What are value chain emissions?

Quick Answer: Value chain emissions are the greenhouse gas emissions that occur across a company's entire supply chain and product lifecycle, including both upstream activities (such as sourcing raw materials and manufacturing components) and downstream activities (such as product use and end-of-life disposal). They are categorised as Scope 3 emissions under the GHG Protocol and typically represent the largest share of a company's total carbon footprint, often exceeding 70% of total emissions for many businesses.

What Are Value Chain Emissions?

Value chain emissions are the greenhouse gas emissions linked to a company's activities that occur outside its own operations. Where Scope 1 covers direct emissions from owned sources and Scope 2 covers purchased energy, value chain emissions (Scope 3) capture everything else: the emissions generated by the businesses, people, and processes that sit upstream and downstream of your own organisation.

The GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard is the framework most widely used to measure and report these emissions. It organises value chain emissions into 15 distinct categories, split between upstream and downstream sources.

For most companies, value chain emissions are not a minor addition to their footprint. Research consistently shows they account for more than 70% of a typical company's total greenhouse gas impact (CDP, 2023). Ignoring them means reporting on a fraction of your actual climate impact.

Upstream vs Downstream: What's the Difference?

The GHG Protocol divides value chain emissions into two directions relative to your business.

Upstream emissions relate to the goods and services your company purchases, and the processes involved in getting them to you:

• Purchased goods and services (Category 1)
• Capital goods (Category 2)
• Fuel- and energy-related activities not covered in Scope 1 or 2 (Category 3)
• Upstream transportation and distribution (Category 4)
• Waste generated in operations (Category 5)
• Business travel (Category 6)
• Employee commuting (Category 7)
• Upstream leased assets (Category 8)

Downstream emissions relate to what happens after your product or service leaves your business:

• Downstream transportation and distribution (Category 9)
• Processing of sold products (Category 10)
• Use of sold products (Category 11)
• End-of-life treatment of sold products (Category 12)
• Downstream leased assets (Category 13)
• Franchises (Category 14)
• Investments (Category 15)

Not all 15 categories will be relevant to every business. A professional services firm will have a very different value chain emissions profile to a product manufacturer. Part of the measurement process involves identifying which categories are material to your specific operations.

Why Do Value Chain Emissions Matter for Carbon Reporting?

Stakeholders, regulators, and frameworks are increasingly requiring companies to account for their full footprint, not just the emissions they directly control.

Reporting standards such as SECR, B Corp, and SBTi-aligned target-setting all reference Scope 3 in some form. The Science Based Targets initiative requires companies to set Scope 3 targets if value chain emissions represent 40% or more of total emissions, which applies to the vast majority of organisations (SBTi, 2023).

From a decarbonisation standpoint, focusing only on Scope 1 and 2 while ignoring value chain emissions is the equivalent of addressing a small fraction of the problem. For a company whose supply chain accounts for 80% of its footprint, even a 50% reduction in Scope 1 and 2 emissions moves the overall number by only 10%.

Value chain emissions data also matters to your customers and investors. Many large organisations now require suppliers to disclose their emissions as part of procurement processes, including through frameworks like PPN 006 and EcoVadis assessments.

What Makes Value Chain Emissions Difficult to Measure?

The challenge with value chain emissions is that much of the data sits outside your direct control. You cannot read your suppliers' energy meters. You do not know exactly how your customers use or dispose of your products. This means measurement relies on a combination of approaches.

Spend-based methods use financial data to estimate emissions by applying average emission factors to categories of expenditure. This is the most accessible starting point and works well for lower-materiality categories, but it produces less precise results.

Activity-based methods use actual operational data, such as tonnes of materials purchased, kilometres travelled, or kilowatt hours consumed. This produces more accurate figures but requires more detailed data collection, often involving supplier engagement.

Supplier-specific data uses actual emissions figures provided directly by suppliers, such as Environmental Product Declarations (EPDs) or Product Carbon Footprints (PCFs). This is the most accurate approach for high-impact upstream categories.

In practice, most companies use a mix of all three, applying more rigorous methods to the categories that drive the most emissions and spend-based estimates where the impact is lower. Seedling supports this layered approach, with built-in supplier surveys and the option to incorporate EPDs and PCFs for categories where accuracy matters most.

How Do You Get Started with Value Chain Emissions?

Measuring value chain emissions for the first time does not require perfect data across all 15 categories. The recommended approach is to start with a materiality assessment: identify which categories are likely to be significant for your business, based on your industry, spend profile, and operational model.

From there, a practical sequence looks like this:

1. Map your value chain to understand where emissions are most likely to concentrate
2. Prioritise categories by materiality, focusing data collection effort where it will have the most impact on accuracy
3. Collect data using spend-based methods for lower-priority categories and activity-based methods for high-impact ones
4. Engage suppliers in priority categories to move from estimates to actual figures over time
5. Report and set targets using a recognised framework such as the GHG Protocol, with SBTi-aligned reduction targets where applicable

Year-on-year improvement in data quality is a realistic and accepted standard. The GHG Protocol acknowledges that Scope 3 measurement is iterative: your first footprint will rely more heavily on estimates, and subsequent years should progressively improve as supplier relationships deepen and data collection processes bed in.

For companies with limited internal resource, the combination of structured software and expert guidance makes a significant difference. Having a clear methodology, the right data collection tools, and someone to advise on which categories to prioritise reduces what could be a multi-month project to something far more manageable.

Value chain emissions sit at the centre of any credible net zero strategy. Getting them measured is not the end of the process; it is the point at which meaningful reduction planning can begin.