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Scope 3 Emissions Simplified: The Complete Guide for SMBs

Understanding and calculating your value chain emissions without losing your mind. A practical approach to Scope 3 reporting

October 3, 2025ClearComply Team

The One-Minute Summary

Scope 3 emissions are all the indirect emissions in your value chain - everything from your suppliers' operations to how customers use and dispose of your products. They typically represent 70-90% of a company's total carbon footprint.

Yes, they're complex to calculate. No, you can't ignore them under CSRD. The good news: perfect data isn't required, and there are practical shortcuts for SMBs.

The Pizza Restaurant Analogy

Imagine you run a pizza restaurant:

  • Scope 1: Gas burned in your ovens (direct emissions)
  • Scope 2: Electricity for your lights and fridges (energy you buy)
  • Scope 3: Everything else - growing the tomatoes, making the cheese, delivering pizzas, customers driving to pick up orders, throwing away the boxes

Scope 3 is the whole story beyond your four walls.

The 15 Categories of Scope 3

Upstream (Before Your Operations)

Category 1: Purchased Goods & Services

  • Raw materials, ingredients, components
  • Example: Steel for manufacturing, coffee beans for café

Category 2: Capital Goods

  • Equipment, buildings, vehicles
  • Example: New machinery, computers, company cars

Category 3: Fuel & Energy Activities

  • Upstream emissions from fuel/electricity
  • Example: Extracting oil that becomes your gasoline

Category 4: Transportation & Distribution (Upstream)

  • Shipping from suppliers to you
  • Example: Trucks bringing inventory to warehouse

Category 5: Waste from Operations

  • Disposal and treatment of your waste
  • Example: Landfill emissions from your trash

Category 6: Business Travel

  • Employee flights, hotels, rental cars
  • Example: Sales team flying to conferences

Category 7: Employee Commuting

  • Daily travel to/from work
  • Example: Staff driving to office

Category 8: Leased Assets (Upstream)

  • Assets you lease and operate
  • Example: Leased warehouse, equipment

Downstream (After Your Operations)

Category 9: Transportation & Distribution (Downstream)

  • Shipping products to customers
  • Example: Delivery trucks to retailers

Category 10: Processing of Sold Products

  • When others process your products
  • Example: Milk processor using your raw milk

Category 11: Use of Sold Products

  • Emissions when customers use products
  • Example: Electricity to run appliances you sell

Category 12: End-of-Life Treatment

  • Disposal of your products
  • Example: Landfill emissions from packaging

Category 13: Leased Assets (Downstream)

  • Assets you own but others operate
  • Example: Buildings you lease to tenants

Category 14: Franchises

  • Operations of your franchisees
  • Example: McDonald's franchise locations

Category 15: Investments

  • Emissions from investments/financing
  • Example: Portfolio companies' emissions

Which Categories Matter for Your Business?

Almost Everyone Has These:

  • Purchased goods & services (Category 1)
  • Business travel (Category 6)
  • Employee commuting (Category 7)
  • Waste (Category 5)

Industry-Specific Priorities:

Manufacturing:

  • Purchased goods (huge)
  • Transportation & distribution
  • Use of sold products
  • End-of-life treatment

Services/Office:

  • Purchased services
  • Business travel (often biggest)
  • Employee commuting
  • Capital goods (IT equipment)

Retail:

  • Purchased goods for resale
  • Transportation both ways
  • Customer travel to stores

How to Calculate (The Practical Way)

Step 1: Start with Spend-Based Method (Quick & Dirty)

How it works: Multiply spending by emission factors Formula: $ spent × kg CO2 per $ = emissions

Example:

  • Spent $100,000 on office supplies
  • Factor: 0.5 kg CO2 per $
  • Emissions: 50,000 kg CO2

Pros: Quick, uses existing financial data Cons: Not very accurate

Step 2: Upgrade to Activity-Based (Where Possible)

How it works: Use actual consumption data Formula: Quantity × emission factor = emissions

Example:

  • Purchased 1,000 kg of steel
  • Factor: 2.5 kg CO2 per kg steel
  • Emissions: 2,500 kg CO2

Pros: More accurate Cons: Requires more data

Step 3: Engage Suppliers (For Material Items)

Ask top suppliers for:

  • Their Scope 1 & 2 emissions
  • Emissions allocated to your purchases
  • Their calculation methodology

Start with your top 10 suppliers by spend.

The SMB Shortcut Method

Focus on the 80/20 Rule

Step 1: Identify top five Scope 3 categories by rough estimation Step 2: Focus detailed calculations there Step 3: Use estimates for the rest

Quick Estimation Tools:

  • EPA's Simplified GHG Calculator (free)
  • GHG Protocol Scope 3 Evaluator (free)
  • Carbon Trust SME Tools (free basics)

When to Use Estimates:

  • Initial baseline year
  • Minor categories (less than 5% of total)
  • When supplier data unavailable
  • For future projections

Real Example: Marketing Agency (50 employees)

Their Scope 3 Breakdown:

  • Purchased services (IT, software): 35 percent
  • Employee commuting: 25 percent
  • Business travel: 20%
  • Capital goods (computers): 10%
  • Office supplies: 5 percent
  • Other: 5 percent

Data Collection Approach: Step 1: Surveyed employees on commuting (got 80% response) Step 2: Pulled travel data from expense system Step 3: Used spend-based for IT services Step 4: Got actual data from computer supplier Step Five: Estimated the rest

Total time invested: 2 weeks part-time Result: Credible baseline for CSRD

Common Challenges & Solutions

"Our suppliers won't share data"

  • Start with largest suppliers
  • Use industry averages
  • Add requirements to new contracts
  • Join industry initiatives for collective asking

"The calculations are too complex"

  • Use free tools initially
  • Consider hiring consultant for baseline
  • Improve accuracy over time
  • Document assumptions clearly

"We don't have historical data"

  • Start measuring now
  • Use estimates for past
  • Focus on trends going forward
  • Be transparent about limitations

"It's too expensive to measure"

  • Many free tools available
  • Cost drops significantly year 2+
  • Consider it investment in risk management
  • Often finds cost savings too

Your 60-Day Scope 3 Action Plan

Week 1-2: Map Your Value Chain

  • List all Scope 3 categories
  • Rough estimate which matter
  • Identify data sources

Week 3-4: Collect Easy Data

  • Business travel records
  • Waste management reports
  • Major supplier invoices
  • Employee commute survey

Week Five-Six: Calculate & Refine

  • Use online tools for calculations
  • Document all assumptions
  • Identify biggest emissions sources

Week 7-8: Engage & Improve

  • Contact top suppliers
  • Set reduction targets
  • Plan better data for next year
  • Create monitoring system

Red Flags to Avoid

Don't claim zero - Everyone has Scope 3 ❌ Don't exclude without justification - Document why categories don't apply ❌ Don't use outdated factors - Emission factors change yearly ❌ Don't forget uncertainty - Acknowledge data limitations ❌ Don't work alone - You need procurement, finance, operations

Quick Wins for Reduction

Option 1: Switch to local suppliers (less transport) Option 2: Encourage remote work (less commuting) Option 3: Choose low-carbon materials (aluminum vs steel) Option 4: Optimize packaging (less waste) Option Five: Select green logistics (rail vs air)

The Bottom Line

Scope 3 emissions are complex but not impossible. Start with estimates, focus on your biggest categories, and improve each year. CSRD accepts good faith efforts with clear documentation over perfect data.

Remember: Everyone struggles with Scope 3. Showing progress and transparency matters more than precision in year one.

Need Help With CSRD Compliance?

Download our free readiness checklist or explore our interactive tools