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.

Scope 3 encompasses all indirect emissions that occur in a company’s value chain. The GHG Protocol divides Scope 3 emissions into 15 distinct value chain categories. 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 Protocol's Scope 3 Standard (Corporate Value Chain 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 disclose and justify the reason for the exclusion.

• 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. In Climate Reporting, this is currently documented in the Appendix tab of the report for Scope 3.6. Equivalent documentation for the other categories is under development.

• Companies shall report Scope 3 emissions in tonnes of carbon dioxide equivalent (t CO₂-equivalent).

Companies reporting under the CSRD must also follow the European Sustainability Reporting Standards (ESRS 1), define the reporting boundaries as per the standard, and disclose and explain any exclusions. To know about the different reporting boundaries, refer to our article here.

How does the GHG Protocol recommend calculating Scope 3 emissions?

The methodology used for calculating 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 descriptions of all 15 categories, along with links to detailed articles that explain the calculation approach for each one.