With today’s speedy delivery services, it’s easy to assume products leave the manufacturer and come straight to the customer. In reality, most supply chains involve three to five distinct stages or stops — factories, trucks, ships, planes, trains and warehouses — before a product reaches the end customer.
Each stage consumes energy and produces greenhouse‑gas emissions, or GHGs. These are the so‑called Scope 3 emissions that stem from upstream activities like transportation, warehousing and supplier operations, as well as downstream activities such as product use, disposal and distribution to customers. Scope 3 emissions represent the lion’s share of most companies’ carbon footprint.
But Scope 3 emissions are difficult to measure. Unlike Scope 1 and Scope 2, Scope 3 captures emissions emanating from outside the company’s own operations. A product that goes through five to seven stops before reaching the consumer will likely result in higher Scope 3 emissions than one that passes through just two or three.
One of the challenges of tracking indirect emissions is that suppliers often report figures in varying ways, which makes it difficult for companies to understand their full impact. Companies making real progress aren’t just tracking Scope 3; they’re uncovering patterns, connecting dots and complying with regulations through software and data‑management tools.
Many companies are chasing carbon reduction targets, but without measuring Scope 3, they’re missing the biggest piece of the puzzle. What if the real emissions challenge isn’t inside your walls, but buried deep in your supply chain data? The good news is software can uncover it — here’s how.
Organizing Scope 3 data for measurement
Since Scope 3 emissions sources are diverse and often outside a company’s direct control, gathering reliable data is a major challenge. The Greenhouse Gas (GHG) Protocol breaks Scope 3 into 15 categories (eight upstream and seven downstream), providing a framework for companies to identify where emissions occur.
Not every category is applicable to every company, so an early step is to determine which are most relevant. That’s where the concept of a materiality threshold comes into play. A materiality threshold is a benchmark to determine which Scope 3 categories have the largest impact on a company’s overall emissions. By setting this threshold — often as a percentage of the total emissions inventory — companies can focus their measurement and management efforts on the categories that truly matter.
For example, a software company might find that employee commuting or “Business Travel” (Category 6) makes up a meaningful share of its Scope 3 emissions, while “Use of Sold Products” (Category 11) doesn’t really apply. A car manufacturer will likely find that “Use of sold Products” is by far its largest category because of the fuel burned by the cars it sells.
This approach ensures that companies invest time and effort efficiently, concentrating on the areas where reductions will make the most meaningful difference. But even with clear priorities, collecting and analyzing accurate emissions data across complex supply chains requires more than spreadsheets and manual tracking.
Why manual approaches fall short
Even after a company has categorized its Scope 3 emissions, the real challenge begins — collecting, analyzing, and verifying the data. A recent survey revealed that many companies still rely on spreadsheets and time‑consuming manual processes for sustainability reporting.
While familiar, spreadsheets are not designed to manage the scale or complexity of Scope 3. Data comes from dozens of internal teams and hundreds of external suppliers, often in inconsistent formats. The result is patchwork reporting, with missing or duplicate entries that make it difficult to get a clear picture of emissions across the value chain.
The costs are significant. Manual reporting consumes time, ties up internal resources, and often requires multiple conversations with suppliers. More critically, it produces data that is prone to errors.
Turning data into action with software
In an evolving regulatory environment requiring third‑party‑verified emissions data, spreadsheets can’t provide the level of accuracy or audit readiness that companies need. The EU’s Corporate Sustainability Reporting Directive (CSRD) and California’s climate reporting legislation require detailed, verifiable disclosures that account for Scope 3 emissions.
Instead of relying on disconnected spreadsheets, companies can centralize emissions data into a single system that spans the entire value chain. These platforms can collect supplier‑specific activity data, apply the right emission factors, and flag inconsistencies in real time. Just as importantly, they give investors and customers confidence that the information being reported is consistent and reliable.
This visibility also allows organizations to quickly identify carbon “hotspots” — areas of the supply chain that contribute disproportionately to emissions. For many sectors, ‘Purchased Goods and Services” (Category 1) and “Use of Sold Products” (Category 11) are the largest contributors. By consolidating these categories with precision, companies can focus their reduction strategies where they will have the greatest impact, rather than spreading resources thinly across all 15 categories.
Once a trustworthy data foundation is in place, the conversation shifts from reporting to strategy. Software enables companies to link emissions data with procurement and operational decisions, and carbon performance becomes a factor in sourcing, supplier selection and even product design. Instead of treating Scope 3 as a compliance exercise, organizations can use it as a guide to uncover inefficiencies, build resilience, and strengthen their competitive position.
Making Scope 3 reporting work smarter
Scope 3 emissions reporting is both relatively new and highly diverse; it is a continuous process rather than an annual exercise. Organizations need to collect high‑quality data on an ongoing basis while navigating evolving value chains, suppliers, and products. A software solution must be able to efficiently capture and manage data as the value chain shifts.
Whether you are looking to establish a Scope 3 reporting program or enhance your current program, engaging with a software platform is paramount to success. Scope 3 emissions reporting is expanding across several jurisdictions, and there is an increase in demand for verification‑ready data — namely, third‑party‑verified data. Since no one entity owns the entire supply chain, performing verifiable Scope 3 accounting will be difficult without dedicated software.
