Scope 3 emissions are defined as all indirect Greenhouse gas emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.
Scope 3 emissions are indirect emissions, other than Scope 2 emissions, from sources owned or controlled by other entities in a reporting entity’s value chain (i.e., upstream or downstream activities). Common examples include emissions from purchased goods or services and emissions from business travel.
The GHG Protocol requires a reporting entity to differentiate its GHG emissions from direct and indirect sources (i.e., Scope 1 vs. Scope 2 and Scope 3), but it does not require a reporting entity to report on Scope 3 emissions. However, some regulations may require it to report Scope 3 emissions. This accounting and reporting structure increases the transparency of the emissions based on which party is emitting the GHGs. It also avoids double counting by making sure that two or more reporting entities do not account for the same emissions in Scope 1, while also providing information about a reporting entity’s other GHG emissions. That is, if every entity and individual throughout the world reported their GHG emissions, the total of all Scope 1 emissions would equal the total GHGs emitted throughout the world.
However, a stakeholder may also want information about how a reporting entity’s decisions (e.g., how much purchased electricity its production process uses, the impact of business travel) affects GHG emissions, which is why reporting entities also report their indirect GHG emissions in Scope 2 and Scope 3 emissions.
