CSRD Scope 3 Emissions Reporting: Complete Guide for 2026

Under CSRD and ESRS E1 (Climate Change), companies must report on Scope 3 greenhouse gas emissions — indirect emissions across the entire value chain — if they are material under the double materiality assessment. Scope 3 covers 15 categories defined by the GHG Protocol Corporate Value Chain Standard, including purchased goods and services, business travel, employee commuting, use of sold products, and end-of-life treatment of products. ESRS E1 paragraphs 44-64 set out the specific disclosure requirements for GHG emissions under CSRD.

Legal Framework: CSRD, ESRS E1 and the GHG Protocol

The Corporate Sustainability Reporting Directive (CSRD), Directive 2022/284/EU of the European Parliament and of the Council of 14 December 2022, replaced the Non-Financial Reporting Directive (NFRD — Directive 2014/95/EU, which had amended Directive 2013/34/EU) and dramatically expanded the scope and depth of sustainability reporting obligations. The CSRD applies first to large public-interest entities (PIEs) with more than 500 employees for financial years starting 1 January 2024 (reports due in 2025), then to large companies meeting at least two of: more than 250 employees, net turnover over €40 million, or total assets over €20 million — for financial years starting 1 January 2025 (reports due in 2026). Listed SMEs fall within scope for financial years starting 1 January 2026 (reports due in 2027).

The technical content of CSRD sustainability reports is governed by the European Sustainability Reporting Standards (ESRS), adopted via Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023. ESRS E1 specifically addresses Climate Change and is the standard that governs GHG emissions reporting. ESRS E1 paragraphs 44 to 64 establish the disclosure requirements for gross GHG emissions broken down by Scope 1 (direct), Scope 2 (indirect from purchased energy) and Scope 3 (all other indirect emissions across the value chain). Application Requirements (AR) 25 to 46 of ESRS E1 provide detailed technical guidance on how to calculate and present Scope 3 emissions. The EFRAG Implementation Guidance 2 (IG 2) on Value Chain provides further practical guidance on how to manage data collection from suppliers and other value chain partners.

The technical methodology for Scope 3 calculation referenced by ESRS E1 is the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard, published by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). This standard defines the 15 Scope 3 categories, explains the four calculation methods (spend-based, average-data, activity-based and supplier-specific), and provides worked examples. ESRS E1 AR 29 specifies that companies should use the GHG Protocol as the primary methodology reference unless sector-specific ESRS provide different guidance. Emission factors should come from established databases such as the UK DEFRA conversion factors, the ecoinvent database, or the IPCC emission factor database. Companies setting emission reduction targets aligned with science must follow the Science Based Targets initiative (SBTi) Corporate Standard, noting that SBTi requires coverage of Scope 3 emissions if they represent more than 40% of total GHG emissions.

The 15 Scope 3 Categories: Upstream and Downstream

The GHG Protocol divides Scope 3 emissions into two groups: upstream (relating to the company's supply chain and operations) and downstream (relating to the use and end-of-life of products and services sold by the company). Upstream categories: Category 1 — Purchased goods and services (typically the largest Scope 3 category for most companies); Category 2 — Capital goods; Category 3 — Fuel and energy-related activities (not included in Scope 1 or 2); Category 4 — Upstream transportation and distribution; Category 5 — Waste generated in operations; Category 6 — Business travel; Category 7 — Employee commuting; Category 8 — Upstream leased assets. Downstream categories: Category 9 — Downstream transportation and distribution; Category 10 — Processing of sold products; Category 11 — Use of sold products (often the dominant downstream category for consumer electronics, vehicles and fossil fuels); Category 12 — End-of-life treatment of sold products; Category 13 — Downstream leased assets; Category 14 — Franchises; Category 15 — Investments (critical for financial institutions).

