Scope 3 Emissions: A Guide to Categories, Reporting, and More

Persefoni Team
By Persefoni Team
September 12, 202214 min read
November 22, 2022, 11:21 AMUpdated
September 12, 2022Updated: November 22, 2022, 11:21 AM14 min read

Scope 3 emissions cover upstream and downstream emissions indirectly generated by a reporting organization throughout its value chain. These are emissions that organizations don’t directly control but happen as a result of their operations. 

Scope 3 is one of three emissions streams defined by the Greenhouse Gas Protocol (GHGP). Scope 1 covers emissions that directly result from operations owned or controlled by a  reporting organization. Scope 2 emissions are the emissions associated with the generation of purchased energy, such as electricity. Scope 2 emissions technically are “indirect” emissions because they occur at the electricity provider’s or utility’s facilities, but they sit in their own category because they come from activities that the company does have control over, like how much energy they use and whether they purchase renewable energy.

Scopes 1 and 2 can be easier to measure since information is typically more readily available to the reporting company (e.g., utility bills). In contrast, scope 3 emissions can be more difficult to measure and manage, because they are generated by third parties that the company has varying degrees of influence over.

Organizations must work with all entities along their supply chain to gather scope 3 data — ranging from suppliers to customers. To make things even more complex, scope 3 is typically the largest category of emissions for most companies. For example, these emissions make up over three quarters of Amazon’s total emissions.

We created this overview to break down the main points of this complex scope. Our guide goes over categories, reporting guidance, and other things you should know when looking to calculate scope 3 emissions. You can also learn more from the GHG Protocol’s official website.

How Can Organizations Measure Scope 3 Emissions?

Organizations can begin measuring their scope 3 emissions by using spend based activity data, secondary data (like industry averages), internal data on their purchases or a combination of these and other available data. As more organizations begin to develop their GHG emissions inventories, reporting entities can gradually increase the use of more precise primary data rather than relying on secondary data. 

The GHGP provides guidance for each scope 3 category to help organizations understand what methods are best suited for their available data and resources.

Reporting organizations can also turn to additional industry-specific guidance built-on the GHGP, like the Partnership for Carbon Accounting Financials’ (PCAF) Standard for financed emissions.

Examples of Companies Measuring Scope 3 Emissions

Apple is one large company that’s already started measuring its scope 3 emissions. They enlisted help from Fraunhofer IZM to verify their scope 3 emissions in recent reports. In their most recent report, Apple found that 98% of its carbon footprint is made up of scope 3 emissions from the creation, use, and disposal of its products.

PepsiCo also measures scope 3 emissions, and is striving to reduce its absolute indirect value chain (scope 3) by 40% by 2030 (against a 2015 baseline). Part of their climate mitigation strategy includes developing efficient and alternative solutions in transportation and distribution, as well as shifting to renewable electricity and fuels in manufacturing and fleet. PepsiCo will also engage with its suppliers and value chain partners to reduce emissions in their operations and beyond.

What Are the Scope 3 Categories?

Scope 3 covers 15 total categories, further broken down into upstream and downstream emissions. The GHGP created these categories to provide organizations with more guidance and structure when reporting on the many emissions that fall under this scope. The categories and guidance also help avoid double-counting within an organization’s own footprint and support consistent and comparable reporting.

Organizations are only required to report on categories if they’re relevant to them. For example, a company producing a product sold to final consumers would not have emissions from the intermediate processing of sold products (category 10). A best practice is to include explanations for any categories deemed not relevant. For the above example this would look like:

Emissions from scope 3 category 10: processing of sold product are considered not relevant for our company because it sells a final product that does not undergo any additional processing prior to being sold to the end user.

Below, we’ll go over each scope 3 emissions category in more detail.

Upstream Activities

Upstream activities cover emissions created by an organization’s purchases to provide their goods and services and support day-to-day operations. This can range from services, like an outsourced IT team, to tangible assets, like purchased materials.

