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Authors: Allan Soo and Nike Klaubert.
Contributors: Tim van Kerkhof (Product Manager for SAP Sustainability Data Exchange), Nico Wottke (Product Manager for SAP Sustainability Footprint Management), Stephan Mueller (Solutions Owner, Finance and Risk), and Ramanathan Gopalakrishnan (Product Marketing for SAP Ariba Category Management).
Complying to EU Corporate Sustainability Reporting Directive Scope 3 Reporting with SAP Ariba
Introduction
With the introduction of EU Corporate Sustainability Reporting Directive (CSRD) in 2023, many companies are scrambling to comply to a range of environmental disclosure requirements set out by the European Financial Reporting Advisory Group’s (EFRAG) European Sustainability Reporting Standards (ESRS). Beginning this year (2025), large EU-based companies will begin reporting their sustainability performance to EU regulatory authorities from the beginning of this year (2025). There are five environmental and four social categories that companies must report on. In this article, only several metrics affect procurement processes.
Impact on Procurement
Disclosing Scope 3.1 Purchased Goods and Services emissions and conducting human rights due diligence activities are the two biggest challenges for procurement departments. However, some sustainability reporting requirements have been around for many years prior to the announcement of EU CSRD. For example, some companies in Australia, the United Kingdom and American companies have been publishing human rights statements for nearly a decade now, while KPMG surveyed large companies in Japan and Australia and found high Scope 3 emission disclosure rates on a voluntary basis, respectively being 88% and 84%. Some of the reasons for the voluntarily high disclosure rates include freely available emission factors data and calculation methodologies and pressure from institutional investors.
What is Scope 3.1 Purchased Goods and Services emissions?
It is estimated that Scope 3.1 emissions constitute more than 80% of most company’s overall carbon footprint, yet it is one of the least understood types of emissions across the different carbon scopes. The types of emission factors can be separated between averages (the use of industry-specific emission factor databases, which is the average Product Carbon Footprint (PCF) to produce a given product, and they are commonly tailored to each country or geography) and supplier-specific actuals (where the supplier measures their own total carbon emissions and divides this by their revenue or production units or mass). For example, suppliers provide cradle-to-gate Scope 3 emission factors in the formats of kgCO2, eqv/kg, kgCO2, eqv/$, kgCO2, eqv/unit or kgCO2, eqv/hour for an item that is purchased and collected to the buyer (reporting entity). Supplier-specific actuals are the most accurate given they are PCFs that are directly measured by the supplier, and buyers should report these emissions over industry averages where possible (even if the value is higher). Scope 3.1emissions are emissions not included from the reporting entity’s Categories 2-8 so as to avoid double counting emissions.
How is it measured?
GHG Protocol outlines a range of Scope 3 emissions sources at the primary and secondary level that a Tier-1, or direct supplier needs to calculate and report on. These include emissions from the materials used in the production of that purchased item, fuel consumed during transportation to the buyer, emission factors of waste produced during the production process, and any other process-based emissions used during the manufacturing and assembly process of the good or service. It is also important to note that contractor emissions fall under this Scope 3.1 emissions which is rendered as indirect emissions from services (i.e., when a company hires an external worker to perform tasks, for example, contractor laptop power consumption and travel).
Scope 3.1 emissions are considered cradle-to-gate emissions, that is, they are emissions that are measured when the item is made from purchase and finally delivered (Figure 1). The purchase of an item can either be a finished or unfinished good (office furniture and laptops are considered finished goods, the sourcing of cement and steel for example, are unfinished goods because they require further processing). Scope 3.1 emissions cover the entire supply chain (from extraction, production and delivery of the final goods and services) and the emissions are separated between upstream and downstream as best practice. Scope 3.1 Purchased Goods and Services are, in simple terms, all upstream emissions a company produces when they purchase a good or service that are not counted in the other upstream Scope 3 emissions (Categories 2-8). The figure below shows an example between direct and indirect procurement Scope 3 emissions collections and reporting, notice how for finished goods procurement, Scope 3.1 emissions are a lot more complex.
Figure 1: Differences in Scope 3 emissions complexities between direct and indirect procurement for collecting and reporting Scope 3.1 Purchased Goods and Services emissions.
Primary emissions data
Primary emissions data is actual data that is supplied directly from the supplier and takes precedence over secondary emissions data (emission factors and averages supplied by lifecycle databases) due to its better proximity to the actual good procured. For example, a buyer will collect Scope 3 emissions data from the direct supplier, who has measured and collected their own PCF from their own suppliers and onsite processes.
