An introduction to Scope 3 greenhouse gas emissions

Learn how the Greenhouse Gas (GHG) Protocol defines Scope 3 emissions, how they are calculated and the requirements an organisation needs to follow when reporting their Scope 3 emissions.

How are Scope 3 emissions defined in the GHG Protocol?

As per the GHG Protocol, all reporting organisations must disclose GHG emissions associated with their operations and categorise them as direct or indirect. Direct emissions are emissions from sources that are owned or controlled by the company. Indirect emissions occur as a result of the reporting company’s activities but the actual emissions occur at sources owned or controlled by other entities. Emissions are further divided into three scopes. Direct emissions are included in scope 1, meanwhile indirect emissions are included in Scope 2 and Scope 3. Scope 2 consists solely of emissions arising from the generation of purchased energy, while Scope 3 encompasses all other indirect emissions that occur in a company’s value chain. While a company has control over its direct emissions, it has influence over its indirect emissions.

The GHG Protocol divides Scope 3 emissions into 15 distinct value chain categories, which are explained in detail below. Scope 3 covers both ‘upstream’ emissions, those that occur in the supply chain before the company produces its product or service, and ‘downstream’ emissions, which occur after the product or service has been sold by the company. For instance, a clothing brand’s upstream emissions would include the farming and producing of fabric, while downstream emissions would include washing, wearing, and discarding the clothes by customers. Similarly, for an electronics company, upstream emissions come from extraction of metals and manufacturing of the product, while downstream emissions come from the use and eventual recycling or disposal of the devices.

Scope 3 emissions often represent the largest share of a company’s carbon emissions, sometimes around 90%, but are simultaneously the hardest to measure and reduce because they involve external actors and complex supply chains.

What are the requirements to be followed when reporting Scope 3 GHG emissions?

The GHG Corporate Standard provides a set of requirements that organisations must follow when calculating and reporting their Scope 3 emissions:

Companies shall account for all Scope 3 emissions. If any Scope 3 category is excluded, the company must justify the reason for the exclusion.
Companies shall follow the European Sustainability Reporting Standards (ESRS 1) and define the reporting boundaries as per the standard, disclosing and explaining any exclusions. To know about the different reporting boundaries, refer to our article on the GHG Protocol.
Companies shall use emission factors that include the emissions of all greenhouse gases defined in the Kyoto Protocol. In Ducky, we use emission factors compliant with this requirement.
Companies shall disclose the choice of method(s) and emission factors used for calculating Scope 3 emissions.
Companies shall report Scope 3 emissions in tonnes of carbon dioxide equivalent (t CO₂-equivalent).

The GHG Protocol groups Scope 3 emissions into 15 distinct value chain categories. For each category, it provides multiple calculation methods ranked by the specificity and quality of data, balancing accuracy with effort and data availability:

Supplier-specific method

This method uses primary data from suppliers, including actual emissions related to the product or service supplied.
Data can be taken from life cycle assessments, product carbon footprints, or an environmental product declaration.
It provides the highest accuracy and reflects unique supplier-specific processes and efficiencies. However, it requires close collaboration with suppliers and significant data collection effort.
This method is preferred for Scope 3 categories where precision is critical such as Scope 3 Category 1 (Purchased goods and services) and Scope 3 Category 2 (Capital assets).

Activity-based method

This method uses physical activity data such as litres of fuel burnt or kilometers traveled.
Emission factors correspond to these physical units (e.g., kg CO2-equivalent per km travelled).
It is suitable when companies have access to operational data but cannot obtain supplier-specific data.
It is more accurate than the spend-based method but requires collection and validation of activity data.

Hybrid method

The hybrid approach combines use of accurate activity/supplier-specific data where available and fills remaining gaps with estimates based on secondary data (spend-based, described below).
This method balances accuracy with practicality and manages data gaps effectively.

Spend-based method

This method estimates emissions based on the financial value of goods or services purchased.
Emission factors expressed as kilograms or tons of CO2-equivalent per unit of currency (e.g., per NOK or euro spent) are applied to the spend data.
It is a top-down approach used when physical activity data is unavailable.
The spend-based method is less precise because it assumes average emissions intensity across a sector or region.
It is primarily used for categories with limited activity data (for example: purchased services) or when conducting initial estimates.

The GHG Protocol advises companies to select calculation methods based on the significance of emissions, data availability, business objectives, cost, and effort. Methods with higher specificity and accuracy are preferred for emission categories that have a greater impact. Companies may also apply different methods within a single category for various activities. The Protocol encourages the use of detailed activity data whenever possible to enhance accuracy.

How are Scope 3 emissions calculated in Climate Reporting?

The methodology used for calculating Scope 3 emissions varies across the 15 different Scope 3 categories. Each category employs specific calculation methods, which are chosen based on factors such as data availability and significance. Below, you will find brief explanations of all 15 Scope 3 categories, along with an overview of how each is calculated within Climate Reporting.

Category 3.1: Purchased goods and services

What is included in this category?

Includes all upstream (i.e., cradle-to-gate) emissions from the production of goods and services purchased or acquired by the reporting company.

How is this category calculated in Climate Reporting?

This category is included in Climate Reporting and is calculated using the spend-based method by extracting the monetary value of purchased goods and services from a company’s financial accounts and multiplying it with relevant spend-based emission factors to calculate CO2-equivalents.

What grounds are there to skip this category?

This category accounts for the majority of emissions for most companies. Therefore, it is not recommended to skip this category.

An introduction to Scope 3 greenhouse gas emissions