Scope 3 Emissions · Value Chain Disclosures
Scope 3 reporting under UK SRS: value chain emissions disclosure
UK SRS S2 requires an entity to consider all 15 GHG Protocol Scope 3 categories and to disclose which are included in its Scope 3 figure.
Under the FCA’s final rules (PS26/19, 30 September 2026), listed companies in scope report Scope 3 on a comply-or-explain basis from accounting periods beginning 1 January 2027, with a one-year relief from disclosure — finalising CP26/5.
Overview
Scope 3 in UK SRS S2: the obligation, in two steps
Scope 3 reporting under UK SRS — indirect emissions across an entity’s value chain — is the most technically challenging part of UK SRS S2 implementation.
UK SRS S2 paragraph 29(a)(i) requires disclosure of absolute gross greenhouse gas emissions classified as Scope 1, Scope 2 and Scope 3, and paragraph 29(a)(vi) requires the entity to disclose which categories of the GHG Protocol Corporate Value Chain (Scope 3) Standard are included in its Scope 3 figure.
The FCA’s final rules recognise the practical challenges of Scope 3 data collection in two steps.
For accounting periods beginning on or after 1 January 2027, listed companies in scope report against UK SRS on a comply-or-explain basis, and a company may use one year’s relief from disclosing Scope 3.
After that year Scope 3 is disclosed, or its omission explained, like every other UK SRS disclosure.
The consultation, CP26/5, had proposed a mandatory UK SRS S2 core with Scope 3 outside it; the final rules put all of it on comply or explain, so there is no hard obligation for Scope 3 to graduate into.
Phasing for listed companies — final rules
- 1 Jan 2027UK SRS S1 and S2, comply or explain
A company may use one year’s Scope 3 relief, stating that it is doing so.
- After year 1Scope 3, disclose or explain
The relief is used up. Disclose Scope 3, or explain why not.
- ThroughoutNever mandatory
The final rules adopt comply or explain across all categories of disclosure.
FCA PS26/19 ¶¶1.7, 3.12, 3.14, 3.20 — final rules, 30 September 2026
What S2 asks for
What Scope 3 covers under UK SRS S2
Scope 3 emissions are all indirect emissions that occur in an entity’s value chain, excluding Scope 2 emissions (purchased energy).
UK SRS S2 paragraph 29(a)(ii) requires greenhouse gas emissions to be measured in accordance with the GHG Protocol Corporate Standard unless a jurisdictional authority or exchange requires otherwise, and paragraph 29(a)(vi) frames Scope 3 by the 15 categories of the GHG Protocol Corporate Value Chain (Scope 3) Standard.
Paragraph 29(a) requires disclosure of:
- Absolute gross Scope 3 emissions in metric tonnes of CO2 equivalent for the reporting period (¶29(a)(i)(3)).
- Categories included — which of the 15 categories are in the entity’s measure of Scope 3 (¶29(a)(vi)(1)).
- Measurement approach — the approach, inputs and assumptions used, and why they were chosen (¶29(a)(iii)).
- Changes — any changes to the approach, inputs or assumptions during the period, and the reasons (¶29(a)(iii)(3)).
Paragraph B32 requires the entity to consider its entire value chain, upstream and downstream, and all 15 categories.
Which categories carry material information is a judgement made under the materiality principle in UK SRS S1, so the Scope 3 materiality assessment sits at the front of the exercise rather than the end.
The GHG Protocol Scope 3 Standard itself takes a stricter line: companies account for all Scope 3 emissions and disclose and justify any exclusions.
Considering all 15 categories is not the same as reporting all 15.
The Standard asks the entity to disclose which categories are included, and ¶B33 makes that disclosure a requirement whatever measurement method is used.
The framework
The 15 GHG Protocol Scope 3 categories
UK SRS S2 adopts the GHG Protocol category framework: every category is considered, and the entity discloses which are included.
Upstream activities · Categories 1–8
Purchased goods and services
Emissions from the production of goods and services purchased during the reporting period.
