Scope 3 emissions are the indirect greenhouse gases a company produces through its supply chain and customer use

Scope 3 covers emissions that happen outside a company's direct control — when suppliers make materials, when customers use products, when waste gets transported, when employees commute. If Scope 1 is what a factory burns in its own furnace and Scope 2 is the electricity it buys, Scope 3 is everything else connected to how the business operates.

The reason companies measure Scope 3 is that it often dwarfs the other two categories combined. A car manufacturer's tailpipe emissions from its own plants might be 5% of its total climate impact; the emissions from drivers using those cars for years can be 80% or more. Ignoring Scope 3 means ignoring most of the damage.

Scope 3 is also the hardest to measure and control, which is why many companies report it separately or with lower confidence than Scope 1 and 2. You will see it listed in sustainability reports, sometimes with a note that the number is an estimate based on industry averages rather than direct measurement.

Key Takeaways

  • Scope 3 includes emissions from suppliers, customer use, waste disposal, business travel, and employee commuting — anything the company does not directly operate but depends on.
  • Scope 3 is usually the largest of the three emissions categories for most companies, especially manufacturers and consumer goods producers.
  • Companies often estimate Scope 3 using industry data and supplier information rather than measuring it directly, so the numbers carry more uncertainty than Scope 1 and 2.
  • Scope 3 reporting is increasingly required by investors, regulators, and corporate sustainability commitments, even though the company cannot fully control these emissions.

The 15 categories of Scope 3 emissions

The Greenhouse Gas Protocol, which sets the standard for corporate emissions reporting, breaks Scope 3 into 15 specific categories. Not every company uses all 15 — a software company will have different Scope 3 sources than a cement manufacturer. But the framework helps may support companies count consistently.

The categories split into two groups: upstream (things that happen before the company sells) and downstream (things that happen after). Upstream includes purchased goods and services, capital goods, fuel and energy-related activities, and transportation of materials. Downstream includes product use, end-of-life treatment, leased assets, franchises, and investments.

For example, a clothing brand's Scope 3 would include emissions from cotton farming (purchased goods), shipping fabric to factories (transportation), customers washing clothes at home (product use), and landfill decomposition when clothes are thrown away (end-of-life). Each category requires different data sources and calculation methods.

Why Scope 3 is harder to measure than Scope 1 and 2

A company can install a meter on its own smokestack or electric bill and know exactly what Scope 1 and 2 are. Scope 3 requires asking suppliers for their data, estimating based on industry averages, or using proxy information like purchase volume and product weight. If a supplier does not track emissions, the company has to guess.

Scope 3 also crosses company boundaries. A retailer cannot force its suppliers to measure emissions the same way or share the data. A manufacturer cannot control how customers use products or dispose of them. This creates gaps and inconsistencies that make Scope 3 numbers less reliable than direct measurements.

Many companies use spend-based or average data methods for Scope 3. Spend-based means multiplying the amount of money spent on a category by an industry average emissions factor — for example, "manufacturing typically produces 2 kilograms of CO2 per dollar spent." Average data means using published studies about typical emissions from a product or activity. Both methods are estimates, not measurements.

How Scope 3 differs from Scope 1 and Scope 2

Scope 1 is direct emissions from sources the company owns or controls — natural gas burned in a building, fuel in company vehicles, chemical reactions in manufacturing. Scope 2 is indirect emissions from purchased electricity, steam, or heating. Both happen at facilities the company operates.

Scope 3 is everything else: emissions from the supply chain, from how customers use the product, from waste management, from business travel by employees, from leased equipment, from franchises using the company's brand. The company influences these emissions but does not directly operate the source.

This distinction matters for climate strategy. A company can reduce Scope 1 by switching to renewable energy or more efficient equipment. It can reduce Scope 2 by buying renewable electricity. But reducing Scope 3 requires working with suppliers, changing product design, or asking customers to use products differently — all harder to control.

Which industries have the largest Scope 3 footprints

Industries where the product itself creates emissions during use have enormous Scope 3 numbers. Automotive, aviation, and fossil fuel companies report Scope 3 as 70% to 95% of their total emissions because the tailpipe or engine is where most damage happens. A car company's manufacturing plant might emit 1 million tons per year, but its sold vehicles emit 100 million tons over their lifetimes.

