Scope 3 emissions are the indirect greenhouse gas emissions that occur across a company’s value chain, upstream and downstream, from sources it does not own or control. The current GHG Protocol standard organizes them into 15 categories, eight upstream and seven downstream, covering everything from purchased goods and services to the use of sold products. A 16th is proposed in the 2026 revision.
The 15 Scope 3 Categories
Upstream
- Purchased goods and services
- Capital goods
- Fuel- and energy-related activities not included in Scope 1 or 2
- Upstream transportation and distribution
- Waste generated in operations
- Business travel
- Employee commuting
- Upstream leased assets
Downstream
- Downstream transportation and distribution
- Processing of sold products
- Use of sold products
- End-of-life treatment of sold products
- Downstream leased assets
- Franchises
- Investments
Why It Matters for Manufacturers
For most manufacturers, Scope 3 is not a supplement to the inventory. It is the inventory. Categories 1, 4, 11 and 12 routinely dwarf everything happening inside the plant.
The hard part is that the data belongs to someone else. A defensible Category 1 number depends on supplier-specific emissions data, and the fallback — multiplying spend by an industry average factor — produces a figure that moves when procurement negotiates a better price and does not move when a supplier decarbonizes. It satisfies a disclosure requirement without informing a decision.
Manufacturers sit on both sides of this. A supplier’s Scope 1 and 2 becomes its customer’s Scope 3 Category 1, which is why data requests keep arriving from customers who are themselves under a reporting obligation.
Screening matters as much as calculating. ESRS requires a company to screen its total Scope 3 emissions across the 15 GHG Protocol categories, or the EN ISO 14064-1:2018 categories, and to identify which are significant based on magnitude and criteria such as spend, influence and transition risk. Emissions are then reported for each significant category, as a total and per category. Significant categories have to be updated annually, with the full Scope 3 inventory refreshed at least every three years and purchased cloud and data center emissions disclosed as a subset of Category 1. An inventory that reports a handful of convenient categories without showing the screening work does not meet the standard.
U.S. and EU Applicability
ESRS E1 requires gross Scope 3 emissions for each significant category. IFRS S2 requires disclosure of total Scope 3 emissions and of which GHG Protocol categories are included in that total, rather than a quantified breakdown of all 15.
The value chain cap shapes what suppliers can be asked for. Set by a delegated regulation adopted July 3, 2026 alongside the revised ESRS and, as of Aug. 31, 2026, not yet published in the Official Journal, it limits what CSRD reporters may require from value chain companies of 1,000 employees or fewer. It works in a way that surprises people. Scope 1 and location-based Scope 2 sit inside the cap, so a reporter can require them. Scope 3 sits above it, which means a reporter may still ask but has to identify the request as exceeding the cap, and the supplier has a statutory right to decline. For value chain companies with 10 employees or fewer, even the Scope 1 and location-based Scope 2 datapoint becomes voluntary. In practice the requests keep arriving either way.
In the U.S., California’s SB 253 phases Scope 3 in after Scope 1 and 2. For Scope 3 specifically, the statute provides that a reporting entity is not subject to an administrative penalty for misstatements made with a reasonable basis and disclosed in good faith, and that from 2027 through 2030 Scope 3 penalties may be assessed only for nonfiling. The Scope 3 timetable also sits against the unresolved Ninth Circuit challenge to California’s climate disclosure laws, argued Jan. 9, 2026 and undecided. U.S. manufacturers outside every mandate still meet Scope 3 through customer questionnaires.
Current Status
Last updated: Aug. 31, 2026
- At a July 21, 2026 workshop, CARB floated limiting first-year SB 253 Scope 3 reporting to five categories: purchased goods and services
- Fuel- and energy-related activities
- Waste generated in operations
- Business travel
- Employee commuting
- Remaining categories are voluntary. This is a pre-proposal approach for stakeholder feedback, not a formal rule. CARB has said a draft regulation is expected later in 2026, followed by a 45-day comment period before board consideration.
- The GHG Protocol published a Scope 3 Standard revision Phase 1 progress update on March 31, 2026. Proposals under development include reporting at least 95 percent of required Scope 3 emissions, narrowing Category 15 to investments and moving insurance, underwriting and other facilitated activities into a proposed new Category 16, “Other Value Chain Activities,” which would be optional for most companies but required for oil and gas distributors. Also proposed: disaggregating emissions by data type and adding a verification disclosure requirement. All of these are proposals under development, not adopted text.
- Under the revised ESRS, adopted July 3, 2026 and not yet published in the Official Journal, value chain data that isn’t yet available can be deferred during a company’s first three years in scope, with an explanation of the efforts made, the reasons the information could not be obtained and a plan to obtain it.
Learn more
- The best Scope 3 software picks + what features matter most
- Carbon Compliance for Industrial Manufacturers: Programs, Penalties and Deadlines That Can’t Wait.
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