Scope 3 software: Manage the carbon footprint of your value chain

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‍This article is based on insights from Dzhordzhio Naldzhiev and the Plan A Sustainability Solutions team.

Managing a company's carbon emissions is no small feat, especially when it comes to Scope 3 emissions. For many sustainability managers, these indirect emissions represent the most challenging and often the most significant portion of their carbon footprint.

Unlike Scope 1 (direct emissions from owned or controlled sources) and Scope 2 (indirect emissions from the generation of purchased energy), Scope 3 emissions come from a company's entire value chain—everything from the production of raw materials to the disposal of products after use. These emissions can be extraordinarily difficult to measure, track and manage, but that isn't to say it's impossible.

In recent years, software solutions have become crucial tools in simplifying the complex task of managing Scope 3 emissions. This article explores how carbon management software can help companies effectively track and manage their Scope 3 emissions, making the journey towards sustainability more achievable and efficient for sustainability managers worldwide.

Understanding Scope 3 emissions: The biggest piece of your carbon footprint puzzle

Before diving into how software can help, it's essential to understand what Scope 3 emissions are and why they matter so much to your overall sustainability strategy.

What are Scope 3 emissions?

Scope 3 emissions are all indirect emissions that occur in a company's value chain but are not directly under the company's ownership or control. The Greenhouse Gas Protocol divides Scope 3 emissions into 15 different categories, spanning both upstream and downstream activities:

Scheme 1,2,3 scope emissions Credit: Plan A based on GHG protocol — The Scopes of emissions according to the GHG Protocol Credit: Plan A

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These emissions can come from a variety of sources, including business travel, waste disposal, the transportation of goods, and even the emissions generated by the use of products sold by the company.

Why Scope 3 emissions dominate your carbon footprint

For most companies, Scope 3 emissions represent the largest portion of their total greenhouse gas emissions—typically between 65-75% of a company's total carbon footprint. In some cases, they can account for more than 90% of a company's total emissions.

There are several reasons why Scope 3 emissions often dominate a company's carbon footprint:

Outsourced operations: Many companies have outsourced significant portions of their operations. For example, DHL Express Nordic found that 98% of its emissions in Sweden originated from outsourced partner transportation firms.

Product use phase: If fossil fuel or electricity is required to use a company's products, the emissions during the product use phase can be substantial.

Customer transportation: For retail companies, customer travel to stores can represent a significant portion of emissions. IKEA discovered that 66% of its emissions inventory was from customer travel.

Material intensity: If greenhouse gas-intensive materials represent a significant fraction of a product's composition, these upstream emissions can be substantial.

The growing regulatory landscape

International regulations and frameworks are increasingly pushing companies to take control of their Scope 3 emissions. The EU Green Deal is setting bold carbon reduction targets that businesses simply can't ignore. Similarly, the Corporate Sustainability Reporting Directive (CSRD) is now requiring companies to be transparent by disclosing detailed emissions data, including Scope 3.

Under the CSRD, companies must disclose:

Gross Scope 3 GHG emissions
Total GHG emissions (sum of Scope 1, 2, and 3)
GHG emissions from each significant Scope 3 category

The Task Force on Climate-related Financial Disclosures (TCFD) is also driving companies to evaluate and report on climate-related risks, including those from Scope 3 emissions. Staying compliant with these frameworks is key to staying competitive and meeting the global sustainability expectations that customers and investors are placing on businesses.

Compliance and voluntary reporting are on the rise. Credit: Plan A

"What I find really interesting in this reporting world, whether it's voluntary or compliance-based, is that there is a certain continuity between one and the other. The voluntary reporting we do, for example, through the B Corporation, prepared us to meet the relevant compliance-based reporting that we either will have in the future as our organisation grows," notes Nathan Bonnisseau, co-founder at Plan A.

The challenges of managing Scope 3 emissions

While Scope 3 emissions are critical to address, they present unique challenges that make them particularly difficult to manage effectively.

