Value Chain

A value chain encompasses all activities, resources, people, organisations, and processes involved in creating and delivering a product or service — from raw material extraction through production, distribution, use, and end-of-life. In ESG reporting, value chain is a key concept: under ESRS 1, material impacts, risks, and opportunities must be assessed across the company’s upstream value chain (suppliers, raw materials), own operations, and downstream value chain (distributors, customers, end users). Value chain Scope 3 GHG emissions (Categories 1–15) represent the emissions associated with all value chain activities beyond the company’s direct control.

ESRS 1 General Requirements (definition of value chain in the context of sustainability reporting); ESRS S2 (Workers in the Value Chain); GHG Protocol Corporate Value Chain (Scope 3) Standard (2011).

Value chain boundaries define the scope of ESRS, CSRD, and CSDDD obligations. For manufacturers, the most material value chain impacts and risks are typically upstream (raw material sourcing, supplier labour standards, Scope 3 Category 1 emissions) and downstream (product use and end-of-life emissions, customer safety). Mapping the value chain is the first step of both the double materiality assessment and CSDDD due diligence. Collecting primary data from tier 1 and tier 2 suppliers is increasingly required for both GHG accounting and ESG disclosures.