Scope 3 emissions are becoming an increasingly important part of corporate climate reporting. While Scope 1 and Scope 2 focus on emissions from sources a company owns or controls and purchased energy, Scope 3 extends the boundary across the wider value chain.
The GHG Protocol classifies Scope 3 into 15 categories – eight upstream and seven downstream. In India, Scope 3 remains a voluntary Leadership Indicator under BRSR. Yet, 421 of the 982 top-1,000 listed companies analysed by IIM Bangalore reported Scope 3 emissions for FY 2024-25.
The question is therefore moving beyond whether companies should disclose Scope 3. It is increasingly about which categories are material, how they are calculated, what data supports them and how transparently they are presented.
What is Scope 3 emissions, and how does it differ from Scope 1 and 2?
Scope 3 emissions cover indirect greenhouse gas emissions across a company’s value chain that are not included in Scope 1 or Scope 2.
This can include emissions from a supplier’s manufacturing process, transportation of purchased goods, employee travel, processing of sold products, use of products by customers and the end-of-life treatment of products.
The distinction is important because Scope 3 emissions often sit outside a company’s direct operational control. A supplier’s furnace may be its Scope 1, while the associated emissions may become your Scope 3. Similarly, fuel burned by a customer using a product sold by your company can fall within your Scope 3.
The three scopes therefore answer different management questions:
| Scope 1 and 2 describe how you operate. Scope 3 describes what you buy and what you sell. |
| Dimension | Scope 1 | Scope 2 | Scope 3 |
| What it covers | Direct emissions from owned or controlled sources | Purchased electricity, steam, heat and cooling | Other indirect upstream and downstream emissions |
| Typical Indian example | Coal in a captive boiler, DG sets, owned fleet | Grid electricity purchased from a DISCOM | Purchased steel, inbound freight, fuel burned in sold vehicles |
| Primary data source | Fuel logs, invoices, meters | Electricity bills and grid emission factors | Supplier data, spend records, LCA databases and product-use models |
| Degree of control | Direct | Direct over consumption; partial over source | Influence rather than direct control |
| BRSR status | Essential Indicator within BRSR Core | Essential Indicator within BRSR Core | Voluntary Leadership Indicator |
| Typical data quality | High | High | Low to medium, but improving |
Scope 3 is also often the largest component of a company’s overall footprint. However, the quality of Scope 3 data can vary considerably because companies frequently rely on estimates, emission factors and information obtained from suppliers or customers.
This makes data methodology and transparency as important as the final emissions number.
What are the 15 Scope 3 emissions categories?
The GHG Protocol’s Corporate Value Chain (Scope 3) Standard divides Scope 3 emissions into 15 categories.
Categories 1–8 are upstream, covering activities before a company’s products leave its operations. Categories 9–15 are downstream, covering activities associated with products after they leave the company’s operations.
| No. | Category | Direction | Indian context example |
| 1 | Purchased goods and services | Upstream | Steel purchased by an auto OEM, API intermediates for a pharma company, IT contractors for a bank |
| 2 | Capital goods | Upstream | Cement and steel used in a new plant, turbines and rolling stock |
| 3 | Fuel- and energy-related activities | Upstream | Mining and transportation of coal before it reaches a boiler; grid transmission losses |
| 4 | Upstream transportation and distribution | Upstream | Inbound road freight, third-party warehousing and transportation paid for by the company |
| 5 | Waste generated in operations | Upstream | Hazardous waste sent to treatment facilities and landfilled sludge |
| 6 | Business travel | Upstream | Domestic flights, hotel stays and hired cabs |
| 7 | Employee commuting | Upstream | Staff buses, two-wheelers, metro travel and work-from-home, where applicable |
| 8 | Upstream leased assets | Upstream | Leased offices or warehouses not already included in Scope 1 or 2 |
| 9 | Downstream transportation and distribution | Downstream | Distributor and retailer logistics not paid for by the company; cold-chain logistics |
| 10 | Processing of sold products | Downstream | A steel coil processed into auto parts or a chemical intermediate processed by a customer |
| 11 | Use of sold products | Downstream | Fuel combusted by customers of an oil marketing company or electricity consumed by a sold air conditioner |
| 12 | End-of-life treatment of sold products | Downstream | Disposal of FMCG packaging, scrapped vehicles and discarded electronics |
| 13 | Downstream leased assets | Downstream | Energy used by tenants in leased commercial properties |
| 14 | Franchises | Downstream | Emissions from franchised restaurants, education centres or retail outlets |
| 15 | Investments | Downstream | Emissions associated with a lender’s loan book, insurer’s portfolio or holding company’s investments |
Not every category carries equal weight
A common mistake is to treat all 15 categories equally.
