Thanks to Regulatory Action, Scope 3 Emissions Are Getting More Attention. Here's What Marketers Need to Know

Regulators are requesting more detailed data on climate impact

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As regulators work to determine how to measure climate impact and incentivize emissions reductions, marketers are faced with a complex task: making behind-the-scenes climate work digestible for a general audience.

While most people likely won’t venture into the weeds on where and how brands and agencies are shrinking their carbon footprints, understanding how emissions are categorized can help marketers avoid unintentional greenwashing.

That’s why we put together this primer on scope 3 emissions, a subset of a company’s overall climate impact—but not directly created by the company itself—that’s getting more attention as regulations on emissions disclosures begin to take shape.

What are scope 3 emissions?

Greenhouse gas emissions are separated into three different scopes. But before we get into what each scope means, here’s a little background:

International measurement standards for climate-harming pollutants are part of the Greenhouse Gas Protocol. Developed in the late 1990s through a partnership between the World Resources Institute and the World Business Council for Sustainable Development, according to the World Economic Forum, the aim was to create a common language for and approach to curbing the global warming that’s happening as a result of human activities.

One outcome of that partnership was a categorization of emissions by scope. Each scope is defined by its relationship to the reporting company:

  • Scope 1 emissions encompass all greenhouse gas emissions generated by things that a company owns or controls. That means any emissions that are created when company factories, machines, vehicles and buildings are in use.
  • Scope 2 emissions are all the emissions that a company creates indirectly by purchasing heat and electricity. Things like installing solar panels or drawing from a cleaner electric grid cut back on scope 2 emissions.
  • Scope 3 is where things get complicated. While also defined as indirect emissions, they go beyond simply the creation of a product, encompassing the use of a product itself and the emissions generated by suppliers that a company uses. That includes any emissions created by things like distribution, employee commuting or travel, purchased goods or product end-of-life, to name a few.

“For most companies, the vast majority of their emissions are in scope 3,” Aron Cramer, president and CEO of sustainable business network and consultancy BSR, told Adweek. “The dirty little secret is that most companies don’t even know how to measure that very effectively because there are so many layers to a supply chain.”

When are regulations coming?

In March 2022, the U.S. Securities and Exchange Commission (SEC) proposed a rule that would require all companies to disclose audited scope 1 and scope 2 emissions. Scope 3 emissions reporting will also be required if they are material, with exemptions for small companies.

If the rule is adopted, large companies would have to begin reporting on scope 1 and 2 emissions during the filing year 2024. Scope 3 disclosures would be required the following year to give companies more time to understand the emissions along complex supply chains. Smaller companies would get an extra year to begin reporting.

What does this mean for marketers?

Scope 3 emissions look vastly different across industries. As a result, how each individual brand or agency must address those emissions will also vary—and different expertise will be required depending on the product, brand or subject area of marketing-related activities.

Still, there are some broad areas worth highlighting. For consumer brands, a major source of scope 3 emissions is likely to come from upstream outsourced production, long-haul shipping and waste associated with product end-of-life. Tech companies will likely see major scope 3 emissions in employee commuting, work from home and the energy consumption associated with servers.

As regulators work to pin down the direct and indirect climate impacts of companies, understanding what that means for brand messaging will help marketers avoid misrepresenting a company’s work.

Where does digital advertising fit into this?

The complexity of emissions measurement, reduction and offsetting—paired with the threat of regulations that will require detailed reporting across all scopes of emissions—has proved fertile ground for new businesses aiming to support companies with this daunting task.

Major consulting firms are hiring more expertise in sustainability reporting, emissions reduction and climate impact measurement to prepare for a projected rise in demand for these services as brands work to reach their climate goals.

For most brands, digital advertising is one aspect of their scope 3 emissions—though it’s most likely a small percentage of their overall impact. Still, eliminating all unnecessary emissions through improved efficiency and better energy sources is necessary to meet emissions reductions goals.

Agencies like dentsu and GroupM have developed carbon calculators and methodologies for reducing the emissions associated with media buying. Media platform Teads is working with an external group to measure carbon emissions of digital ads for clients, and U.K.-based agency Assembly recently launched its own media decarbonization offering called the Clean Media Lab.

Wait a minute—where have I heard of scope 3 before?

Scope3 is also the name of a company founded in 2022 by Brian O’Kelley that aims to bring attention to ad tech’s climate footprint.

Not to be confused with the entire scope of emissions that ad tech occupies, the goal of O’Kelley’s company is to eliminate unnecessary technology that’s often present when working with low-quality publishers. The company sells what it calls “green media products” by cutting out that extra tech and then offsetting the remaining emissions with carbon reduction projects.

O’Kelley has also been a vocal supporter of standardized measurement when it comes to media decarbonization. “The biggest challenge right now is that the industry has not aligned on a standard,” he told Adweek in December. And while there’s been some momentum from groups like Ad Net Zero and the IAB, a global methodology for measurement has not yet been established.

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