Category 9 Downstream Transportation and Distribution – The best read

Category 9 Downstream Transportation and Distribution

Category description – Category 9 Downstream Transportation and Distribution includes emissions that occur in the reporting year from transportation and distribution of sold products in vehicles and facilities not owned or controlled by the reporting company.

This category also includes emissions from retail and storage. Outbound transportation and distribution services that are purchased by the reporting company are excluded from category 9 and included in category 4 (Upstream transportation and distribution) because the reporting company purchases the service. Category 9 includes only emissions from transportation and distribution of products after the point of sale. See table 5.7 in the Scope 3 Standard for guidance in accounting for emissions from transportation and distribution in the value chain.

Emissions from downstream transportation and distribution can arise from transportation/storage of sold products in vehicles/facilities not owned by the reporting company. For example:

  • Warehouses and distribution centers
  • Retail facilities
  • Air transport
  • Rail transport
  • Road transport
  • Marine transport.

In this category, companies may include emissions from customers traveling to and from retail stores, which can be significant for companies that own or operate retail facilities. See chapter 5.6 of the Scope 3 Standard for guidance on the applicability of category 9 to final products and intermediate products sold by the reporting company. A reporting company’s scope 3 emissions from downstream transportation and distribution include the scope 1 and scope 2 emissions of transportation companies, distribution companies, retailers, and (optionally) customers.

If the reporting company sells an intermediate product, the company should report emissions from transportation and distribution of this intermediate product between the point of sale by the reporting company and either (1) the end consumer (if the eventual end use of the intermediate product is known) or (2) business customers (if the eventual end use of the intermediate product is unknown).

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Category 8 Upstream Leased Assets – The best calculation guidance

Category 8 Upstream Leased Assets

Category description – Category 8 Upstream Leased Assets includes emissions from the operation of assets that are leased by the reporting company in the reporting year and not already included in the reporting company’s scope 1 or scope 2 inventories. This category is applicable only to companies that operate leased assets (i.e., lessees). For companies that own and lease assets to others (i.e., lessors), see category 13 (Downstream leased assets).

Leased assets may be included in a company’s scope 1 or scope 2 inventory depending on the type of lease and the consolidation approach the company uses to define its organizational boundaries (see section 5.2 of the Scope 3 Standard).

If the reporting company leases an asset for only part of the reporting year, it should account for emissions for the portion of the year that the asset was leased. A reporting company’s scope 3 emissions from upstream leased assets include the scope 1 and scope 2 emissions of lessors (depending on the lessor’s consolidation approach).

See Appendix A of the Scope 3 Standard for more information on accounting for emissions from leased assets.

Category 8 Upstream Leased Assets – Calculating emissions from leased assets

Figure 8.1 (below) shows a decision tree for selecting a calculation method for emissions from upstream leased assets.

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Category 1 Purchased Goods and Services – The best calculation guidance

Calculating Scope 3 Emissions GHG Category 1 Purchased Goods and Services

Category description – Category 1 Purchased Goods and Services 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).

This guidance page for Category 1 Purchased Goods and Services serves as a companion to the Scope 3 Standard to offer companies practical guidance on calculating their scope 3 emissions. It provides information not contained in the Scope 3 Standard, such as methods for calculating GHG emissions for each of the 15 scope 3 categories, data sources, and worked examples.

Category 1 includes emissions from all purchased goods and services not otherwise included in the other categories of upstream scope 3 emissions (i.e., category 2 through category 8). Specific categories of upstream emissions are separately reported in category 2 through category 8 to enhance the transparency and consistency of scope 3 reports.

Emissions from the transportation of purchased products from a tier one (direct) supplier to the reporting company (in vehicles not owned or controlled by the reporting company) are accounted for in category 4 (Upstream transportation and distribution).

Companies may find it useful to differentiate between purchases of production-related products (e.g., materials, components, and parts) and non-production-related products (e.g., office furniture, office supplies, and IT support). This distinction may be aligned with procurement practices and therefore may be a useful way to more efficiently organize and collect data (see box 5.2 of the Scope 3 Standard).

