Scope 3 Emissions vs Supply Chain Due Diligence

As EU sustainability regulations expand, companies are increasingly required to look beyond their own operations and into their value chains. Two major concepts dominate this area: Scope 3 Emissions reporting (primarily under the CSRD) and Supply Chain Due Diligence (primarily under the CSDDD). While they overlap in focusing on the value chain, they require entirely different methodologies and address different types of risk.

Core Definitions

• Scope 3 Emissions: A specific environmental metric. It refers to all indirect greenhouse gas (GHG) emissions that occur in a company's value chain, including both upstream (e.g., purchased goods, business travel) and downstream (e.g., use of sold products, end-of-life treatment) activities.
• Supply Chain Due Diligence: A holistic risk management process. It is the ongoing process of identifying, preventing, mitigating, and accounting for adverse human rights and environmental impacts throughout the supply chain.

Regulatory Drivers

The requirements stem from different legislative frameworks:

• Scope 3 Reporting: Driven by the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS), specifically ESRS E1 (Climate Change). It is a reporting obligation.
• Due Diligence: Driven by the Corporate Sustainability Due Diligence Directive (CSDDD). It is an action and behavior obligation, requiring companies to actively change how they manage their supply chains, not just report on them.

Data and Methodology Differences

The practical work required for each differs significantly:

Scope 3 Emissions requires quantitative carbon accounting. Companies must gather activity data from suppliers (e.g., energy used to manufacture a component) or use spend-based emission factors to calculate a total CO2 equivalent figure. The focus is purely on greenhouse gases.

Supply Chain Due Diligence requires qualitative and quantitative risk assessment. Companies must map their supply chains to identify risks of forced labor, child labor, inadequate workplace safety, biodiversity loss, and pollution. The focus is on human rights and broad environmental harm. The output is not a single metric, but a documented process of risk mitigation and supplier engagement.

The Intersection

While distinct, the two concepts intersect. A robust supply chain due diligence process (CSDDD) will uncover the primary sources of environmental impact in the value chain, which directly informs the data collection needed for accurate Scope 3 emissions reporting (CSRD). Furthermore, the CSRD requires companies to report on the due diligence processes they have in place, effectively linking the reporting of the former with the actions of the latter.

Summary Comparison