These are also called “supplier-specific data” as the Scope 3 PCFs are specific to the products produced and supplied by the seller. Figure 2 below shows a generalized depiction of the entire Scope 3.1 emissions journey that is not double counted by the buyer/reporting entity.
Figure 2: An oversimplified mockup of Scope 3 Category 1 upstream emissions maps not including the reporting entity’s own Scope 3 Category 2-8 emissions when sourcing finished goods such as a laptop.
Suppliers report these PCFs in the format of Partnership for Carbon Transparency (PACT) V2 from the World Business Council for Sustainable Development’s (WBCSD), which also follows the GHG Protocol for Scope 3. It aims to encourage a repository for Scope 3 inventory data between buyers and suppliers in a streamlined, standardized format. The document outlines steps that procurement can take to make Scope 3 calculations easier. Below is a PACT V2 diagram that provides guidance on calculating PCFs, where upstream and direct activities are separated, however in this case, we are more concerned with upstream activity emissions. The level of emissions reporting complexity is illustrated in Figure 3.
Figure 3: Purchasing departments would evaluate the Scope 3 PCFs across a wide variety of items from their direct suppliers. Depending on the relationship with the suppliers, the buyer would actively work with suppliers to cascade down actions that will reduce the carbon intensity on producing the item or simply choose the most sustainable option. Figures custom modified from WBCSD PACT V2.
Secondary emissions data
Secondary data are emissions data that is obtained from lifecycle assessment (LCA) databases where no supplier-specific primary data is known. For example, ecoinvent, EXIOBASE, AusLCI, US EPA, Australia’s National Greenhouse Accounts (NGA) Factors and numerous other GHG Protocol backed databases are available. The emission factors can be separated between material extraction and process/manufacturing emissions. Below is a list of some emission factors from the US EPA.
Activity | Type | Emission Factors |
Energy Grid (Tennessee Valley) | Electricity | 895.7 (lb CO2 / MWh) |
Energy Grid (NYC/Westchester) | Electricity | 974.7 (lb CO2 / MWh) |
Energy Grid (US Average) | Electricity | 771.5 (lb CO2 / MWh) |
Scope 3 Upstream Transportation and Distribution | Medium- and Heavy-Duty Truck | 1.298 (kg CO2/vehicle-mile) |
Scope 3 Upstream Transportation and Distribution | Rail | 0.021 (kg CO2/short ton-mile) |
Scope 3 Upstream Waste Generated (Landfill) | Mixed electronics and desktop CPUs | 0.02 (MTCO2e / Short Ton Material) |
Scope 3 Upstream Waste Generated (Landfill) | Office paper | 1.25 (MTCO2e / Short Ton Material) |
Scope 3 Business Travel and Employee Commuting | Commuter Rail | 0.133 (kgCO2e /passenger-mile) |
Scope 3 Business Travel and Employee Commuting | Air Travel (Long Haul, >= 2,300 miles) | 0.163 (kgCO2e /passenger-mile) |
Source: US EPA 2025
Emission factors are estimates and they are updated periodically as a country’s grid energy mix changes. For example, Germany’s green energy mix might increase by 5% this year, and therefore, carbon emissions from grid energy consumptions will decrease upstream and the emission factor will be updated. Another example is the production of “green steel” using renewable hydrogen, electric arc furnaces powered with solar and wind, or the use of thermal ceramic batteries, which ships the product via green transportation that could theoretically cut the PCF down to 0 kgCO2,eqv /kg green steel for the buyer. But what if upstream transportation is not electrified with renewable energy, or only 50% of the thermal manufacturing process uses coal? This demonstrates the importance of using actual, supplier-specific emissions.
Do non-CO2 GHG emissions count?
Yes. When discussions around GHG emissions occur, it is assumed that only CO2 emissions are counted. However, there are 10 or more different GHG gases and they are given what is called a “Global Warming Potential” (GWP) using CO2 as a reference point over a period. For example, nitrous oxide has about 273-310 times the effect CO2 has on global warming over 100 years. Methane (CH4) and refrigerants such as hydrofluorocarbon R134a should be included in upstream emissions even though these GHG refrigerants are being phased out and methane emissions are specific to certain industries (for example, farming, wastewater biosolids treatment, decomposition and fertilizer manufacturing) and some suppliers can recover the latter in the form of a renewable biogas.