Consumer goods companies also report high Scope 3, especially in agriculture-based industries. A food company's Scope 3 includes farming emissions from suppliers, which can exceed the company's own manufacturing and transportation combined. Apparel and footwear companies report Scope 3 from cotton growing, dyeing, and customer washing.

Technology and software companies typically report lower Scope 3 as a percentage of total emissions, since their products do not burn fuel or require raw material extraction. But they still count Scope 3 from employee commuting, business travel, and data center energy use by customers.

How companies reduce Scope 3 emissions

Reducing Scope 3 requires different strategies than reducing Scope 1 and 2. A company cannot straightforward install solar panels and solve the problem. Instead, companies work on supplier engagement, product redesign, and customer behavior change.

Supplier engagement means asking suppliers to measure and reduce their own emissions, offering incentives for cleaner practices, or switching to suppliers with lower carbon footprints. A retailer might require suppliers to meet emissions targets or provide data on their Scope 1 and 2. A manufacturer might help suppliers install energy-efficient equipment.

Product redesign means making goods that create fewer emissions during use or disposal. An automaker develops electric vehicles to eliminate tailpipe emissions. A clothing brand uses materials that require less water and energy to produce. A packaging company switches to recyclable materials to reduce end-of-life emissions.

Customer behavior change is the hardest lever. Some companies provide information to help customers use products more efficiently — driving tips for car owners, washing instructions for clothing. Others offer incentives for returning products for recycling or reuse. But ultimately, the company cannot force customers to change how they use what they buy.

Scope 3 reporting requirements and trends

Scope 3 reporting is increasingly mandatory. The Securities and Exchange Commission (SEC) proposed rules requiring large public companies to disclose Scope 3 emissions in their financial filings, though the final rule and timeline remain in development. The European Union requires large companies to report Scope 3 under its Corporate Sustainability Reporting Directive. Many states and countries have similar requirements or are developing them.

Beyond regulation, investors and customers are demanding Scope 3 data. Major asset managers have made net-zero commitments that require portfolio companies to measure and reduce Scope 3. Corporate sustainability pledges — like Science Based Targets or net-zero commitments — almost always include Scope 3 reduction goals.

The trend is toward more detailed Scope 3 reporting, not less. Companies are moving from industry-average estimates toward supplier-specific data, using questionnaires and audits to get real numbers. This takes more time and money but produces more credible results.

Frequently Asked Questions

Is Scope 3 always bigger than Scope 1 and 2 combined?

Not always, but often. For companies whose products create emissions during use — cars, airplanes, heating oil — Scope 3 is typically 70% to 95% of total emissions. For companies in heavy manufacturing or energy production, Scope 1 can be larger. For service companies, Scope 3 might be smaller. The ratio depends entirely on the business model.

Can a company reduce Scope 3 if it does not own the supply chain?

Yes, but indirectly. Companies can set supplier standards, offer technical support to help suppliers reduce emissions, switch to lower-carbon suppliers, or redesign products to need less material or energy. They cannot force suppliers to change, but they can create incentives and requirements that make it worth doing.

Why do companies report Scope 3 if they cannot control it?

Because Scope 3 often represents the majority of a company's climate impact, and ignoring it misrepresents the true damage. Investors, regulators, and customers want to know the full picture. Reporting Scope 3 also signals that the company is taking climate responsibility seriously, even for emissions outside its direct control.

How accurate are Scope 3 estimates?

Accuracy varies widely. Estimates based on industry averages can be off by 20% to 50% or more. Estimates based on supplier data are more reliable but still depend on how well suppliers measure their own emissions. Companies typically note the uncertainty in their reports and work toward more precise measurement over time.

Do all companies have to report Scope 3?

Requirements vary by location and company size. Large public companies in the EU and increasingly in the US face mandatory reporting. Smaller companies and private companies may not be required, but many report voluntarily to meet investor or customer expectations. Check your local regulations and your industry standards to know what applies to you.