The Scope 3 Challenge No One Is Solving in India’s Energy Transition
India's national climate commitments include targets for 500 GW of non-fossil power capacity by 2030 and net-zero emissions by 2070. These targets are primarily focused on Scope 1 and 2 emissions and there has been little discussion of how to report or reductions in Scope 3 emissions at the national level.
September 02, 2025. By News Bureau
When we think about greenhouse gas emissions, we typically envision direct sources like factories or vehicle exhaust. But a significant portion of emissions lies deeper within value chains Scope 3 emissions, covering indirect emissions upstream (from suppliers) and downstream (from customers). As India moves towards a sustainable future, overlooking these indirect emissions risks undermining the effectiveness and integrity of national climate goals.
India emits around 3 billion tons of CO₂-equivalent on a yearly basis, or approximately 7 per cent of global emissions. However, a large portion of India’s carbon footprint derives not from direct operations but from value chain and scope 3 emissions. For sectors like oil and gas, coal, power generation, and even renewables, these ‘hidden’ emissions represent the most important climate impact to address, if India is going to meet its development aspirations and climate commitments with its energy transition.
A Primer in Scope 3: the ‘Invisible’ Emissions
Emissions are typically broken down into 3 scopes. Scope 1 emissions are direct emissions from a company’s owned operations, e.g. a company burning fuel on site. Scope 2 emissions refer to indirect emissions from electricity or fuel purchased from an external source. Scope 3 emissions refer to all other indirect emissions; they include emissions related to raw material sourcing, emissions related to the performance of an end-product, and even emissions associated with the disposal of that end-product.
For instance, when an oil company extracts and sells fuel, emissions released when the fuel is combusted by customers represent downstream Scope 3 emissions for the oil producer. Equally, upstream Scope 3 emissions include emissions from the extraction equipment, outsourced transport, refining processes, and production inputs purchased by the oil company.
The reasons Scope 3 is ignored
Scope 3 emissions measurement is inherently complex. Companies must collect granular data from potentially thousands of suppliers and customers across multiple geographies. Many smaller suppliers lack emission inventories or credible reporting capabilities, and companies often rely on generic emission factors and assumptions. As a result, Scope 3 reporting typically involves high uncertainty and lower reliability compared to direct emissions measurement, creating barriers to credible accounting and consistent reduction targets.
Second, Scope 3 has historically been optional. Companies have focused on things they somewhat easily control. It is also not very common that companies are required to report on Scope 3, and even not common to assign targets to reduce them. In aggregate, global companies are greater than double as likely to assign targets for Scope 1 and Scope 2 then Scope 3 emissions. In India, 40 percent of listed firms disclose any Scope 3 emissions at all, which would reflect nearly all large listed firms in the country.
India’s Emissions Story: Answering the Question of Scope 3
India’s total greenhouse gas emissions are led by energy-related sectors. Power generation accounts for almost 37 percent, followed by agriculture (21 percent), industry (17 percent), and transport (9 percent). These are direct emissions from energy-related companies, Scope 1 in the scheme of things. But take a closer look and you will see that most of these emissions are someone else’s Scope 3 emissions.
For example, when Coal India extracts coal, the emissions produced during coal combustion at power plants represent its downstream Scope 3 emissions. Similarly, oil and gas producers account for downstream Scope 3 emissions when their fuels are burned in vehicles or industrial operations. Even renewable energy technologies carry significant Scope 3 footprints, as the manufacture of solar panels or wind turbines typically involves energy-intensive processes reliant on fossil fuels elsewhere in the supply chain.
If we continue to overlook these value-chain emissions, we risk severely undervaluing the true carbon costs embedded in economic activities. For instance, an electric utility adopting solar energy may drastically reduce its Scope 1 emissions but unless the emissions involved in manufacturing the solar panels are also factored in, the full climate benefit is overstated, and the real emissions reduction is incomplete.
Policy Gaps and Corporate Blindness
India's national climate commitments include targets for 500 GW of non-fossil power capacity by 2030 and net-zero emissions by 2070. These targets are primarily focused on Scope 1 and 2 emissions and there has been little discussion of how to report or reductions in Scope 3 emissions at the national level.
Most energy companies in India still exclude Scope 3 emissions from their net-zero pledges. Oil and gas firms typically commit to reducing emissions from their direct operations (Scope 1 and 2), but rarely include the substantial downstream emissions from the use of their products such as fuel combustion by customers. Similarly, coal industry commitments often highlight improvements in mining efficiency or power plant performance, but they seldom address the significant lifecycle emissions from coal combustion itself. Without incorporating Scope 3, net-zero commitments remain incomplete, understating both corporate accountability and the true scale of India’s emissions challenge.