Collecting Scope 3 emissions solutions using SAP Ariba Direct Materials Sourcing and SAP Sustainability Footprint Management
SAP offers solutions on collecting and reporting Scope 3 emissions. Purchasing SAP Ariba alongside SAP sustainability solutions can help you comply to reporting requirements such as EU CSRD ESRS or reporting frameworks like IFRS S/2.
SAP Ariba Direct Materials Sourcing with SAP Sustainability Footprint Management enables you to collect, calculate and store carbon data (Figure 4) that can then be exported into other sustainability solutions such as SAP Sustainability Control Tower and SAP Green Ledger while leveraging the power of the SAP S/4HANA Cloud ERP system to help run your business.
Figure 4: Supplier is requested to provide Scope 3 PCFs for the item from the buyer with SAP Sustainability Footprint Management.
SAP Sustainability Footprint Management helps you calculate missing Scope 3 values (as averages) that follow both the GHG Protocol and WBCSD PACT standard, and the total emissions procured based on the actual data given by suppliers. SAP Sustainability Footprint Management stores the Scope 3 emissions data you have collected, enables accurate, ERP-based calculation of the Corporate Carbon Footprint (CCF) all the way down to highly granular PCFs which can then be exported into other SAP sustainability solutions for reporting purposes. During a sourcing event, suppliers input their Scope 3 PCFs for the item to the buyer for procurement. This data can be seen on the dashboard for the buyer to get an accurate idea on the accumulation of Scope 3.1 emissions (Figure 5).
Figure 5: The total Scope 3.1 Purchased Goods and Services emissions is presented on the dashboard.
Collect Scope 3 PCFs at scale with SAP Sustainability Data Exchange, SAP Supplier Business Network and SAP Sustainability Footprint Management
Collecting PCFs from suppliers through sourcing events is a highly useful case when a business partner is new or not known yet, as it helps buying companies make an impactful, sustainable decision very early in the procurement process. When, however, the business partner is already known and well established, then SAP provides you with an automated, integrated solution for large-scale data exchange: SAP Sustainability Data Exchange enables you to directly collect supplier-specific, actual Scope 3 PCFs from listed items over the SAP Supplier Business Network (Figure 6). Rather than rely only on sourcing events, buyers can use SAP Sustainability Data Exchange to request many suppliers to send their actual Scope 3 emission values in PACT formats on the items they are supplying. The SAP Sustainability Data Exchange can automatically transfer the received PCFs to SAP Sustainability Footprint Management, where they can serve as the basis for CCF and PCF calculation. In case a supplier is not able to provide PCF information yet, SAP Sustainability Footprint Management has the capabilities to estimate emission factors based on customer-chosen LCA databases (Figure 7)- powered in a nearly no-touch manner by AI! Hence, a comprehensive and complete assessment of the entire Scope 3.1 emissions is possible and readily available. The calculated emissions are automatically integrated into solutions such as SAP Sustainability Control Tower or SAP Spend Control Tower for reporting or further analysis. An example is the sourcing of an assembled good – a battery module pack (Figure 7). There are many different components that go into the assembly and manufacturing of the battery module, and each component has a PCF as well.
Figure 6: Using SAP Sustainability Data Exchange (pictured above), the buyer can request suppliers over SAP Supplier Business Network to provide actual Scope 3 PCFs on multiple items so they can be collected at scale. The buyer uses SAP Sustainability Footprint Management to calculate the total Scope 3 emissions procured and will store this carbon data.
Figure 7: The buyer uses SAP Sustainability Footprint Management to calculate the supplier’s list of components and ingredients with missing PCFs.
Calculating missing Scope 3 emissions data with SAP Sustainability Footprint Management
The buyer uses SAP Sustainability Footprint Management to calculate missing Scope 3.1 Purchased Goods and Services emissions for the battery module. It can also calculate other Scope 3 category emissions such as transportation and end-of-life disposal of sold products (Figure 8). The calculations fill in missing data with GHG Protocol compliant Scope 3 emission values.
Figure 8: Scope 1, 2 and 3 emissions can be calculated with SAP Sustainability Footprint Management for the buyer where a supplier is unable to provide actual Scope 3 PCFs.
