Lesson 1, Topic 1
In Progress

Scope 3 Categories

Introduction to Scope 3 Categories

Scope 3 emissions, as outlined by the GHG Protocol, are categorized into fifteen distinct groups. These encompass eight upstream categories related to emissions from purchased goods and services (such as supplier emissions) and seven downstream categories associated with emissions from sold goods and services (such as customer emissions).

Upstream Categories

  1. Purchased Goods and Services: Emissions from the entire lifecycle of purchased goods and services up to their receipt by the reporting company, including raw material extraction, agricultural activities, and upstream electricity use.
  2. Capital Goods: Emissions from the production of physical assets used in producing goods and services, like facilities, equipment, and vehicles.
  3. Fuel- and Energy-Related Activities: Emissions from producing fuels or energy purchased and used by the reporting company, excluding direct consumption emissions covered in scopes 1 and 2.
  4. Upstream Transportation and Distribution: Emissions from transporting and distributing purchased products, excluding company-owned transportation.
  5. Waste Generated in Operations: Emissions from third-party disposal and treatment of waste from owned or controlled operations, including solid waste and wastewater.
  6. Business Travel: Emissions from employee travel for business activities in vehicles owned or operated by third parties, excluding company-owned transportation.
  7. Employee Commuting: Emissions from employee travel between home and work, including remote work.
  8. Upstream Leased Assets: Emissions from the operation of leased assets.

Downstream Categories

  1. Downstream Transportation and Distribution: Emissions from transporting and distributing sold goods and services, including retail and storage.
  2. Processing of Sold Products: Emissions from third-party processing of sold intermediate products after they are sold by the reporting company.
  3. Use of Sold Products: Emissions from the use of sold goods and services by consumers or business customers.
  4. End-of-Life Treatment of Sold Products: Emissions from the disposal and treatment of sold products, such as landfilling and incineration.
  5. Downstream Leased Assets: Emissions from the operation of assets owned by the company and leased to other entities.
  6. Franchises: Emissions from the operation of franchises not included in scopes 1 or 2.
  7. Investments: Emissions linked to investments not included in scopes 1 or 2, primarily relevant to investors and financial institutions.

Classifying Scope 3 emissions facilitates data collection and calculation, giving companies increased transparency and enabling them to identify critical areas in their value chain for emission reduction efforts.

Scope 3 emissions are hard to reduce, but why?

  • Fewer science-based targets for Scope 31. ​
  • Scope 3 is why most undershoot their target2. ​

(Source:  1McKinsey & Co; “On target: How to succeed with carbon-reduction initiatives”, May 3, 2021 and 2Gieskeam et al, 2021. School of Earth and Environment, University of Leeds. “On Target?” https://doi.org/10.3390/su13041657)​

Because:

  • Don’t know or cannot trace the suppliers; cannot track chain of custody​
  • Unreliable, low-quality data​
  • Need a whole-supply-chain approach to incentivize co-investment​

Category 1: Purchased goods and services

This category includes all upstream (i.e., cradle-to-gate) emissions from the production of products purchased or acquired by the reporting company in the reporting year. Products include both goods (tangible products) and services (intangible products). ​

These emissions fall under ISO Category 4: Indirect GHG emissions resulting from products utilized by an organization.

Category 1 is particularly relevant to the following sectors:

  • Service industry
  • Products with low energy consumption during use (e.g., furniture)
  • Food, beverage, and hospitality
  • Healthcare
  • Personal and household goods, and retail
  • Chemicals
  • Technology
  • Infrastructure and utilities

​(Source: https://ghgprotocol.org/sites/default/files/standards_supporting/Chapter1.pdf)

The final part of this introduction to Scope 3 will focus on purchased goods and services. If your business produces food or beverages, in most cases you can expect the goods and services you purchase to account for more than 50% of your emissions.

This tells us that when looking to meet goals or targets related to climate change, prioritising sustainable suppliers can have a hugely significant impact, beyond most steps that could be taken which focus purely on your processes.

For example, figures for Nestlé in 2018 showed that this accounted for over 70% of their total emissions.

​(Source: Our Net Zero roadmap | Nestlé Global (nestle.com))​

Examples of tangible products (goods) include:​

  • Production-related products like materials, fresh ingredients, components, and parts​
  • Non-production-related products like office furniture/supplies and Personal Protective Equipment (PPE)​

Examples of intangible products (services) include:

  • Accounting services, cloud storage, and IT support 

(Source: Scope 3 Category 1 – Purchased goods and services | thinkstep-anz)

(Source: Value Change in the Value Chain: Best practices in Scope 3 Greenhouse Gas Management v3.0)