Guide · Emissions basics
What is Scope 3 — and do you actually have to report it?
Scope 1, 2 and 3 in plain language, and then the question most people are really asking: a customer mentioned Scope 3, so what do they need from you, what are you obliged to give, and what does a proportionate answer look like from a small supplier?
Practical orientation for SMEs, not legal advice. Reporting obligations depend on your size, sector and jurisdiction.
- Scope 1 is fuel you burn. Scope 2 is energy you buy. Scope 3 is everything else in your value chain — fifteen categories, upstream and downstream.
- Reporting duties fall on the reporting entity, not on its suppliers. Most SMEs are not required to report Scope 3 by anyone.
- The big one: when a customer asks for “your Scope 3”, they usually need your Scope 1 and Scope 2 — because your direct emissions are their Scope 3.
- “We do not calculate Scope 3” is a legitimate answer. A fabricated number is not.
- If you do want a figure, produce a labelled screening estimate, not a fake inventory.
The three scopes, quickly
The GHG Protocol splits a company's emissions into three buckets. The split is about control, not about importance.
Fuel you burn
Direct emissions from sources you own or control — company vehicles, on-site gas heating, a generator, refrigerant leaks.
Effort: From fuel-card statements and gas bills. An afternoon.
Energy you buy
Indirect emissions from the electricity, heat or steam you purchase — generated elsewhere, but consumed by you.
Effort: Twelve months of electricity bills × a published grid factor.
Everything else in your value chain
All other indirect emissions, up and down the chain: what you buy, business travel, commuting, waste, transport, and the use of what you sell.
Effort: Anything from a rough screening estimate to a full project.
Notice the asymmetry. Scope 1 and Scope 2 are computed from documents sitting in your own accounts payable. Scope 3 depends on data held by other organisations — your suppliers, your customers, your employees' commuting habits. That is the entire reason it is hard, and it is why it is unreasonable to expect a small supplier to produce it on demand.
The fifteen categories
The GHG Protocol Corporate Value Chain (Scope 3) Standard defines fifteen categories. You will not need most of them; the point of the list is to locate the two or three that matter for your business.
Upstream — what you buy
Purchased goods and services, capital goods, fuel- and energy-related activities not already in Scope 1 or 2, upstream transport and distribution, waste generated in operations, business travel, employee commuting, and upstream leased assets.
Downstream — what happens after you sell
Downstream transport and distribution, processing of sold products, use of sold products, end-of-life treatment of sold products, downstream leased assets, franchises, and investments.
For a professional-services or software business, the material categories are almost always purchased goods and services, business travel, and employee commuting. For a manufacturer, purchased goods and the use of sold products usually dominate everything else. Two categories done honestly beat fifteen done by guesswork.
Do you have to report it?
For most SMEs reading this: no — not by law. Disclosure obligations attach to the entity required to report, which is typically a large or listed company, and they do not flow down to that company's suppliers as legal duties. What flows down is a request, which is a commercial matter.
Where the frameworks are concerned: EFRAG's VSME is a voluntary standard designed for exactly this situation and does not demand a Scope 3 inventory from a small company. ISSB S2 does require Scope 3 disclosure — of the entity applying it, which is your customer, not you. Regimes such as California SB 253 set size thresholds and phase Scope 3 in after Scope 1 and 2, again for the in-scope company itself. If you are unsure which regime your customer is reporting under, the Regulations Hub has a guide for each.
What your customer actually needs from you
This is the part worth reading twice, because it converts a frightening request into a task you can finish this week.
Your Scope 1 and 2 are your customer's Scope 3
When a large company builds its Scope 3 inventory, the biggest category is normally purchased goods and services — which is you. To improve that number it needs supplier-specific data in place of an industry average applied to spend. Supplier-specific data means your direct emissions: your Scope 1 and Scope 2, for a stated period, with the method named. It does not mean your value-chain inventory.
So when the email says “please provide your Scope 3”, the useful reply is a clarifying question: do you need our own value-chain emissions, or a supplier-specific figure for what you buy from us? In most cases the answer is the second, and you already know how to produce it. When a customer names a specific scheme rather than asking directly — an EcoVadis assessment, a CDP supply-chain request — the named-request triage guide covers where each one goes.
If you genuinely do need a Scope 3 figure
Sometimes the answer really is the first one — a tender requires it, or you have decided you want it. In that case, do not attempt a full inventory. Do a screening estimate and label it as one.
Screen first
Identify the two or three categories likely to dominate. Ignore the rest until they are shown to matter.
Estimate, then label
A common rule of thumb puts SME Scope 3 at roughly 2–4× Scope 1 and 2 combined. Useful for scale; useless if presented as measurement.
State the method
Spend-based or activity-based, which factors, which period. The method is what makes an estimate defensible.
EcoDiligence takes the same position in the product. Every profile calculates Scope 1 and Scope 2 from your energy data using a sourced, country-correct grid factor — see the Methodology for the factor table and provenance. Where a regime asks for Scope 3 — currently the Bursa Malaysia SEDG and the ASEAN ASEDG disclosures — the wizard offers an explicit choice rather than a bare number field: not available, a screening estimate derived from your Scope 1 and 2, or your own detailed figure. Whichever you pick, the method is printed next to the number. A labelled estimate is honest data; an unlabelled one is a problem waiting for next year.
What a buyer can and cannot require
If your customer is an EU company reporting under CSRD, there is a formal limit on what it may require from an SME in its value chain — the VSME value-chain cap. It is not a technicality; it is the strongest single piece of leverage a small supplier has when a request is disproportionate. Read what the cap covers, including replies you can send as they are. And if you are on the other side of this — writing the request rather than receiving it — the vendor questionnaire template sets out how to ask about Scope 3 in a way that produces a real answer instead of a placeholder.
Frequently asked questions
This page is practical orientation for SMEs and is not legal advice. Whether any disclosure obligation applies to you depends on your size, sector, jurisdiction and customers, and thresholds and phase-in dates change — consult the relevant regime or a qualified adviser. Scope definitions and categories follow the GHG Protocol Corporate Value Chain (Scope 3) Standard. Data prepared with EcoDiligence is self-reported and is not a third-party rating or assurance.
Start with the part you can actually calculate
Your Scope 1 and Scope 2 — from your own bills, with a sourced country factor and the method on the record. Free, in minutes.