Data collection and accuracy challenges

One of the most significant challenges of managing Scope 3 emissions is the sheer difficulty of collecting accurate data. Unlike Scope 1 and Scope 2 emissions, which can be monitored through internal systems and energy usage, Scope 3 emissions rely on data from third parties–suppliers, contractors, and customers.

The data from these external sources is often inconsistent, incomplete, or outdated, making it hard to get an accurate picture of a company's emissions. According to a 2021 BCG study, only 9% of companies are able to measure their emissions comprehensively across all scopes, including value chain emissions, and 86% of companies still record and report their emissions manually using spreadsheets.

Scope 3 emissions can also span across various stages of the value chain, from raw material extraction to product disposal. This broad scope makes it difficult to track emissions in a structured way. Without accurate and reliable data, sustainability managers are left with a fragmented, unclear view of their company's environmental impact.

Supplier engagement difficulties

Getting suppliers to engage in carbon emissions tracking can be another significant challenge. Many suppliers, especially smaller ones, may not have the tools, processes, or awareness to track and report their emissions. This can create significant gaps in data, making it difficult for companies to assess the full extent of their Scope 3 emissions.

Building strong relationships with suppliers and fostering a culture of transparency and collaboration is key to improving data sharing. However, this is easier said than done. For many sustainability managers, ensuring suppliers share the right data at the right time can feel like an uphill battle.

Reporting and transparency hurdles

The demand for transparency in corporate carbon reporting has never been higher. Companies need to track and report their Scope 3 emissions in a way that is clear, verifiable, and in line with international standards.

The complexity of reporting on Scope 3 emissions is exacerbated by the lack of consistent reporting frameworks. Companies often struggle to reconcile different standards and frameworks, resulting in time-consuming efforts to ensure compliance with regulations like the EU's Corporate Sustainability Reporting Directive (CSRD).

How software simplifies Scope 3 emissions management

Managing Scope 3 emissions manually is not only time-consuming but also prone to errors and inconsistencies. Software solutions designed specifically for carbon management offer a more efficient, accurate, and comprehensive approach.

What are the main challenges and solutions to Scope 3 emissions? (Credit: Plan A)

Automating data collection and integration

One of the most significant benefits of using software for managing Scope 3 emissions is the ability to automate, streamline and improve data collection.

Rather than manually collecting data from a multitude of sources, software can streamline this process by pulling data from suppliers, partners, and other third-party systems into one central, secure platform. This can drastically reduce the time and effort needed for data collection, while also improving data accuracy. Furthermore, it allows companies to have actual year-on-year comparisons rather than disparate analyses.

Carbon accounting software provides templates for importing data and the capacity to ingest millions of rows of information. It can also connect with existing tools via APIs, allowing data to flow automatically and minimising human errors in data input and manipulation.

"One of the key essential measures for Plan A is the time to action, time to report, time to data upload. And these are very operational metrics of the efficiency of a sustainability team. If that team is able to divide by 80 the time get a complete report, then they have that much more time available to strategise around this data," explains Nathan Bonnisseau, co-founder at Plan A.

Many software solutions can also merge with existing systems, for example ERP or CRM systems, making it easier to integrate emissions data. Automation also reduces the risk of human error, ensuring that the data you're working with is as accurate and up-to-date as possible.

Enhancing supplier collaboration

Another critical role that software plays in managing Scope 3 emissions is improving collaboration with suppliers. Many software platforms include features like supplier questionnaires, surveys, and dashboards that help companies communicate clearly with their suppliers about emissions data requirements.

Software can also help standardise data collection methods, ensuring that suppliers submit emissions data in a format that is easy to integrate and analyse. By providing suppliers with a clear, user-friendly platform for reporting emissions, companies can enhance the quality and consistency of the data they receive.

For example, DHL implemented a tailored calculation tool for outsourced transportation, requiring partners to enter data on vehicles, distance travelled, and fuel efficiency. This system allows DHL to screen individual carriers for environmental performance and make decisions based on emissions performance.

