What is Scope 3?

Category 1: Purchased goods and services

Summary

The Scope 3 standard requires you to account for all the greenhouse gas emissions involved in both creating and delivering goods and services that you purchase.

You must account for all the emissions for any goods and services you purchase that are not already covered in categories 2-8 in Scope 3. Therefore, this category acts as a catch-all.

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Examples

Common:
office supplies, furniture, software services like AWS
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Service and software companies:
This category is relevant for service and software companies.

For example, a management consulting firm that procures office supplies must allocate, under Scope 3 category, the emissions from:

1. the raw materials used to produce the office supplies,
2. the processing of these raw materials into the finished goods it is buying and
3. the delivery of the supplies by ship, train and van to its office
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Physical product and other companies:
This category is relevant for physical product and other companies.

For example, a pharmaceutical manufacturer that procures masks for its staff must allocate, under Scope 3 category, the emissions from:

1. the raw materials used to produce the mask,
2. the processing of these raw materials into the finished goods it is buying and
3. the delivery of the supplies by ship, train and van to its office
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If your supply chain has adequate carbon footprinting data, you need only look at the carbon footprint from your direct supplier, as it will already include the full supply chain emissions.

Category 2: Capital goods

Summary

The Scope 3 standard requires you to account for all the greenhouse gas emissions for any capital goods you purchase. These are items that are a final product that has an extended life and would include vehicles, machinery and office equipment like laptops.

The GHGP uses ‘capital goods’ to refer to these, and anything that your accountant ‘capitalises’ would fall in this category.

You must account for all the emissions involved in both creating and delivering the capital good to you.

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Examples

Common:
laptops, vehicles, tables
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Service and software companies:
This category is relevant for service and software companies.

For example, a digital marketing agency that owns all employee laptops must allocate, under this Scope 3 category, the emissions from:

1. the raw materials used to produce the laptop - the plastics, nuts and bolts, silicon and carbon.
2. the processing of these raw materials into the finished goods it is buying, which would for example include all of the impacts of the factories, workers and the energy required to power the machinery.
3. the delivery of the laptop by ship, train and van to its office.
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Physical product and other companies:
This category is relevant for physical product and other companies.

For example, a mining company that operates its own excavators must allocate, under this Scope 3 category, the emissions from:

1. the raw materials used to produce the excavator - the steel, nuts and bolts, the rubber.
2. the processing of these raw materials into the finished goods it is buying, which would for example include all of the impacts of the factories, workers and the energy required to power the machinery.
3. the delivery of the excavator by ship, train and van to the company’s facilities.
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In practice, this is extremely difficult. The vast majority of companies that you purchase capital goods from will not know the emissions of the raw materials, their processing or delivery impact, and will not be able to tell you the emissions of the item you have purchased.

If your supply chain has adequate carbon footprinting data, you need only look at the carbon footprint from your direct supplier, as it will already include the full supply chain emissions.

Category 3: Fuel- and energy-related activities not included in Scope 1 or 2

Summary

The Scope 3 standard requires you to account for all the greenhouse gas emissions arising from the extraction, production, transportation and distribution of fuels and energy that you purchase or acquire to consume for running your company’s operations.

The emissions from the combustion/generation of the purchased fuel and energy (electricity, heating, etc) are already accounted for in Scope 1 and Scope 2 emissions. This category is concerned with upstream emissions of this energy.

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Examples

Common:
upstream emissions of purchased fuels, electricity, steam, cooling and heating

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Service and software companies:
This category is relevant for service and software companies where burning fuels and using electricity is inevitable.

For example, a food-delivery service company must allocate, under this Scope 3 category, all the emissions from:

1. extracting, producing and transporting the energy source such as petrol, and diesel to the company’s vehicle fleet and coal, and natural gas to the company’s facilities and offices
2. extracting, producing and transporting the energy source used to generate the electricity it consumes
3. the transmission and distribution losses associated with moving generated electricity from the power plant to the point of consumption at the company’s facilities and offices
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Physical product and other companies:
This category is relevant for physical product and other companies where burning fuels and using electricity is inevitable.

