Scope 3 Emissions: The hidden impact in your value chain

As the climate crisis intensifies, corporate leaders are under increasing pressure to account for emissions far beyond their direct operations. While Scopes 1 and 2 emissions, those related to owned assets and purchased energy, are well-established components of sustainability reporting, it’s Scope 3 emissions that represent the largest, and often most complex, piece of the puzzle.

For ESG managers and sustainability consultants, Scope 3 emissions reduction isn’t just a technical necessity - it’s a strategic imperative for long-term business resilience, investor trust, and regulatory alignment.

Let’s start with the basics: What are Scope 3 emissions?

Defined by the Greenhouse Gas Protocol, Scope 3 emissions include all indirect emissions that occur in a company’s value chain, both upstream and downstream. These emissions are not produced by the company itself or from the energy it purchases, but by suppliers, product users, logistics partners, waste handlers, and other third parties that support the business ecosystem.

Scope 3 emissions are currently categorised into 15 different areas, grouped under three main buckets:

1. Upstream activities such as purchased goods and services, capital goods, transportation, and waste generated in operations.‍
2. Downstream activities including the use of sold products, end-of-life treatment, and investments.‍
3. Employee-related activities such as business travel and commuting.

According to Allianz, Scope 3 emissions can account for over 70% of a company’s total carbon footprint, especially for consumer-facing and manufacturing-heavy industries. That makes them the largest lever for driving meaningful decarbonisation across industries.

Why measuring Scope 3 emissions matters now more than ever

Scope 3 emissions reduction is no longer a ‘nice-to-have’. It's becoming a regulatory requirement, a reputational differentiator, and a key factor in achieving long-term sustainability targets.

Here are some of the top reasons ESG managers should prioritize Scope 3 measurement:

Regulatory pressure is growing

Governments all over the world are tightening disclosure requirements. For example, Singapore’s SGX mandate will likely require large, listed companies to report Scope 3 emissions from FY2026, following global trends that mirror the EU CSRD and the U.S. SEC’s evolving climate disclosure frameworks.

Enabling net-zero ambitions

With over 5,000 businesses now committed to net-zero goals, emissions reduction cannot stop at factory gates. Since Scope 3 represents the bulk of total emissions, achieving climate neutrality is impossible without addressing the full value chain. Read this blog post to learn more about aligning your business strategy with net-zero targets.

Brand trust and customer expectations

Today’s customers, especially Gen Z and Millennials, demand transparency. Companies that demonstrate clear efforts toward Scope 3 emissions reduction are better positioned to win customer loyalty, investor trust, and public goodwill.

Supply chain resilience and risk management

Understanding and managing Scope 3 emissions allows businesses to identify which suppliers are lagging on sustainability and which pose a risk to operational continuity. This insight supports procurement decisions and strengthens long-term supply chain resilience.

Informed product and investment decisions

Reliable Scope 3 data can inform lower-emission product designs and influence capital investments that prioritize long-term environmental and financial returns.

How to build a Scope 3 emissions reduction strategy

Designing a Scope 3 emissions reduction strategy requires a balance between accuracy, collaboration, and continuous improvement. Let’s look at how ESG teams can begin building a measurable and impactful roadmap:

Prioritise emission categories through a materiality assessment:

Not all 15 Scope 3 categories are equally relevant to every organisation. Begin by conducting a materiality assessment using the GHG Protocol’s Scope 3 guidance to determine which categories are most material to your business.

For instance, a consumer electronics company may find the "use of sold products" category contributes most to its footprint, whereas a food manufacturer might focus on agricultural inputs and upstream logistics. This targeted approach enables smarter resource allocation, faster impact, and tailored reduction initiatives. Use the GHG Protocol Scope 3 Guidance to evaluate which of the 15 emission categories are most material to your business. This step helps prioritize resources on categories that drive the biggest impact.

Examples include:

• Purchased goods and services
• Business travel
• Transportation and distribution
• Use of sold products

Tip: For help with ESG prioritisation, read our guide on setting ESG goals.

Improve your data quality and transparency:

Accurate Scope 3 emissions reduction depends on high-quality, granular data, especially from upstream and downstream partners. While spend-based models can provide a starting point, companies should aim to collect activity-based data from suppliers and logistics partners to improve reporting fidelity.

How to do this effectively:

• Engage suppliers early and encourage emissions disclosures.
• Where primary data is unavailable, use hybrid models combining spend and activity data.
• Use clear methodologies from the GHG Protocol to ensure consistency.
• The biggest challenge here is balancing completeness with data quality, so set a baseline, then refine over time

Leverage technology to identify emissions hotspots

Technology is essential for turning complex data into actionable insight. Platforms like Zuno Carbon streamline data collection and visualise carbon hotspots across your value chain, helping you pinpoint which suppliers, categories, or products contribute most to your Scope 3 footprint. Through advanced analytics and dashboards, teams can:

• Identify high-impact intervention points.
• Monitor year-over-year reductions.
• Align carbon insights with procurement and operational decision-making.

This is where digital platforms come in. Solutions like Zuno Carbon help businesses:

• Collect Scope 3 data across suppliers and operational units.
• Automate emissions calculations for all 15 categories.
• Identify carbon hotspots and visualize them with intuitive dashboards.
• Generate audit-ready reports for sustainability disclosures.

This not only saves time, but ensures consistency and accuracy in reporting. Want to learn more about how carbon accounting underpins Scope 3 emissions reduction? Read our guide to carbon accounting.

Set science-based targets

A best-in-class Scope 3 emissions reduction strategy includes science-based targets (SBTs) validated by the Science Based Targets initiative (SBTi).