Summary of methods for calculating emissions from purchased goods and services

Companies may use the methods listed below to calculate scope 3 emissions from purchased goods and services. The first two methods – supplier-specific and hybrid – require the reporting company to collect data from the suppliers, whereas the second two methods – average-data and spend-based – use secondary data (i.e. industry average data). These methods are listed in order of how specific ( See Box 1.1 for further explanation of the data specificity and data accuracy) the calculation is to the individual supplier of a good or service. However, companies need not always use the most specific method as a first preference (see figure 1.1 and box 1.1).

  • Supplier-specific method – collects product-level cradle-to-gate GHG inventory data from goods or services suppliers.
  • Hybrid method – uses a combination of supplier-specific activity data (where available) and secondary data to fill the gaps. This method involves:
    • collecting allocated scope 1 and scope 2 emission data directly from suppliers;
    • calculating upstream emissions of goods and services from suppliers’ activity data on the amount of materials, fuel, electricity, used, distance transported, and waste generated from the production of goods and services and applying appropriate emission factors; and
    • using secondary data to calculate upstream emissions wherever supplier-specific data is not available.
  • Average-data method – estimates emissions for goods and services by collecting data on the mass (e.g., kilograms or pounds), or other relevant units of goods or services purchased and multiplying by the relevant secondary (e.g., industry average) emission factors (e.g., average emissions per unit of good or service).
  • Spend-based method – estimates emissions for goods and services by collecting data on the economic value of goods and services purchased and multiplying it by relevant secondary (e.g., industry average) emission factors (e.g., average emissions per monetary value of goods).

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Category 2 Capital Goods Scope 3 emissions – The best calculation guidance

Calculating Scope 3 Emissions GHG Category 2 Capital Goods

Category description – Category 2 Capital Goods includes all upstream (i.e., cradle-to-gate) emissions from the production of capital goods purchased or acquired by the reporting company in the reporting year. Emissions from the use of capital goods by the reporting company are accounted for in either scope 1 (e.g., for fuel use) or scope 2 (e.g., for electricity use), rather than in scope 3.

This guidance page for Category 2 Capital Goods serves as a companion to the Scope 3 Standard to offer companies practical guidance on calculating their scope 3 emissions. It provides information not contained in the Scope 3 Standard, such as methods for calculating GHG emissions for each of the 15 scope 3 categories, data sources, and worked examples.

Capital goods are final products that have an extended life and are used by the company to manufacture a product; provide a service; or sell, store, and deliver merchandise. In financial accounting, capital goods are treated as fixed assets or as plant, property, and equipment (PP&E). Examples of capital goods include equipment, machinery, buildings, facilities, and vehicles.

In certain cases, there may be ambiguity over whether a particular purchased product is a capital good (to be reported in category 2) or a purchased good (to be reported in category 1). Companies should follow their own financial accounting procedures to determine whether to account for a purchased product as a capital good in this category or as a purchased good or service in category 1. Companies should not double count emissions between category 1 and category 2. See box 2.1 for accounting for emissions from capital goods.

Box [2.1] Accounting for emissions from capital goods

In financial accounting, capital goods (sometimes called “capital assets”) are typically depreciated or amortized over the life of the asset. For purposes of accounting for scope 3 emissions, companies should not depreciate, discount, or amortize the emissions from the production of capital goods over time. Instead companies should account for the total cradle-to-gate emissions of purchased capital goods in the year of acquisition, the same way the company accounts for emissions from other purchased products in category 1. If major capital purchases occur only once every few years, scope 3 emissions from capital goods may fluctuate significantly from year to year. Companies should provide appropriate context in the public report (e.g., by highlighting exceptional or non-recurring capital investments).

Source: Box 5.4 from the Scope 3 Standard

Calculating emissions from Category 2 Capital Goods

Companies may use the following methods to calculate scope 3 emissions from capital goods:

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Category 3 Fuel and Energy Related Activities – The best calculation guidance

Category 3 Fuel and Energy Related Activities Not Included in Scope 1 or Scope 2

Category description – Category 3 Fuel and Energy Related Activities includes emissions related to the production of fuels and energy purchased and consumed by the reporting company in the reporting year that are not included in scope 1 or scope 2.

