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Greenhouse gas (GHG) emissions are categorised into three scopes by the Greenhouse Gas Protocol, a widely used international accounting tool that helps businesses and governments track, report, and manage greenhouse gas emissions.

For an overview of all three scopes, check this article.

Scope 3 is the broadest category and includes all other indirect emissions that occur in a company’s value chain. This includes emissions related to the production of purchased goods and services, business travel, employee commuting, waste disposal, use of sold products, and other activities not owned or directly controlled by the company.

Scope 3 can often be the largest share of a company’s totalGHG emissions but is also the most difficult to measure and manage.

We will tackle the emission factors by distinguishing between upstream and downstream emissions:

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Upstream

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Purchased goods and services

This refers to the emissions from the production of goods and services that a company buys. For a manufacturing company, this could include raw materials like steel or plastic, as well as services like IT support or cleaning. For example, if your company buys steel to make car parts, the emissions from mining, processing, and transporting that steel are included here.

Capital goods

These are long-lasting goods that a company uses to produce its products, like machinery, buildings, and vehicles. The emissions come from the production of these goods. For instance, if your company buys a new machine for the factory, the emissions from making that machine are counted here.

Fuel and energy related activities

This includes emissions from producing the fuels and energy that your company uses, but not the emissions from burning the fuel itself (those are Scope 1). For example, if your company uses electricity, the emissions from extracting and processing the coal used to generate that electricity are included here.

Upstream transportation and distribution

These are the emissions from transporting goods to your company. This includes the emissions from trucks, ships, or planes that deliver raw materials or products to your factory or office. For example, if your company imports parts from overseas, the emissions from shipping those parts are included here.

Waste generated in operations

This covers the emissions from disposing of waste generated by your company's operations. For example, if your factory produces scrap metal or plastic waste, the emissions from transporting and processing that waste are included here.

Business travel

These are the emissions from employees traveling for work. This includes flights, car rentals, and hotel stays. For example, if your sales team flies to another city for a meeting, the emissions from their flights and hotel stays are included here.

Employee commuting

This includes the emissions from employees traveling to and from work. For example, if your employees drive to work, the emissions from their cars are included here.

Upstream leased assets

These are the emissions from assets that your company leases but does not own, like office buildings or equipment. For example, if your company leases office space, the emissions from the energy used in that office are included here.

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Downstream

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Transportation and distribution of sold products

This refers to the emissions from transporting and distributing products after they leave the company's control. For example, the emissions from the trucks, ships, or planes that deliver your products to stores or customers are included here.

Processing of sold products

These are the emissions from further processing of your products by other companies. For instance, if your company sells intermediate products like metal parts that are later used by another company to make bicycles, the emissions from the energy used in the bicycle manufacturing process are included here.

Use of sold products

This includes the emissions that occur when customers use your products. For example, if your company sells electric heaters, the emissions from the electricity used to power these heaters in customers' homes are included here. This category can be significant, especially for products that consume energy during use.

End of life treatment of products

These are the emissions from disposing of your products at the end of their life. This could include emissions from landfilling, recycling, or incinerating the products. For example, if your company sells plastic bottles, the emissions from the processes involved in recycling or disposing of these bottles are included here.

Downstream leased assets

These are the emissions from assets that your company owns but leases to other entities. For example, if your company owns office buildings or equipment that you lease to other businesses, the emissions from the energy used in these buildings or by this equipment are included here.

Franchises

This includes the emissions from the operations of franchises that your company owns but does not directly control. For example, if your company is a franchisor of a chain of cafes, the emissions from the energy used in these cafes are included here.

Investments

These are the emissions associated with the investments your company makes, such as equity investments, debt investments, or project finance. For example, if your company invests in a renewable energy project, the emissions from the construction and operation of the renewable energy facilities are included here.

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Case Study

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Let’s do a case study to better illustrate these categories! Imagine your manufacturing company,"EcoWidgets Inc.," makes eco-friendly widgets. Here's how these emissions might look in your supply chain: 

• Purchased Goods and Services: EcoWidgets Inc. buys recycled plastic to make its widgets. These are emissions from collecting, processing, and transporting the recycled plastic.
• ‍Capital Goods: EcoWidgets Inc. buys a new energy-efficient machine to produce widgets. The emissions from manufacturing and delivering this machine are counted here.‍
• Fuel and Energy-RelatedActivities: EcoWidgets Inc. uses electricity from a local power plant. The emissions from extracting and processing the natural gas used to generate this electricity.‍
• Upstream Transportation and Distribution: The recycled plastic is shipped from a supplier in another country. These are the emissions from the ship and trucks used to transport the plastic.‍
• Waste Generated in Operations: During production, EcoWidgets Inc. generates plastic scraps. These are emissions from transporting and recycling these scraps.‍
• Business Travel: The sales team travels to a trade show to promote the widgets. The emissions from their flights, car rentals, and hotel stays are included here.‍
• Employee Commuting: Employees drive to the factory every day. The emissions from their cars are included here.‍
• Upstream Leased Assets: EcoWidgets Inc. leases office space in a nearby city. These are the emissions from the energy used in this office.‍
• Transportation andDistribution of Sold Products: EcoWidgets Inc. ships its widgets to retailers across the country. The emissions from the trucks and planes used to transport these widgets are included here.‍
• Processing of Sold Products: Some of the widgets are sold to another company that uses them as components in their own products. The emissions from the energy used in this further processing are included here.‍
• Use of Sold Products: Customers use the widgets in their homes, and the emissions from the electricity used to power these widgets are included here.‍
• End of Life Treatment of Products: When customers dispose of the widgets, the emissions from recycling or landfilling the widgets are included here.‍
• Downstream Leased Assets: EcoWidgets Inc. leases office space to other businesses. The emissions from the energy used in these offices are included here.‍
• Franchises: EcoWidgets Inc. has franchised stores that sell its widgets. The emissions from the energy used in these stores are included here.‍
• Investments: EcoWidgets Inc. invests in a renewable energy project. The emissions from the construction and operation of the renewable energy facilities are included here.

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