Scope 3 Emissions: Mastering the Value Chain Carbon Footprint

Scope 3 emissions encompass all indirect greenhouse gas emissions that occur along a company's upstream and downstream value chain. These are emissions that do not originate from a company's own facilities (Scope 1) or purchased energy (Scope 2), but from everything that happens before and after their operations. They represent the most extensive and challenging emission category: for most industrial companies, Scope 3 emissions account for 70% to over 90% of their total carbon footprint.

Scope 3 is no longer a voluntary sustainability topic. The CSRD (Corporate Sustainability Reporting Directive) mandates reporting on material Scope 3 categories for companies in scope. Furthermore, OEMs and Tier 1 suppliers are increasingly demanding carbon data from their suppliers to complete their own Scope 3 inventories.

The GHG Protocol: Understanding Scopes 1, 2, and 3

The Greenhouse Gas Protocol (GHG Protocol) is the global standard for carbon accounting. It categorizes emissions into three scopes:

• Scope 1: Direct emissions from owned or controlled sources (e.g., gas combustion in furnaces, company vehicles).
• Scope 2: Indirect emissions from purchased energy (electricity, steam, heating/cooling).
• Scope 3: All other indirect emissions in the value chain, divided into 15 categories.

Upstream vs. Downstream Activities

The 15 categories are split into upstream (before production) and downstream (after production). For mid-sized manufacturing companies, the following are most critical:

• Category 1 – Purchased Goods and Services: Usually the largest category for manufacturers. It includes emissions from the production of all raw materials (steel, aluminum, plastics) and sub-components.
• Category 4 – Upstream Transportation and Distribution: CO2 related to the logistics from suppliers to your plant.
• Category 11 – Use of Sold Products: Often the largest category for manufacturers of energy-consuming products like machinery or vehicles.
• Category 12 – End-of-Life Treatment: Emissions from the disposal and recycling of the company's products.

Why Scope 3 is a Data Problem in Production

While Scopes 1 and 2 can be measured directly within your own plant, Scope 3 happens at third parties. This creates a reliance on supply chain data, production models, and usage assumptions.

Closing the Data Gap with MES

To calculate a reliable footprint for Category 1 (Purchased Goods), a manufacturer needs two variables:

1. Material consumption per order/batch (from production).
2. Emission factors per material category (from suppliers or databases).

An MES (Manufacturing Execution System) is the key to closing this gap. It provides real-time data on exactly how many kilograms of a specific material were used for a specific order. Without this batch-level data, companies are forced to use inaccurate estimates that are increasingly rejected by regulators and OEMs.

CSRD and OEM Data Requirements

Under the CSRD and the ESRS E1 standard, companies must not only report total emissions but also define reduction targets and track progress. This requires moving away from one-time "snapshots" toward regular, data-driven reporting.

Simultaneously, direct inquiries from OEMs are increasing. If an automotive manufacturer reports its Scope 3 footprint, its Category 1 includes the parts purchased from you. Consequently, they require the CO2 content of every delivered component. These requests currently arrive via CDP questionnaires, supplier surveys, or as mandatory contract clauses.

Calculation Methods: From Estimates to Primary Data

The GHG Protocol defines three main calculation approaches:

1. Spend-based Method: Multiplying financial expenditure by industry-average emission intensities. Simple, but inaccurate as it doesn't reflect product-specific improvements.
2. Activity-based Method: Using physical data (kg of material, ton-kilometers of transport) multiplied by database emission factors. More accurate, but requires structured production data.
3. Supplier-specific Method: Using verified Product Carbon Footprint (PCF) data directly from the supplier. This is the "gold standard" for accuracy.

FAQ

Do we have to report all 15 Scope 3 categories?

No. The GHG Protocol and CSRD require reporting on material categories. A category is typically considered material if it accounts for more than 5% of total Scope 3 emissions. Most manufacturers focus on 3 to 5 categories.

What happens if suppliers cannot provide CO2 data?

In this case, you must use industry average values from databases like ecoinvent. However, this results in a less accurate footprint. Over time, suppliers who can provide primary data will have a competitive advantage over those who remain "data-dark."

What is the difference between Scope 3 for automotive vs. food industries?

In Automotive, Category 1 dominates due to energy-intensive raw materials like steel and aluminum. In Food, Category 1 is driven by agricultural land use (methane/nitrous oxide), while Category 11 (downstream) is significant due to consumer refrigeration and cooking.