Capital goods
Emissions from the production of capital equipment and infrastructure purchased during the reporting period.
Fuel- and energy-related activities
Emissions from the production of fuels and electricity purchased that are not included in Scope 1 or 2.
Upstream transportation and distribution
Emissions from transportation and distribution services purchased, including inbound logistics.
Waste generated in operations
Emissions from disposal and treatment of waste generated in operations.
Business travel
Emissions from employee air, rail, road and other transport for business purposes.
Employee commuting
Emissions from employee transport between home and work.
Upstream leased assets
Emissions from operating assets leased by the reporting entity, not included in Scope 1 or 2.
Downstream activities · Categories 9–15
Downstream transportation and distribution
Emissions from transportation and distribution services not paid for by the entity.
Processing of sold products
Emissions from processing of intermediate products sold by the entity.
Use of sold products
Emissions from the use of products sold by the entity over their expected lifetime.
End-of-life treatment of sold products
Emissions from disposal and treatment of sold products at the end of their life.
Downstream leased assets
Emissions from operating assets owned by the entity and leased to others.
Franchises
Emissions from the operation of franchised assets.
Investments
Emissions associated with the entity’s investments not included in Scope 1 or 2 — financed emissions sit here.
An entity whose activities include asset management, commercial banking or insurance must disclose additional information about its financed emissions, which form part of Category 15, under UK SRS S2 ¶29(a)(vi)(2) and ¶¶B58–B63A.
Paragraph 29A, carried over from the ISSB’s December 2025 amendments to IFRS S2 (December 2025 text), permits the entity to limit its Category 15 measure to financed emissions and to exclude emissions attributable to derivatives.
Timeline
Timeline and comply-or-explain framework
Under the FCA’s final rules, Scope 1, Scope 2 and Scope 3 emissions are all on a comply-or-explain basis for in-scope listed companies from accounting periods beginning 1 January 2027 — the consultation had proposed Scope 1 and 2 as mandatory.
Step 1: comply or explain, with the Scope 3 relief (from 1 January 2027)
Listed companies in scope report Scope 1 and Scope 2 emissions from accounting periods beginning on or after 1 January 2027, or explain why not.
For Scope 3, a company may use the one-year relief and simply state that it is doing so.
No further explanation is required during the relief period (PS26/19 ¶3.20).
A company that already discloses Scope 3 is free to keep doing so.
Step 2: Scope 3 disclose or explain (after the relief)
Once the relief year is used, listed companies either comply — disclose Scope 3 emissions in accordance with UK SRS S2, in full or in part — or explain.
The content of an explanation, as consulted on, is set out in CP26/5 paragraph 4.8.
CP26/5 proposed that a company not disclosing Scope 3, once the relief was used, would identify:
- the specific paragraphs of UK SRS S2 not complied with;
- the reasons;
- the steps being taken or planned to make the disclosures in future, with the timeframe.
FCA CP26/5 ¶4.8 — the consultation; check the final wording in PS26/19
Reliefs
Transition reliefs available
The reliefs are optional, and they run out — under the FCA’s final rules the Scope 3 relief lasts one year and the UK SRS S1 non-climate relief two.
One-year Scope 3 relief
An in-scope company may use one year’s non-disclosure of Scope 3 under UK SRS S2, stating that it is doing so; no further explanation is required during the relief period. CP26/5 ¶¶8.6–8.12 had proposed the same length.
First-year relief on comparatives
No comparative information is required in the first annual reporting period in which the Standard is applied.
UK SRS S1 non-climate relief
Under the FCA’s final rules a company may use two years’ non-disclosure of UK SRS S1 non-climate matters. The two-year figure is the FCA’s, not the Standard’s — Appendix E of UK SRS S1 carries no time limit of its own.
Alternative measurement methods
In the first annual reporting period an entity may measure its emissions using a method other than the GHG Protocol Corporate Standard, provided it used that method in the immediately preceding period.
