The Greenhouse Gas (GHG) Protocol classifies carbon emissions into three distinct scopes:
- Scope 1 – Direct emissions from fuel combustion on-site.
- Scope 2 – Indirect emissions from purchased electricity.
- Scope 3 – Indirect emissions across the value chain of a business.
Scope 1 and Scope 2 emissions are relatively straightforward to measure, as they are within a company’s direct control. Scope 3 emissions, however, encompass a company’s entire value chain, including both upstream and downstream activities, making them more complex to quantify and manage.
Given the intricate nature of supply chains, Scope 3 emissions are divided into 15 categories that span a business’s upstream and downstream operations. Not all categories are relevant to every business, and some standards allow emissions contributing less than 1% of total emissions to be excluded—though they must first be calculated before being discounted.
Upstream Emissions
These emissions arise from activities related to producing goods or services before they reach the company.
- Purchased Goods and Services
This category includes emissions from raw materials, components, and services acquired to create a product or service. For manufacturers, this is often the largest source of Scope 3 emissions, whereas for an accountancy firm, these emissions may be minimal. - Capital Goods
Capital goods such as machinery, buildings, and IT equipment have their own category, separate from purchased goods and services, due to their long-term nature. - Fuel- and Energy-Related Activities
While Scope 1 and 2 account for emissions from fuel combustion and electricity usage, this category includes indirect emissions from fuel extraction, refining, transportation, and energy losses during distribution through the grid. - Upstream Transportation and Distribution
Emissions from the transportation of raw materials, components, and supplies to a business are captured here. - Waste Generated in Operations
The disposal, recycling, or reuse of waste generated during business operations produces emissions, which fall under this category. - Business Travel
Travel by employees using non-company-owned transport, such as flights, trains, buses, and taxis, is included here. - Employee Commuting
This covers emissions from employees commuting to and from work, as well as energy use from remote work setups (e.g., home office electricity consumption). - Upstream Leased Assets
Emissions from leased assets that the business does not own but uses for operations—such as leased vehicles or cloud servers—are captured in this category.
Downstream Emissions
These emissions arise from activities occurring after a product or service is sold.
- Downstream Transportation and Distribution
This includes emissions from the transportation of finished products to customers. - Processing of Sold Products
If sold products require further processing before reaching the end user, the associated emissions fall into this category. For example, a steel manufacturer may need to account for the emissions associated with shaping the steel into car parts when supplying to an automotive company, or a textile company selling fabric that must be dyed, cut, and sewn by a third party before becoming a final garment.
- Use of Sold Products
This category covers emissions produced during the usage phase of a product’s lifecycle, typically applicable to energy-consuming goods such as electrical appliances, cars, or heating systems. - End-of-Life Treatment of Sold Products
Once a product reaches the end of its lifespan, emissions arise from its disposal, recycling, or recovery—similar to waste generated in operations. - Downstream Leased Assets
This category covers emissions from assets owned by a company but leased to others, like a car rental company which leases vehicles, where emissions from the use of those vehicles are counted in this category.
- Franchises
If a business operates franchises, the emissions generated by those franchises are included in Scope 3 to ensure a comprehensive carbon footprint assessment. - Investments
Emissions related to financial investments, such as pension funds or equity portfolios, are captured here. The emissions footprint depends on the nature of the investments—whether they fund fossil fuel extraction or renewable energy projects, for example.
Conclusion: Taking Action on Scope 3 Emissions
Understanding and addressing Scope 3 emissions is a crucial step in a company’s journey towards sustainability. While these emissions can be complex to quantify, they often represent the largest portion of an organisation’s carbon footprint. By identifying key sources within your value chain, prioritising reductions, and collaborating with suppliers and stakeholders, businesses can make meaningful progress towards net-zero goals.
Reducing Scope 3 emissions is not just about regulatory compliance—it’s an opportunity to drive innovation, improve efficiency, and enhance your organisation’s sustainability credentials in an increasingly eco-conscious market.