Value Chain Emissions: What They Are and How to Manage Them Effectively

As climate accountability accelerates, organizations are being asked to look beyond their walls. It’s no longer enough to reduce emissions from internal operations or purchased energy; regulators, investors, and customers now expect full transparency across the entire value chain. This involves measuring, managing, and reporting emissions associated with suppliers, logistics, product use, and even disposal.

For compliance leaders, this shift represents both a challenge and a critical opportunity. Value chain emissions, also known as scope 3 emissions, typically account for the vast majority of a company’s carbon footprint. Yet they’re also the most complex to address. As disclosure laws, such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and California’s SB 253, come into force, organizations must take decisive action to gain control over these indirect emissions and align with international climate frameworks.

What Are Value Chain Emissions?

Value chain emissions represent the indirect greenhouse gas (GHG) impacts that occur throughout a company’s broader business ecosystem. They are categorized as scope 3 under the Greenhouse Gas Protocol and reflect the emissions generated not by the company itself, but by the activities it relies on, across both supply and demand chains.

Unlike scope 1 and 2 emissions, which stem from an organization’s operations or energy use, scope 3 includes everything from raw material extraction and supplier production to the use and disposal of finished products. This spans categories such as upstream transportation, business travel, waste generated in operations, and downstream distribution and product end-of-life.

For most organizations, scope 3 emissions are not just significant; they are dominant. Research across sectors consistently shows that these emissions account for the bulk of corporate climate impact, often reaching 70% to 90% of total emissions. Without addressing them, any net-zero strategy remains incomplete.

Value chain emissions are also where many of the biggest risks and opportunities lie. They reveal inefficiencies, supply vulnerabilities, and hotspots for decarbonization, and they’re quickly becoming a focal point of regulatory scrutiny and investor expectations.

Why Value Chain Emissions Matter

Understanding where emissions occur is the first step, but knowing why they matter is what turns measurement into meaningful action. As the climate crisis intensifies, value chain emissions have become a central concern not only for sustainability teams but also for compliance, finance, procurement, and risk management. These emissions are now under the spotlight of regulators, investors, customers and civil society.

A Hidden Driver of Carbon Footprints

For most organizations, the largest share of their climate footprint lies outside their direct control. Value chain emissions typically account for 70% to 90% of total corporate greenhouse gas emissions. Yet many businesses still concentrate the bulk of their efforts on scope 1 and scope 2, focusing on internal operations and energy consumption. This leaves the majority of their climate impact unaddressed and undermines the success of emissions reduction strategies.

Regulations Raising the Bar

Global regulators are making it clear: value chain emissions are part of the compliance equation.

• The EU’s Corporate Sustainability Reporting Directive (CSRD), with its underlying European Sustainability Reporting Standards (ESRS), mandates detailed disclosures across all three emissions scopes.
• In the United States, California’s SB 253 will require large businesses to report scope 3 emissions beginning in 2027, transitioning from safe harbor to limited assurance by 2030.
• On a global scale, the IFRS S2 standard issued by the International Sustainability Standards Board (ISSB) now embeds scope 3 into climate-related financial disclosures, reinforcing the need for robust supply chain data across capital markets.

As we will explore later, each of these frameworks places scope 3 data front and center. Organizations that can’t provide a clear view of their value chain emissions will face increasing scrutiny from regulators and fall short of basic compliance expectations.

Changing Market Expectations

Beyond regulation, pressure from stakeholders is accelerating. Institutional investors want to understand the full extent of climate exposure. Multinational buyers are integrating carbon metrics into procurement decisions, while ESG ratings agencies are asking tough questions about data quality, target credibility, and value chain engagement. Conversely, those who demonstrate command over their value chain emissions earn recognition. Clear data, science-aligned targets, and collaborative supplier engagement build trust and strengthen ESG positioning across the board.

Climate Goals Depend On It

Net-zero commitments are now the norm across industries, but few will be achieved without addressing emissions upstream and downstream. The Science Based Targets initiative (SBTi) requires companies to include scope 3 in their near-term targets if it accounts for 40% or more of total emissions. That threshold is easily surpassed in most sectors.

Moreover, the Paris Agreement’s 1.5°C pathway demands value chain decarbonization at scale. Whether you’re aiming for SBTi validation, internal net-zero goals, or climate leadership recognition, reducing scope 3 is non-negotiable.

