The practical challenges of measuring Scope 3 emissions

Quick recap: Scope 1, Scope 2 and Scope 3

Before we zoom in on Scope 3, here is a quick refresher.

Scope 1 – Direct emissions

Scope 1 emissions are direct greenhouse gas (GHG) emissions from sources owned or controlled by the organisation. Examples include:

• Fuels burned on site (for example natural gas or manufacturing fuels)
• Company-owned non-electric vehicles
• Fugitive emissions (for example refrigerant leaks from AC units)

Scope 2 – Purchased energy

Scope 2 emissions are indirect GHG emissions from the generation of purchased energy, such as:

• Electricity
• Purchased heating, cooling or steam
• Charging company-owned electric vehicles

Scope 3 – All other value chain emissions

Scope 3 emissions include all other indirect emissions that are not covered in Scopes 1 and 2. They occur upstream and downstream of your own operations and often represent the majority of a company’s total footprint.

What are Scope 3 emissions?

Scope 3 emissions cover the greenhouse gases generated across your entire value chain, from the goods and services you buy to how your products are used and disposed of by customers.

They include, for example:

• Purchased goods and services
• Capital goods (for example equipment or buildings)
• Upstream and downstream transportation and distribution
• Waste generated in operations
• Business travel and employee commuting
• Use and end-of-life treatment of sold products
• Franchises and investments

Operational control and influence

Unlike Scopes 1 and 2, where you have direct operational control, Scope 3 is about influence rather than ownership. You are expected to account for emissions from activities you do not directly control but can influence through:

• Procurement decisions
• Supplier standards and contracts
• Customer requirements
• Partnership and investment strategies

If you can exert meaningful influence over a part of your value chain, it should be considered when assessing Scope 3.

The 15 Scope 3 categories (upstream and downstream)

The GHG Protocol splits Scope 3 into 15 categories, grouped into upstream and downstream emissions. KEY ESG’s platform mirrors this structure.

Upstream emissions (before your operations)

1. Purchased goods and services

Emissions from producing the goods and services you buy (for example raw materials, software, professional services, office supplies).

2. Capital goods

Emissions from producing long-term assets such as machinery, buildings and IT equipment.

3. Fuel and energy related activities

Emissions from producing the fuels and energy you purchase that are not already counted in Scopes 1 or 2.

4. Upstream transportation and distribution

Emissions from transporting goods to you, using third-party logistics.

5. Waste generated in operations

Emissions from treatment and disposal of your operational waste.

6. Business travel

Emissions from employee business trips using transport not owned or operated by your company.

7. Employee commuting

Emissions from employees travelling to and from work in vehicles not owned or controlled by your company.

8. Upstream leased assets

Emissions from operating assets you lease from others that are not included in Scopes 1 or 2.

Downstream emissions (after your operations)

9. Downstream transportation and distribution

Emissions from transporting and distributing sold products to end users, via third parties.

10. Processing of sold products

Emissions from further processing of intermediate products you sell.

11. Use of sold products

Emissions from customers using your products or services.

12. End-of-life treatment of sold products

Emissions from how your products are disposed of or recycled.

13. Downstream leased assets

Emissions from assets you lease to others.

14. Franchises

Emissions from franchise operations under your brand.

15. Investments

Emissions associated with your investments in other businesses and projects.

Why Scope 3 emissions matter so much

Regulations across multiple jurisdictions often require Scope 3 reporting after Scopes 1 and 2, because Scope 3 is both:

• Less directly controlled and harder to measure
• Highly material in most sectors

Research such as that from the Carbon Trust suggests that Scope 3 often makes up between 65 percent and 95 percent of a company’s total carbon footprint. That means tackling only Scope 1 and 2 can leave out the majority of your climate impact.

From our work with businesses, we see five main drivers for getting started with Scope 3:

1. Regulatory requirements

Frameworks and regulations such as CSRD, SFDR and SECR increasingly expect at least a “best effort” Scope 3 disclosure.

2. Stakeholder expectations

Investors, lenders, customers and employees want a complete picture of your climate impact. Excluding Scope 3 undermines the credibility of your reporting.

3. Risk mitigation and cost savings

Without mapping your value chain emissions, it is difficult to identify exposure to:

• Transition risks (for example carbon pricing or supply chain regulations)
• Physical risks (for example climate related disruptions)
• Cost saving opportunities (for example more efficient logistics or lower carbon suppliers)

4. Science based and net zero targets

You cannot set meaningful SBTi aligned or net zero targets if you do not understand the full baseline, including Scope 3.

5. Commercial advantage and contract wins

In many sectors, carbon data is now a prerequisite for RFPs and long term contracts. Suppliers are increasingly asked to provide product level emission factors or proof of decarbonisation plans.

Everyone needs to start somewhere

When we speak with businesses, especially those at an early stage of ESG maturity, one theme comes up again and again:

“Scope 3 feels too big. We do not know where to start.”