For many businesses, a small number of categories account for the majority of Scope 3 emissions. Category 1, Category 11 or Category 15 can be particularly significant depending on the business model.
Business travel and employee commuting may be relatively easy to calculate but can represent only a small share of total Scope 3 emissions in many industrial sectors.
Boundaries matter
Correct category allocation is critical.
For example, outbound freight paid for by the reporting company belongs in Category 4, while certain downstream transportation activities fall under Category 9. Similarly, leased assets need to be assessed against the company’s consolidation approach and should not be double-counted across scopes.
Category 11 also has a defined minimum boundary covering direct use-phase emissions from products that burn fuel, consume electricity or contain greenhouse gases. Indirect use-phase emissions, such as energy used to wash a garment, are optional.
The objective is not simply to calculate a number for every category. It is to establish a consistent, defensible and clearly defined inventory boundary.
What do BRSR, GRI and IFRS S2 require on Scope 3?
Indian companies increasingly need to understand how different reporting frameworks approach Scope 3. The requirements are not identical, making it important to build an underlying inventory that can support multiple reporting needs.
BRSR
Under Principle 6 of BRSR, Scope 1 and Scope 2 are Essential Indicators and form part of BRSR Core. Scope 3 is currently a Leadership Indicator.
Companies voluntarily disclosing Scope 3 under BRSR report total Scope 3 emissions in tCO₂e, Scope 3 emissions intensity per rupee of turnover and whether an independent assessment has been carried out.
BRSR does not require the 15 Scope 3 categories to be separately presented. This creates an important presentation consideration: two companies can report similar Scope 3 totals while using significantly different boundaries and category coverage.
BRSR Value Chain
BRSR value chain disclosures are distinct from Scope 3 reporting, although the data collected can support Scope 3 calculations.
SEBI’s March 2025 circular establishes a value-chain perimeter covering partners individually accounting for 2% or more of purchases or sales, subject to a 75% value coverage limit. These partners report specified BRSR Core attributes, including their Scope 1 and Scope 2 emissions.
For companies calculating Scope 3, this can provide valuable primary data for categories such as purchased goods and services and transportation.
GRI 102
GRI 102: Climate Change 2025 introduces a dedicated Scope 3 disclosure. It applies to reporting periods beginning on or after 1 January 2027 and replaces the relevant emissions disclosures in GRI 305.
Disclosure 102-7 covers Scope 3 greenhouse gas emissions, while equivalent IFRS S2 disclosures may be used where emissions are measured using the GHG Protocol.
IFRS S2
IFRS S2 requires companies to consider all 15 Scope 3 categories and disclose the categories included after considering the complete list.
Amendments issued in December 2025, effective for periods beginning 1 January 2027, allow financial institutions to limit Category 15 to financed emissions.
While IFRS S2 has not yet been mandated in India, its requirements are increasingly relevant to companies engaging with global investors and lenders.
| Build to the detail of IFRS S2 and GRI 102. Roll up to the BRSR total – not the other way around. |
What are Indian companies actually disclosing on Scope 3?
Scope 3 disclosure among Indian listed companies is increasing.
IIM Bangalore’s analysis of FY 2024-25 BRSR filings covered 982 of the top 1,000 listed companies. It found that 421 companies, or 42.9%, reported Scope 3 emissions, compared with 292 companies, or 29.7%, a year earlier.
The disclosed Scope 3 total reached 1.48 billion tCO₂e, compared with 1.31 billion tCO₂e for Scope 1 and Scope 2 combined. However, only 272 companies reported a Scope 3 intensity, compared with 826 companies reporting Scope 1 and Scope 2 intensity.
The numbers point to an important trend: Scope 3 disclosure is growing, but coverage, consistency and data quality remain uneven.
ICRA ESG’s study of the NSE top 200 also found an increase in companies disclosing Scope 3, with the number rising from 75 to 119 over four years. Upstream categories such as purchased goods, energy, waste, business travel and employee commuting showed relatively strong coverage.
