Is indirect emissions in the supply chain (Scope 3) mandatory to calculate? Should SMEs calculate it?

Indirect emissions occurring within the value chain (Scope 3) are a key indicator of an enterprise's comprehensive and substantive commitment to managing greenhouse gas (GHG) emissions. Although not yet mandatory under Vietnam's current legal framework, calculating Scope 3 is increasingly becoming an essential "passport" for SMEs to participate in global supply chains.

From a legal perspective

According to Decree No. 06/2022/ND-CP, as amended and supplemented by Decree No. 119/2025/ND-CP, the calculation of Scope 3 emissions is not yet a mandatory requirement for the majority of small and medium-sized enterprises in Vietnam. Current regulations primarily focus on compelling enterprises to report on Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased energy).

From a strategic perspective

While not legally mandated, calculating Scope 3 emissions should be considered a strategic priority. Market pressures and partner requirements are rapidly transforming this voluntary action into a de facto necessity.

Pressure from the supply chain

Large corporations and foreign direct investment (FDI) enterprises are increasingly obligated to report their own Scope 3 emissions. As a result, they require their suppliers, often SMEs, to provide emission data to complete their comprehensive GHG inventories. According to a 2022 report by PwC37, over 80% of Vietnamese enterprises have committed or will commit to Environmental, Social, and Governance (ESG) principles, cascading these data disclosure requirements down their supply chains.²

Global trend

International regulations like the EU's Carbon Border Adjustment Mechanism (CBAM) and Corporate Sustainability Reporting Directive (CSRD) are extending transparency requirements throughout entire value chains. SMEs, as integral links, will inevitably face demands for this data to enable their partners' compliance.

Practical impact

In many sectors such as textiles, food, and consumer goods, Scope 3 can account for the vast majority (often over 70%) of a company's total carbon footprint. Calculating these emissions helps SMEs identify the most significant "hotspots" and develop targeted reduction strategies, such as optimizing transportation and logistics routes, selecting suppliers with lower carbon footprints, and minimizing waste in production and packaging.

Challenges and solutions for SMEs

Calculating Scope 3 emissions is complex as it relies heavily on data from external partners. However, SMEs are not expected to measure all 15 categories at once. A practical approach is to start with categories that are both material to the business and have more accessible data:

• Category 4: Upstream transportation and distribution.
• Category 5: Waste generated in operations.
• Category 6: Business travel.
• Category 7: Employee commuting.

By starting with a manageable scope and gradually expanding, SMEs can proactively adapt to the global trend of carbon transparency. This capability is rapidly becoming a critical factor for retaining key customers and integrating into sustainable export markets.

References

37. PricewaterhouseCoopers. (2022). Readiness for ESG in Vietnam 2022. PwC Vietnam. https://www.pwc.com/vn/vn/publications/vietnam-publicat,ions/esg-readiness-2022.html