The Invisible Iceberg: Why Scope 3 Emissions Are Your Biggest Problem

What are Scope 3 emissions?

Scope 3 emissions are all indirect emissions that occur in a company’s value chain, excluding the direct emissions from sources the company owns or controls (Scope 1) and the emissions from the electricity, heat, steam and cooling the company purchases (Scope 2). Scope 3 covers upstream activities such as purchased goods and services, transportation, and business travel, and downstream activities such as product use, product end-of-life, and downstream transportation and distribution.

Why are they called the invisible iceberg?

Think of a company’s emissions like an iceberg: Scope 1 and 2 are the visible tip above water — obvious, measurable, and under the company’s direct control. Scope 3 makes up the much larger mass below the surface — harder to see, more diffuse, and often outside immediate control. Because the majority of emissions for many sectors (retail, manufacturing, logistics) lie in the value chain, Scope 3 becomes the biggest problem for achieving real climate impact.

Key categories of Scope 3

The Greenhouse Gas Protocol groups Scope 3 into 15 categories. Here are the most commonly relevant ones for businesses:

• Purchased goods and services — emissions from the production of items you buy (raw materials, components, packaging).
• Capital goods — emissions from producing long-lived assets like machinery, buildings, and vehicles.
• Fuel- and energy-related activities — upstream emissions from fuel production and electricity transmission losses.
• Upstream transportation and distribution — third-party shipping, warehousing, and handling before goods reach you.
• Waste generated in operations — emissions from disposal and treatment of operational waste.
• Business travel and employee commuting — flights, cars, trains used by staff for work.
• Downstream transportation and distribution — emissions from delivering finished goods to customers.
• Use of sold products — emissions that result when customers use a product (very significant in some industries).
• End-of-life treatment — emissions from disposal, recycling or landfill of sold products.

Why Scope 3 is challenging

Collecting accurate Scope 3 data often requires coordination across many suppliers, logistics providers, and customers. Challenges include:

• Data unavailability: Smaller suppliers may not measure or disclose emissions.
• Data quality and consistency: Different methodologies, inconsistent activity data, and estimates complicate aggregation.
• Boundary setting and responsibility: Determining which activities to include, and how to allocate emissions across co-products or shared infrastructure.
• Scale and complexity: Hundreds or thousands of supplier relationships and product variants multiply the effort required.

Why addressing Scope 3 matters

Ignoring Scope 3 risks misleading claims of low climate impact while upstream or downstream activities continue to produce most emissions. Concrete reasons to act include:

• Materiality: For many businesses, Scope 3 is 70–90% of their total emissions.
• Regulatory and investor pressure: Governments and investors increasingly expect comprehensive value-chain reporting and reduction plans.
• Supply chain resilience and cost: Efficiency improvements that reduce emissions (less material use, better logistics) often lower costs and improve resilience.
• Reputation and customer demand: Buyers and consumers prefer lower-carbon products and transparent sourcing.

Beginner-friendly steps to measure and reduce Scope 3

Start simple, iterate, and build relationships. A pragmatic approach:

1. Map your value chain: Identify the most material activities and categories. Use spend analysis and product flow maps to prioritize—focus first on purchased goods and transportation if those are your largest drivers.
2. Collect data: Ask suppliers for basic activity data (tonnes of material, distance shipped, fuel used). Where direct data are unavailable, use spend-based or activity-based emission factors as interim methods.
3. Use standard methods: Apply GHG Protocol guidance, vetted emission factor databases (e.g., ecoinvent, DEFRA/UK BEIS, EPA), and consistent scope boundaries to ensure comparability.
4. Engage suppliers: Communicate expectations, provide templates, and prioritize key suppliers for deeper collaboration. Offer support, training, or incentives for data collection and emissions reduction projects.
5. Set targets and KPIs: Define short- and long-term reduction targets (absolute or intensity-based) and track KPIs like emissions per unit produced, supplier coverage percentage, or emissions per dollar spent.
6. Implement reductions: Use procurement strategies (prefer lower-carbon materials), product design (light-weighting, longer life), logistics optimization (modal shift to rail/sea, route optimization, consolidation), and demand-side measures (customer education, product-as-a-service models).
7. Report and verify: Publish transparent methods and assumptions. Consider third-party assurance for credibility as reporting expectations rise.

Real-world examples

Example 1: A retailer discovers that 80% of emissions come from product manufacture. By working with top suppliers to switch to recycled materials and improve energy efficiency, they reduce their Scope 3 footprint while cutting raw material costs.

Example 2: A manufacturer reduces downstream use-phase emissions by redesigning a product to be more energy-efficient for customers. This lowers the lifecycle emissions that would otherwise appear in their Scope 3 reporting.

Tools and partnerships

There are software platforms and frameworks that simplify Scope 3 work: supplier engagement portals, spend-to-emissions calculators, and lifecycle assessment (LCA) tools. Partnerships with industry coalitions, NGOs, and logistics providers can accelerate data sharing and joint decarbonization projects.

Common beginner mistakes and how to avoid them

Common pitfalls include:

• Trying to measure everything at once — prioritize material categories to avoid paralysis by analysis.
• Relying solely on low-quality spend-based data — use spend-based estimates only as a first step and improve with activity or primary data over time.
• Ignoring supplier relationships — passive requests for data rarely work; collaborate and provide support instead.
• Setting targets without a baseline or clear methodology — ensure targets are measurable, time-bound, and based on defensible data.
• Overlooking downstream impacts — for some products, customer use or disposal dominates the footprint and must be addressed.

How this applies to logistics and warehousing

For logistics-heavy businesses, Scope 3 often includes upstream inbound transportation, third-party warehousing, and downstream distribution. Practical actions include optimizing packaging to fit more units per pallet, consolidating shipments, shifting to lower-carbon transport modes, and requiring logistics partners to report fuel and energy use. Warehouse electrification and energy efficiency contribute to Scope 1/2 for the warehouse owner but can also affect Scope 3 for customers using third-party fulfillment.

Bottom line



Scope 3 emissions are your biggest problem because they are typically the largest, most complex, and least directly controlled part of your carbon footprint. But they are also where the greatest opportunities lie: meaningful reductions in Scope 3 unlock the true climate impact of your business, often while improving efficiency, cutting costs, and strengthening supplier relationships. Start with mapping and prioritizing, move from estimates to primary data, engage partners, and set clear, measurable targets. Over time, the invisible iceberg becomes visible — and manageable.