When calculating an organization's carbon footprint, scope 3 is almost always the largest and most complex category. Yet we see that many companies postpone or underestimate scope 3 because they don't know where to start. In this article, we explain step by step how to calculate scope 3 emissions according to the GHG Protocol, what data you need and how to move from a first estimate to a reliable calculation.
What are scope 3 emissions?
The Greenhouse Gas (GHG) Protocol divides greenhouse gas emissions into three scopes:
- Scope 1: direct emissions from sources the company owns or controls, such as natural gas consumption, company vehicles and refrigerants
- Scope 2: indirect emissions from purchased energy, such as electricity and district heating
- Scope 3: all other indirect emissions in the value chain, both upstream (suppliers) and downstream (customers, distribution)
Scope 3 is by far the largest category for most companies. For a manufacturing company, scope 3 typically accounts for 70-90% of the total footprint. For a service company with few direct emissions, scope 3 can represent more than 95%. This makes scope 3 not only the biggest challenge but also the greatest opportunity for emission reduction.
Scope 3 is relevant for, among others:
- CSRD/ESRS reporting: ESRS E1 requires reporting on scope 1, 2 and 3
- SBTi targets: if scope 3 accounts for more than 40% of the total footprint (which is almost always the case), you must also set scope 3 targets
- Supply chain requirements: an increasing number of clients require a complete scope 1-3 footprint
The 15 scope 3 categories according to the GHG Protocol
The GHG Protocol defines 15 categories of scope 3 emissions, divided into upstream and downstream.
Upstream (categories 1-8)
- Purchased goods and services: the production of everything you purchase, from raw materials to office supplies. Often the largest category
- Capital goods: the production of machinery, buildings and vehicles you acquire
- Fuel- and energy-related activities (not included in scope 1 or 2): extraction and transport of fuels, transmission losses in the electricity grid
- Upstream transportation and distribution: transportation of purchased goods to your location
- Waste generated in operations: processing of your business waste by third parties
- Business travel: flights, hotel stays, rental cars
- Employee commuting: the daily journey of employees to the office
- Upstream leased assets: emissions from assets you lease (if not included in scope 1 or 2)
Downstream (categories 9-15)
- Downstream transportation and distribution: transportation of your products to the customer
- Processing of sold products: further processing of your semi-finished products by customers
- Use of sold products: energy required to use your products
- End-of-life treatment: recycling, incineration or landfill of your products after use
- Downstream leased assets: emissions from assets you lease to others
- Franchises: emissions from franchisees
- Investments: emissions linked to your financial investments
Which categories are typically the largest? For most companies, category 1 (purchased goods), category 4 (upstream transportation), category 6 (business travel) and category 7 (employee commuting) are the most significant. For manufacturing companies, category 11 (use of sold products) can also be substantial.
Step 1: Determine which categories are relevant
You do not need to calculate all 15 categories in equal detail. The GHG Protocol requires you to conduct a screening to determine which categories are material. Rules of thumb:
- Focus on the top 5: in practice, the five largest categories typically cover more than 90% of your scope 3 emissions
- Use a spend-based screening: allocate your total procurement expenditure across categories to make an initial estimate
- Sector-specific: in the food industry, category 1 (raw materials) is dominant; in the IT sector, category 11 (energy consumption of sold products) is often the largest
For categories that account for less than 1-2% of your total footprint, a rough estimate is sufficient. For the material categories, you invest in more accurate data.
Step 2: Collect data
Data collection is the most time-intensive part of scope 3. There are three methods, from rough to precise:
Spend-based method (level 1)
The simplest approach: multiply your procurement expenditure per category by a sector-average emission factor (in kg CO2 per euro). Data sources include ADEME (France), Exiobase and the DEFRA tables (UK).
Example: you spend €500,000 annually on packaging materials. The emission factor for the packaging sector is 0.5 kg CO2/€. Your scope 3 emission for this category is therefore 500,000 x 0.5 = 250,000 kg = 250 tonnes CO2.
The spend-based method is useful as a starting point but lacks precision. Price fluctuations affect the outcome, and sector averages do not account for the specific sustainability performance of your suppliers.
Activity-based method (level 2)
More accurate: use physical activity data instead of financial data. Think kilograms of purchased materials, kilometers of transport, kilowatt-hours of energy consumption or number of flights.
Example: you purchase 100,000 kg of steel. The emission factor for steel production is 1.85 kg CO2/kg. Your emission is 100,000 x 1.85 = 185,000 kg = 185 tonnes CO2.
Supplier-specific method (level 3)
The most accurate method: use actual emission data from your suppliers. This requires your suppliers to calculate their own carbon footprint and share this data with you. This is where location-specific emission data from supply chain partners becomes crucial.