This guidance page for Category 3 Fuel and Energy Related Activities serves as a companion to the Scope 3 Standard to offer companies practical guidance on calculating their scope 3 emissions. It provides information not contained in the Scope 3 Standard, such as methods for calculating GHG emissions for each of the 15 scope 3 categories, data sources, and worked examples.

Category 3 excludes emissions from the combustion of fuels or electricity consumed by the reporting company because they are already included in scope 1 or scope 2. Scope 1 includes emissions from the combustion of fuels by sources owned or controlled by the reporting company. Scope 2 includes the emissions from the combustion of fuels to generate electricity, steam, heating, and cooling purchased and consumed by the reporting company.

This category includes emissions from four activities (see table 3.1).

Fuel and energy related emissions not included in scope 1 or scope 2

Table 3.2 explains how each company accounts for GHG emissions. In this example, the emission factor of the electricity sold by Company B is 1 tonne (t) CO2e/MWh. All numbers are illustrative only.

Table [3.2] Accounting for emissions across an electricity value chain

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Category 4 Upstream Transportation and Distribution – The best calculation guidance

Category 4 Upstream Transportation and Distribution

Category description – Category 4 Upstream Transportation and Distribution includes emissions from:

  • Transportation and distribution of products purchased in the reporting year, between a company’s tier 1 suppliers1 and its own operations in vehicles not owned or operated by the reporting company (including multi-modal shipping where multiple carriers are involved in the delivery of a product, but excluding fuel and energy products)   – link to figure 7.3 in the Scope 3 Standard
  • Third-party transportation and distribution services purchased by the reporting company in the reporting year (either directly or through an intermediary), including inbound logistics, outbound logistics (e.g., of sold products), and third-party transportation and distribution between a company’s own facilities.

This guidance page for Category 4 Upstream Transportation and Distribution serves as a companion to the Scope 3 Standard to offer companies practical guidance on calculating their scope 3 emissions. It provides information not contained in the Scope 3 Standard, such as methods for calculating GHG emissions for each of the 15 scope 3 categories, data sources, and worked examples.

Emissions may arise from the following transportation and distribution activities throughout the value chain:

  • Air transport
  • Rail transport
  • Road transport
  • Marine transport
  • Storage of purchased products in warehouses, distribution centers, and retail facilities.

Outbound logistics services purchased by the reporting company are categorized as upstream because they are a purchased service. Emissions from transportation and distribution of purchased products upstream of the reporting company’s tier 1 suppliers (e.g., transportation between a company’s tier 2 and tier 1 suppliers) are accounted for in scope 3, category 1 (Purchased goods and services). Table 4.1 shows the scope and category of emissions where each type of transportation and distribution activity should be accounted for.

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Category 5 Waste Generated in Operations – The best calculation guidance

Category 5 Waste Generated in Operations

Category description – Category 5 Waste Generated in Operations includes emissions from third-party disposal and treatment of waste generated in the reporting company’s owned or controlled operations in the reporting year. This category includes emissions from disposal of both solid waste and wastewater.

This guidance page for Category 5 Waste Generated in Operations serves as a companion to the Scope 3 Standard to offer companies practical guidance on calculating their scope 3 emissions. It provides information not contained in the Scope 3 Standard, such as methods for calculating GHG emissions for each of the 15 scope 3 categories, data sources, and worked examples.

Only waste treatment in facilities owned or operated by third parties is included in scope 3. Waste treatment at facilities owned or controlled by the reporting company is accounted for in scope 1 and scope 2. Treatment of waste generated in operations is categorized as an upstream scope 3 category because waste management services are purchased by the reporting company.

This category includes all future emissions that result from waste generated in the reporting year. (See chapter 5.4 of the Scope 3 Standard for more information on the time boundary of scope 3 categories.)

Waste treatment activities may include:

  • Disposal in a landfill
  • Disposal in a landfill with landfill-gas-to-energy (LFGTE) – that is, combustion of landfill gas to generate electricity
  • Recovery for recycling
  • Incineration
  • Composting
  • Waste-to-energy (WTE) or energy-from-waste (EfW) – that is, combustion of municipal solid waste (MSW) to generate electricity
  • Wastewater treatment.