Regulations Mandating Scope 3 Action

The regulatory environment for emissions disclosure is undergoing a rapid transformation. Once limited to voluntary reporting and operational boundaries, today’s mandates extend deep into the value chain, placing scope 3 emissions firmly within the scope of compliance.

This shift is driven by a global consensus: without transparency on indirect emissions, climate risk cannot be accurately measured, managed or mitigated. As a result, national and international frameworks are converging on the shared expectation that companies must account for their entire carbon footprint, including the emissions tied to suppliers, partners, logistics and downstream impacts.

EU CSRD & ESRS

The EU’s Corporate Sustainability Reporting Directive (CSRD), which began phasing in from 2024, marks a step change in corporate climate disclosure. Companies subject to CSRD must report on scopes 1, 2, and 3 in detail, following the European Sustainability Reporting Standards (ESRS). This includes upstream emissions from purchased goods and services, as well as downstream emissions from product use and disposal. For many companies, this is the first time they have been legally obligated to quantify and disclose value chain impacts at scale.

California SB 253

California’s Climate Corporate Data Accountability Act (SB 253) extends mandatory emissions disclosure to companies earning over $1 billion in revenue and doing business in the state. Beginning in 2026, firms must report scope 1 and 2 emissions, with scope 3 disclosures due by 2027 under a safe harbor period. By 2030, scope 3 data must meet limited assurance standards, signaling a long-term regulatory commitment to value chain transparency.

IFRS S2 (ISSB Global Standard)

The International Sustainability Standards Board (ISSB) introduced IFRS S2 to create a global baseline for climate-related disclosures in financial reporting. Scope 3 is included by default when it is material (which, for most organizations, it is). This standard is rapidly being adopted across capital markets and by regulators seeking alignment between financial disclosures and climate risk.

SBTi Criteria for Corporate Climate Targets

Beyond disclosure, action is also being regulated, most prominently through the Science Based Targets initiative. To qualify for SBTi validation, companies must include scope 3 targets if these emissions represent more than 40% of their total footprint. The SBTi also requires that companies quantify emissions using GHG Protocol methodologies and demonstrate progress over time. As thousands of companies commit to SBTi-aligned goals, scope 3 reductions have become a core component of credible climate strategies.

EU Carbon Border Adjustment Mechanism

Although CBAM is a trade mechanism rather than a disclosure rule, it has major implications for scope 3 tracking. Beginning its transition in 2023 and entering full enforcement in 2026, the EU CBAM imposes a carbon cost on imported goods such as steel, aluminum, cement, and fertilizers. To comply, importers must calculate and report the embedded emissions of products sourced from outside the EU, effectively requiring upstream scope 3 visibility from global suppliers.

Barriers to Progress in Managing Value Chain Emissions

While awareness and regulatory pressure around scope 3 emissions are accelerating, turning that momentum into action remains a complex undertaking. Value chain emissions span thousands of data points, multiple tiers of suppliers and operational activities far outside a company’s direct control. For many organizations, the road to accurate measurement and meaningful mitigation is anything but straightforward. The following challenges are among the most common barriers organizations face as they work to manage and reduce value chain emissions:

• Data Collection and Quality: Capturing reliable scope 3 data is notoriously difficult. Suppliers often lack emissions accounting systems or the capacity to measure their own scope 1 and 2 data, let alone attribute emissions to a specific customer. As a result, companies frequently rely on spend-based estimations, generic emission factors, or sectoral proxies.
• Scope Complexity: The Greenhouse Gas Protocol outlines 15 categories of scope 3 emissions, each with its own boundaries, data sources and accounting methodologies. From upstream purchased goods to downstream product disposal, the range of activities is vast, and not all of them apply equally across industries. Building a full emissions inventory requires careful scoping, prioritization and technical understanding.
• Supplier Engagement: Supplier participation is foundational to value chain decarbonization, but it remains a significant hurdle. Many suppliers, especially SMEs, have not yet begun tracking emissions or may lack the knowledge, resources or incentives to do so. Organizations must invest in supplier education, communication and collaboration to build trust and drive consistent reporting practices.
• Verification and Assurance: As regulations such as California’s SB 253 phase in third-party assurance requirements for scope 3 data, the demand for qualified verifiers is rising sharply. However, limited global availability of carbon auditors creates bottlenecks. For companies with large or complex supply chains, achieving limited or reasonable assurance for value chain emissions may require years of planning and system readiness.
• Integration and Reporting: Scope 3 data doesn’t exist in a vacuum. It needs to be integrated into broader carbon accounting platforms, ESG disclosures and climate strategy frameworks. Aligning data inputs across reporting standards, such as CSRD, ISSB S2, CDP and SBTi, can be a logistical challenge, especially for multinational organizations with fragmented systems.