The GHGP organizes the following categories under upstream activities.

Category 1: Purchased Goods and Services

This category covers emissions from the production of all purchased or acquired products and services not covered in categories 2 to 8. Since it can encompass many purchases, organizations can group them further by use: production-related (like parts for their product), also referred to as direct purchasing, and non-production-related (like HR software), also referred to as indirect purchasing.

Category 2: Capital Goods

Category 2 includes emissions from the production of purchased or acquired capital goods. The GHGP defines capital goods as final products with extended life that are used to:

  • Provide a service

  • Deliver, sell or store merchandise

  • Produce a product

Since organizations may categorize assets differently, the GHGP lets reporters determine what goods fall under category 1 and category 2, but organizations should not double-count. 

The GHGP also requires organizations to account for the cradle-to-gate emissions in the year they’ve acquired capital assets, similar to how they’d account for category 1 emissions. This may differ from how organizations normally amortize, depreciate or discount capital goods over time in financial accounting.

Category 3: Fuel- and Energy-Related Activities

Category 3 covers emissions from fuel- and energy-related activities that aren’t covered in scopes 1 and 2. “Energy” in this case refers to electricity, cooling, heating and steam. 

This category covers the following fuel- and energy-related activities:

  • Upstream emissions of purchased energy or fuels, meaning the transportation, creation, and extraction of fuels consumed by the reporting company or fuels consumed in the generation of energy that is used by the reporting company

  • Transmission and distribution (T&D) losses, meaning the generation of energy that’s consumed by a T&D system

  • Generation of purchased electricity sold to end users, meaning the generation of energy (including upstream emissions and combustion) purchased by the reporting organization and sold to end users - reported by the utility company or energy retailer

This category does not cover emissions from the combustion of the fuel and energy consumed by the organization, since these are covered in scopes 1 and 2.

Category 4: Upstream Transportation and Distribution

This category looks at emissions generated from third-party transportation and distribution services paid for by the reporting company. This can include the emissions generated to transport supplies between warehouses and from the storage of goods in warehouses or distribution centers.

Category 5: Waste Generated in Operations

Category 5 looks at emissions created by the third-party treatment and disposal of waste from a company’s controlled or owned operations. This covers all future emissions from waste and includes both wastewater and solid waste. Emissions from category 5 can optionally include the transportation of waste from the reporting company to the waste vendor. These emissions include the scope 1 and scope 2 emissions of an organization’s third-party waste management company(s), when available.

Category 6: Business Travel

This category covers emissions generated from employee transportation for business-related activities in third-party-owned or operated vehicles that are not for day-to-day commuting. 

Organizations also have the option to include emissions from hotels. 

This category does not cover the following emissions:

  • Travel in vehicles owned or controlled by the organization since this is covered in scope 1

  • Employee commuting, since this is covered in scope 3, category 7

  • Travel in leased vehicles, since this is covered in scope 3, category 8

Category 7: Employee Commuting

Category 7 covers emissions from employee commutes between their workplace and home.

Organizations can also include emissions generated from remote work if it is anticipated to be significant or they have had structural changes transitioning from in-office working to remote working.

Category 8: Upstream Leased Assets

This category looks at emissions from the operation of assets the reporting organization leases from other organizations in the reporting year and not yet included in the reporting organization’s scope 1 or scope 2 inventories. Organizations will include the lessor’s scope 1 and 2 emissions in their emissions for the leased asset.

Downstream Activities

Downstream activities look at how emissions created as goods and services make their way from the organization’s operations to the end user. These activities can range from product distribution to retailers to customers’ product disposal.

The GHG Protocol organizes the following categories under downstream activities.

Category 9: Downstream Transportation and Distribution

Category 9 focuses on emissions generated from transportation and distribution services paid for by the company’s customers - whether that’s a downstream intermediate customer (e.g. Final manufacturer or wholesaler) or the final end customer.