For example, a waste recycler must allocate, under this Scope 3 category, all the emissions from:

1. extracting, producing and transporting the energy source such as coal, and natural gas consumed by the company’s facilities and offices
2. extracting, producing and transporting the energy source used to generate the electricity it consumes
3. the transmission and distribution losses associated with moving generated electricity from the power plant to the point of consumption at the company’s facilities and offices

Category 4: Upstream transportation & distribution

Summary

The Scope 3 standard requires you to account for all the greenhouse gas emissions arising from:

1. getting products purchased by you that are transported and distributed to, and within, your own facilities in third-party vehicles and
2. transportation and distribution services purchased
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The GHGP differentiates transportation & distribution based on whether it is paid for by you, labelling all transportation/storage of sold products paid for by you as ‘upstream’ and the other as ‘downstream’  (which pertains to Scope 3 Category 9: Downstream transportation & distribution).

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Examples

Common:
receiving a shipment of packaging material from your immediate suppliers or distributing raw materials to different facilities through purchased logistics services
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Service and software companies:
This category may be relevant for service and software companies.

For example, an event management company that procures event props must allocate, under this Scope 3 category, the emissions from the transportation of the shipment from the supplier’s facility to company facilities.

Note that, in this case, the shipment arrives in third-party vehicles.
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Physical product and other companies:
This category may be relevant for physical product and other companies.

For example, a soap manufacturer that procures packaging material must allocate, under this Scope 3 category, the emissions from the transportation of the shipment from the supplier’s facility to company facilities.

Note that, in this case, the shipment arrives in third-party vehicles.

Category 5: Waste generated in operations

Summary

The Scope 3 standard requires you to account for the greenhouse gas emissions from the waste generated in your company’s operations. This includes third-party disposal and treatment of solid waste and wastewater.

Anything from your operations that is disposed of offsite, is captured in Scope 3 Category 5. Waste disposed of on-site is captured in Scope 1, which is where waste management companies would account for these emissions, for example. Any waste from the end-of-life of your products is accounted for in Scope 3 Category 12.



If you are a paperless or zero-waste company, on the other hand, you may have zero emissions under this category.

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Examples

Common:
the fabric and fibre waste that you pay a waste management service to handle, and the effluents you pay the wastewater treatment services to treat
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Service and software companies:
For a health-tech company, for example, waste could be stationery and paper waste in their office premises. Such a company must allocate, under this Scope 3 category, the emissions from:

1. collecting and transporting discarded stationery and paper waste (generated in your company’s offices) to the recycling facility which is not already accounted for in Scope 3 Category 4
2. recycling of any paper waste
3. transfer and disposal of the non-recyclable waste material
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Physical product and other companies:
For a clothing manufacturer, for example, waste could be the fabric and fibre waste. Such a company must allocate, under this Scope 3 category, the emissions from:

1. collecting and transporting discarded fabric and fibre waste (generated in your company’s operations) to the recycling facility which is not already accounted for in Scope 3 Category 4
2. recycling of the recovered fibre
3. transfer and disposal of the non-recyclable waste material

Category 6: Business travel

Summary

The Scope 3 standard requires you to account for the greenhouse gas emissions from all the trips that are taken by your employees in third-party vehicles (that you do not own, or lease) to conduct business-related activities. All business travel through flights, trains, buses and cars and other modes should be accounted for. You may report emissions from hotel stays during business trips; it is optional.

The GHGP uses ‘business travel’ to refer to all transportation of employees that are business-related but does not include your employees' commute to the office, which is captured Scope 3 Category 7.

If the vehicle that is used is one that you lease, for example, a leased company car, the emissions would not fall under this category (in which case, they would be covered in Scope 3 Category 8: Upstream Leased Assets).