The FCA’s relief windows are one year (Scope 3) and two years (S1 non-climate matters).
CP26/5 paragraph 8.11 proposed a trap for early movers — a company that chose to comply with the new rules early would not have had the transitional reliefs available; check the final rules before applying early.
For a voluntary user of the Standard outside the FCA’s rules, the Scope 3 relief in UK SRS S2 paragraph C4 carries no time limit at all; it is the FCA’s rules, through paragraph C6, that limit it for listed companies.
| Scope | Timeline | Requirement type | First-year relief | Sector focus |
|---|---|---|---|---|
| Scope 1 | From 2027 | Comply or explain | No comparative data | All sectors |
| Scope 2 | From 2027 | Comply or explain | No comparative data | All sectors |
| Scope 3 | From 2027, with a one-year relief | Comply or explain | No comparative data, plus one year’s relief from disclosure | Varies by category |
| Financed emissions | Same as Scope 3 | Category 15 specific methodology | Same as Scope 3 | Financial institutions only |
The explain limb
Explaining under comply-or-explain
Neither CP26/5 nor the final rules publishes a list of acceptable reasons for not disclosing Scope 3.
What CP26/5 proposed is the shape of the explanation: the specific paragraphs of UK SRS S2 not complied with, the reasons, and the steps planned to make the disclosures in future, with a timeframe.
The reasons companies most often give in practice fall into four groups: data availability, commercial sensitivity, technical measurement and resource constraints.
Whatever the reason, an explanation built to those three limbs will be a documented one.
Comply-or-explain is the basis for Scope 3 under the FCA’s final rules, as for every other UK SRS disclosure.
Explaining is a legitimate long-run position rather than a temporary indulgence — but it is a documented position, not a blank.
CP26/5 paragraph 4.11: a company that explains rather than complies on Scope 3 may not be able to state compliance with UK SRS — the Standards’ own compliance statement (UK SRS S1 ¶72) requires all applicable requirements to be met.
Reasons companies commonly give
| Group | What it looks like |
|---|---|
| Data availability | Suppliers or value chain partners unable or unwilling to provide primary emissions data, particularly in complex international supply chains. |
| Commercial sensitivity | Detailed value chain disclosure would reveal competitively sensitive information about supplier relationships, pricing or business model. |
| Technical measurement | Categories where methodology is particularly complex or uncertain, such as lifetime use emissions of certain products. |
| Resources and systems | Insufficient internal resources or systems for comprehensive value chain data collection, particularly for smaller listed entities. |
Materiality
Scope 3 materiality assessment by category
UK SRS S2 requires an entity to consider all 15 Scope 3 categories (paragraph B32) and to disclose which are included in its measure (paragraph B33).
Which categories carry material information is judged under the materiality principle in UK SRS S1, and the GHG Protocol Scope 3 Standard expects any excluded category to be disclosed and justified.
A Scope 3 materiality assessment therefore needs a documented basis for every category left out, not just for those brought in.
The GHG Protocol’s criteria for identifying relevant Scope 3 activities are a practical starting point: size and sector guidance are the quantitative tests, and influence, stakeholders, risk and outsourcing the qualitative ones.
Entities should document their materiality assessment methodology and review it annually as business activities and value chains evolve.
UK SRS S2 paragraph B34 requires a reassessment of which Scope 3 categories are included when a significant event or a significant change in circumstances occurs.
GHG Protocol Table 6.1 — identifying relevant Scope 3 activities
| Criterion | Test |
|---|---|
| Size | Activities expected to contribute significantly to total anticipated Scope 3 emissions. |
| Sector guidance | Size of emissions relative to what sector-specific guidance identifies as significant. |
| Influence | Potential emissions reductions the company could undertake or influence. |
| Stakeholders | Activities deemed critical by customers, suppliers, investors or civil society. |
| Risk | Activities that contribute to the company’s climate-related risk exposure. |
| Outsourcing | Activities outsourced that were previously in-house, or that peers typically perform in-house. |
| Other | Any additional criteria the company or its sector develops. |
Which Scope 3 categories matter — by sector
Under UK SRS S2 (paragraph B32), an entity must consider its whole value chain and all 15 GHG Protocol Scope 3 categories, and disclose which categories its Scope 3 figure includes — it is not required to report all 15. The materiality lens means most companies will only have a handful of dominant categories. This matrix shows where the weight typically sits — though every company's exact profile differs.