Real-time data and dashboards

Real-time data is essential for effective emissions management. With traditional methods, sustainability managers would have to wait weeks or even months to gather and analyse emissions data. However, software solutions can provide real-time insights into Scope 3 emissions, giving managers the ability to track emissions trends as they happen.

Customisable dashboards are another feature that can make Scope 3 emissions management more effective. Dashboards allow managers to visualise their emissions data in a way that is both comprehensive and easy to understand, making it easier to identify problem areas and opportunities for improvement.

Real-time data allows companies to identify which Scope 3 categories contribute most significantly to their overall emissions. This helps prioritise reduction efforts where they will have the greatest impact and make more informed decisions about where to focus emissions reduction efforts.

Key features to look for in Scope 3 management software

Selecting the right software for managing Scope 3 emissions can be challenging with the growing number of providers on the market. Here are some essential features to look for when evaluating different solutions.

Data accuracy and verification

One of the most important factors to consider when choosing software for managing Scope 3 emissions is ease of data collection and certifications of calculations and emission factors. Software solutions should provide ways of verifying the quality and reliability of the data being collected.

"How many times have you seen a consultancy report that does not explain its variables, uncertainty or data inputs? In a world of increasing corporate scrutiny, and trade wars, decarbonisation and cost modelling requires rigorously vetted data and tools. Scientific evidence is the foundation that underpins our platform and we take pride in how we build, understand and evidence decarbonisation options for companies," notes Dr Dzhordzhio Naldzhiev, Head of Research and Policy at Plan A.

Look for platforms that offer built-in data validation tools and integrations with trusted sources. Software should include comprehensive emission factors databases that are regularly updated and enriched by dedicated teams. Leading providers offer emission factors for dozens of countries worldwide, allowing companies to input their emission factors if necessary.

Make sure to look for certifications like TÜV or other internationally recognised certification bodies, which ensure compliance with standards like the GHG Protocol, providing confidence in the quality of calculations and methodologies used.

Easy supplier integration

As we've seen, supplier engagement is a key challenge in managing Scope 3 emissions. Therefore, it's essential to choose software that makes it easy to integrate supplier data into your emissions management system.

Look for platforms that allow for easy data uploads, seamless integration with supplier reporting tools, and flexible formats for data collection. The software should be able to accommodate different levels of supplier maturity in terms of emissions reporting capabilities.

Effective software should provide templates and guidance for suppliers, making it easier for them to provide the necessary data in a consistent format. This can significantly improve data quality and completeness while reducing the burden on both your team and your suppliers.

Customisation and flexibility

Every business has unique emissions sources and reporting needs. The software you choose should be flexible enough to accommodate the specific requirements of your company.

Customisation options, such as the ability to tailor reports, dashboards, and data entry forms, can make a huge difference in how well the software fits your company's needs. The platform should be adaptable to your organisation's structure, whether you need to track emissions by department, facility, region, or product line.

key components of comprehensive emissions management software — Key components of comprehensive emissions management software (Credit: Plan A)

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The benefits of using software for managing Scope 3 emissions

Implementing software for Scope 3 emissions management brings numerous benefits that go beyond just compliance with regulations. Let's explore some of the most significant advantages.

Improved efficiency and time-saving

One of the most immediate benefits of using software to manage Scope 3 emissions is the improvement in efficiency. By automating data collection, standardising reporting, and providing real-time insights, software can save sustainability managers a significant amount of time and effort.

The manual process of collecting and processing emissions data across a complex value chain can consume hundreds of hours each quarter. Carbon accounting software can reduce this burden dramatically, allowing sustainability teams to focus on strategic initiatives rather than getting bogged down in data collection.

According to a study by McKinsey, companies integrating ESG priorities into their strategies using robust systems consistently outperform their peers in Total Shareholder Returns (TSR). Specifically, companies excelling in growth, profitability, and ESG generated an annual TSR premium of 2 percentage points over their purely financial counterparts and 7 percentage points over average performers.

