Which Scope 3 Categories Do SMEs Actually Need to Report?

Introduction

For many small and growing businesses (SMEs), Scope 3 emissions — the indirect greenhouse gas emissions from their value chain — are the most confusing part of CSRD reporting.

The Corporate Sustainability Reporting Directive (EU 2022/2464) and ESRS E1 (Climate Change) require companies to disclose all material emissions, including those from suppliers, customers, and waste. However, smaller companies under the VSME (Voluntary Sustainability Reporting Standard for SMEs) are allowed to take a proportionate approach, focusing only on the categories that matter most.

This article explains which Scope 3 categories small and growing businesses (SMEs) actually need to report, how to determine materiality, and where to start if you’re new to emissions accounting.

1. Understanding Scope 3 Emissions

Scope 3 covers all indirect emissions not included in your company’s direct (Scope 1) or purchased energy (Scope 2) footprint.

The GHG Protocol — the framework underlying CSRD — divides Scope 3 into 15 categories grouped into “upstream” and “downstream” activities.

Here’s the full list:

But SMEs are not expected to report all 15 — only those that are material to their business and can be reasonably estimated.

2. Which Scope 3 Categories Are Most Relevant for SMEs

Most SMEs can focus on 5–7 key categories, depending on their sector and supply chain. Here’s a breakdown of the most common ones:

Most Commonly Material Scope 3 Categories for SMEs

1. Purchased goods and services (Category 1) – emissions from suppliers, subcontractors, and purchased materials.
2. Upstream transportation and distribution (Category 4) – deliveries and logistics not owned by you.
3. Waste generated in operations (Category 5) – disposal and recycling of operational waste.
4. Business travel (Category 6) – flights, car rentals, and hotel stays for staff.
5. Employee commuting (Category 7) – home-to-work travel, especially in hybrid setups.
6. Downstream transportation (Category 9) – delivery of sold products or materials.
7. End-of-life treatment of sold products (Category 12) – for manufacturers or retailers of physical goods.

Categories like franchises or investments usually don’t apply to SMEs unless they own or finance other entities.

3. How to Decide What’s “Material”

Materiality means significant impact or relevance. To decide which Scope 3 categories to include, consider:

• Size of the emission source (e.g. fuel vs. office waste).
• Influence over the activity (e.g. key suppliers or logistics).
• Stakeholder expectations (e.g. large customers asking for data).
• Financial relevance (e.g. material purchase spend).

If a category contributes less than 5% of total estimated emissions and isn’t relevant to stakeholders, it’s typically considered non-material and can be excluded — as long as you state this in your report.

Example disclosure:

“Categories 10–15 were considered immaterial to our operations as the company does not manufacture products or operate leased assets.”

4. Estimating Scope 3 Emissions for SMEs

You can estimate emissions using spend-based or activity-based methods:

• Spend-based: € of goods/services × emission factor (kg CO₂e/€).
• Activity-based: Measured quantity (litres, tonnes, km) × emission factor (kg CO₂e/unit).

Public sources such as EEA, ADEME, or DEFRA offer reliable factors.

For example:

€100,000 spent on packaging materials × 1.8 kg CO₂e/€ = 180 tCO₂e (Category 1).

10,000 km of third-party transport × 0.18 kg CO₂e/km = 1.8 tCO₂e (Category 4).

If you lack data, see our guide on how to estimate missing data for CSRD reporting.

5. Reporting Under CSRD vs VSME

• CSRD (ESRS E1-6) requires disclosure of total Scope 1, 2, and 3 emissions, explaining which categories are included and why.
• VSME B7 allows SMEs to report simplified totals and describe estimation methods.

Example (Full CSRD Disclosure)

“Scope 3 emissions (Categories 1, 4, 5, 6, and 7) were estimated using spend-based and activity-based methods. Other categories were assessed as immaterial due to low relevance to operations.”

Example (VSME Simplified Disclosure)

“The company estimated its indirect (Scope 3) emissions for purchased goods, transport, and waste using standard emission factors and supplier data where available.”

Both approaches are valid, as long as your methodology is consistent and clearly explained.

6. Improving Data Quality Over Time

Your Scope 3 data will start as rough estimates — that’s expected. Each reporting cycle, aim to:

• Collect actual data from top suppliers.
• Request ESG information in tenders and contracts.
• Refine emission factors based on updated benchmarks.
• Reassess material categories annually.

By Year 3, most SMEs move from broad estimates to 70–90% primary data for major categories, meeting CSRD’s “reasonable assurance” expectations.

Frequently Asked Questions

Do SMEs need to report all 15 categories?

No. You only need to report the categories that are material and relevant to your operations. For most SMEs, this is between 5 and 7.

What happens if I exclude a category?

You must explain the reason for exclusion — for example, “Category 10 not applicable as the company does not manufacture products.” Transparency is more important than completeness.

Are subcontractor emissions included?

Yes. Subcontractors fall under Category 1 (Purchased goods and services) or Category 4 (Upstream transport). See our detailed guide on reporting subcontractor emissions.

Do I need to verify Scope 3 data?

Under limited assurance, auditors will review your methodology and consistency, not re-calculate every estimate. Keep sources and calculations traceable.

Key Terms

• Scope 3 emissions – Indirect GHG emissions from activities in your value chain.
• Materiality – Assessing which topics or impacts are significant to disclose.
• Spend-based method – Estimating emissions using financial spend data.
• Activity-based method – Estimating emissions using physical quantities.
• VSME Standard – Simplified sustainability disclosure for small and medium-sized enterprises.

Conclusion

SMEs do not need to report all 15 Scope 3 categories — only those that are material and relevant to their business. Focus on your main suppliers, logistics, waste, and travel activities. Be transparent about what’s included, estimate responsibly, and improve over time.

This proportional approach fully meets the CSRD and VSME requirements while keeping your reporting process practical and achievable.

For an annual overview of when to collect Scope 3 data, consult our annual CSRD reporting calendar.

Not sure which Scope 3 categories apply to your business? Use our interactive selector to identify which categories are most relevant to your operations:

This tool will help you determine which categories you should focus on reporting based on your business type, industry, and value chain activities.