Step-by-Step Process: How to Report Scope 3 Under CSRD

1. Conduct the double materiality assessment to determine if climate and Scope 3 are material: Under CSRD and ESRS 1 (General Requirements), companies must carry out a double materiality assessment before deciding which ESRS standards and disclosures to report. Double materiality has two perspectives: impact materiality (does the company cause significant actual or potential impacts on the environment and people through its value chain?) and financial materiality (do climate-related risks and opportunities have, or could they have, a material financial effect on the company?). If climate is assessed as material — which it will be for the vast majority of companies subject to CSRD — then ESRS E1 applies in full, including Scope 3 disclosures. ESRS E1 AR 25 clarifies that all 15 Scope 3 categories must be considered, and those assessed as significant must be reported quantitatively. The double materiality assessment must be documented, reviewed by management and approved by the board or equivalent governance body.
2. Map your value chain (upstream suppliers, own operations, downstream customers): Before calculating emissions, you need to understand the boundaries of your reporting. Scope 3 requires mapping the entire value chain: who are your significant tier-1 and tier-2 suppliers? What are the main inputs and services you purchase? What happens to your products after they leave your facilities? This value chain mapping serves as the basis for identifying which Scope 3 categories are relevant and significant. EFRAG IG 2 recommends starting with a high-level mapping using spend data to identify which spend categories are most likely to represent the largest emissions, then progressively refining the analysis. The value chain map should cover both the upstream supply chain and the downstream use and end-of-life of your products.
3. Identify which of the 15 Scope 3 categories are relevant and significant: Not all 15 Scope 3 categories will be relevant for every company. GHG Protocol and ESRS E1 AR 26 require that each category be assessed as relevant or not relevant based on: the size of emissions (is the category likely to be large?), the degree of influence the company has over the emissions, the existence of stakeholder expectations and sector benchmarks, and the availability of data. Categories assessed as relevant and significant must be quantified and disclosed. Categories assessed as not relevant must be listed with a justification. For most manufacturing companies, categories 1 (purchased goods) and 11 (use of sold products) tend to dominate. For services companies, categories 6 (business travel) and 7 (employee commuting) are often most significant.
4. Choose the appropriate calculation method for each category: The GHG Protocol defines four methods for calculating Scope 3 emissions, which are also referenced in ESRS E1 AR 29-31: the spend-based method (multiply financial spend by an economic emission intensity factor — easiest to apply but least accurate), the average-data method (multiply activity data by an average emission factor, e.g. tonne-kilometres of freight multiplied by a transport emission factor), the activity-based method (multiply specific activity data by emission factors, e.g. litres of fuel consumed in supplier operations multiplied by fuel-specific emission factors — more accurate but requires more supplier data), and the supplier-specific method (use actual emission data provided directly by individual suppliers — most accurate but requires a supplier engagement programme). Companies should use the most accurate method available given their data access, working towards supplier-specific data over time as they build their supplier engagement programme.
5. Collect data from suppliers and other value chain partners: The most challenging aspect of Scope 3 reporting is data collection. For categories 1 and 2 (purchased goods and capital goods), the best data comes from suppliers who can provide their own product carbon footprints or facility-specific emission factors. To obtain this data, companies need to develop a supplier engagement programme: communicate the requirement to key suppliers, provide them with templates or calculation guidance, integrate sustainability criteria into supplier qualification, and set progressive requirements (starting with a request for data from top suppliers by spend, then expanding). This typically takes 2-3 reporting cycles to build up sufficient coverage. In the meantime, companies use spend-based or average-data methods as proxies while noting the limitations in their disclosures.
6. Calculate emissions using appropriate emission factors: Once you have activity data (spend, weight, distance, energy consumption, etc.) and the appropriate methodology for each category, you apply emission factors to convert physical or financial activity data into tonnes of CO2-equivalent (tCO2e). Emission factors can be obtained from: UK DEFRA Greenhouse Gas Conversion Factors (updated annually, widely used for categories 3, 4, 6 and 7), the ecoinvent database (comprehensive LCA-based database widely used for categories 1, 2 and 3), the IEA electricity emission factors (for location-based Scope 2 and Scope 3 category 3), supplier-specific product carbon footprint data, or sector-specific emission factor databases (e.g. IPCC for agriculture). All emission factors used must be documented and disclosed, with sources, vintages and any assumptions explained. Emissions must be reported in tCO2e (tonnes of CO2 equivalent), which aggregates CO2, CH4, N2O, HFCs, PFCs, SF6 and NF3 using global warming potential (GWP) values from the latest IPCC Assessment Report.
7. Set science-based reduction targets covering Scope 3: ESRS E1 requires companies to disclose their GHG emission reduction targets (ESRS E1 para 34). The Science Based Targets initiative (SBTi) provides the methodology most widely accepted by investors and other stakeholders for setting credible emission reduction targets. The SBTi Corporate Standard requires companies to set targets covering Scope 3 emissions if these represent more than 40% of total Scope 1+2+3 emissions. For most companies this threshold is exceeded, making Scope 3 targets mandatory under SBTi. Near-term SBTi targets must cover at least 67% of Scope 3 emissions. Net-zero targets must cover 90% of total GHG emissions by 2050 at the latest. Companies in land-intensive sectors must additionally follow SBTi FLAG (Forests, Land and Agriculture) for their agricultural supply chain emissions (category 1).

