Key Takeaways
- 173% of Scope 3 disclosures still rely on spend-based EEIO factors
- 2SBTi will require activity-based data for Scope 3 targets from FY 2027
- 3CSRD limited assurance triggers a step-change in primary data demands
- 4Supplier engagement programmes deliver 35-60% emissions visibility uplift
Why Scope 3 Now Matters Financially
Scope 3 emissions — those occurring across a company's value chain but outside its operational boundaries — typically represent 70-90% of a company's total carbon footprint. For asset-light sectors including financial services, technology, retail, and pharmaceuticals, the proportion is even higher.
Until recently, Scope 3 disclosure was treated as a secondary metric, with most companies reporting estimates based on environmentally-extended input-output (EEIO) factors applied to procurement spend. This approach satisfies disclosure obligations but provides limited operational insight and is increasingly recognised as inadequate for credible decarbonisation strategies. CSRD's limited assurance requirements, SBTi's tightening validation criteria, and investor due diligence questionnaires now demand activity-based, supplier-specific data.
The SBTi Transition
The Science Based Targets initiative will require companies setting or revalidating Scope 3 targets after FY 2027 to use activity-based emissions factors rather than spend-based EEIO factors for at least 67% of Scope 3 inventory by Category. This represents a significant operational shift for the 5,400+ companies with validated SBTi targets, most of which currently use spend-based methods.
The transition will require companies to systematically engage their top 200-500 suppliers (typically representing 60-80% of procurement spend) to collect product-level or facility-level emissions data, validated through documented methodologies.
“SBTi will require activity-based data for at least 67% of Scope 3 inventory by Category from FY 2027.”
Building Supplier Data Programmes
MindEarth's experience supporting corporate supplier engagement programmes across India, the EU, and ASEAN identifies four success factors. First, segment suppliers by emissions materiality rather than spend — a high-emissions intensity supplier with $5M annual spend may matter more than a $50M spend low-intensity supplier. Second, integrate data requests into existing procurement and qualification processes rather than running parallel sustainability surveys. Third, provide suppliers with technical assistance — many SMEs lack the carbon accounting capabilities to respond credibly to data requests. Fourth, design data infrastructure for incremental quality improvement rather than perfect-first-attempt completeness.
Well-designed programmes typically deliver 35-60% emissions visibility uplift within 18 months — moving from blanket EEIO factors to a hybrid model where high-materiality suppliers report primary data and low-materiality categories continue with proxy estimates.
Investor and Regulator Expectations
Asset managers and proxy advisors have rapidly elevated Scope 3 from a disclosure-only item to a financial materiality factor. ISS and Glass Lewis voting guidelines now consider Scope 3 disclosure quality and target ambition when evaluating director re-election and say-on-climate votes. Major asset managers including Norges Bank, Legal & General, and Aviva have published explicit Scope 3 expectations applied across their portfolio engagement.
On the regulatory side, CSRD's limited assurance requirements (mandatory from FY 2024 for in-scope companies) trigger a step-change in primary data demands, since assurance providers cannot validate EEIO-based estimates beyond confirming methodology disclosure. Companies anticipating reasonable assurance requirements (currently targeted for FY 2028) need to begin building supplier data infrastructure now.