A reporting company’s scope 3 emissions from waste generated in operations derive from the scope 1 and scope 2 emissions of solid waste and wastewater management companies. Companies may optionally include emissions from transportation of waste in vehicles operated by a third party.

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Category 6 Business Travel – The best calculation guidance

Category 6 Business Travel

Category description – Category 6 Business Travel includes emissions from the transportation of employees for business-related activities in vehicles owned or operated by third parties, such as aircraft, trains, buses, and passenger cars.

This guidance page for Category 6 Business Travel serves as a companion to the Scope 3 Standard to offer companies practical guidance on calculating their scope 3 emissions. It provides information not contained in the Scope 3 Standard, such as methods for calculating GHG emissions for each of the 15 scope 3 categories, data sources, and worked examples.

Emissions from transportation in vehicles owned or controlled by the reporting company are accounted for in either scope 1 (for fuel use), or in the case of electric vehicles, scope 2 (for electricity use). Emissions from leased vehicles operated by the reporting company not included in scope 1 or scope 2 are accounted for in scope 3, category 8 (Upstream leased assets). Emissions from transportation of employees to and from work are accounted for in scope 3, category 7 (Employee commuting). See table 6.1.

Category 6 Business Travel

Emissions from business travel may arise from:

Companies may optionally include emissions from business travelers staying in hotels.

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Category 7 Employee Commuting – The best calculation guidance

Category 7 Employee Commuting

Category description – Category 7 Employee Commuting includes emissions from the transportation of employees (“Employees” refers to employees of entities and facilities owned, operated, or leased by the reporting company. Companies may include employees of other relevant entities (e.g., franchises or outsourced operations) in this category, as well as consultants, contractors, and other individuals who are not employees of the company, but commute to facilities owned and operated by the company) between their homes and their worksites.

Emissions from employee commuting may arise from:

  • Automobile travelCategory 7 Employee Commuting
  • Bus travel
  • Rail travel
  • Air travel
  • Other modes of transportation (e.g., subway, bicycling, walking).

Companies may include emissions from teleworking (i.e., employees working remotely) in this category.

A reporting company’s scope 3 emissions from employee commuting include the scope 1 and scope 2 emissions of employees and third-party transportation providers.

Calculating emissions from Category 7 employee commuting

Figure 7.1 offers a decision tree for selecting a calculation method for scope 3 emissions from employee commuting.

Companies may use one of the following methods:

  • Fuel-based method, which involves determining the amount of fuel consumed during commuting and applying the appropriate emission factor for that fuel
  • Distance-based method, which involves collecting data from employees on commuting patterns (e.g., distance travelled and mode used for commuting) and applying appropriate emission factors for the modes used
  • Average-data method, which involves estimating emissions from employee commuting based on average (e.g., national) data on commuting patterns

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Carbon dioxide equivalent defined – 1 Best read

Carbon dioxide equivalent defined

In study material each GHG described has a different global warming potential (GWP). The GWP of a given GHG indicates how much energy one unit of the GHG absorbs (i.e., the ability of that gas to trap heat in the atmosphere) compared to one unit of carbon dioxide, generally over a 100-year period.

The larger the GWP, the more that the GHG warms the earth compared to carbon dioxide over the stated time period. For example, PFCs and HFCs often absorb thousands of times more energy than carbon dioxide. The GWP of each GHG is published as a factor and used to translate GHGs, other than carbon dioxide, into carbon dioxide equivalent (C02e) units.

The GHG Protocol considers C02e to be the universal unit of measurement for GHGs since it expresses the GWP of each GHG in terms of the GWP of one unit of carbon dioxide. C02e and individual GHGs are often expressed in metric tons, which is the equivalent of 1,000 kilograms (or approximately 2,204 pounds).

The purpose of this measure is to enable a reporting entity, users and other stakeholders to compare the potency of the overall emissions from a reporting entity, both across entities and over time, even when the composition of the GHG emissions changes.

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