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Examples

Common:
Overseas trip to attend a conference; intercity travel for business meetings
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Service and software companies:
For a financial services company, for example, emissions from an overseas trip to attend a conference would fall under this Scope 3 category. Such a company must account for the emissions it is proportionately responsible for from:

1. the passenger car or bus the employee takes to get to the airport
2. the aeroplane the employee boards to get to the city where the conference is being held
3. the passenger car or bus or train the employee takes to get to the conference and to other venues to carry out any other business-related activities in the city
4. the impact of accommodation during the trip (Optional)
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Physical product and other companies:
For a construction company, emissions from a trip to attend a tender settlement meeting would fall under this Scope 3 category. Such a company must account for the emissions it is proportionately responsible for from:

1. the passenger car or bus the employee takes to get to the airport
2. the aeroplane the employee boards to get to the city where the meeting is being held
3. the passenger car or bus or train the employee takes to get to the meeting and to other venues to carry out any other business-related activities in the city
4. the impact of accommodation during the trip (Optional)

Category 7: Employee commuting

Summary

The Scope 3 standard requires you to account for the greenhouse gas emissions from the vehicles that employees use to commute to work. These vehicles may be owned by the employees or third-party vehicles like public transport.

The GHGP calls for accounting for these emissions even if the vehicle is employee-owned, and even if it is not paid for by you, since your business necessitates employee commuting to drive its operations.

Optionally, you can account for the emissions of employees working remotely.

The emissions from business-related travel but not to a worksite would not fall under this category. Instead, they would be covered in Scope 3 Category 6: Business Travel.
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Examples

Common:
Daily employee commute to the office or coworking space, etc.
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Service and software companies:
This category is relevant for service and software companies that have workspaces that their employees commute to on a regular basis, such as an office building.

Such companies must allocate, under this Scope 3 category, the emissions from the vehicles that their employees use for daily office commutes.
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Physical product and other companies:
This category is relevant to physical product and other companies that have workspaces that their employees commute to on a regular basis. This could be a processing plant for a manufacturing company.

Such companies must allocate, under this Scope 3 category, the emissions from the vehicles that their employees use for daily commuting to the plant.

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Fully remote companies, on the other hand, will have no emissions to account for commuting but may choose to account for at-home energy usage of their staff.

Category 8: Upstream leased assets

Summary

The Scope 3 standard requires you to account for the greenhouse gas emissions from the operation of assets you lease. Only emissions within the duration of the lease shall be accounted for.

The GHGP differentiates between assets you lease from others and the ones that you lease to others, labelling the former ‘upstream’ and the latter ‘downstream’. In this category, only emissions from ‘upstream’ leased assets are covered.

If the lease of the asset ends in the middle of the reporting year, you must account for the emissions from the usage of the asset during the six months they were leased by you.

Furthermore, the type of the lease (finance/capital or operating lease) plays a role in determining whether fuel combustion and use of purchased electricity in the leased asset would belong in your scope 1 and scope 2 respectively or your scope 3. For more guidance around this, you can refer to Appendix A of the Scope 3 here (pages 124-125, particularly).

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Examples

Common:
leased buses, office space, storage space, vehicles, leased equipment
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Service and software companies:
This category is relevant for service or software companies that lease assets from other entities to use for business purposes. Assets may include office buildings or cars.

Such companies must allocate, under this Scope 3 category, the emissions from the usage of the leased office cars, for example, during the relevant period they were leased by you.
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Physical product and other companies:
This category is relevant for physical product and other companies that lease assets from other entities to use for business purposes. Assets may include plants, premises, trucks and warehouses.

Such companies must allocate, under this Scope 3 category, the emissions from the usage of the leased warehouses, for example, during the relevant period they were leased by you.
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Category 9: Downstream transportation & distribution

Summary

The Scope 3 standard requires you to account for all the greenhouse gas emissions arising from transporting, storing and delivering your sold products to the end consumer in vehicles and facilities not owned by you.

