ERM - Three steps to leverage your Scope 3 disclosure for value

In the coming years, corporate value creation linked to Net Zero strategies will increasingly depend on managing and disclosing Scope 3 greenhouse gas (GHG) emissions—those generated across the entire value chain, beyond direct operations. Between 2025 and 2029, many companies will report Scope 3 emissions for the first time as part of mandatory disclosures driven by new regulations such as the EU Corporate Sustainability Reporting Directive (CSRD) and the UK’s Sustainability Disclosure Requirements. In addition, several jurisdictions including California, Australia, China, Brazil, and Turkey are introducing or planning similar requirements.

For years, leading companies voluntarily reported Scope 3 emissions under frameworks like CDP, TCFD, and SBTi. However, voluntary reporting quality has been inconsistent. The shift to mandatory disclosure is setting higher expectations on completeness, materiality, risk assessments, and reporting across all key Scope 3 categories. The EU’s CSRD, for instance, now requires detailed reporting on value chain emissions, with deadlines adjusted under the EU Omnibus proposal: large EU firms must comply by 2028, large subsidiaries of non-EU companies and listed SMEs by 2029, while large public-interest entities start in 2025 as planned. Meanwhile, mechanisms such as the EU’s Carbon Border Adjustment Mechanism (CBAM) will require companies importing carbon-intensive goods to report and price embedded emissions.

As regulation tightens, pressure is also mounting from investors, customers, and other stakeholders for companies to produce credible climate transition plans aligned with science-based targets. The SBTi requires firms to reduce absolute emissions across their value chains by up to 42% by 2030 and 90% by 2050 compared to 2020 levels. Such ambitious reductions will demand changes in supplier engagement, procurement strategies, and product design. Scope 3 data is becoming central to decision-making, as it often represents emissions five to twenty times greater than those from direct operations (Scopes 1 and 2).

Far from being a compliance burden, Scope 3 disclosure offers companies the chance to create business value, mitigate risks, and build resilience. Supplier selection increasingly includes carbon criteria, and some companies are requiring suppliers to provide product footprint data or meet emissions targets. In the UK, government contracts now require Scope 3 assessments, while private investors and lenders are integrating Scope 3 performance into due diligence processes.

To succeed, companies should take three key steps:

1. Map Scope 3 emissions hotspots – Identify where emissions are concentrated across the 15 categories defined by the GHG Protocol. This involves gathering data from finance, procurement, and supplier teams, supported by digital tools and expert input to ensure accuracy and coverage.

2. Align with applicable standards – Understand the regulatory and voluntary frameworks relevant to your business, from CSRD and CBAM to SBTi. Avoid selective reporting that focuses on small sources (e.g. business travel) while neglecting major contributors like purchased goods or product use, which could expose the company to accusations of greenwashing.

3. Leverage Scope 3 data as business intelligence – High-quality, assurance-ready data can support smarter decision-making, supplier collaboration, innovation, and cost savings. Integrating Scope 3 targets into strategy will position companies to capture value and strengthen competitiveness as decarbonization accelerates.

In summary, Scope 3 disclosure, once seen mainly as a voluntary exercise, is rapidly becoming a regulatory and strategic imperative. Companies that act now to build robust reporting processes, engage suppliers, and align with Net Zero goals will be best placed to create long-term business value in the transition to a low-carbon economy.

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