Enrich spend with Scope 3 emissions data using SAP Spend Control Tower and SAP Sustainability Footprint Management
Simply seeing Scope 3 emissions data is not enough when driving sustainable procurement purchasing strategies. To drive sustainable purchasing activities, spend should be enriched with Scope 3 emissions data to help buyers identify both cost- and emissions-intensive areas and then act on this. Furthermore, buyers can use SAP SFM to examine emissions data at highly granular levels to get a wider carbon footprint profile of the products they are procuring, noticing that Scope 3.1 emissions carry significant carbon footprint (Figure 9).
Figure 9: Different types of emission categories procured can be seen in SAP Sustainability Footprint Management. However, this solution alone does not enrich emissions data with finance or spend data from purchasing.
SAP Spend Control Tower offers a solution to enrich spend data of purchased goods with the emissions calculated in SAP Sustainability Footprint Management (Figure 10). Buyers can visually identify emission hotspots and set a basis for a data-driven decarbonization strategy, so that they can act and collaborate with suppliers to drive deep decarbonization efforts. According to the European Union’s Corporate Sustainability Due Diligence Directive (EU CSDDD), reporting entities need to demonstrate Scope 3 emissions due diligence and actions on decarbonisation.
Figure 10: SAP Spend Control Tower with spend data enriched using SAP Sustainability Footprint Management. Buyers can drill down on their procured emissions spend at the supplier, category and product level.
Execute sustainable purchasing strategies with SAP Ariba Category Management
You can use SAP Ariba Category Management to set sustainable procurement goals and strategies (Figure 11). These goals could include reducing Scope 3 emissions procured and other environmental, social governance (ESG) initiatives.
Figure 11: Set decarbonisation targets as part of your sustainable procurement strategy that are visible across your purchasing organisation.
Report Scope 3.1 emissions to SAP Sustainability Control Tower for reporting purposes
SAP Sustainability Control Tower is the official reporting solution to help companies comply to EU CSRD ESRS and ISSB IFRS S/2 frameworks. Procurement data is automatically reflected within SAP Sustainability Control Tower through the processes described above.
Figure 12: Accumulated Scope 3 emissions which is stored on SAP Sustainability Footprint Management is reported into SAP Sustainability Control Tower, to which artificial intelligence (AI) can then automate the generation of an ESG report across the broad spectrum of sustainability metrics.
The SAP AI solution automates the creation of an ESG report with SAP Sustainability Control Tower that reduces costs-to-comply to EU CSRD ESRS (Figure 12).
Use Green Ledger to gain better financial comparisons from procurement activities
Chief Financial Officers (CFO) can reuse their information from procurement and their calculated PCFs from SAP Sustainability Footprint Management to start assessing carbon data in the same quality and granularity as financial data. With the help of SAP Green Ledger, CFOs can now account for their carbon emissions, providing trusted and auditable proof of their company’s total emissions.
Furthermore, by accounting for carbon emissions, companies can now also start controlling their emissions, identifying how the overall financial measures compare to GHG emissions and thereby identify future investment areas (Figure 13).
Figure 13: SAP Green Ledger provides a holistic view of your Scope 1, 2 and 3 emissions and the impact organizational spend procurement has towards the CFO’s financial bottom line.
SAP Green Ledger, therefore, plays a key role in helping CFOs understand the cause and effect of their financial strategies and its environmental impacts, and adjust their financial and investment strategies to improve ESG ratings and responses expected by institutional investors.
Conclusion
SAP offers a range of procurement and sustainability solutions to help you address emissions and reporting requirements for authorities and stakeholders (Figure 14). There are financially material imperatives procurement has across the wider organisation, including to that of the CFO. Besides the wide range of penalties for failing to adhere to reporting and due diligence requirements, there are other expectations from stakeholders to invest and financially support companies who are conscious about their ESG obligations.
Figure 14: SAP offers a comprehensive suite of sustainability solutions to help procurement comply and report on their sustainability activities. The power of procurement is extensible with the SAP S/4HANA Cloud ERP solution, combining highly efficient systems of running organisations, with sustainability reporting and compliance features.
Tackling Scope 3.1 emissions is a monumental task given the size, complexity and scale of the emissions footprint it has on an organisation which requires deep, environmental dexterity from procurement. Procurement has an important role in driving down Scope 3.1 emissions and this can only be effective when the emissions data from suppliers is accurate. We offer tools to help customers collect, calculate, evaluate, and report on their sustainability activities which begins from purchasing and ends with the stakeholder. Our solutions are further augmented with AI capabilities which reduces the time and cost to comply for customers, and we expect AI to play an ever-increasingly important role in driving sustainable procurement outcomes for organisations.
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