Avoid the travel-and-commute trap
Categories 6 and 7 are often easier to calculate, explain and verify. But ease of measurement does not necessarily mean materiality.
A report that presents business travel emissions in significant detail while omitting a material Category 11 or Category 1 can create a misleading impression of completeness.
The focus should therefore be on material categories first, rather than the categories that are easiest to calculate.
Why is Scope 3 easy for some industries and hard for others?
Scope 3 challenges differ significantly by sector.
Two factors are particularly important:
- Concentration – How much of the company’s Scope 3 footprint sits in a small number of categories?
- Data proximity – How close is the underlying activity data to the company’s own records?
For example, units sold, freight invoices and travel bookings may already exist in a company’s systems. By contrast, borrower emissions, farm-level inputs or the electricity mix of a tier-two supplier may require information from external parties.
| Business profile | Examples | Typical challenge |
| Concentrated + close data | Oil marketing, coal, cement | A dominant category with relatively accessible data |
| Concentrated + distant data | Banks, NBFCs, food and FMCG | A dominant category dependent on external data |
| Dispersed + close data | IT and professional services | Several mid-sized categories with internally available data |
| Dispersed + distant data | Chemicals, pharmaceuticals, diversified groups | Multiple categories with complex and fragmented value chains |
Sector relevance should determine where reporting effort is concentrated.
For example, financial services can be dominated by Category 15, while capital goods and transport OEMs can have significant Category 11 emissions. Food and beverage companies can face significant Category 1 challenges because of fragmented agricultural supply chains.
For steel and cement, Scope 1 remains the dominant emissions challenge, with Scope 3 playing a comparatively smaller role.
The implication is clear: Scope 3 reporting should be materiality-led, not template-led.
How should Scope 3 be presented in a BRSR or annual report?
A credible Scope 3 disclosure is not simply about publishing a large number. Readers need to understand what the number includes, how it was calculated and where the underlying data comes from.
1. Lead with the category map, not just the total
Show all 15 categories and provide a status for each: Calculated; Estimated; Not relevant, with a reason; Not yet calculated. This makes gaps visible rather than leaving the reader to assume that an undisclosed category was immaterial.
2. Explain how each number was calculated
Identify the calculation approach used for each material category, such as supplier-specific, activity-based or spend-based. A supplier-verified Category 1 and a spend-based Category 1 may produce similar emissions numbers but represent very different levels of data quality.
3. Reconcile the category total with the BRSR figure
The Scope 3 total reported under BRSR should reconcile with the category-level inventory using the same boundary. The report should clearly identify the categories included and cross-reference the detailed breakdown.
4. Separate actual change from methodology change
Scope 3 totals can change because of changes in activity, emission factors, methodology, primary data or restatements. A simple year-on-year bridge can help readers understand the reason for the movement.
5. Pair financial intensity with physical intensity
BRSR requires Scope 3 intensity per rupee of turnover. Where relevant, companies can supplement this with physical intensity metrics such as tCO₂e per tonne of product, per vehicle sold, per unit of output or per crore of loan book.
6. Put Scope 3 where the business strategy lives
Scope 3 should not be isolated only within an environmental section. Category 11-heavy companies may need to connect it with product design and portfolio strategy, Category 1-heavy companies with procurement and supplier engagement, and Category 15 for lenders with portfolio risk.
What should a Scope 3 category table contain?
| Column | What to show | Why it matters |
| Category | Number and GHG Protocol name | Comparability |
| Status | Calculated, estimated, not relevant or not yet calculated | Completeness |
| Emissions | Current and previous year tCO₂e | Trend and scale |
| Share of Scope 3 | Percentage contribution | Materiality |
| Calculation method | Supplier-specific, activity-based or spend-based | Data quality |
| Primary data share | Percentage based on supplier/customer data | Data maturity |
| Change note | Restated, new or methodology updated | Transparency |
This approach allows readers to see not only how much a company reports, but also how reliable and complete the underlying inventory is.
What is changing in Scope 3 reporting?
Scope 3 reporting is evolving across multiple fronts.
GHG Protocol
The GHG Protocol is revising its Scope 3 Standard for the first time since 2011. Its Phase 1 Progress Update of 31 March 2026 is a working draft rather than a final standard. The proposals include at least 95% coverage of required Scope 3 emissions, exclusions capped at 5% and justified, greater visibility of data types used, and an optional Category 16 for facilitated activities. The final timeline remains subject to the ongoing process and should be re-verified before publication.
