What Are Scope 3 Emissions and How Can You Reduce Them?

When it comes to reducing emissions, many businesses start with what’s easiest to see and measure - such as energy use in offices, fuel for company vehicles, or waste from operations. But beyond these direct sources lies a far larger challenge: Scope 3 emissions.

These are the indirect emissions generated across your value chain - from the goods and services you purchase to the transport, distribution, and disposal of your products. For most Australian businesses, they account for the majority of their total carbon footprint.

With new climate reporting regulations coming into effect and net-zero targets looming, tackling Scope 3 emissions is no longer optional but essential.

At Ofload, we help businesses optimise freight operations while reducing their carbon emissions. This guide breaks down what Scope 3 emissions are, why they matter, and how you can take practical steps to reduce them.

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Scope 3 emissions are all the indirect greenhouse gas emissions that occur across your company’s value chain, excluding those emitted from owned assets (Scope 1) and purchased energy (Scope 2).

To understand this better, let's break down the three scopes:

• Scope 1: Direct emissions from sources owned or controlled by your company, such as fuel combustion in company vehicles, on-site generators, or industrial processes.
  
• Scope 2: Indirect emissions from the generation of purchased electricity, steam, heating, or cooling consumed by your company.
  
• Scope 3: All other indirect emissions occurring in your company's value chain (both upstream and downstream activities), including distribution of goods/services, and leased assets like trucks.
  

Think of it this way - if your business manufactures products:

• Scope 1 = Emissions from your factory’s fuel use
  
• Scope 2 = Electricity you buy to run the factory
  
• Scope 3 = Emissions from raw materials, supplier transport, and how customers use or dispose of your product

One companies Scope 1 could be another companies Scope 3

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According to the Carbon Disclosure Project (CDP), Scope 3 emissions account for more than 70% of a company’s total emissions on average (CDP, 2023). This makes tackling Scope 3 not only important for climate goals but essential for compliance with Australia’s upcoming climate reporting standards under Australian Sustainability Reporting Standards (ASRS).

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Scope 3 emissions are challenging to quantify because they rely on data from suppliers, transport partners, customers, and other third parties. Each entity in the supply chain may use different data formats, or may not track emissions data at all.

Some key challenges include:

• Data availability: Many suppliers don’t currently collect or share emissions data.
  
• Lack of standardisation: Emission factors vary across industries and geographies.
  
• Complexity of supply chains: Multilayered vendor relationships reduce visibility.
  
• Fragmented freight: Inconsistent truck use, backhauls, and low-load efficiencies make freight emissions difficult to calculate.
  

With the Australian Government introducing mandatory climate disclosures from 1 July 2025 (starting with large entities), businesses must now address Scope 3 emissions. Even those not in the first reporting tranche will feel pressure from corporate customers to disclose or support accurate emissions accounting

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Scope 3 emissions - those outside a company’s direct control - are categorised by the Greenhouse Gas Protocol into 15 types, grouped under upstream and downstream activities.

These are indirect emissions related to a company’s supply chain - covering everything from the goods and services it purchases, to employee commuting and business travel.

The eight upstream categories are:

1. Purchased Goods and Services
2. Capital Goods
3. Fuel and Energy-Related Activities (not included in Scope 1 or 2)
4. Upstream Transportation and Distribution
5. Waste Generated in Operations
6. Business Travel
7. Employee Commuting
8. Upstream Leased Assets
   
   

These cover indirect emissions that occur after a product leaves the business, including distribution, use, and end-of-life treatment.

The seven downstream categories are:

1. Downstream Transportation and Distribution
2. Processing of Sold Products
3. Use of Sold Products
4. End of Life Treatment of Sold Products
5. Downstream Leased Assets
6. Franchises
7. Investments
   

For most Australian businesses, the most material Scope 3 categories are purchased goods, transport (upstream and downstream), and waste. In freight-reliant industries like FMCG, personal care, and retail, logistics emissions are often a major contributor (Greenhouse Gas Protocol; McKinsey 2023).

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Scope 3 emissions can no longer be an afterthought, for most businesses it’s where most of their carbon footprint lives, and where action matters most.

In fact, they typically account for 70 to 90% of a company’s total carbon footprint (Greenhouse Gas Protocol, 2022), and are on average 11 times higher than Scope 1 and 2 combined (CDP, 2024). That makes them the biggest opportunity and biggest challenge for businesses looking to cut emissions.

Businesses will face pressure from multiple directions:

• Regulations are changing - From July 2025, large Australian companies will be required to report on Scope 3 emissions.
• Investors are paying attention - Climate risk is now a priority for regulators like APRA.
• Customers are asking questions - Many companies now expect emissions data from suppliers as part of their procurement and ESG processes.

Freight is the backbone of the Australian economy, it keeps the country moving. But it also accounts for 19% of Australia’s transport emissions (Climate Change Authority, 2021). Reducing freight-related Scope 3 emissions goes beyond reporting compliance and is a key opportunity to improve sustainability and strengthen your business with:

1. More resilient supply chains through improved efficiency and visibility
2. Stronger positioning in tenders and procurement processes
3. Better access to green capital as sustainability becomes a prerequisite for investors and partners

Did you know?: In some industries, like consumer goods, transport alone can be up to 90% of a singular product’s footprint (McKinsey, 2023).

