Scope 3: from blanket rules to targeted action
Reporting on scope 3 emissions is one of the most complex sustainability challenges companies face. Prompted in part by the EU’s Corporate Sustainability Reporting Directive (CSRD) and the Omnibus Directive, a heated debate has emerged: critics argue for abolishing scope 3 reporting altogether, while proponents insist it’s essential for a more sustainable economy. The truth likely lies somewhere in between: Scope 3 reporting has its flaws but scrapping it entirely would be a missed opportunity. Instead, it needs reform.
A catch-all term that conceals more than it reveals
To begin with, we need to understand the criticism, which arises from three key shortcomings: lack of relevance, high administrative burden, and insufficient accuracy and transparency.
First, the lack of relevance. Scope 3 includes a wide range of emissions across the entire value chain – from raw materials and production to consumer use and waste. Add to that the fact that each sector has its own value chain with unique characteristics and conflicting perspectives: what’s upstream for one company is downstream for another. The current definition makes no distinction between what is relevant or material but instead requires aggregated reporting across the board. Yet what’s material can vary dramatically between sectors and even sub-sectors.
Second, the high administrative burden. Many scope 3 emissions fall outside a company’s direct control or visibility. Building a robust methodology and collecting bottom-up data from value chain partners is labour-intensive and often hampered by limited cooperation, lack of capacity, and inconsistent reporting standards. As a result, reporting becomes a major source of frustration and cost. As a workaround, companies frequently resort to top-down estimates to efficiently map the entire value chain. But scope 3 reporting isn’t meant to deliver perfect totals – it’s about identifying key climate impacts and transition risks and fostering collaboration across the value chain.
Third, limited accuracy and transparency. Because companies are free to choose their own methods and data sources, the results are highly inconsistent. A patchwork of estimates and methodologies makes comparisons difficult, and aggregated reporting by different players only compounds the problem. Without a shared and transparent reference framework, it is unclear what action is needed to reduce emissions, leaving space to shift responsibility rather than drive change.
From catch-all to precision: how scope 3 reporting can be improved
To assess transition risks, companies need relevant, accurate, and transparent insights, yet scope 3, in its current form, falls short. While the debate about scope 3’s future increasingly turns into an all-or-nothing discussion, we advocate for more nuance: the diversity of scope 3 emissions calls for a sector-specific approach that balances materiality and feasibility. This can be achieved through sector-specific standards and requirements, focusing only on material value chain emissions within a sector, disaggregated by relevant source. This shift would bring several key benefits:
First, relevance. Companies should be assessed only on the emissions that are truly material to their sector. A one-size-fits-all approach doesn’t reflect the realities of different industries. Materiality should be determined based on factors like risk, emission intensity, strategic importance, and potential for engagement and eventual reduction.
Second, comparability. Sector-specific standards foster the development and standardisation of sector-specific methods, data, and indicators. This would significantly improve the comparability of reporting and allow for more effective monitoring of progress.
Third, feasibility. Material activities are usually closer to a company’s core operations and performance and therefore more within its sphere of influence. This means information from value chain partners is strategically valuable, making it easier and more worthwhile to collect detailed data, such as through direct collaboration with strategic suppliers. Scarce resources can then be focused on achieving greater precision and reliability for only the material activities and suppliers, promoting further harmonization where it matters most.
Fourth, impact. This approach allows companies to focus efforts on what actually moves the needle. Rather than getting bogged down in minor or irrelevant sources, companies can direct their resources toward the most significant emission drivers. This promotes responsibility, fosters cooperation, and leads to meaningful reductions – without excessive reporting burdens.
Fifth, compliance. This strategy also supports emerging standards. The Science Based Targets initiative (SBTi), for instance, now recommends setting targets only for the most relevant scope 3 categories.¹ A targeted approach aligns with such frameworks and makes climate ambition more actionable.
Conclusion: balancing effort and impact
So far, scope 3 reporting requirements have generated confusion—but they’ve also helped companies better understand the sustainability of their value chains. To maintain that momentum, we must shift the focus from imperfect data and reporting burdens to materiality and actionable insight. With smarter standardization and a focus on what matters most, scope 3 can evolve into a tool that not only obliges companies to measure emissions but also drives real progress on sustainability.
Ironically, the Omnibus Directive risks undermining this progress. By proposing to exempt 80% of companies from reporting obligations and its failure to introduce sector-specific standards, the European Commission may be heading in the wrong direction. Policymakers should instead engage with sectors to define common methods, standardize data, and lower administrative burdens. As long as top-down estimates remain the norm, scope 3 data will remain unreliable and inadequate for decision-making. A more focused policy approach can reduce red tape and, in turn, free up capacity to focus on what truly matters: reducing emissions.
