Scope 3 emissions explained: the 15 categories, how to measure, how to prioritise

Scope 3 emissions are all indirect greenhouse gas emissions in a company's value chain, other than those from purchased energy. For most sectors, Scope 3 accounts for 70–95% of the total footprint — yet it is the least measured, least understood and hardest to reduce.

The 15 Scope 3 categories

The GHG Protocol Corporate Value Chain (Scope 3) Standard defines 15 categories, split into upstream and downstream.

Upstream (categories 1–8):

1. Purchased goods and services
2. Capital goods
3. Fuel- and energy-related activities (not in Scope 1 or 2)
4. Upstream transportation and distribution
5. Waste generated in operations
6. Business travel
7. Employee commuting
8. Upstream leased assets

Downstream (categories 9–15):

9. Downstream transportation and distribution
10. Processing of sold products
11. Use of sold products
12. End-of-life treatment of sold products
13. Downstream leased assets
14. Franchises
15. Investments (financed emissions — dominant for banks and asset managers)

Which categories are material for you?

Materiality is sector-specific:

• Retail / consumer goods: categories 1, 4, 11 typically dominate.
• Manufacturing: categories 1, 11, 12.
• Banking: category 15 (financed emissions) is almost always >99%.
• Real estate: categories 1, 11, 13.
• Professional services: categories 1, 6, 7.

Under ESRS E1 and SBTi, companies must screen all 15 and report those that are material.

Measurement approach

Scope 3 measurement is a hierarchy — move up as data quality improves:

1. Spend-based — €M procured × emission factor per €. Fast, low accuracy.
2. Average-data — mass or units × industry-average emission factor.
3. Hybrid — mix of primary and secondary data.
4. Supplier-specific — actual emissions data from suppliers.

Start with spend-based to identify the material categories, then invest in primary data collection for the top 3–5.

Financed emissions (category 15)

For banks, insurers and asset managers, category 15 dominates. The PCAF Standard provides the methodology — attributing a share of each borrower's or investee's emissions based on the ratio of financing to enterprise value. Redigo Carbon supports PCAF-aligned financed emissions calculation for loan portfolios.

Reduction strategy

Scope 3 reduction is fundamentally a supply-chain engagement problem:

• Supplier programmes — cascade emission targets through procurement contracts.
• Product redesign — reduce material intensity, extend product life, design for end-of-life.
• Use-phase efficiency — where category 11 dominates (e.g. appliances, vehicles).
• Modal shift — for transport-heavy value chains.
• Financed transition — for banks, engage borrowers via Sustainability-Linked Loans.

Reporting requirements

Material Scope 3 categories must be disclosed under CSRD/ESRS E1 and ISSB IFRS S2. SBTi requires Scope 3 targets when Scope 3 is >40% of the total footprint. CDP scoring rewards granular Scope 3 disclosure.

Common pitfalls

• Skipping the screening. Companies jump to detailed measurement on non-material categories.
• Over-reliance on spend data. Spend factors have wide uncertainty; move to activity data on material categories.
• Ignoring category 11. For anyone selling energy-consuming products, use-phase often exceeds every other category combined.