What data do you need?
The required data varies by category:
- Category 1 (procurement): purchase volumes per product group (kg, units, m3) or procurement expenditure per supplier
- Category 4 (transportation): tonne-kilometers, mode of transport (truck, ship, aircraft), distances
- Category 5 (waste): waste weight per stream (residual waste, paper, plastic, wood), treatment method (recycling, incineration, landfill)
- Category 6 (business travel): flight kilometers per class, hotel nights, train kilometers
- Category 7 (employee commuting): number of employees, average commuting distance, mode of transport, number of office days
Step 3: Calculate emissions
The basic formula for calculating emissions is straightforward:
Emission (kg CO2e) = Activity data x Emission factor
The challenge lies in selecting the right emission factors. Multiple databases are available for this purpose:
- DEFRA (UK Government): widely accepted, updated annually, freely available. Contains emission factors for transport, energy, materials, waste and more
- ecoinvent: the most comprehensive database for life cycle data, with thousands of process descriptions. Paid, but the standard for LCA calculations
- ADEME: French emission factor database, free, well-suited for European calculations
- CO2emissiefactoren.nl: Dutch emission factors, specific to the Dutch energy mix and transportation modes
Important: preferably use location-specific emission factors over global averages. The emission factor for electricity in the Netherlands differs significantly from that in Norway or Poland. Read more about this in our article on changes to the GHG Protocol for scope 2.
Calculation example category 7: employee commuting
Suppose you have 50 employees. A survey reveals:
- 30 employees commute by car (average 25 km one way)
- 10 employees by bicycle/e-bike
- 10 employees by public transport (average 35 km one way)
- Average 220 working days per year, of which 60% in the office (132 days)
Calculation:
- Car: 30 persons x 50 km round trip x 132 days x 0.21 kg CO2/km = 41,580 kg
- Bicycle: negligible
- Public transport: 10 persons x 70 km round trip x 132 days x 0.05 kg CO2/km = 4,620 kg
- Total category 7: 46,200 kg = 46.2 tonnes CO2e
Step 4: Report and improve
After calculating all material scope 3 categories, you prepare the report. According to the GHG Protocol, you report:
- Total scope 3 emissions in tonnes of CO2 equivalents
- Emissions per category
- Calculation method used per category (spend-based, activity-based, supplier-specific)
- Emission factors and sources used
- Any exclusions with justification
Your scope 3 reporting forms the basis for:
- SBTi targets: if scope 3 exceeds 40% (almost always the case), you must set a scope 3 reduction target of at least 2.5% per year
- CSRD/ESRS E1: the climate standard requires reporting on all material scopes
- Reduction actions: the data reveals where the greatest reduction potential lies, enabling you to take targeted measures
Improving data quality over time: in the first year, it is normal to work largely on a spend-based basis. Each year, you shift towards more accurate methods. In years 2-3, you request activity data from your top-20 suppliers. In years 3-5, you encourage suppliers to calculate and share their own footprint.
Common mistakes in scope 3
In our practice, we regularly see the same mistakes recurring:
- Excluding too many categories: some companies report only category 6 and 7 (business travel and employee commuting) because these are easy to calculate. But category 1 (procurement) is almost always many times larger. By excluding the major categories, you miss the bulk of your footprint
- Using only the spend-based method: the spend-based method is fine as a starting point but insufficient as a long-term solution. Price inflation increases your calculated emissions without actual emissions having risen. Work towards activity-based calculations
- Outdated or incorrect emission factors: emission factors change annually. Always use the most recent version of DEFRA, ecoinvent or other sources. And use country-specific factors where possible
- Not linking scope 3 to reduction targets: a footprint without a reduction plan is merely a reporting exercise. The value lies in identifying reduction measures: engaging suppliers, optimizing transport, circular procurement
- Double counting: be alert to overlap between categories. Transport already included in the purchase price of a product (category 1) should not be counted again in category 4
Need help with your carbon footprint?
Kroll SR calculates scope 1-3 footprints according to the GHG Protocol for companies across various sectors. From the initial screening to a complete, audit-ready calculation you can use for SBTi validation and CSRD reporting.
Our approach:
- Data collection: we help set up an efficient data request process for your suppliers and internal departments
- Calculation: we calculate your footprint using the appropriate emission factors and methods, tailored to your sector
- Reporting: the result is a clear report you can use for internal decision-making, supply chain partners and external reporting
- Reduction plan: based on the footprint, we develop a concrete reduction plan with prioritized measures
Want to learn more about our CO2 footprint & SBTi guidance? Or would you prefer to start with your ESG report? Contact us for a no-obligation consultation.