The GHGP differentiates transportation & distribution based on whether it is paid for by you, labelling all transportation/storage of sold products paid for by you as ‘upstream’ (which pertains to Scope 3 Category 4: Upstream transportation & distribution) and the other as ‘downstream’. This category only concerns the latter.

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Examples

Common:
delivering a smartphone to a customer, storing inventory
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Service and software companies:
This category may not be relevant for service and software companies, as they are unlikely to be physically delivering products to customers.
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Physical product and other companies:
This category may be relevant for physical product and other companies.

Consider a manufacturer that sells toys to a big-box store, which eventually sells and delivers the toys to the end customer. In this case, the big-box store pays for the delivery to its stores/warehouses and the subsequent delivery to its customers. The emissions for these deliveries would fall under this Scope 3 category. The manufacturer must account for the emissions from:

1. transporting the cartons of product to your distributors/retailers and storing those in the warehouse
2. shipping the toys from the warehouse/store to the customer’s doorstep

Category 10: Processing of Sold Products

Summary

The Scope 3 standard requires you to account for all the greenhouse gas emissions from the processing of the intermediate products you sell. These companies can be manufacturers which use your product to make or add to their final product.

Intermediate products are products that require further processing, transformation, or inclusion in another product before end use. All the emissions from processing them into another product or system before end use belong in this category.

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Examples

Common:
converting wood into furniture, adding third-party processors to laptops
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Service and software companies:
This category may not be relevant for service companies, as they will not sell intermediate products.

A software company that sells software used in cars may need to allocate, under this Scope 3 category, emissions from integrating the software into the car such as testing.
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Physical product and other companies:
This category is relevant for physical product and other companies that sell intermediate products.

Consider a manufacturer that makes and sells engineered wood to several furniture companies. In this case, the wood sold is an intermediate product. The manufacturer must allocate, under this Scope 3 category, the emissions from the processing of the engineered wood that is carried out by the furniture company after they buy it. The processing stages may include cutting, shaping, colouring and coating and assembling.

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In practice, this can be pretty complex as there may be many potential downstream applications to your sold product.

Category 11: Use of Sold Products

Summary

The Scope 3 standard requires you to account for all the greenhouse gas emissions arising from the end-use of goods and services sold by your company. End-users include both consumers and business customers that use final products.

Furthermore, the standard classifies category 11 emissions into two types:

1. Direct use-phase emissions: These are emissions you must report. They include emissions from products that directly consume energy (fuels or electricity) during use, fuels and feedstocks and greenhouse gases and products that contain or form greenhouse gases that are emitted during use.
2. Indirect use-phase emissions: Reporting these emissions is optional.They include emissions from products that indirectly consume energy (fuels or electricity) during use.
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For more information and examples around this, you can refer to the calculation guidance here (pages 113-124, particularly).

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Examples

Common:
use of goods and services like refrigerators, apparel, food delivery services by customers
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Service and software companies:
This category is relevant for service or software companies.

A project management software company, for example, must allocate, under this Scope 3 category, the emissions arising from the usage of phones and laptops for using their final software product.
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Physical product and other companies:
This category is relevant for physical product and other companies.

A refrigerator manufacturer must allocate, under this Scope 3 category, the emissions from the use of the refrigerator by its customers. It may also account for emissions related to maintenance, service and repair of the refrigerator (optional).

Category 12: End-of-life treatment of sold products

Summary

The Scope 3 standard requires you to account for all the greenhouse gas emissions arising from the disposal and treatment of products sold (by your company) at the end of their life, which includes methods such as landfilling, incineration, composting and recycling. Additionally, you are required to report a description of the methodologies and assumptions used to calculate emissions.

As per the GHGP, the point of sale demarcates emissions related to

• the waste generated in operations before the point of sale (which is covered in
Scope 3 Category 5) from those pertaining to
• the waste disposal and treatment of products after they are sold and at the end of their life, which is covered here.
  