The result is often analysis paralysis, where Scope 3 is avoided entirely because the “perfect” approach seems out of reach. At KEY ESG, our philosophy is simple: start somewhere, then improve year on year. An incremental approach gives you time to:

• Identify which categories are material
• Build basic data flows and ownership
• Engage your finance, HR and procurement teams
• Move gradually from rough estimates to more granular methods

By the time Scope 3 reporting becomes mandatory for your organisation, you will already have a robust foundation instead of starting from scratch.

The practical challenges of Scope 3 measurement

For companies that are not yet using KEY ESG’s Scope 3 tool, we consistently see two major challenges.

Challenge 1: Making sense of 15 Scope 3 categories

The GHG Protocol’s 15 categories are the gold standard for Scope 3 reporting and are referenced in many ESG regulations. However, for teams with limited ESG resources, the documentation can feel burdensome and highly technical.

Common pain points include:

• Not knowing which categories are relevant or material
• Uncertainty over which data source or method to use
• Limited time to read and interpret long guidance documents
• Difficulty mapping real world data (for example invoices or travel receipts) to the correct category

Challenge 2: Getting usable data from supply chain partners

A significant portion of Scope 3 emissions data depends on suppliers and distributors, both upstream and downstream, being able to share their own Scope 1 and 2 emissions or product level factors.

In practice, we often hear:

• “Our suppliers do not have carbon data yet”
• “They cannot give us product specific emission factors”
• “We do not know how to prioritise which suppliers to engage first"

The good news is that there is a strong trend towards better cooperation as:

• Suppliers receive more and more requests for emissions data
• They themselves come into scope for regulations and investor expectations

In the meantime, spend based methodologies allow you to estimate emissions based on financial data where supplier specific numbers are not yet available. These methods are less precise, but they are invaluable as a starting point and are fully supported in the KEY ESG platform.

Where to start: prioritising upstream categories

KEY ESG’s guidance, and our customers’ experience, shows that a pragmatic first step is to focus on a subset of upstream Scope 3 categories. These categories are both highly material and relatively accessible from a data perspective.

Recommended starting categories:

1. Purchased goods and services (3.1)

Why it matters: Often one of the largest Scope 3 contributors.
Where to find data: finance and procurement systems, expense reports, supplier portals.
Typical method: start with spend based data, then move to average based data (for example kilograms of paper or tonnes of raw material) and eventually supplier specific factors.

2. Capital goods (3.2)

Why it matters: high value assets such as machinery, IT equipment and buildings can have significant embodied emissions.
Where to find data: capex records and fixed asset registers.
Typical method: often reported alongside purchased goods and services, using financial or quantity data.

3. Fuel and energy related activities (3.3)

Why it matters: captures emissions from the upstream production of energy you purchase.
In KEY ESG: this category can be auto calculated from your Scope 1 and 2 activity data in the platform, which removes complexity and avoids double counting.

4. Upstream transportation and distribution (3.4)

Why it matters: emissions from transporting goods to you, for example inbound logistics.
Where to find data: logistics invoices and supplier delivery records.
Typical method: distance, weight or spend based methods, depending on data availability.

5. Waste generated in operations (3.5)

Why it matters: a visible category that is often easy to explain internally.
Where to find data: waste contractor reports, often monthly or annual, including waste types and weights.
Typical method: use waste provider data where possible, otherwise use national or regional averages.

6. Business travel (3.6)

Why it matters: commonly scrutinised by stakeholders and a visible behaviour change lever.
Where to find data: travel management systems, expense reports, HR systems or mileage reimbursements.
Best practice: aim for fuel or ticket based data where possible. Distance based methods are acceptable as a fallback.

7. Employee commuting (3.7)

Why it matters: helps capture day to day travel habits and can link directly to internal engagement.
Where to find data: employee or HR surveys, or in some cases building access data.
Typical method: survey employees on modes of transport, distance and working patterns, then extrapolate over the year.

Improving Scope 3 data over time

Once you have established a baseline across a handful of categories, the next step is to improve both coverage and quality.

1. Expand category coverage

Each year, review your Scope 3 profile and ask:

• Are last year’s categories still material?
• Have there been changes such as new products, office moves or acquisitions?
• Which additional categories can you bring into scope with data you already have?

Sometimes a category may be less material, but including it demonstrates maturity and responsiveness to stakeholder expectations.

2. Upgrade calculation methods

A common progression is:

1. Spend based method

Use financial spend multiplied by sector level emission factors. This is fast and accessible, ideal for getting started.

2. Average or quantity based method

Apply emission factors to physical quantities, for example kilograms, tonnes or kilowatt hours. This is more accurate and better for tracking change over time.

3. Supplier specific method

Use emission factors provided directly by suppliers for specific products, services or sites. This is the most accurate method, but it requires suppliers to have mature carbon reporting.

KEY ESG supports all three approaches and allows you to upgrade methods category by category as your data and relationships mature.

3. Strengthen systems and processes

• Implement or optimise travel booking and expense systems for better data capture.
• Embed simple protocols and deadlines, for example logging trips within 24 hours of travel.
• Train teams on why the data matters to your long term goals and net zero strategy.