India's top 250 quoted companies are required to disclose Scope 3 emissions as per SEBI BRSR Core guidelines, which is a relatively early stage. There are no mandates for reductions in Scope 3 emissions or inclusion in ESG scoring frameworks yet.
Challenges: From Data to Accountability
First, accurate measurement is critical. Companies need reliable tools to trace emissions data throughout their supply chains and to systematically capture this information from suppliers. Standardising methodologies, improving data transparency, and developing sector-specific emission factors will be essential for credible measurement and consistent reporting.
Second, accountability must expand beyond direct operations. Businesses need to recognise their responsibility for emissions that occur both upstream and downstream in their value chains. This shift requires engaging closely with suppliers to implement lower-carbon practices and rethinking product design to minimise lifecycle emissions.
Finally, supportive policy measures are necessary to drive meaningful change. Instruments such as carbon border taxes, incentives for sustainable inputs (like recycled materials or green hydrogen), and strengthened green procurement policies can incentivise companies to prioritise Scope 3 reductions. Initiatives like India’s Mission LiFE, focusing on sustainable consumption, provide an important policy framework for addressing demand-side Scope 3 emissions.
Possible Actions
India emits around 3 billion tons of CO₂-equivalent on a yearly basis, or approximately 7 per cent of global emissions. However, a large portion of India’s carbon footprint derives not from direct operations but from value chain and scope 3 emissions. For sectors like oil and gas, coal, power generation, and even renewables, these ‘hidden’ emissions represent the most important climate impact to address, if India is going to meet its development aspirations and climate commitments with its energy transition.
A Primer in Scope 3: the ‘Invisible’ Emissions
Emissions are typically broken down into 3 scopes. Scope 1 emissions are direct emissions from a company’s owned operations, e.g. a company burning fuel on site. Scope 2 emissions refer to indirect emissions from electricity or fuel purchased from an external source. Scope 3 emissions refer to all other indirect emissions; they include emissions related to raw material sourcing, emissions related to the performance of an end-product, and even emissions associated with the disposal of that end-product.
For instance, when an oil company extracts and sells fuel, emissions released when the fuel is combusted by customers represent downstream Scope 3 emissions for the oil producer. Equally, upstream Scope 3 emissions include emissions from the extraction equipment, outsourced transport, refining processes, and production inputs purchased by the oil company.
The reasons Scope 3 is ignored
Scope 3 emissions measurement is inherently complex. Companies must collect granular data from potentially thousands of suppliers and customers across multiple geographies. Many smaller suppliers lack emission inventories or credible reporting capabilities, and companies often rely on generic emission factors and assumptions. As a result, Scope 3 reporting typically involves high uncertainty and lower reliability compared to direct emissions measurement, creating barriers to credible accounting and consistent reduction targets.
Second, Scope 3 has historically been optional. Companies have focused on things they somewhat easily control. It is also not very common that companies are required to report on Scope 3, and even not common to assign targets to reduce them. In aggregate, global companies are greater than double as likely to assign targets for Scope 1 and Scope 2 then Scope 3 emissions. In India, 40 percent of listed firms disclose any Scope 3 emissions at all, which would reflect nearly all large listed firms in the country.
India’s Emissions Story: Answering the Question of Scope 3
India’s total greenhouse gas emissions are led by energy-related sectors. Power generation accounts for almost 37 percent, followed by agriculture (21 percent), industry (17 percent), and transport (9 percent). These are direct emissions from energy-related companies, Scope 1 in the scheme of things. But take a closer look and you will see that most of these emissions are someone else’s Scope 3 emissions.
For example, when Coal India extracts coal, the emissions produced during coal combustion at power plants represent its downstream Scope 3 emissions. Similarly, oil and gas producers account for downstream Scope 3 emissions when their fuels are burned in vehicles or industrial operations. Even renewable energy technologies carry significant Scope 3 footprints, as the manufacture of solar panels or wind turbines typically involves energy-intensive processes reliant on fossil fuels elsewhere in the supply chain.
If we continue to overlook these value-chain emissions, we risk severely undervaluing the true carbon costs embedded in economic activities. For instance, an electric utility adopting solar energy may drastically reduce its Scope 1 emissions but unless the emissions involved in manufacturing the solar panels are also factored in, the full climate benefit is overstated, and the real emissions reduction is incomplete.
Policy Gaps and Corporate Blindness
India's national climate commitments include targets for 500 GW of non-fossil power capacity by 2030 and net-zero emissions by 2070. These targets are primarily focused on Scope 1 and 2 emissions and there has been little discussion of how to report or reductions in Scope 3 emissions at the national level.