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Examples

Common:
disposal and recycling of discarded plastic bottles, and electronics; landfilling of discarded apparel, food waste
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Service and software companies:
This category may not be relevant for service and software companies, as they will almost certainly not be dealing with physical products.

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Physical product and other companies:
This category is relevant for physical product and other companies.

A plastic bottle manufacturer must allocate, under this Scope 3 category, all the emissions arising from the disposal and recycling of discarded plastic bottles. It must account for the emissions from:

1. collecting and transporting discarded plastic bottles (sold by your company) to the recycling facility
2. recycling of the discarded plastic bottles
3. transfer and disposal of the unrecyclable plastic material

Category 13: Downstream leased assets

Summary

The Scope 3 standard requires you to account for the greenhouse gas emissions from the operation of assets you have leased to other entities if any. Only emissions within the duration of the lease shall be accounted for.

The GHGP differentiates between assets you lease from others and the ones that you lease to others, labelling the former ‘upstream’ and the latter ‘downstream’. In this category, only emissions from ‘downstream’ leased assets are covered.
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Examples

Common:
studios, office space, commercial vehicles leased out to others
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Service and software companies:
This category may not be relevant for service and software companies, as they will most probably not be operating any assets that they could lease out to others.

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Physical product and other companies:
This category is relevant for physical product and other companies that deal with property management.

Consider a logistics provider who also leases out warehouses. It must allocate, under this Scope 3 category, the emissions arising from the operation of all the warehouses leased out to its customers.

Assuming the lease ends in the middle of the reporting year, it must account for the emissions from the operation of the warehouses during the six months they were leased out to its lessees.

However, if leasing is your primary business, the emissions from the operation of your leased-out assets belong in your Scope 3 Category 11.

Category 14: Franchises

Summary

The Scope 3 standard requires you to account for the greenhouse gas emissions from the operation of franchisees that you contract with, emissions that are not already covered in Scope 1 or Scope 2. Franchises are companies that are granted licences by your company to sell or distribute your goods or services in return for payments.

Scope 1 and Scope 2 emissions of franchisees must be accounted for, while reporting Scope 3 emissions of your franchisee is optional.

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Examples

Common:
fast-food franchises
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Service and software companies:
This category is relevant for service and software companies that are franchisors.

A brick-and-mortar tutoring service franchisor must allocate, under this Scope 3 category,  the emissions from the operations of all the brick-and-mortar classrooms that all its franchisees are running.
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Physical product and other companies:
This category is relevant for physical products and other companies that are franchisors.

A coffee shop franchisor must allocate, under this Scope 3 category, the emissions from the operations of the coffee shops that its franchisees are running, including but not limited to operating the coffee shops/stores (required) and delivering sold products to the customer (optional).

Category 15: Investments

Summary

The Scope 3 standard requires you to account for the greenhouse gas emissions associated with your investees that are not already covered in Scope 1 or Scope 2. The emissions should be proportional to the share of investment in your investee. Your selected organisational boundary will affect this calculation.

Investments are categorised as a downstream Scope 3 category because the provision of capital or financing is a service provided by you.

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Examples

Common:
loan financing to projects or companies
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Service and software companies:
This category is relevant for service and software companies that invest or provide financial assistance to other businesses.

A banking services company, for example, must allocate, under this Scope 3 category, the emissions from the power plants it finances. The company must report emissions emanating from the new capacity added to the plant (financed by the company) including expansions of existing plants, but not re-financings of existing plants.
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Physical product and other companies:
This category is relevant for physical products and other companies that are franchisors.

A coffee shop franchisor must allocate, under this Scope 3 category, the emissions from the operations of the coffee shops that its franchisees are running, including but not limited to operating the coffee shops/stores (required) and delivering sold products to the customer (optional).

Further information

You can read more in the overall guidance from the Greenhouse Gas Protocol on Scope 3 here, and the calculation guidance here.