Scope 3 emissions move up the reporting value chain

1st February 2024

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At the end of 2023, the UK government ran a consultation on the benefits, costs and practicalities of scope 3 greenhouse gas emissions, and the links between this reporting and the Streamlined Energy and Carbon Reporting (SECR) framework. IEMA made a substantial response to the consultation.

The Greenhouse Gas Protocol classifies a company’s emissions into three scopes. Scope 1 (direct emissions from owned or controlled resources) and scope 2 (indirect emissions from the generation of purchased energy) are generally easy to account for. Scope 3 emissions are all the other emissions in the organisation’s up and downstream value chains that have been created because of the production and consumption of its product or services.

Any financial accountant will immediately spot that one organisation’s scopes 1 and 2 are necessarily another organisation’s scope 3. But it isn’t the case that all the world’s scopes 1 and 2 neatly add up to all the world’s scope 3. Because of the way they are attributed, one organisation’s scopes 1 and 2 will often be part of multiple other organisations’ scope 3, leading to them being more than double counted across the economy as a whole. And given that these emissions account in theory for the whole value chain, it isn’t surprising to see estimates that scope 3 can account for 80-95% of an organisation’s total footprint.

There are two core reasons why there is little comparison between financial accounting and carbon accounting. First, with carbon accounting there’s no double entry aspect to prevent errors; instead it’s more accurately described as an inventory. Second, financial accounting has a well-established rulebook for making financial comparisons between organisations, but carbon accounting is still decades behind in this process. The GHG Protocol is reviewing its frameworks and guidance, but currently carbon-based comparisons between companies are not necessarily sound.

Meanwhile, it’s unlikely that free markets alone will act to prevent emissions from rising and the climate crisis from worsening. We need regulators to step in.

Along with many other jurisdictions, the UK government is considering incorporating the sustainability standards of the International Financial Reporting Standards (IFRS) Foundation into UK regulated financial reporting
(see, and it’s also considering the future design of the SECR framework. The IFRS standards include scope 3 emissions, so the recent consultation focused on the benefits, costs and practicalities of scope 3 reporting and the success of SECR.

IEMA’s climate change and energy steering group held two workshops to discuss the consultation. Its first conclusion, on scope 3, was that scope 3 emission data collection is challenging even for experts. For instance, it’s difficult to define boundaries within complex supply chains, and once they have been defined it can then be impossible to acquire data from suppliers and clients. However, if an organisation starts on this process and then repeats it from one year to the next, it will have a very good method for understanding its progress on emissions reduction. In other words, while scope 3 reporting isn’t useful for comparing one company with another, it is an excellent corporate emissions management and reduction toolkit.

The second conclusion, on SECR, was that its value may be diminishing. This is because it’s optional to implement any actions that are identified in SECR reporting, so any companies that were minded to take action have probably already done so, and companies that have not yet taken voluntary action probably need a regulatory push. Companies in both groups by now will most likely view SECR reporting as a tickbox exercise.

IEMA’s recommendations were:

  • The implementation of IFRS standards is a great moment to take a holistic view of what reporting is supposed to achieve and to design a new framework focused on this outcome.
  • Acknowledging the difficulties in obtaining data from external organisations, larger companies should be encouraged to support smaller companies in this exercise.
  • That all guidance be in language that is as clear and unambiguous as possible to help companies to comply.
  • That education and skills development be at the heart of any new regulations.

See here for details.


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