Scope 3 categories: how to calculate each of the fifteen

The GHG Protocol Scope 3 Standard sets eight upstream categories — purchased goods and services, capital goods, fuel- and energy-related activities, upstream transportation and distribution, waste generated in operations, business travel, employee commuting and upstream leased assets — and seven downstream: downstream transportation and distribution, processing of sold products, use of sold products, end-of-life treatment of sold products, downstream leased assets, franchises and investments.

The GHG Protocol's Technical Guidance offers four methods for category 1, from most to least specific: supplier-specific (product-level cradle-to-gate data from the supplier), hybrid (supplier Scope 1 and 2 data plus secondary data for the rest), average-data (mass or units purchased multiplied by an industry-average factor) and spend-based (money spent multiplied by a factor per unit of economic value). In the UK the usual spend-based source is Defra's spend-based emissions multipliers.

Both, in different places. The GHG Protocol treats the spend-based method as the last resort for calculation but useful for screening, because spend and emissions may not correlate well. A common pattern is to screen every category with spend-based estimates, then move the largest categories to activity-based or supplier-specific data. UK SRS S2 requires inputs to be prioritised by direct measurement, activity-specific data, timely and representative data, and verification, and to prefer primary data all else being equal.

Paragraphs B38 to B57 of UK SRS S2 set a measurement framework. The entity uses all reasonable and supportable information available without undue cost or effort, prioritises inputs using four characteristics (direct measurement, data from specific activities, timely and representative data, and verified data), prefers primary data all else being equal, and discloses the extent to which its measure uses inputs from specific activities and verified inputs. The standard presumes that Scope 3 can be estimated reliably using secondary data and industry averages.

The GHG Protocol lists criteria for identifying relevant Scope 3 activities: size, influence, risk, stakeholders, outsourcing, sector guidance and spending or revenue analysis, plus any other criteria the company or its sector develops. The most rigorous approach, in the GHG Protocol's words, is to use screening methods to estimate every activity and rank them from largest to smallest. Under the Scope 3 Standard, excluded activities must be disclosed and justified.

The GHG Protocol Scope 3 Standard uses five: technological representativeness, temporal representativeness, geographical representativeness, completeness and reliability. Companies should select the most representative, complete and reliable data available, describe the data quality of what they report, and improve it over time, prioritising activities with relatively low data quality and relatively high emissions.

Many carbon accounting products automate parts of the work, such as mapping spend lines to categories, applying factor sets and collecting supplier data. None changes the underlying methods: the calculations remain the GHG Protocol's methods for each category, and the reporting company remains responsible for its boundary, data and disclosures. Judge a tool by which methods it supports for your largest categories and whether it keeps an audit trail of factors and data by year.

UK SRS S2 paragraph 29A permits an entity to limit its category 15 measure to financed emissions — emissions attributed to loans and investments, including loans, project finance, bonds, equity investments and undrawn loan commitments, and assets under management for asset managers — and to exclude derivatives. The GHG Protocol methods for category 15 are investment-specific, project-specific and average-data; financial institutions commonly use the PCAF standard.