The standard-setting board designed to meet the demand of international investors for corporate climate and other ESG reporting.

In October 2022, the ISSB confirmed that it will require Scope 3 disclosure, to meet investors’ needs and to align with the TCFD framework and GHG Protocol. The ISSB is set to outline relief provisions (e.g. more time or working with jurisdictions on ‘safe harbor’) to help companies apply these new requirements.

The ISSB highlights certain risks and opportunities from activities related to an organization’s Scope 3 emissions, including:

• Transition risks, such as increasingly stringent energy efficiency standards that affect product design;
• Climate opportunities, such as growing demand for energy-efficient products.

EcoVadis

The world’s largest provider of business sustainability ratings

EcoVadis ratings cover all aspects of ESG, assessing a company’s performance across the following key pillars: Environmental, Labor & Human Rights, Ethics and Sustainable Procurement.

Scope 3 emissions sit under ‘Environmental’ and disclosing them influences a company’s rating. Companies with over 1,000 employees are expected to demonstrate ‘Action’ and ‘Reporting’ on Scope 3 emissions, including influencing suppliers to reduce GHG emissions and collecting GHG data from the value chain. Companies can also request GHG information from their suppliers via the EcoVadis platform.

CDP

The global platform for corporate environmental disclosure. Over 18,700 companies, representing 64% of global market capitalization, disclosed environmental information through CDP in 2022.

• CDP’s requirements for Scope 1-3 GHG emissions disclosure are aligned with the GHG Protocol and TCFD recommendations and will soon incorporate ISSB climate-related disclosure standards;
• CDP strongly encourages companies to disclose their supply chain emissions, and provides guidance on Scope 3 relevance per sector;
• Through CDP’s supply chain program, companies with US$5.5 tn in purchasing power requested over 23,000 suppliers to disclose through CDP.
• In 2021, suppliers disclosing through CDP reported emissions reductions of 1.8billion tCO2e.

SASB (Sustainability Accounting Standards Board)

A standard-setter guiding the disclosure of financially material sustainability information.

The SASB standards have been incorporated into the ISSB. The Scope 3 elements of the standards aren’t focused on GHG emissions inventories. Instead they focus on the direct (physical and transitional) risks and opportunities that companies face in relation to upstream and downstream supply chains:

• Product Design & Lifecycle Management – incorporation of environmental, social, and governance (ESG) considerations in characteristics of products and services provided or sold by the reporting entity
• Supply Chain Management – management of ESG risks within a reporting entity’s supply chain
• Materials Sourcing & Efficiency – issues related to the resilience of materials supply chains to impacts of climate change and other external environmental and social factors. 

Resources:
SASB Standards FAQsSASB and GHG Emissions

SBTi (Science Based Targets initiative)

The organization that defines best practice in science-based target setting for GHG emissions reductions, and validates companies' and financial institutions' targets as science-based.

For near-term science-based targets, companies need to include Scope 3 emissions if these account for 40% or more of their total emissions. This is the case for most companies; currently, 96% of science-based targets include Scope 3. The targets for Scope 3 emissions need to be aligned with limiting global warming to well below 2°C.

For long-term net-zero science-based targets, Scope 3 emissions must be included in all cases, with a target reduction of 90-95%.

Resources:
SBTi Corporate Manual

California SB 253 and SB 261

SB 253 mandates companies operating California with over $1 billion in total revenue to disclose their corporate emissions.

The legislation covers not just direct emissions (Scope 1) and emissions from electricity use (Scope 2), but also Scope 3 emissions. It goes beyond the proposed SEC rules by including all Scope 3 emissions.

Gov. Gavin Newsom revised his 2024-2025 state budget proposal to include $22 million to fund the SB 253 and 261 disclosure laws, among other climate programs.

Resources:
SB-253 Climate Corporate Data Accountability Act.

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EU CBAM (Carbon Border Adjustment Mechanism)

While the existing EU Emissions Trading System (ETS) covers European Union (EU) countries, the CBAM will apply a carbon price to goods produced outside the EU.

From October 2023, importers will need to report the total GHG emissions embedded in consignments of aluminum, steel, fertilizers, electrical energy, or cement, if these are produced outside the EU. This covers manufacturing emissions, and emissions from the production of electricity used in the production or manufacturing processes. Find out more.

New: The UK has also proposed its own CBAM.

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UK Streamlined Energy and Carbon Reporting (SECR)

The UK’s new SECR carbon legislation affects how large companies disclose their greenhouse gas (GHG) emissions and energy data, and advises Scope 3 reporting (although it is not mandatory). View our full explainer of the SEC reporting requirements.

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Upcoming regulations

The frameworks and standards listed above are used by companies who voluntarily disclose their emissions. In some cases, mandatory disclosure regulations also include Scope 3. For example:

EU CSRD (Corporate Sustainability Reporting Directive)

A major update to the 2014 NFRD (Non-Financial Reporting Directive). 

The EU CSRD will apply to over 50,0000 companies, and will phase in from 2024 (starting with large public-interest companies). Disclosure of Scope 3 GHG emissions is required, where relevant (the definition of relevance and significant categories is yet to be defined but it aims to align with the GHG Protocol). Reported information will need to be audited.

US Federal Suppliers Climate Risks and Resilience Rule

A new climate disclosure and target-setting rule for suppliers to the world’s biggest buyer.

Major US Federal contractors will need to publicly disclose Scope 3 GHG emissions through CDP in line with the GHG Protocol, and set science-based targets (including Scope 3 emissions if they count for more than 40% of the organization’s total emissions). Learn more.

US Securities and Exchange Commission (SEC) climate disclosure rules

Proposed new disclosure requirements for publicly listed companies in the US.

Under the proposed new SEC rule, public companies will have to report their climate-related risks, emissions, and net-zero transition plans, in detail, in line with TCFD recommendations, from 2025.