IFRS S2
ISSB amendments to IFRS S2 issued in December 2025 are effective for periods beginning 1 January 2027. Among other changes, financial institutions may limit Category 15 to financed emissions.
GRI 102
GRI 102: Climate Change 2025 applies to reporting periods beginning 1 January 2027 and replaces the relevant emissions disclosures under GRI 305.
SEBI Value Chain Provisions
SEBI’s value-chain provisions move toward assessment or assurance from FY 2026-27. This makes the quality of supplier information increasingly important. The same primary data collected for value-chain reporting can also strengthen Scope 3 categories such as purchased goods and services and transportation.
| Scope 3 reporting is moving towards greater transparency around categories, methods, exclusions and data quality. |
Frequently Asked Questions
What is Scope 3 emissions?
Scope 3 covers indirect greenhouse gas emissions across a company’s value chain that are not included in Scope 1 and Scope 2. It can include emissions from suppliers, logistics, business travel, employee commuting, customer use of products and end-of-life treatment. Because the underlying data often sits with other organisations, Scope 3 is generally more difficult to measure.
What are the 15 Scope 3 emissions categories?
The GHG Protocol defines eight upstream categories: purchased goods and services, capital goods, fuel- and energy-related activities, upstream transportation and distribution, waste generated in operations, business travel, employee commuting and upstream leased assets. The seven downstream categories are downstream transportation and distribution, processing of sold products, use of sold products, end-of-life treatment, downstream leased assets, franchises and investments.
Is Scope 3 reporting mandatory under BRSR?
No. Scope 3 is currently a voluntary Leadership Indicator under Principle 6 of BRSR. Companies that disclose it report total Scope 3 emissions, intensity per rupee of turnover and assessment status. Scope 1 and Scope 2 are Essential Indicators and fall within BRSR Core. Despite being voluntary, Scope 3 disclosure is becoming increasingly common among India’s largest listed companies.
What is the difference between Scope 1 vs Scope 3 emissions?
Scope 1 emissions arise from sources owned or controlled by a company, such as boilers, furnaces and company-owned vehicles. Scope 3 emissions arise elsewhere in the value chain, such as at suppliers or during customer use of products. Scope 1 is generally based on direct operational data, while Scope 3 frequently relies on estimates, emission factors and external data.
What are some Scope 3 emissions examples for Indian companies?
An automobile company may include purchased steel under Category 1 and emissions from fuel used by vehicles sold under Category 11. An FMCG company may account for agricultural inputs and product end-of-life. A bank’s Scope 3 inventory may be dominated by Category 15, while an IT services company may have significant business travel, employee commuting and purchased services.
Which Scope 3 category matters most for my industry?
It depends on the company’s business model and value chain. Energy, automotive and capital goods companies can have significant Category 11 emissions. Food, FMCG and chemicals companies can have significant Category 1 emissions. Banks and insurers can be dominated by Category 15. Steel and cement remain primarily Scope 1-led businesses, with Scope 3 representing a comparatively smaller share.
Can Scope 3 emissions be assured in India?
Yes. Scope 3 can be voluntarily subjected to third-party assurance. Since Scope 3 currently sits outside BRSR Core assurance, companies may choose to obtain limited or reasonable assurance depending on their reporting objectives. Beginning with categories supported by stronger primary data can help establish a more defensible evidence trail.
How should a company start measuring Scope 3?
A practical starting point is to screen all 15 categories using available spend and activity data. The company can then identify material categories, prioritise the largest sources, document exclusions and progressively replace spend-based estimates with supplier- or activity-based data. Designing the inventory with the level of detail expected under frameworks such as IFRS S2 and GRI 102 can also reduce future reporting rework.
Where does K&A come in?
Scope 3 reporting is moving from a single voluntary figure towards a more detailed view of value-chain emissions.
K&A helps companies structure Scope 3 reporting around category coverage, materiality, calculation methods, data quality and presentation. This includes screening the 15 categories, identifying sector-relevant priorities and presenting the methodology and data quality alongside the emissions figures in BRSR and annual reports.
The objective is simple: help companies build a Scope 3 disclosure that readers can understand, evaluate and trace back to its underlying data.
| If your Scope 3 total is growing faster than your confidence in it, it may be time to look beyond the number. |
