Scope 3 Reporting: Process, Challenges, and Strategic Importance

1. Importance of Scope 3 Reporting

Scope-3 emissions cover all indirect greenhouse gas emissions that occur along a company’s upstream and downstream value chain. While Scope 1 represents direct emissions from owned or controlled sources, and Scope 2 covers emissions from purchased energy, Scope 3 encompasses all other indirect sources — from purchased raw materials and logistics processes to the use and disposal of sold products. In many industries, these emissions account for the largest share of a company’s total greenhouse gas footprint, making them central to any credible climate strategy.

Accordingly, Scope-3 emissions are critical for:

• credible net-zero strategies

• Science-Based Targets

• regulatory reporting obligations

• investor and customer requirements

• 
  strategic transformation programs

The methodological foundation for Scope-3 accounting is provided by the Corporate Value Chain (Scope 3) Accounting and Reporting Standard of the GHG Protocol. This standard defines 15 categories of Scope-3 emissions and provides companies with a structured framework for measuring and reporting. It ensures comparability and transparency while still allowing for different methodological approaches depending on data availability and organizational maturity.

2. Entry and Process for Scope-3 Reporting

In practice, the first step in Scope-3 reporting is often a screening analysis. This involves a high-level estimate based on financial data, industry benchmarks, and generic emission factors. The purpose of this phase is not to achieve maximum precision but to identify emissions hotspots and prioritize categories. In large and complex supply chains, this approach provides a pragmatic starting point for building a more detailed Scope-3 inventory over time.

Phase 1: Entry via Screening
- Financial data (spend-based approach) 
- Industry benchmarks
- Generic emission factors  

As reporting maturity increases, Scope-3 accounting evolves from a purely finance-based approximation to a more detailed, activity-based inventory. Companies begin to collect specific activity data — for example, material quantities, transport distances, or energy consumption. Ideally, primary data is also obtained directly from suppliers. This shift from average or generic data to specific, activity-based information is crucial for enhancing the accuracy and reliability of the inventory and for robustly tracking progress toward climate targets.

Phase 2: Methodological Deepening
- Activity-based calculations (e.g. material quantities, transport distances)
- Supplier-specific primary data
- Hybrid models/ combining different data sources 

3. Data Collection and Integration

Data collection in Scope-3 reporting is not merely a technical task but a cross-functional process. Since relevant emission sources are distributed across the entire value chain, different business functions must coordinate their efforts. Purchasing, controlling, logistics, HR, and sustainability teams each contribute specific data points, which must be consolidated into a consistent system.

Typical internal and external data sources include:

• Purchasing systems to track procured goods and services

• ERP and controlling data for financial and quantity-based structuring

• Logistics and transport data to calculate transport emissions

• HR data, e.g., for commuting and business travel

• Supplier surveys to collect primary data

The quality of a Scope-3 inventory depends heavily on how well these data sources are integrated. Digital interfaces, standardized data requirements, and clearly defined processes not only increase efficiency but also improve consistency and traceability of results.

4. Quality Assurance and Documentation

Reliable Scope-3 reporting does not end with the calculation of emissions. Systematic quality assurance is equally critical. Since many calculations are based on estimates or averages, results must be critically reviewed and transparently documented.

A professional quality assurance process typically includes:

• Plausibility checks at category and total inventory levels

• Comparison with previous years to identify deviations

• Sensitivity analyses for key assumptions

• Transparent documentation of methods, emission factors, and uncertainties

Particularly when using average or secondary data, disclosing uncertainties is a key element of credible reporting. The goal is not absolute precision but methodological transparency and continuous improvement.

5. Key Challenges in Scope-3 Reporting

Data availability along the supply chain
One of the greatest challenges is limited data availability. Global supply chains are often complex, multi-tiered, and not fully transparent. Common issues include:

• Missing or incomplete emissions data from suppliers

• Different methodological standards and accounting approaches

• Dynamic procurement and production structures

These conditions make consistent and comparable calculations difficult. Building structured supplier programs with clear data requirements and developing capabilities along the value chain is therefore essential.

Data quality and uncertainty
Even when data is available, quality remains a challenge. Many Scope-3 categories rely partially on:

• Industry averages

• Country-specific emission factors

• Assumptions on product lifetime and energy efficiency

These parameters can vary widely and significantly impact results. A professional approach requires systematic analysis, documentation, and gradual reduction of uncertainties over multiple reporting periods.

Methodological complexity
The 15 categories of the Corporate Value Chain Standard of the GHG Protocol each require specific calculation logic. There is no single formula for Scope 3; rather, different approaches must be combined depending on the emission source. Typical methodological questions include:

• Delineation of leasing and outsourcing models

• Treatment of joint ventures and participations

• Avoidance of double-counting within the value chain

Consistency across multiple reporting periods is essential to distinguish real emissions reductions from methodological effects.

Organizational requirements
Scope-3 reporting is not an isolated sustainability project but a company-wide transformation process. It requires clear governance structures and defined roles. Success factors include:

• Defined responsibilities for each Scope-3 category

• Integration of emissions data into existing management and IT systems

• Close collaboration between purchasing, sustainability, controlling, and operational units

• Embedding climate targets into procurement and product strategies

Only when Scope 3 is organizationally anchored can it serve as a management tool rather than merely fulfilling a reporting obligation.

6. Strategic Value of Professional Scope-3 Reporting

A mature Scope-3 reporting process provides transparency on a company’s actual emission hotspots. This transparency is not only important for regulatory compliance but also unlocks strategic opportunities. Emission hotspots along the value chain often indicate:

• Efficiency potential in material and energy use

• Innovation opportunities in product design and business models

• Opportunities for closer collaboration with suppliers

• Competitive differentiation

Moreover, transparent disclosure of indirect emissions enhances credibility with investors, customers, and regulators. Scope-3 reporting thus evolves from a mere reporting requirement to a strategic lever for decarbonization and long-term competitiveness.

7. Support through the Sustainability Cockpit

The Sustainability Cockpit significantly facilitates Scope-3 reporting by consolidating various data sources and calculation methods.

Depending on the maturity of the data, companies can use both spend-based methods and detailed primary data to capture their emissions. A central component is the emission factor database, which provides numerous emission factors. Additionally, integrating Ecoinvent factors can further increase accuracy, especially for Scope-3 data. Companies also have the option to add their own emission factors to reflect industry- or company-specific circumstances.

In the emission factor search, it is possible to specify whether data should be reported based on purchase values or on more precise consumption data. The activity-specific data reliability indicator transparently shows the proportion of primary versus secondary data.

This functionality allows the Sustainability Cockpit to support consistent Scope-3 reporting while also enabling the continuous improvement of data quality and emission inventory accuracy.