Data-driven decision making

With accurate, real-time data at their fingertips, sustainability managers can make more informed, data-driven decisions about where to focus their decarbonisation efforts.

Software platforms provide actionable insights that can help managers identify opportunities for emissions reduction, track progress over time, and adjust strategies based on the latest data. This level of insight allows companies to prioritise the most impactful initiatives, ensuring that resources are allocated effectively.

Beyond the immediate financial rewards, proactive decarbonisation helps companies future-proof their operations against the devastating effects of climate change. In 2022 alone, extreme weather events caused $165 billion in damages in the US, underscoring the financial risks of inaction.

Supporting compliance and reporting

The regulatory landscape around carbon emissions reporting continues to evolve, with frameworks like the CSRD imposing increasingly stringent requirements. Software can help ensure that Scope 3 emissions are reported accurately and in accordance with these standards.

With automated data collection, validation, and reporting features, compliance becomes significantly less burdensome. Software platforms can generate reports in the required formats, ensuring that all necessary information is included and presented correctly.

Tesco, for example, achieved an impressive 41% reduction in emissions from its stores and distribution centres per square foot compared to its 2006 baseline. This commitment to sustainability has reduced costs and bolstered operational efficiency—energy-saving initiatives alone have saved Tesco £37 million annually. Beyond the financial savings, Tesco's integrated approach to sustainability has enhanced its brand reputation, fostering greater customer loyalty and driving market share growth.

Aspect	Traditional approach	Software-based approach
Time investment	Hundreds of hours spent on manual data collection, validation, and reporting each quarter	Automated processes reduce time investment by up to 80%, freeing resources for strategic initiatives
Data accuracy	Prone to human error, inconsistent methodologies, and data gaps	Automated validation, standardised calculations, and comprehensive data coverage
Supplier engagement	Ad-hoc requests, inconsistent formats, and limited visibility into supplier performance	Structured data collection, real-time feedback, and supplier performance dashboards
Decision-making	Delayed insights, limited ability to identify hotspots, and reactive approach	Real-time data, predictive analytics, and targeted reduction strategies
Regulatory compliance	Resource-intensive preparation for audits and reporting cycles	Audit-ready documentation, compliance-focused reporting templates, and reduced risk

How Plan A's platform addresses Scope 3 management challenges

Plan A offers a comprehensive software solution specifically designed to address the unique challenges of Scope 3 emissions management. Let's explore how Plan A's platform helps sustainability managers tackle these challenges.

Explore Plan A's interface via the interactive demo below:

Streamlined data collection and processing

Plan A's platform simplifies the complex process of collecting and processing Scope 3 emissions data through several key features:

Automated data collection: The platform can ingest data from various sources, including supplier systems, ERP platforms, and manual uploads, reducing the time and effort required to gather emissions information.
Data validation: Built-in validation checks ensure that data is accurate and consistent, flagging potential errors or inconsistencies for review.
Standardised formats: The platform provides templates and structured formats for data collection, making it easier to gather information from suppliers and other third parties.

When computing is outsourced to the cloud, IT emissions that were previously classified under Scope 1 (direct emissions) and Scope 2 (purchased electricity emissions) for on-premise infrastructure are instead accounted for under the cloud provider's Scope 1 and Scope 2. As a result, these emissions shift to the organisation's Scope 3 (indirect value chain emissions), often leading to higher reported Scope 3 emissions. Plan A's platform helps companies navigate these complexities by correctly categorising emissions based on their specific setup.

Comprehensive analysis and visualisation

Plan A's platform doesn't just collect data—it transforms that data into actionable insights:

Custom dashboards: The platform offers customisable dashboards that allow sustainability managers to visualise emissions data in a way that makes sense for their specific needs.
Hotspot identification: Advanced analytics capabilities help identify the most significant sources of Scope 3 emissions, allowing companies to focus their reduction efforts where they'll have the greatest impact.
Progress tracking: The platform enables companies to track their progress over time, monitoring reductions and identifying areas where additional efforts may be needed.