4. Engage your supply chain

Most companies begin by focusing on their top 5 to 25 suppliers by spend, risk or strategic importance. You can:

• Ask for company level emissions and product specific factors
• Collaborate on reduction initiatives
• Integrate emissions performance into procurement criteria

Over time, improvements in your suppliers’ emissions will directly reduce your own Scope 3 footprint.

Bringing your team along on the Scope 3 journey

Scope 3 measurement is not just a technical task. It is a company-wide behaviour change.

Practical ideas to build engagement include:

• Business travel

Encourage lower carbon modes, for example trains instead of flights where feasible. Provide clear guidance on how to record trips and which options are preferred.

• Employee commuting

Add a few targeted questions to existing HR or engagement surveys. Track travel modes and distances to identify hotspots.

• Incentives

Offer extra leave, travel passes, cycle to work schemes, carpool benefits or flexible work arrangements for low carbon choices. Celebrate teams or individuals who reduce travel emissions or champion sustainable options. Starting this early means you can refine survey design and messaging over time, which makes data more accurate each year.

How KEY ESG’s Scope 3 accounting platform helps

KEY ESG’s Scope 3 module is designed for normal business users, not just carbon specialists. It is fully aligned with the GHG Protocol and mirrors the 15 upstream and downstream Scope 3 categories used in our Carbon 101 Scope 3 guidance.

Key features include:

• Category by category configuration
• Opt in or out of each data point and record a reason. This is crucial for audits and for continuity if ESG ownership changes.
• Set the cadence (monthly, quarterly or yearly) to match how your data is collected.

The platform also includes a user-friendly UI with built in guidance and learning. For every data point, you will see:

• What the metric is and why it matters
• Where to find data (for example finance, HR or suppliers)
• Linked SDGs and further reading
• Multiple calculation methods including support for spend based, average based and supplier specific methods, as well as automated calculations for categories such as 3.3 where possible.
• Bulk import options and attachments for supporting evidence.

The platform incorporates research from sources such as Anthesis and EcoAct, alongside employee survey options and suggested average values, to help you estimate home working emissions more accurately.

Through our partnership with Climatiq, users have access to more than 60,000 up to date, verified emission factors, which enables more precise and automated Scope 3 calculations.

Limitations, and why starting now still matters

No model can capture every possible Scope 3 emission source across every industry. Some categories will always require bespoke treatment and direct engagement with niche suppliers.

That is why KEY ESG’s approach is:

1. Get you started quickly using robust, standardised categories and methods.
2. Allow you to add bespoke data points for sector specific or asset specific emissions.
3. Support continuous improvement as your data, systems and supplier relationships mature.

Businesses that tackle Scope 3 proactively can:

• Minimise their overall carbon footprint
• Align with evolving regulations
• Strengthen their reputation and brand
• Win and retain customers
• Unlock cost savings and operational efficiencies

How KEY ESG can help

If you are ready to move beyond theory and begin measuring Scope 3 emissions in practice, you can watch our on-demand webinar, “Understanding carbon accounting: Getting started with Scope 3 and beyond”, to get a preview of our carbon accounting platform. Or, book a personalised demo with one of KEY ESG’s ESG experts to see how our platform can help you measure, report and reduce your full carbon footprint.

Frequently asked questions about Scope 3 emissions

What are Scope 3 emissions?

Scope 3 emissions are all indirect greenhouse gas emissions that occur across a company’s value chain and are not included in Scope 1 or Scope 2. This includes emissions from purchased goods and services, business travel, employee commuting, waste, transportation, and the use and disposal of sold products.

Why are Scope 3 emissions difficult to measure?

Scope 3 emissions are difficult to measure because they rely on data from suppliers, customers, and third parties that a business does not directly control. Data is often incomplete, inconsistent, or unavailable, especially for businesses at an early stage of carbon reporting.

Which Scope 3 categories should businesses start with?

Businesses should usually start with upstream categories that are both material and easier to access data for. These often include purchased goods and services, capital goods, business travel, employee commuting, waste generated in operations, and upstream transportation and distribution.

Do businesses need supplier specific emissions data to measure Scope 3?

No. While supplier specific data is the most accurate, businesses can start by using spend based or average based calculation methods. These approaches allow businesses to estimate Scope 3 emissions using financial or activity data until supplier specific information becomes available.

How can businesses improve Scope 3 data over time?

Businesses can improve Scope 3 data by expanding the number of categories they report on, upgrading calculation methods from spend based to quantity based or supplier specific, strengthening internal data collection systems, and engaging with key suppliers to request emissions data.

Are Scope 3 emissions required for regulatory reporting?

In many jurisdictions, Scope 3 emissions are increasingly expected as part of ESG and sustainability reporting frameworks such as CSRD and SFDR. While requirements often follow Scope 1 and 2 reporting, businesses are encouraged to demonstrate a best effort approach to Scope 3 as early as possible.

How does KEY ESG help with Scope 3 measurement?

KEY ESG’s Scope 3 tool breaks emissions down into the 15 GHG Protocol categories and guides businesses through data collection using clear prompts and multiple calculation methods. This allows businesses to start with the data they have and improve accuracy year on year.