| Scope 3 category | Oil & Gas | Financial Services | Utilities | Manufacturing | Real Estate | Retail / Consumer | Tech / Software | Pharma | Transport |
|---|---|---|---|---|---|---|---|---|---|
| Upstream categories | |||||||||
| 1Purchased goods & servicesUpstream | Med | Med-low | Med | Very high | Med | Very high | High | Very high | Med |
| 2Capital goodsUpstream | Med-low | Low | Med | Med | High | Med-low | Med | Med | High |
| 3Fuel- & energy-relatedUpstream | High | Low | High | Med | Med-low | Med-low | Med-low | Med-low | High |
| 4Upstream transportationUpstream | Med | — | Low | High | Low | High | Low | Med | Very high |
| 5Waste in operationsUpstream | Med-low | — | Med-low | Med-low | Med-low | Med-low | Low | Med-low | Low |
| 6Business travelUpstream | Low | Med | Low | Low | Low | Low | Med | Med | Low |
| 7Employee commutingUpstream | Low | Med | Low | Med-low | Low | Med-low | Med | Med-low | Med-low |
| 8Upstream leased assetsUpstream | Low | Med-low | Low | Low | — | Med-low | Med-low | Low | Med-low |
| Downstream categories | |||||||||
| 9Downstream transportationDownstream | Med | — | Low | Med | — | High | Low | Med | Very high |
| 10Processing of sold productsDownstream | Med | — | Med-low | Med | — | Med-low | — | Low | — |
| 11Use of sold productsDownstream | Very high | — | High | High | — | High | Med | Med-low | Med-low |
| 12End-of-life of sold productsDownstream | Med | — | Low | Med | Low | Med | Med-low | Med-low | — |
| 13Downstream leased assetsDownstream | Low | Med-low | Low | Low | Very high | Low | Low | — | Low |
| 14FranchisesDownstream | — | — | — | — | Low | Med | Low | — | Low |
| 15Investments (financed emissions)Downstream | Low | Very high | Low | — | Low | — | — | — | — |
Most sectors have 2–3 dominant categories
The materiality lens means companies don't need to measure all 15 categories with equal rigour, though each must be considered and the categories included must be stated (paragraph B32). Oil & gas concentrates in Category 11 (use of sold products — i.e. customers burning the fuel). Financial services concentrates in Category 15 (investments — financed emissions). Real estate concentrates in Category 13 (downstream leased assets — tenant energy use). Retail typically spans Categories 1, 4, 9, and 11.
Financial institutions carry an extra explanation duty
Paragraph B59A is a UK addition to IFRS S2, made in the final version of UK SRS S2. Where an entity determines it is impracticable to reliably estimate its financed emissions for the same reporting period as its financial statements, it must disclose why, the measurement approach, inputs and assumptions used for any financed emissions it does report, and its plan and timeline for reporting on an aligned period. It is a disclosure duty about period alignment, not a relief from the Category 15 requirements.
Low materiality must still be assessed
UK SRS S2 requires all 15 categories to be considered (paragraph B32). A category marked "low" or "not typical" here is not automatically immaterial for a specific company — only that it's unlikely to be material across the sector. Companies must conduct their own materiality assessment and disclose which categories are included in their Scope 3 figure (paragraphs 29(a)(vi)(1) and B33).
Professional services firms often find business travel (Category 6) and employee commuting (Category 7) among the few material categories.
These patterns are indicative; every company’s profile differs.
Data
Data collection strategies and methodology
Successful Scope 3 implementation needs structured data collection that balances accuracy, cost and practicality.