According to SBTi guidance, if Scope 3 emissions represent more than 40% of a company’s total footprint (which they typically do), companies are required to set Scope 3 targets aligned with the 1.5°C climate pathway. Integrating science-based targets ensures your efforts aren’t just symbolic but aligned with climate science, investor expectations, and regulatory frameworks.

For more tips on creating ambitious yet realistic sustainability KPIs, explore our full SBTi article to learn how to set impactful, compliant targets.

Embed sustainability across all business functions

Setting targets isn’t enough, operationalising them is where transformation happens. Embed Scope 3 emissions reduction into the DNA of your organisation by:

• Creating cross-functional working groups that bring together procurement, finance, logistics, HR, and R&D.
• Tying reduction KPIs to executive compensation, departmental targets, and supplier performance.
• Training internal teams and suppliers to understand the importance and methods of decarbonization

This holistic integration helps build an organisation-wide culture of accountability and positions sustainability as a long-term value driver rather than a siloed initiative

Collaborating with suppliers to cut Scope 3 emissions

For most companies, Scope 3 emissions reduction hinges on supplier cooperation. A significant share of indirect emissions stems from upstream activities such as raw material extraction, manufacturing, transportation, and other supplier-driven processes. Therefore, collaborating with suppliers isn’t just helpful - it’s essential to any credible Scope 3 emissions reduction strategy.

Make sustainable supplier selection a standard practice:

Sustainability should start at the procurement level. To ensure your supply chain is aligned with your decarbonisation goals, embed environmental performance into vendor selection and evaluation processes:

• Integrate emissions performance into RFPs and contract awards.‍
• Select suppliers with established emissions reduction targets, preferably those aligned with science-based targets.‍
• Prioritise vendors with transparent sustainability reporting and published ESG commitments.
• Evaluate environmental performance alongside cost and delivery reliability during tenders.

Over time, this approach raises the sustainability baseline across your supply chain and standardizes carbon-conscious procurement practices.

Educate and empower your suppliers

Many suppliers, especially small or medium-sized enterprises, may simply lack the knowledge, tools, or resources to measure and manage emissions effectively. This is where companies can take on an important enabling and collaborative role, not just in emissions reduction, but across a wide range of sustainability efforts.

Support your suppliers by:

• Offering training workshops, webinars, and step-by-step guides on emissions measurement and reporting.
• Providing access to carbon tracking templates or platforms that simplify data collection and disclosures.
• Creating toolkits for decarbonization strategies and sharing best practices that have worked in your own organisation

By building supplier capabilities, businesses create a ripple effect of climate action that cascades down the value chain.

Establish clear guidelines and expectations

Clarity and consistency in expectations are vital. Suppliers should know exactly what’s expected of them from the outset. To build this framework:

• Include emissions reduction clauses in supplier contracts.‍
• Create or update your supplier code of conduct to include sustainability expectations, including reporting and decarbonization goals.
• Request regular emissions disclosures, progress updates, and sustainability certifications through platforms or emissions portals.
• Encourage transparency and align expectations with your own Scope 3 emissions reduction strategy.

Finally, reinforce expectations with accountability mechanisms and incentives

• Monitor performance over time using dashboards or reporting software.
• Provide recognition or preferential treatment to suppliers that show strong climate leadership.
• Use supplier scorecards to benchmark and encourage continuous improvement.

Looking ahead: Why Scope 3 emissions reduction is a strategic priority

As businesses gear up for 2030 and 2050 climate milestones, Scope 3 will remain the frontier of corporate climate action. Here’s why this matters now more than ever:

• Regulators are beginning to mandate Scope 3 disclosures in climate filings.‍
• Investors are pressuring firms to disclose value chain emissions and align portfolios with net-zero pathways.‍
• Consumers are choosing brands that show genuine environmental responsibility.

Organisations that fail to manage Scope 3 risks maybe exposed to reputational damage, investor divestment, and missed growth opportunities. In contrast, those that embrace Scope 3 reduction now will be well-positioned to lead tomorrow’s economy, an economy that prizes transparency, accountability, and climate leadership.

Conclusion: From complexity to opportunity

Scope 3 emissions reduction is undoubtedly one of the most challenging aspects of sustainability leadership, but also the most rewarding. By understanding your full emissions footprint, engaging suppliers, and embedding climate goals into your operations, your company can transform a compliance exercise into a powerful business advantage.

Platforms like Zuno Carbon help ESG professionals tackle this complexity with confidence, offering end-to-end carbon accounting and ESG tracking, value chain insights, and integrated sustainability reporting all in one place.

Book a demo today to see how Zuno Carbon can support your Scope 3 emissions reduction strategy and help drive your business toward net-zero.

Frequently Asked Questions (FAQs)

1. What are Scope 3 emissions?

Scope 3 emissions refer to all indirect greenhouse gas emissions that occur outside a company’s direct operations but are still part of its value chain. These include everything from purchased goods and services, transportation, and employee commuting, to the use and disposal of sold products. According to the GHG Protocol, Scope 3 often makes up more than 70% of a business’s total emissions, making it the most significant and most complex emission category to address.

2. How do you reduce Scope 3 emissions?

Reducing Scope 3 emissions requires a combination of data collection, supplier engagement, and strategic procurement. Key steps include:

• Conducting a materiality assessment to identify the most impactful categories.
• Collaborating with suppliers to gather emissions data and implement decarbonization practices.
• Embedding sustainability into product design and business travel policies.
• Using ESG tools like Zuno Carbon to track and reduce emissions across the full value chain.