For businesses engaging with their sustainability goals and embarking on a net zero journey, they will have to engage with their carbon emissions. These emissions are split into three different scopes. Although many companies manage to measure and set targets for Scope 1 & 2 emissions, Scope 3 often proves more elusive even though for many companies these emissions represent the most significant proportion of their total output.
Getting to grips with Scope 3 is becoming an increasingly important element of the decarbonisation landscape, especially for those who wish to decarbonise their supply chains to achieve sustainability and net zero targets.
What Are Scope 1, 2 & 3 Emissions?
The three scopes are ways of categorising different kinds of emissions that a company generates both in its own internal practices and also through its supply chain. The Greenhouse Gas Protocol (GHG) defines what emissions come under each scope, with these definitions being adopted as the accounting standard for when it comes to reporting on emissions. The three scopes are defined as follows:
- Scope 1- Direct emissions that are generated from sources that are owned or controlled by a company, this could include elements such as company vehicles, fuel combustion, furnaces and heating oil/gas.
- Scope 2- Emissions that are caused by a company indirectly, for example the emissions from purchased electricity used by a company would fall into this category, alongside emissions from heat, steam and cooling.
- Scope 3- ‘Value Chain’ emissions that the company is responsible for up and down its entire supply chain. These emissions are not produced by the company itself and are not the result of activities from assets owned or controlled by them. This includes purchased goods & services, transportation & distribution, waste generated, capital goods, processing & use of sold goods alongside many others.
The numerous possibilities for emissions that could fall within a businesses’ ‘value chain’ illustrate its significant contribution to overall figures and the increasing importance of understanding Scope 3. Analysis by Cornwall Insight found that in 2023 corporate disclosures indicate Scope 3 emissions are on average 26 times higher than Scopes 1 & 2 but despite this, businesses are still twice as likely to capture data for the operational emissions of Scopes 1 & 2 than the supply chain emissions of Scope 3.
This data reinforces the importance of measuring, tackling and reducing your Scope 3 emissions as it would play a significant role in helping to decarbonise your business and achieve sustainability goals. However, the significant challenge for most businesses is obtaining data relating to their Scope 3 emissions since many occur from the result of activities not controlled by them, compared to the greater control available in measuring Scopes 1 & 2.
The Increasing Importance of Scope 3 Emissions
Scope 3 is becoming of increasing importance to due strengthening regulation. The government is currently consulting on a draft for UK Sustainability Reporting Standards (SRS) which if endorsed will be made available for entities to use on a voluntary basis and will include Scope 3 emissions. The outcome is expected in Autumn of this year, with the Financial Conduct Authority also consulting on whether listed companies should be required to use the SRS framework as a legal requirement, similar to the Taskforce for Climate Related Financial Disclosures.
Decarbonising your supply chain can also assist with reducing costs which are driven by global policies against high carbon producing activities. In 2025 there are now 80 global carbon pricing instruments which cover 28% of global GHG emissions. The number of instruments is only set to increase, meaning that decarbonising your supply chain could protect against the rising costs from high carbon activities. A new pricing instrument, the International Maritime Organisation’s Net Zero Framework, is set to increase the price of high carbon shipping, meaning that businesses may wish to think in greater detail about introducing EVs to their fleet if much of their shipping is done via road vehicles. For businesses who export to the EU they will also be subject to the requirements of the EU Carbon Border Adjustment Mechanism (CBAM) from 2026 which requires exporters to report on and pay charges for carbon leakage in the process of exporting goods to the EU. Failure to provide such information could risk reputational damage or additional costs from financial penalties.
The changing regulatory landscape underscores the increasing importance of measuring Scope 3. Businesses who do put in place methods to capturing the required data will be well positioned to engage with more stringent legislation as it begins to be introduced.
How Can LGE Help?
Getting ahead of the game when it comes to understanding your emissions and decarbonising your supply chain can have significant benefits for your company, including:
- Improved energy efficiency, reduction in consumptions and reduction in energy wastage
- Help achieve sustainability, net zero and CSR goals
- Help be one step ahead of any potential legislation that is to be introduced
- Assist with streamlining the process for existing reporting schemes such as ESOS & SECR
LGE has multiple service offerings to help your business obtain these benefits, these include:
- Carbon Footprinting– LGE can support businesses wanting to understand its Scopes 1, 2 & 3 emissions through an annual carbon footprint reporting service which allows for year-by-year comparisons.
- Net Zero Strategies– LGE can help businesses meet net zero targets through creating a tailored roadmap which will consider business needs, sustainability aspirations and current progress with the strategies taking a sustainable, sensible and measurable route.
- Energy Surveys– LGE’s onsite energy surveys can help businesses identify areas for energy reduction, energy wastage and energy efficiency, helping to reduce costs and emissions being generated.
- CBAM Support– LGE can provide support for mitigating the impact of CBAM including managing compliance through comprehensive measurements of carbon emissions and developing long-term strategies to mitigate the impacts of CBAM.
- EV Charging- LGE works with partners to provide access to EV charging infrastructure, LGE can help analyse offers and oversee project management of their installation.
Click here to read more on LGE’s net zero offerings or contact us at info@lgegroup.com