Organizations that sell an intermediate product should report on the transportation and distribution from the point of sale to either the end-user or the business customer when that transportation is paid for by the downstream entity.

Organizations can also optionally include emissions from storage and retail customer travel to and from stores.

Category 10: Processing of Sold Products

This category looks at emissions created when third parties process sold intermediate products following the sale by the reporting organization. Intermediate products are goods integrated into another product before use or used to produce another product, like paint or wood used to craft a dining table.

Organizations will include scope 1 and 2 emissions from downstream value chain entities involved in the process of these emissions. Since organizations don’t always know the end use of their products, the GHGP provides guidance for calculating scope 3, category 10 emissions in this scenario. The GHGP encourages organizations to pick a method based on their ability to collect data from partners and on their own business goals.

Category 11: Use of Sold Products

Category 11 focuses on emissions created from sold services and goods by the reporting organization. It encompasses the expected lifetime emissions for all relevant products across an organization’s product portfolio for all products sold during the reporting year.

This category further divides sold products into two types:

  • Direct use-phase emissions (required) include products that directly consume fuel or energy during use and GHG and products that form or contain GHG that are emitted during use

  • Indirect use-phase emissions(encouraged if they’re expected to be significant) include products that indirectly consume energy or fuel during use

Organizations reporting on avoided emissions must report separately from their scope 1, 2, and 3 inventories.

Category 12: End-of-Life Treatment of Sold Products

This category looks at emissions from waste treatment and disposal of sold products at the end of their life cycle. That includes the total expected end-of-life emissions from all products sold during the reporting year. 

For sold intermediate products, organizations should account only for the emissions associated with the intermediate product at the end of life, and not for the final product it helped create.

Calculating these emissions requires assumptions about consumers' end-of-life treatment since it’s difficult to know how consumers will dispose of products. Organizations should report on these assumptions and methods used to calculate these emissions.

Category 13: Downstream Leased Assets

Category 13 covers emissions generated from the operation of owned or leased assets leased or subleased to other entities that aren’t included in scopes 1 or 2.

The GHGP acknowledges that it may not be valuable to differentiate assets that are leased (category 13) and sold (category 11) to customers. In this case, the GHGP recommends reporting these emissions under category 11 instead of category 13 to avoid double-counting.

Category 14: Franchises

This category encompasses emissions from franchise operations. This is applicable for franchisors and includes scope 1 and 2 emissions from franchisees. 

Scope 3 emissions from the franchisee can optionally be included if they are anticipated to be significant. Franchisors can also choose to include their franchisees’ scope 3 emissions under category 1 depending on the purchasing model.

Category 15: Investments

Category 15 emissions are also called financed emissions and cover emissions associated with investments. This category is mainly for financial institutions, but it’s relevant for all other organizations with investments.

This category is broken into four types:

  • Project finance

  • Debt investments

  • Managed investments and client services

  • Equity investments 

Emissions should be allocated based on the organization’s share of investment in the investee. Since portfolios can change over time, organizations should either choose a fixed point in time or use a representative average from the reporting year.

Organizations can look to the GHGP’s guidance on category 15 emissions along with guidance from the Partnership for Carbon Accounting Financials (PCAF) for further information on calculating financed emissions.

Are These Emissions Regulated?

Scope 3 emissions are voluntary under the GHGP, but carbon disclosure mandates vary between countries and other governing entities. For example, the U.S. Securities and Exchange Commission (SEC) has proposed rules that would require certain larger companies to include scope 3 emissions in their climate-related disclosures. The Science Based Targets initiative (SBTi) requires companies to cover scope 3 if scope 3 makes up more than 40% of their overall emissions.

Does Net-zero Include Scope 3?

Reaching Net-zero should consider an organization’s entire value chain of emissions, including those generated by suppliers and end-users (scope 3). Rapid and significant cuts in value chain emissions are a core focus of the Net Zero standard and must be the ultimate priority for organizations. Most organizations will require deep decarbonization of 90-95% to reach net-zero under the Standard.