5 Steps for Managing Value Chain Emissions

With regulatory pressure mounting and climate expectations growing, managing value chain emissions effectively requires not just data but also a strategy grounded in proven frameworks, credible targets and supplier collaboration.

1. Use the GHG Protocol as Your Foundation

The  GHG Protocol’s scope 3 Standard  remains the global benchmark for measuring indirect emissions. It provides structured guidance for identifying relevant emissions categories, choosing calculation methods, and documenting assumptions. Companies should begin by clearly defining their organizational and operational boundaries, then apply the Protocol’s 15-category structure to ensure complete coverage. Using this standard from the outset helps maintain consistency, improves comparability, and supports alignment with other frameworks.

2. Build a Comprehensive Emissions Inventory

A full scope 3 inventory is essential for setting targets and tracking progress. According to SBTi guidance, companies should quantify emissions across all relevant scope 3 categories before establishing reduction goals. This not only improves credibility but reveals hotspots that can guide action. Prioritize traceability by documenting methodologies, data sources, and reliability levels, particularly where estimations are used. Transparency is key to building trust with stakeholders and meeting assurance requirements.

 3. Engage and Enable Suppliers

Supplier engagement is the cornerstone of Scope 3 success. Many emissions are generated by upstream partners, which means reduction efforts must extend beyond your operations. Build structured engagement programs that include supplier training, carbon data collection surveys and technical support. Focus especially on strategic and high-emitting suppliers who can have an outsized impact on your overall footprint.

4. Align Across Regulatory Frameworks

Scope 3 reporting is increasingly required under multiple frameworks, with CSRD, CDP, SEC climate rules, TCFD, and ISSB among them. Rather than duplicating efforts, aim to align disclosures across standards using a consistent emissions inventory. A single, verified dataset can serve multiple reporting needs, reduce administrative burden, and improve data integrity. Streamlining your reporting architecture also helps ensure you’re future-proofed as global rules converge.

5. Plan for Verification and Disclosure

With laws like SB 253 introducing assurance requirements for scope 3, it’s crucial to plan for third-party verification. Begin by building strong internal controls, maintaining documentation, and applying recognized methodologies. Where feasible, publish your emissions data and methodologies to demonstrate transparency. Verified and traceable reporting satisfies regulatory expectations and builds stakeholder confidence.

Turning Insights Into Action

Successfully managing value chain emissions is more than a compliance exercise. It is a foundation for long-term resilience, credibility, and operational improvement. Yet, as we’ve explored, organizations face no shortage of challenges. Inconsistent supplier data, regulatory complexity and limited internal capacity can all slow progress.

The path forward requires practical solutions. Leading companies are turning to partners that can help embed emissions management into their systems, supply chains and decision-making processes. With the right support, what seems complex becomes manageable.

Digital platforms are helping organizations automate data collection, track supplier performance, and centralize scope 3 information in a single view. By using tools that provide standardized emissions assessments and scorecards, companies can identify where the biggest impacts lie, engage suppliers more effectively, and measure progress with clarity. This is especially valuable for working with small and medium-sized suppliers who may not have the resources to report on their own.

These systems also support alignment across frameworks like the GHG Protocol, CSRD, and SBTi. When scope 3 data can be integrated into broader ESG reporting and verified against regulatory requirements, companies gain both transparency and confidence in their disclosures.

Your Next Move

EcoVadis brings these capabilities together in a way that helps organizations move faster, with greater confidence and less risk. From supplier engagement to carbon scorecards and emissions tracking, our solutions are designed to deliver real progress on value chain decarbonization.

Book a demo today and see how EcoVadis can help you turn scope 3 from your biggest challenge into your strongest climate advantage.