Most energy companies in India still exclude Scope 3 emissions from their net-zero pledges. Oil and gas firms typically commit to reducing emissions from their direct operations (Scope 1 and 2), but rarely include the substantial downstream emissions from the use of their products such as fuel combustion by customers. Similarly, coal industry commitments often highlight improvements in mining efficiency or power plant performance, but they seldom address the significant lifecycle emissions from coal combustion itself. Without incorporating Scope 3, net-zero commitments remain incomplete, understating both corporate accountability and the true scale of India’s emissions challenge.
India's top 250 quoted companies are required to disclose Scope 3 emissions as per SEBI BRSR Core guidelines, which is a relatively early stage. There are no mandates for reductions in Scope 3 emissions or inclusion in ESG scoring frameworks yet.
Challenges: From Data to Accountability
First, accurate measurement is critical. Companies need reliable tools to trace emissions data throughout their supply chains and to systematically capture this information from suppliers. Standardising methodologies, improving data transparency, and developing sector-specific emission factors will be essential for credible measurement and consistent reporting.
Second, accountability must expand beyond direct operations. Businesses need to recognise their responsibility for emissions that occur both upstream and downstream in their value chains. This shift requires engaging closely with suppliers to implement lower-carbon practices and rethinking product design to minimise lifecycle emissions.
Finally, supportive policy measures are necessary to drive meaningful change. Instruments such as carbon border taxes, incentives for sustainable inputs (like recycled materials or green hydrogen), and strengthened green procurement policies can incentivise companies to prioritise Scope 3 reductions. Initiatives like India’s Mission LiFE, focusing on sustainable consumption, provide an important policy framework for addressing demand-side Scope 3 emissions.
Possible Actions
- Enhance emission reporting standards: Develop clear, standardised reporting guidelines, supported by comprehensive, India-specific emission factor databases.
- Expand green procurement policies: Strengthen public procurement frameworks to incentivise and reward suppliers with credible, low-carbon value chains.
- Promote science-based targets: Encourage companies to adopt rigorous, science-based climate targets that explicitly include Scope 3 emissions.
- Strengthen supplier collaboration: Support active engagement and co-investment with suppliers to adopt low-carbon technologies and processes.
- Support MSME capacity-building: Provide accessible tools, technical guidance, and dedicated research to help smaller businesses measure, report, and reduce their emissions accurately.
- Increase consumer awareness: Educate consumers about the life-cycle emissions associated with their product choices, promoting informed and sustainable consumption decisions.
What You Don't Measure You Can't Manage
India's energy transition cannot afford to remain superficial. By focusing primarily on direct emissions that are simpler to quantify, we risk overlooking the more substantial Scope 3 emissions embedded across supply chains. Although measuring these indirect emissions presents significant technical challenges, establishing robust methodologies and consistent data collection processes is essential for achieving credible emissions reductions.
Prioritising Scope 3 management is not merely sound climate policy it's prudent economic strategy. Supply chains with lower embedded carbon emissions are inherently more resilient to regulatory shifts and global market demands. Products designed with life-cycle emissions in mind are more competitive internationally, especially as markets implement carbon pricing and border adjustments. Companies that understand and effectively manage their comprehensive emission footprints are better equipped for sustained long-term growth.
India's transition to sustainability must therefore move beyond expanding renewable energy infrastructure alone. It requires rigorous, data-driven analysis and management of emissions throughout the entire value chain. Only by addressing emissions comprehensively from raw materials sourcing through to product use and disposal can India ensure its climate ambitions translate into measurable, lasting progress.
- Rajesh Patel, CEO - Snowkap
India's energy transition cannot afford to remain superficial. By focusing primarily on direct emissions that are simpler to quantify, we risk overlooking the more substantial Scope 3 emissions embedded across supply chains. Although measuring these indirect emissions presents significant technical challenges, establishing robust methodologies and consistent data collection processes is essential for achieving credible emissions reductions.
Prioritising Scope 3 management is not merely sound climate policy it's prudent economic strategy. Supply chains with lower embedded carbon emissions are inherently more resilient to regulatory shifts and global market demands. Products designed with life-cycle emissions in mind are more competitive internationally, especially as markets implement carbon pricing and border adjustments. Companies that understand and effectively manage their comprehensive emission footprints are better equipped for sustained long-term growth.
India's transition to sustainability must therefore move beyond expanding renewable energy infrastructure alone. It requires rigorous, data-driven analysis and management of emissions throughout the entire value chain. Only by addressing emissions comprehensively from raw materials sourcing through to product use and disposal can India ensure its climate ambitions translate into measurable, lasting progress.
- Rajesh Patel, CEO - Snowkap
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