With Plan A's reporting tools, companies can generate comprehensive reports that break down emissions by scope, category, and other relevant factors, providing a clear picture of their carbon footprint.

Goal setting and reduction planning

Measuring emissions is just the first step—reducing them is the ultimate goal. Plan A's platform supports this process through:

Target setting: The platform enables companies to set science-based targets for emissions reduction, including specific goals for Scope 3 categories.
Reduction planning: Based on emissions data and hotspot analysis, the platform helps companies develop actionable plans for reducing their Scope 3 emissions.
Scenario analysis: Companies can model different scenarios to understand the potential impact of various reduction strategies, helping to prioritise efforts.

Plan A's decarbonisation module provides a comprehensive framework for developing and implementing effective emissions reduction strategies, focusing on the areas with the highest impact potential.

The risks of not investing in Scope 3 emissions management software

While implementing advanced software for Scope 3 management requires investment, the risks of not doing so are significant and potentially far more costly in the long run.

Regulatory non-compliance risks

The regulatory landscape around carbon emissions reporting is becoming increasingly stringent, with frameworks like the EU's Corporate Sustainability Reporting Directive (CSRD) mandating comprehensive Scope 3 reporting. Companies that rely on manual processes for emissions tracking face significant compliance risks:

Inaccurate reporting: Without proper systems, companies may submit incomplete or inaccurate emissions data, potentially resulting in regulatory penalties.
Inability to meet deadlines: Manual processes can be time-consuming, making it difficult to meet reporting deadlines, especially as requirements become more complex.
Lack of audit readiness: Companies without robust data management systems may struggle during audits, unable to provide the documentation and evidence needed to support their emissions claims.

Explore our Regulation Centre

Competitive disadvantages

Companies that fail to effectively manage their Scope 3 emissions may find themselves at a competitive disadvantage:

Customer preferences: As consumers become more environmentally conscious, companies with strong sustainability credentials have an advantage in the marketplace.
Investor scrutiny: Investors increasingly view climate risk as business risk, and companies without effective emissions management strategies may face challenges attracting investment.
Supply chain requirements: Large companies are increasingly requiring their suppliers to provide emissions data and demonstrate reduction efforts, potentially excluding those without proper management systems.

Read our Whitepaper: How to engage your board on sustainability

Missed reduction opportunities

Perhaps the most significant risk is the opportunity cost of not identifying and addressing emissions hotspots:

Inefficient resource allocation: Without detailed emissions data, companies may invest in reduction initiatives that have minimal impact while overlooking more significant opportunities.
Inability to track progress: Companies cannot effectively measure the success of their reduction efforts without proper tracking systems.
Lack of strategic direction: Without a comprehensive understanding of their emissions profile, companies may struggle to develop effective sustainability strategies.

Read our CEO's point of view on the return on investment of sustainability

The future of Scope 3 emissions management

As regulatory requirements and stakeholder expectations continue to evolve, effective Scope 3 emissions management is no longer optional—it's a business imperative. Software solutions like Plan A's platform offer a comprehensive approach to this complex challenge, enabling companies to collect accurate data, gain actionable insights, and develop effective reduction strategies.

By investing in robust Scope 3 management software, companies can turn a potential compliance burden into a strategic advantage, identifying opportunities for emissions reduction that can lead to operational efficiencies, cost savings, and enhanced reputation.

The journey to effective Scope 3 management may seem daunting, but with the right tools and partners, it's entirely achievable. As you consider your approach to carbon management, remember that the investment you make today in comprehensive emissions management will pay dividends in the future, both for your business and for the planet.

Ready to take your Scope 3 emissions management to the next level? Book a demo with Plan A today and discover how our platform can simplify your carbon accounting journey.

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