CSRD Scope 3 Reporting Timeline

Common Mistakes in CSRD Scope 3 Reporting

• Mistake: Reporting only categories that are convenient, not all material ones: A common error is for companies to report only a few Scope 3 categories that are easy to calculate (e.g. business travel and employee commuting) while ignoring much larger categories like purchased goods (category 1) or use of sold products (category 11). ESRS E1 AR 26 requires that all 15 categories be assessed for relevance and that significant categories be quantitatively disclosed. Selective omission without justification will be flagged by external auditors during the mandatory limited assurance review (and eventually reasonable assurance, which becomes mandatory under CSRD from 2028 under the original timeline). Companies should assess all 15 categories, document the assessment and disclose which categories are material and which are not, with reasons.
• Mistake: Using outdated or mismatched emission factors: Emission factors vary significantly by year, geography and methodology. Using the wrong emission factor — for example, applying a global average electricity emission factor instead of a country-specific one, or using an old DEFRA factor when a newer version is available — can lead to material errors in Scope 3 disclosures. ESRS E1 AR 29 requires companies to disclose the sources and vintages of all emission factors used, and to use factors that are as recent and specific as possible. Companies should establish an annual process to update their emission factor library and recalculate prior year data where material changes occur.
• Mistake: Confusing Scope 2 market-based and location-based with Scope 3 category 3: ESRS E1 requires companies to report Scope 2 emissions using both the market-based and location-based methods (ESRS E1 para 56). Scope 3 category 3 (fuel and energy-related activities not included in Scope 1 or 2) captures the upstream emissions associated with the extraction, production and transmission of purchased fuels and electricity — it is separate from Scope 2 and must not be double-counted. This distinction is frequently misunderstood, leading to either double-counting or omission of category 3. ESRS E1 AR 33 clarifies the boundary between Scope 2 and category 3.
• Mistake: Failing to link Scope 3 disclosures to the transition plan and targets: ESRS E1 requires an integrated presentation: the company's transition plan (para 16-19), its GHG emission reduction targets (para 34-36) and its current Scope 3 emissions (para 44-64) must be coherent and mutually reinforcing. A common error is to have ambitious Scope 3 reduction targets without any credible plan for how to achieve them (e.g. supplier engagement programme, product redesign, investment in low-carbon logistics). External assurance providers will test the consistency between targets, plans and current emission levels. ESRS E1 also requires companies to disclose any significant capital expenditure, operational expenditure and revenue associated with their climate transition plan.

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Frequently Asked Questions about CSRD Scope 3 Reporting

Which Scope 3 categories are mandatory under CSRD?

Under CSRD and ESRS E1, all 15 Scope 3 categories must be assessed for materiality as part of the double materiality assessment. Categories that are assessed as material (i.e. that involve significant impacts, risks or opportunities) must be quantitatively reported. There is no fixed list of mandatory categories — the materiality assessment is company-specific. However, ESRS E1 AR 25 establishes a rebuttable presumption that categories 1-14 are significant for most companies, which means a company must provide solid justification to exclude them. ESRS 1 Appendix C provides a one-year phase-in provision for Scope 3 disclosures for large companies in their first year of reporting, during which they must describe the reasons for omission and their plans to obtain the missing data.

What emission factors should I use for Scope 3?

ESRS E1 AR 29 requires companies to use the most appropriate, specific and recent emission factors available for their Scope 3 calculations. For business travel (category 6) and employee commuting (category 7), the UK DEFRA Greenhouse Gas Conversion Factors are widely used and updated annually. For purchased goods and services (category 1), ecoinvent is the most comprehensive database for product-level life cycle assessment emission factors. For freight transport (category 4 and 9), the GLEC Framework (Global Logistics Emissions Council) provides standardised transport emission factors. For financial institutions reporting Scope 3 category 15 (investments), the PCAF (Partnership for Carbon Accounting Financials) methodology is the recognised standard. All emission factor sources and vintages must be disclosed in the sustainability report.

