Addressing Scope 3 under PSPK 2: Challenges and Strategies for the Manufacturing Sector

The manufacturing sector faces new challenges in emissions reporting alongside the development of the Sustainability Disclosure Standards Statement (PSPK 2) in Indonesia. The standard was issued by the Indonesian Institute of Accountants (IAI) in 2025 and will take effect starting January 1, 2027. Its implementation refers to the ISSB, specifically IFRS S2 which addresses climate-related disclosures.

Climate-related disclosures under PSPK 2 include information on a company’s greenhouse gas (GHG) emissions across its value chain. This issue particularly concerns the manufacturing sector because emissions arise from suppliers, transportation, distribution, and product use. These activities extend beyond a company’s direct operations and contribute to its overall value chain emissions. These indirect emissions across the value chain are known as Scope 3 emissions. Unlike Scope 1 and Scope 2, Scope 3 covers activities beyond a company’s direct operations, making measurement more complex, especially for manufacturers that involve many parties.

This situation encourages manufacturing companies to strengthen their ability to identify, measure, and manage Scope 3 emissions. These efforts require not only reliable emissions data but also the ability to trace activities across the value chain.

Read Also: Adopting IFRS S1 & IFRS S2: A Corporate Readiness Guide

Understanding Scope 1, Scope 2, and Scope 3

Based on the Greenhouse Gas Protocol referenced in PSPK 2, corporate emissions are classified into three main scopes:

• Scope 1 (Direct Emissions): emissions from sources directly owned or controlled by the company, such as fuel use in machinery or operational vehicles.
• Scope 2 (Indirect Emissions): emissions from the company’s purchased energy consumption, such as electricity, heating, or steam.
• Scope 3 (Value Chain Emissions): indirect emissions arising from activities across a company’s value chain, from suppliers to the use of products by consumers. The GHG Protocol divides Scope 3 into 15 categories covering both upstream and downstream activities, as follows.

               Sumber: GHG Protocol

Why Does Scope 3 Matter to the Manufacturing Sector?

Scope 3 is highly relevant for the manufacturing sector because its business processes involve a long and complex value chain. Emissions do not only come from production activities, but also from suppliers, logistics companies, distributors, and even consumers.

For example, an electronics manufacturer generates Scope 1 emissions from fuel use at its facilities and Scope 2 emissions from purchased electricity. Meanwhile, emissions from the production of metals, plastics, electronic components, and packaging by suppliers fall under Scope 3. Additional emissions may arise when customers use electricity to operate the products after purchase.

This example shows that a large share of a company’s emissions can come from activities outside its direct operations. Therefore, reducing emissions within the factory alone may not be enough to lower the company’s overall carbon footprint. Managing Scope 3 helps companies develop a more comprehensive understanding of emission sources across their value chains. This information, in turn, enables them to identify activities with the highest emissions contributions and establish more effective emission reduction priorities.

How to Calculate Scope 3 Emissions

Scope 3 measurement begins by identifying emission-generating activities and determining the relevant activity data. Companies then multiply this data by the appropriate emission factors. However, calculation methods vary by emission category and depend on the availability and quality of company data. The GHG Protocol provides several approaches that companies can use:

• Supplier-Specific Method: Uses emissions data obtained directly from suppliers. This method provides more specific results because it relies on actual supplier data.
• Activity-Based Method: Uses actual activity data, such as the amount of raw materials, weight of goods, transportation distance, or energy consumption, which is then multiplied by the appropriate emission factor.
• Average-Data Method: Uses industry average data or emission factors based on product type or activity when supplier-specific data is unavailable.
• Spend-Based Method: Estimates emissions based on the company’s expenditure, multiplied by an economic-based emission factor. This method is useful when activity data is unavailable, although the results tend to be less accurate.
• Hybrid Method: Combines supplier-specific data with secondary or average data to produce more appropriate estimates, particularly when not all suppliers can provide emissions data.

Challenges in Measuring Scope 3 Emissions

Unlike Scope 1 and Scope 2, Scope 3 measurement is more complex because it involves various parties outside the company. Companies need to trace activities across the value chains, while the availability and quality of data from each party may vary. Some of the main challenges in measuring Scope 3 for the manufacturing sector include:

• Limited supplier data
  Much of the data required for Scope 3 measurement comes from external parties, particularly suppliers. Not all suppliers have established emissions measurement systems or can provide the data companies need. As a result, companies often have to rely on estimates or secondary data.
• Complex value chains
  Manufacturing companies may work with numerous suppliers, distributors, logistics providers, and end users. The longer the value chain, the more difficult it becomes to trace emission sources comprehensively and determine which activities should be included in the calculation.
• Differences in data quality and methods
  Emissions data obtained from one supplier may come from actual measurement, while another supplier may use estimates or industry average emission factors. These differences in method can affect the consistency and reliability of the measurement results.
• Limited Resources and Systems
  Measuring Scope 3 requires cross-functional coordination, from procurement, production, and logistics to sustainability and finance. Companies must also establish systems to collect, store, validate, and process the data consistently.

Making Strategic Use of the Transition Period

The Indonesian Institute of Accountants (IAI) provides transition relief in the implementation of PSPK 2 to help companies deal with the challenges of collecting Scope 3 data:

• Deferral of Scope 3 Disclosure Obligation
  Companies are given up to three years from the standard’s effective date to prepare for measuring and disclosing Scope 3 emissions. This transition period can be used to map key suppliers and identify relevant emission sources. Companies can also use it to build a data collection system and improve the readiness of supply chain partners.
• Strengthening Qualitative Disclosures
  If technical capacity and supply chain data collection systems are not yet adequate to calculate emissions precisely, the standard allows companies to provide qualitative information first. Issuers only need to disclose their governance process, material category mapping, and climate risk mitigation measures being implemented with suppliers.
• Preparing Data for Comparative Periods
  During the initial implementation period, companies are exempted from the obligation to present the prior-year’s comparative data for Scope 3 emissions. This removes the audit burden of historical value chain data, which may not have been adequately documented in the past.
• A Phased Focus on Climate-Related Issues
  By adopting a climate-focused approach in the first year, companies can prioritize mapping suppliers’ carbon footprints and energy use under PSPK 2 before collecting other non-climate value chain information, such as social issues and labor rights, under PSPK 1.

Building Readiness for PSPK 2 Implementation

Manufacturing companies can start preparing for PSPK 2 implementation through the following steps:

1. Map the value chain and emission sources.
2. Determine the required data and its sources.
3. Build a system for data collection and documentation.
4. Strengthen the involvement of suppliers and business partners.
5. Establish appropriate measurement methods and emission factors.
6. Strengthen data controls and quality.

These preparations can help companies produce more reliable sustainability information and support the management of climate-related risks and opportunities. These steps can also improve a company’s readiness to meet regulatory requirements and stakeholder expectations.

For companies that need assistance preparing for the implementation of PSPK 1 and PSPK 2, PT Synergy Ultima Nobilus is ready to help through consultation services tailored to the company’s needs. Contact Us for further information.

Reference

Greenhouse Gas Protocol. (2011). Corporate Value Chain (Scope 3) Accounting and Reporting Standard. World Resources Institute and World Business Council for Sustainable Development.

Dewan Standar Keberlanjutan Ikatan Akuntan Indonesia. (2024). Draf eksposur PSPK 2: Pengungkapan terkait iklim [Exposure draft]. Ikatan Akuntan Indonesia.

Editorial Credits
Written by: SHL
Edited and reviewed by: ECK