Primary data collection
Supplier engagement programmes
Direct collection of emissions data from key suppliers, typically the largest by spend or emissions impact.
Customer and partner engagement
Working with customers and distributors to collect use-phase and end-of-life emissions data.
Technology platforms
Supplier portals and data management systems that enable systematic data collection and validation.
Primary data gives the highest accuracy but requires significant investment in supplier relationships and systems.
Most entities focus primary data collection on the categories with the largest emissions or where they have the most influence.
Secondary data and calculation approaches
| Approach | How it works |
|---|---|
| Spend-based | Procurement spend data combined with emissions factors to estimate supplier emissions. |
| Activity-based | Physical activity data — quantities, distances, energy use — combined with appropriate emissions factors, such as the UK government conversion factors published by DESNZ for UK activities. |
| Industry averages | Sector-specific emissions factors for categories where specific data is not available. |
| Hybrid | Primary data from key suppliers combined with secondary calculations for smaller suppliers or categories. |
The GHG Protocol’s Scope 3 Calculation Guidance sets out calculation methods for each of the 15 categories, including data quality and uncertainty considerations.
Technology and systems
Enterprise sustainability platforms
Integrated collection, calculation and reporting across all Scope 3 categories.
Supply chain integration
Links between sustainability data collection and existing procurement and supply chain systems.
Industry collaboration platforms
Sector initiatives for coordinated data sharing and methodology development.
Assurance and verification tools
Data quality control and preparation for external assurance.
Financial institutions
Financial institution requirements
UK SRS S2 ¶29(a)(vi)(2) and ¶¶B58–B63A impose additional requirements on entities whose activities include asset management, commercial banking or insurance, for the financed emissions that form part of Category 15.
| Activity | Paragraphs | Must disclose |
|---|---|---|
| Asset management | ¶B61 | Absolute gross financed emissions by Scope 1, 2 and 3; total AUM included; percentage of total AUM included, with an explanation of exclusions; methodology, including the allocation method. |
| Commercial banking | ¶¶B62–B62A | Absolute gross financed emissions by Scope for each industry by asset class; gross exposure to each industry by asset class, with undrawn loan commitments shown separately; percentage of gross exposure included, with an explanation of exclusions; methodology and allocation method. |
| Insurance | ¶¶B63–B63A | Absolute gross financed emissions by Scope for each industry by asset class; gross exposure to each industry by asset class; percentage of gross exposure included; methodology and allocation method. |
The Standard is methodology-agnostic: it does not name the PCAF Global GHG Accounting and Reporting Standard for the Financial Industry, although PCAF is the method most financial institutions use for the attribution step.
Paragraph B59A is the one place where UK SRS S2 asks for more than IFRS S2.
Where an entity determines that it is impracticable to reliably estimate its financed emissions for the same reporting period as its financial statements, B59A requires it to disclose why, the measurement approach, inputs and assumptions used for any financed emissions it does report, and its plan, including the timeline, to bring the two periods into line.
It is an added disclosure duty triggered by a timing mismatch, not a general relief from financed emissions reporting.
Recorded in Annex A of the DBT consultation response.
Planning
Implementation planning
Given the comply-or-explain timeline and the complexity of value chain data collection, entities should begin Scope 3 preparation well ahead of the end of the one-year relief.
The sequence runs from materiality and supplier strategy, through pilots and systems, to full collection, controls and drafting.
Companies that wait until 2027 to begin serious Scope 3 preparation are likely to find themselves relying on the explain option rather than disclosing once the relief ends.
Working back from the end of the relief
- 12–18 monthsBefore the effective date
Materiality assessment, supplier engagement strategy, technology platform selection.
- 6–12 monthsBefore the effective date
Supplier engagement programme launch, data collection pilots, internal systems development.
- 3–6 monthsBefore the effective date
Full data collection, methodology documentation, internal controls testing.
- Pre-reportingBefore the report is drafted
Board and audit committee education, assurance provider engagement, disclosure drafting.
