Scope 3 - Other indirect emissions

The GHG Protocol defines indirect emissions as emissions that do not originate from equipment owned by your organization, but which you still have an influence over.

For example, in most cases your organization does not own the aircraft that employees travel on, but you still have influence over how many flights are taken, where employees travel to, and whether meetings can be held via video instead. For many organizations, it is therefore natural to set a target to reduce the climate impact from air travel. This impact is reported as part of Scope 3.

This part of the greenhouse gas inventory is voluntary to report, but for many organizations it represents the largest share of their total climate impact. We therefore recommend estimating/calculating the indirect impact you have, so that you can identify areas to work on further.

Upstream emissions

Upstream emissions include the production and processing of goods and services that the organization purchases from others, such as flights and transport services.

Category 1: Purchased goods and services

This category often accounts for a large share of an organization’s total climate impact. It includes the production and transport/delivery of goods and services that your organization purchased during the reporting year. This includes, for example, office supplies, cleaning services, raw materials used in production, etc.

Here, the GHG Protocol uses a “cradle-to-gate” approach, meaning that all climate impacts from the production of purchased products must be included, regardless of how many steps back in the value chain they occur. All transport and logistics are also included up to the supplier. Transport from the supplier to your organization, however, must be reported in Category 4: Upstream transportation and distribution.

Category 2: Capital goods

Capital goods are larger pieces of equipment used, for example, in production; this may include machinery, vehicles, etc. The climate impact from these is calculated in the same way as for Category 1. Unlike in financial accounting, these goods must not be depreciated in the climate inventory; the entire climate impact must be included in the year in which the equipment was purchased. This may cause large year-to-year variations in the climate inventory, which is also why capital goods are separated from “normal” purchases of goods and services (reported in Category 1).

The definition of capital goods may vary somewhat between organizations; it is often useful to use the same definition in the climate inventory as in the financial accounts.

Category 3: Fuel- and energy-related activities

This category includes, for example, emissions from fuel production and the effects of transmission and distribution losses (electricity lost in the grid on its way to you). The category is divided into five parts:

A – Upstream emissions from purchased fuels: Extraction, production, and transport of fuels you have purchased (the combustion of the fuel itself is reported in Scope 1). In our software GHG123, this is calculated automatically based on reported fuel quantities in Scope 1. The emissions are categorized as fuel- and energy-related activities and WTT (well-to-tank).

B – Upstream emissions from purchased electricity: Extraction, production, and transport of fuels used to produce electricity, district heating, district cooling, and steam that you have purchased (the combustion of the fuel is included in the electricity reported in Scope 2). In our software GHG123, this is calculated automatically based on reported electricity quantities in Scope 2. The emissions are categorized as fuel- and energy-related activities and WTT (generation).

C – Transmission and distribution losses (also called grid losses): Loss of energy during the transmission of electricity, district heating, district cooling, and steam that you have purchased. For example, the Norwegian power grid has up to around 10% grid losses; this means that the electricity supplier must produce 110 kWh for every 100 kWh you purchase. The 100 kWh is reported in Scope 2, while the remaining 10 kWh is reported in this category. In our software GHG123, this is calculated automatically based on reported electricity quantities in Scope 2. The emissions are categorized as fuel- and energy-related activities and T&D (transmission and distribution).

D – Upstream emissions from transmission and distribution losses (grid losses): Extraction, production, and transport of fuels used to produce electricity, district heating, district cooling, and steam that is lost during transmission and distribution. In our software GHG123, this is calculated automatically based on reported electricity quantities in Scope 2. The emissions are categorized as fuel- and energy-related activities and WTT (T&D).

E – Electricity generation for resale: If you purchase electricity for resale, the production of that energy is reported in this category.

Category 4: Upstream transportation and distribution

This category includes all transport services that your organization has purchased to transport raw materials or finished products to you, as well as to transport finished products from you to other organizations or customers. It also includes, for example, electricity used in leased warehouses as part of logistics services you have purchased.

Note that this category includes both logistics services TO you and FROM you, as long as you have paid for them. If someone else pays for the transport from you, the emissions must be reported in Category 9: Downstream transportation and distribution.

Category 5: Waste generated in operations

This includes transport related to the treatment of waste and wastewater. You can read more about how this is calculated in our article here.

Category 6: Business travel

Travel undertaken for the organization using vehicles not owned by the organization must be included here. This applies to both air travel and mileage reimbursement for employees’ private vehicles, as well as train, bus, etc.

If you wish, you may also include emissions from hotel stays that employees have had in connection with work.

Category 7: Employee commuting

This includes travel undertaken by employees on a daily basis to and from work.

Category 8: Upstream leased assets

If you lease premises or equipment for which you do not report emissions in Scope 1 or Scope 2, emissions from energy consumption must be reported here.

This applies, for example, to leased data centers/servers for companies that provide software, or leased premises for organizations that follow the “financial control” reporting approach (read more in our article on control approaches).

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Downstream emissions

Downstream emissions concern the climate impact from the use and treatment of goods and services that the organization provides to others, such as electricity consumption from products you sell or their end-of-life treatment.

Category 9: Downstream transportation and distribution

This includes emissions from transportation and distribution that occur after the product has been sold by you, i.e. transport that you do not pay for. As an example; if your organization sells frozen fish, Category 9 would include transport from you to wholesalers (unless you pay for this), electricity for cold storage at the wholesaler, and transport between wholesalers and grocery stores.

You may also include travel undertaken by customers to reach you, for example if you have retail outlets that customers travel to by car.

Category 10: Processing of sold products

If your organization sells products that require further processing before being sold to end users, the climate impact from that processing must be reported in this category.

Category 11: Use of sold products

This category is used to report energy use from the products you sell, if your organization sells products that consume energy during use (e.g. washing machines or apartments). It is also used to report other greenhouse gas emissions from sold products, for example if you sell cars that run on fossil fuels.

Indirect energy use may also be included here; for example, if you sell clothing, energy will be used when it is washed.

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

This includes emissions from waste treatment of products sold by your organization once they are no longer in use. The category also includes disposal of packaging for the products you sell.

Category 13: Downstream leased assets

This includes emissions from premises or equipment that your organization owns and leases out to others.

Category 14: Franchises

If your organization has franchises, emissions from these (e.g. electricity consumption) may be reported in this category.

Category 15: Investments

This category is mainly used by banks and other financial institutions, and includes, for example, emissions from companies that your organization has invested in.

Read more here: https://ghgprotocol.org/standards/scope-3-standard