Can I use spend-based methods for Scope 3 category 1?

Yes, the spend-based method is an accepted approach for Scope 3 category 1 (purchased goods and services) under both the GHG Protocol and ESRS E1. The spend-based method multiplies the financial spend with a supplier on a given category of goods or services by an economic emission intensity factor (tCO2e per currency unit) for that category. While it is the easiest method to apply — since it only requires spend data already available in the company's accounting system — it is also the least accurate, because it does not reflect the actual emission intensity of specific suppliers or products. ESRS E1 AR 30 acknowledges that spend-based estimates are acceptable as a starting point but encourages progressive movement towards more accurate methods (activity-based or supplier-specific) over time. The method used and its limitations must be disclosed.

How do I engage my suppliers for Scope 3 data?

Supplier engagement for Scope 3 data collection is one of the most practically challenging aspects of CSRD compliance. The recommended approach is: first, identify your top 20-30 suppliers by spend, which typically represent 70-80% of procurement spend and a similar proportion of category 1 emissions. Second, send them a standardised questionnaire requesting their product or facility carbon footprint data, ideally aligned with the CDP Supply Chain questionnaire or the WBCSD/WRI Scope 3 Evaluator tool. Third, provide training or support to suppliers who do not yet measure their emissions — many suppliers of large companies are beginning their own carbon measurement journeys. Fourth, integrate Scope 3 emission disclosure as a supplier qualification criterion. EFRAG IG 2 provides a detailed supplier engagement programme template that can be adapted for your specific procurement categories.

What if Scope 3 data is unavailable for certain categories?

ESRS 1 Appendix C provides a one-year phase-in period for Scope 3 disclosures for companies in their first year of CSRD reporting, allowing them to omit certain Scope 3 categories while explaining why the data is not yet available and what steps are being taken to obtain it. After the phase-in period, companies must report all material Scope 3 categories. Where supplier-specific data is not available, companies may use proxies (spend-based or average-data estimates) provided they disclose the estimation methodology, the emission factors used and the material uncertainties. ESRS E1 para 63 requires companies to disclose the percentage of Scope 3 emissions calculated using primary data (from suppliers) versus secondary data (proxies) to allow readers to assess data quality.

How does Scope 3 interact with SBTi targets?

The Science Based Targets initiative (SBTi) requires companies to set emission reduction targets covering Scope 3 if those emissions represent more than 40% of the company's total Scope 1+2+3 GHG inventory. For most companies, Scope 3 exceeds 40% of total emissions — in many cases it represents 70-90% — making Scope 3 target-setting effectively mandatory under SBTi. Near-term SBTi Corporate Standard targets must cover at least 67% of Scope 3 emissions (by emissions weight). Long-term net-zero SBTi targets must cover 90% of total GHG emissions. Under CSRD, companies must disclose whether their GHG reduction targets are science-based (aligned with the Paris Agreement 1.5°C pathway) and whether they have been externally validated. SBTi validation is the most widely recognised form of third-party validation for science-based targets and significantly enhances the credibility of CSRD sustainability disclosures.

Conclusion

Scope 3 emissions reporting under CSRD and ESRS E1 is one of the most technically demanding aspects of the new EU sustainability reporting framework. The requirement to quantify and disclose indirect emissions across 15 categories spanning the entire value chain — from raw material extraction by tier-2 and tier-3 suppliers to the use and end-of-life of products sold by the company — requires a systematic approach, significant data collection effort and progressive improvement over multiple reporting cycles. The good news is that companies are not expected to achieve perfect data quality in their first reporting year: ESRS 1 provides phase-in provisions, and the use of proxy methods is explicitly acknowledged as appropriate while primary data collection is built up through supplier engagement programmes.

For sustainability, ESG and finance teams responsible for CSRD compliance, the practical priorities for Scope 3 are: complete a rigorous double materiality assessment to identify which categories are material; start with spend-based estimates for category 1 (purchased goods) using a tool like the WBCSD Scope 3 Evaluator; launch a supplier engagement programme targeting your top 20-30 suppliers by spend; align your Scope 3 reduction targets with SBTi; and build the internal data infrastructure — ERP integrations, procurement data quality, supplier data portals — that will progressively improve data quality over time. Technology tools that automate these workflows, manage supplier data collection and generate ESRS-compliant disclosures can dramatically reduce the reporting burden and improve data quality.