How Can Reporting Organizations Reduce Scope 3 Emissions?

Organizations can reduce their scope 3 emissions by prioritizing their highest-impact reductions. In the meantime, they can work with suppliers and other stakeholders to look for opportunities to reduce emissions along their value chain. Here are some of the steps they can take to start lowering their scope 3 emissions:

  • Engage suppliers to encourage them to measure and reduce emissions; Prioritize working with suppliers and vendors who are taking actions to reduce their carbon footprint.

  • Prioritize collecting more easily accessible and collectible data and progressively work to gain more granularity for all Scope 3 data.

  • Work with customers and retailers to invest in R&D to reduce emissions for product usage and disposal.

  • Engage with industry working groups to advance emissions data and help improve methodologies, tools, and other resources. For example, the Sustainable Apparel Coalition and Higg Co. provide apparel-specific accounting guidance, collect supplier data, and maintain an EF database.  

Reduce emissions within your control, like those associated with business travel, commuting, and waste generation.

Do Scope 3 Emissions Include Double-counting?

The GHGP’s scope 3 guidance is flexible to help organizations avoid double-counting between categories within their own inventory.

For example, some purchases may not clearly fit into category 1 or category 2. It’s up to the discretion of that organization to categorize their emissions, but they must not double-count between categories. 

Organizations can work on avoiding double-counting in their own inventory by familiarizing themselves with categories and assigning ambiguous emissions to a single category. If organizations determine that double-counting in their own inventory is inevitable, they should include an explanation in their disclosure.

Double counting across organizations and value chains is also a consideration, but is complex and should not be used as justification for excluding emissions from an organization’s own inventory unless it is mandated by a reporting requirement.

How To Start Reducing Scope 3 Emissions

Energy (75.6% of emissions or 37.6 GtCO2e), agriculture (11.6% of emissions or 5.8 GtCO2e), and industrial processes (6.1% of emissions or 3.1 GtCO2e) have the highest overall emissions according to the World Resources Institute (WRI).

The WRI says that reducing large emissions sources is a great place to start, but change is necessary for all sectors. This includes actions like phasing out coal in electricity generation.

Why Should Organizations Manage These Emissions if They’re Not Required?

Organizations should manage scope 3 emissions to make the highest impact possible when reducing their carbon footprint while also improving their operations. Many investors, shareholders, and customers are increasingly demanding this information.

There are many tangible financial and long-term business benefits organizations can gain from managing their scope 3 emissions. Below are a few opportunities that can open up:

  • Meet or get ahead of mandated emissions requirements

  • Build trust and transparency with investors, customers, employees, and other stakeholders

  • Improve efficiency and lower costs with operations, products, and services. Taking scope 3 into account helps companies understand their value chain from a system’s perspective, unlocking opportunities for better design and collaborative innovation with suppliers. 

On a larger scale, tackling scope 3 emissions helps organizations play their part in limiting global warming. Rising temperatures are a global issue that requires everyone’s participation. Although measurement is difficult, it’s still doable with the right tools in place and buy-in from your team.

Finding the right carbon management platform is the easiest way to automate as much as possible and move away from manual measurement. 

See how you can use Persefoni’s all-in-one carbon accounting platform to measure and disclose your scope 3 emissions.

Summary: Unpacking Scope 3 Emissions [Infographic]



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Persefoni is a leading Climate Management & Accounting Platform (CMAP). The company’s Software-as-a-Service solutions enable enterprises and financial institutions to meet stakeholder and regulatory climate disclosure requirements with the highest degrees of trust, transparency, and ease. As the ERP of Carbon, the Persefoni platform provides users with a single source of carbon truth across their organization, enabling them to manage their carbon transactions and inventory with the same rigor and confidence as their financial transactions.

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