Disclosing Scope 3 in the first in-scope year, rather than using the relief, tests systems and processes before the relief would have ended.
The FCA said its rules would not prevent a company that already discloses Scope 3 from continuing to do so.
Assurance
Assurance considerations
The FCA’s final rules do not require assurance; where a listed company obtains it, it names the assurance provider, which disclosures were assured and which assurance standards were used (PS26/19 ¶2.45).
Scope 3 emissions still present particular challenges for assurance providers and for entities considering voluntary assurance.
The FRC’s ISSA (UK) 5000 standard, issued on 12 November 2025 for voluntary use, governs how a sustainability assurance engagement is performed if one is commissioned.
Practical guidance specific to Scope 3 assurance is still developing as market practice evolves.
To fold Scope 3 preparation into a wider programme, see our UK SRS compliance guide, the clause-by-clause reference for UK SRS S2, and the editorial UK SRS timeline.
Under the FCA’s final rules, where assurance is obtained the company names the provider, which disclosures were assured and which assurance standards were used.
Where Scope 3 assurance gets hard
| Issue | Why |
|---|---|
| Data source verification | Supplier-provided data needs coordination between the assurance provider and supplier systems. |
| Methodology appropriateness | Whether the primary or secondary data approach is appropriate for each category. |
| Completeness | Whether all material categories have been identified and included. |
| Comply-or-explain | For entities that explain, the adequacy of explanations and improvement plans. |
Sources
Primary sources
Every figure, date and status on this page traces to the instrument’s owner. Secondary commentary is never the source for a number.
- GHG ProtocolCorporate Value Chain (Scope 3) Standard
The 15-category framework UK SRS S2 ¶29(a)(vi) and ¶B32 refer to, and the Table 6.1 relevance criteria.
- Department for Business and TradeUK SRS S2 Climate-related Disclosures — final standard (PDF)
Published 25 February 2026. ¶29(a), ¶29A, ¶¶B32–B34, ¶¶B58–B63A and Appendix C.
- Financial Conduct AuthorityPS26/19: Aligning listed issuers' sustainability disclosures with international standards
First published 30 September 2026. The final rules: comply or explain across the UK SRS (¶1.2, ¶1.7); one year’s Scope 3 relief (¶3.14), stated as used (¶3.20); assurance (¶2.45).
- Financial Conduct AuthorityCP26/5: Sustainability disclosures
The consultation PS26/19 finalises: the Scope 3 explain limb it proposed (¶4.8) and its draft reliefs (¶¶8.6–8.12).
- Department for Business and TradeUK SRS consultation response (PDF)
Annex A records the untimed Scope 3 relief and the added paragraph B59A.
- IFRS FoundationIFRS S2 Climate-related Disclosures — December 2025 text
The ISSB text UK SRS S2 is based on, including the December 2025 amendments on Category 15 and financed emissions (¶¶29A–29C, B58–B63A).
- GHG ProtocolScope 3 Calculation Guidance
Category-by-category calculation methods, data quality and uncertainty guidance.
- Department for Energy Security and Net ZeroGreenhouse gas reporting: conversion factors 2026
UK conversion factors used in activity-based Scope 3 calculations.
- Partnership for Carbon Accounting FinancialsGlobal GHG Accounting and Reporting Standard for the Financial Industry
The financed emissions method most institutions use for Category 15. UK SRS S2 does not mandate it.
- Financial Reporting CouncilISSA (UK) 5000 issued (12 November 2025)
The FRC sustainability assurance standard, issued for voluntary use.
Continue reading
Read next
UK SRS S2 — climate-related disclosures
The full S2 requirements, of which Scope 3 is one part.
Climate scenario analysis under UK SRS
How scenario analysis integrates with value chain emissions under UK SRS S2.
UK SRS timeline
The implementation timeline under the FCA’s final rules, including every Scope 3 transitional relief.
UK SRS compliance guide
A full compliance programme, including Scope 3 data infrastructure planning.