GHG accounting and Scope 3
Summary: Scope 1, 2 and 3 at a glance
For a company’s greenhouse gas accounting, 3 scopes are considered. In addition to direct Scope 1 emissions, Scope 2 includes indirect emissions from energy procurement. Scope 3 encompasses all other indirect greenhouse gas emissions along the entire value chain. In many industries, these account for over 80% of total emissions. This makes Scope 3 the decisive lever for climate strategies, investor requirements, and CSRD reporting.
The calculation is carried out in five steps:
- Define organizational boundaries & fundamental approach
- Identify material categories (e.g., purchased goods, capital goods, tenant energy, business travel) & define their system boundaries.
- Collect activity data (quantities, expenditures, or supplier data).
- Select emission factors (e.g., DEFRA, ecoinvent, EXIOBASE).
- Calculate & document emissions – including clear assumptions and data quality assessment.
Companies use “spend-based,” average data, or primary data for this, depending on quality ambition and data availability; often, a hybrid method is most practical.
A correct demarcation of organizational and system boundaries determines whether emissions fall into Scope 1/2 or Scope 3, which is a common source of error. Various tools can assist with automation and reporting.
Conclusion: Scope 3, in particular, is complex but essential for effective decarbonization and credible ESG reporting. Companies that address Scope 3 early and in a structured manner secure clear advantages in financing, strategy, and competitiveness.
Understanding and calculating Scope 3 correctly
Scope 3 has become the decisive factor for many companies’ overall CO₂ balance. While Scope 1 and Scope 2 are already well-established, Scope 3 represents the biggest challenge but also the greatest lever when it comes to decarbonization, investor requirements, and regulatory requirements like the CSRD.
This blog article explains why Scope 3 emissions are indispensable for almost all companies, how they are calculated correctly, and where the greatest potential lies.
What is Scope 3 and why is this category so important?
Scope 3 includes all indirect emissions along the entire value chain. It begins with upstream activities such as the manufacturing of purchased goods and their transport, and ends with downstream activities such as the use of sold products, disposal, commuting, or investments.
In many industries, Scope 3 emissions account for more than 80% of the total balance. Thus, Scope 3 influences the entire climate strategy:
- Investors & banks increasingly demand transparent Scope 3 data.
- CSRD & ESRS make Scope 3 a mandatory component.
- According to VSME, Scope 3 can also be voluntarily reported in the Comprehensive Module.
- Supply chains are becoming central actors in decarbonization.
- Net-Zero path without Scope 3? Not possible.
Companies that manage Scope 3 emissions make better investment decisions, reduce risks, and strengthen their competitive position.
Scope 1, Scope 2, and Scope 3 at a glance
To clearly categorize all GHG emissions, a clear demarcation is needed, although this can vary depending on the chosen approach:
Scope 1: direct emissions
- own boilers
- company vehicles
- refrigerant losses
Scope 2: indirect emissions from purchased energy
- electricity
- district heating / district cooling
- market-based vs. location-based factors
Scope 3: all other indirect emissions along the value chain
15 categories, divided into 8 “Upstream” and 7 “Downstream” categories.
Examples of categories:
- Purchased goods & services (3.1)
- Capital goods (3.2)
- Business travel (3.6)
- Employee commuting (3.7)
- Use of sold products (3.11)
- Leased assets (3.13)
How to calculate Scope 3 correctly: The 4-step process
The correct calculation of the respective emissions follows the GHG Protocol, a clearly defined procedure.
1. Identify Material Categories
Upstream and downstream emissions can (but do not have to) include all 15 categories.
A comprehensible assessment and justification are important, for example, based on:
- emission quantity
- company’s influence potential
- industry comparisons
- stakeholder expectations
- data availability
This Materiality Assessment makes Scope 3 manageable and controllable.
Download free template
We have created an Excel template for Scope 3 Materiality Assessment that you can use directly. The template includes evaluating the criteria recommended by the GHG Protocol for determining material Scope 3 categories. In the template, the evaluations of the criteria and their weighting can be fully customized.
2. Collect activity data
Different data types are required depending on the Scope 3 category and data availability:
- quantities (e.g., t concrete, kWh heat, km travel)
- financial expenditures (spend-based)
- supplier-specific primary data
The more precise the data, the more accurate the Scope 3 results. Accordingly, a high level of quality can only be achieved with valid data foundations.
3. Select emission factors
Relevant sources:
- GHG Protocol (IPCC)
- ecoinvent
- ProBas
- GEMIS etc.
Scope 3 emissions must only be calculated with transparently documented factors, which is an important audit criterion for auditors and investors. It is important to note that the data sources for emission factors should not be changed over time to ensure consistent results. Should a change occur, transparent documentation is essential.
4. Calculate & document emissions
The general formula is as follows:
Emissions (tCO₂e) = Activity Data × Emission Factor
Important:
- describe assumptions
- disclose uncertainties
- classify data quality from A–D
- maintain consistent methodology
This documentation is essential for Scope 3 to pass CSRD/ESRS audits.
Calculation methods: Which approach makes sense for Scope 3
Different methods are used depending on the category or data availability:
1. Spend Based (Top Down)
Ideal for service providers and missing primary data. This method is well-suited for getting started but has the disadvantage of lower accuracy. However, it can be helpful for a rough screening.
2. Average Data
For transport, generic materials, and early screening phases. This data type offers a solid middle ground.
3. Supplier-Specific Data (Bottom Up)
The gold standard in Scope 3 reporting. This data type offers the highest data quality, which is particularly relevant for emission hotspots.
4. Hybrid Method
The most realistic option for Scope 3 beginners.
Example: Primary data for steel/concrete + average values for transport + spend-based for services.
System and organizational boundaries: Why they influence Scope 3
Not only Scope 3 is often incorrectly assigned, especially for energy consumption, but also Scope 1 or 2.
Defining organizational boundaries (Equity Share, Operational Control vs. Financial Control) determines whether emissions fall into Scope 1/2 or Scope 3.
Incorrect demarcation or inconsistent methodology application can massively over- or underestimate Scope 3.
Typical challenges with Scope 3 and how to solve them
Scope 3 accounting often fails due to:
- missing supplier data
- double counting
- unstable baselines
- lack of documentation
- unclear responsibilities
Best Practice:
- clear division of roles
- documented methods
- annual data quality review
- actively involve suppliers (Supplier Engagement)
- clear sustainability communication
Which tools help with accounting
For beginners:
- ecocockpit (free, GHG-compliant)
- Excel-based calculation tools, for example from the GHG Protocol
For growing Scope 3 requirements:
- All-in-One ESG software solutions
- osapiens
- Tanso
- Leadity
- more
- Specialized solutions for carbon footprint
- PlanA
- ClimatePartner
- Global Changer
- more
In our CRS Tool Overview, you will find more providers and can filter them by CO2 management functions.
Important: A tool does not replace the logic behind it. The correct calculation remains a data and process project.
Conclusion: Why Scope 3 will become the most important climate metric in the coming years, alongside Scope 1 & 2
Scope 3 is far more than a complicated number in a sustainability report. As part of the CSRD, the publication of emissions offers competitive advantages.
Companies that understand and manage Scope 3 emissions gain:
- better investment decisions
- more robust climate strategies
- higher data quality in the supply chain
- stronger position with banks, investors, and customers
Scope 3 is both a challenge and an opportunity. It is the key to any credible decarbonization strategy.
Do you need support with your general understanding, the specific Materiality Assessment, or calculating the Scope 3 categories? We’d be happy to offer an individual workshop—online or on site! You can find more information here.