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Cutting Scope 3 emissions takes a strategic, whole-of-supply-chain approach. It starts with understanding your biggest emission sources and working collaboratively to make meaningful changes.

Key actions include:

• Measure and prioritise: Identify the categories driving your emissions and focus efforts where they’ll have the most impact. Typically, these include transportation and waste.
  
• Engage suppliers: Collaborate with your suppliers to gather emissions data, set reduction targets, and support greener practices through training and incentives.
  
• Optimise freight: Improve route planning, increase truck load efficiency, and shift freight to cleaner transport modes like rail or electric vehicles.
  
• Adopt circular principles: Design products and packaging to reduce waste, increase recycled content, and support reuse or recycling programs.
  
• Influence customers: Help downstream users lower emissions by offering sustainable options and guidance on product use and disposal.
  
• Partner for progress: Work with industry groups, tech providers, and peers to share insights and accelerate emissions reductions together.
  

Focusing on Scope 3 emissions will open the door to real opportunities; improving efficiency, strengthening supplier relationships, and gaining a competitive edge in a market gearing towards sustainability values. These efforts create lasting value for both your business and the wider environment.

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Freight is a major driver of Scope 3 emissions in Australia. Moving goods across long distances (predominately by road) creates significant carbon output.

What affects freight emissions?

• Distance: Longer routes produce more emissions.
• Mode: Road freight emits more carbon than rail or sea.
• Load efficiency: Partially empty trucks waste fuel and increase emissions.
• Fleet type: Newer, cleaner vehicles help lower emissions.
  

Freight also offers one of the most practical opportunities to cut emissions. Strategies you could take include:

• Consolidating loads to maximise capacity
• Switching to rail or sea where possible
• Optimising routes to reduce unnecessary travel
• Choosing carriers with cleaner, more efficient fleets

Addressing freight emissions is vital for reducing your overall carbon footprint, but it also means you can cut costs and build supply chain resilience.

Did you know?: 92% of freight in Australia moves by road, often via small operators with fewer than 10 trucks (Bureau of Infrastructure, Transport and Regional Economics [BITRE], 2014).

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Tracking Scope 3 emissions can feel overwhelming, especially when data lives across different systems, suppliers, and freight partners. But the right technology can help you measure, manage and reduce.

Modern platforms can pull live data from your existing systems -  like ERP, procurement, and logistics - capturing key activity details such as distance travelled, load weight, and fuel type. This creates a clear, end to end picture of emissions generated across your entire supply chain.

With the right tools, you can:

• Accurately measure emissions in real time, down to individual shipments or SKUs
• See beyond your direct suppliers to uncover hidden hotspots in deeper tiers
• Compare and forecast carrier data all in one place to analyse emissions impacts before making changes
• Access real time emissions data and download audit-ready reports with your stakeholders
• Unlock actionable insights to begin reducing your emissions

Therefore, investing in the right technology and tools can turn Scope 3 from the hardest emissions to measure into the area where the biggest progress can be made. Unlocking the insights you need to make informed decisions, meet rising expectations, and drive change valuable across your supply chain.

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With climate disclosure laws coming into effect from 1 July 2025, Scope 3 emissions have moved from the sidelines to the centre of business strategy.

For many Australian companies, freight is not only one of the most material Scope 3 categories, but also one of the most actionable. Optimising transport today means more than just cutting carbon: it’s about building smarter, more resilient supply chains that meet regulatory, investor, and customer expectations.

At Ofload, we help businesses move freight with greater visibility, efficiency, and lower emissions. Our Carbon Analytics Platform and Dataverse give you the real-time data and insights needed to track progress and take action, while our national carrier network helps you unlock carbon savings from day one.

Scope 3 may be complex. Freight doesn’t have to be.‍

Ready to get started? Chat to the team.

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Sources:

Bureau of Infrastructure, Transport and Regional Economics. (2014, May 2). Freightline 1 – Australian freight transport overview. Department of Infrastructure and Regional Development. https://www.bitre.gov.au/sites/default/files/Freightline_01.pdf

CDP. (2023). Scope 3 upstream: Big challenges, simple remedies [Report]. CDP Worldwide. https://cdn.cdp.net/cdp-production/cms/reports/documents/000/007/834/original/Scope-3-Upstream-Report.pdf

CDP. (2024). Transparency to transformation: A chain reaction. https://cdp.net/en/research/global-reports/transparency-to-transformation

Climate Change Authority. (2021, February). Transport (Fact sheet). https://www.climatechangeauthority.gov.au/sites/default/files/2021Fact%20sheet%20-%20Transport.pdf

Greenhouse Gas Protocol. (2011). Corporate value chain (Scope 3) standard. World Resources Institute & World Business Council for Sustainable Development. https://ghgprotocol.org/corporate-value-chain-scope-3-standard

Greenhouse Gas Protocol. (2022, June). Scope 3 frequently asked questions. World Resources Institute & World Business Council for Sustainable Development. https://ghgprotocol.org/sites/default/files/standards_supporting/Scope%203%20Detailed%20FAQ.pdf

McKinsey. (2023). Starting at the source: Sustainability in supply chains. McKinsey on Sustainability & Resource Productivity. https://www.mckinsey.com/capabilities/sustainability/our-insights/starting-at-the-source-sustainability-in-supply-chains