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How to Calculate Scope 3 Emissions: A Step-by-Step Guide for Beginners

 


Why Scope 3 Matters

Scope 3 emissions are the hidden carbon footprint in your value chain—everything from the coffee beans your office buys to the flights your employees take. They often make up 70-90% of a company’s total emissions, yet most businesses ignore them.

Examples of Scope 3 activities are:

  • Purchased goods (e.g., raw materials, office supplies)
  • Employee commutes and business travel
  • Waste disposal
  • How customers use your products

If you’ve ever wondered, “Why is our carbon footprint so high despite going solar?”, Scope 3 is likely the culprit.

 




Step 1: Understanding All 15 Scope 3 Categories

Before focusing on the most relevant categories for your business, it’s essential to understand the full spectrum of Scope 3 emissions as defined by the GHG Protocol. These 15 categories cover every indirect emission source in your value chain—from raw materials to product disposal.


Here’s a breakdown of all categories, their significance, and real-world examples:

Upstream Emissions (Your Supply Chain)

1. Purchased Goods & Services

  • What it includes: Emissions from producing materials, components, and services you buy.
  • Examples:
    • Office supplies (paper, laptops)
    • Raw materials (steel, cotton, plastic)
    • Outsourced services (accounting, marketing)
  • Why it matters: Often the largest Scope 3 category for manufacturers and retailers.

2. Capital Goods

  • What it includes: Emissions from manufacturing long-term assets (equipment, machinery, buildings).
  • Examples:
    • Factory machines
    • Company vehicles
    • IT servers
  • Why it matters: Significant for industries with heavy machinery (construction, tech).

3. Fuel- & Energy-Related Activities (Not in Scope 1/2)

  • What it includes: Emissions from producing fuels/electricity you buy (even if you don’t burn them).
  • Examples:
    • Extraction of natural gas for your boilers eg. methane
    • Losses in electricity transmission like heat in power lines

o   Diesel burned by pipelines transporting natural gas to your facility

  • Why it matters: Often overlooked but adds 5–15% to energy footprints.

4. Upstream Transportation & Distribution

  • What it includes: Emissions from shipping goods to you (by suppliers or logistics partners).
  • Examples:
    • Freight trucks delivering raw materials
    • Air shipping for urgent orders
  • Why it matters: Critical for e-commerce and global supply chains

 5. Waste Generated in Operations

  • What it includes: Emissions from disposing of your waste (landfill, recycling, incineration).
  • Examples:
    • Food waste from cafeterias
    • Packaging trimmings
  • Why it matters: Landfill waste emits methane (25x worse than CO₂).

6. Business Travel

  • What it includes: Employee travel (flights, trains, hotels).
  • Examples:
    • Sales team flights
    • Hotel stays for conferences
  • Why it matters: A major emissions source for consulting firms and multinationals.

7. Employee Commuting

  • What it includes: Daily travel to/from work (cars, buses, bikes).
  • Examples:
    • Gasoline cars (high emissions)
    • Electric trains (low emissions)
  • Why it matters: Hybrid work has reduced this, but it’s still significant for offices.

8. Upstream Leased Assets

  • What it includes: Emissions from assets you lease (and don’t own).
  • Examples:
    • Leased warehouses
    • Rented company cars
  • Why it matters: Often missed in carbon accounting.

 Downstream Emissions (Your Products & Customers)

9. Downstream Transportation & Distribution

  • What it includes: Emissions from shipping products to customers.
  • Examples:
    • Amazon delivery trucks
    • Air freight for luxury goods
  • Why it matters: E-commerce giants like Shopify track this closely.

10. Processing of Sold Products

  • What it includes: Emissions when customers process your goods (e.g., refining, cooking).
  • Examples:
    • A steel mill’s emissions when making your metal into cars
    • A bakery baking your flour into bread
  • Why it matters: Key for B2B companies selling raw materials.

 11. Use of Sold Products

  • What it includes: Emissions when customers use your product.
  • Examples:
    • Gasoline burned in cars you sell
    • Electricity used by your smartphones
  • Why it matters: The #1 category for automakers and electronics firms.

12. End-of-Life Treatment of Sold Products

  • What it includes: Emissions from disposing/recycling your products.
  • Examples:
    • Landfilled plastic packaging
    • Recycled iPhones
  • Why it matters: Fast fashion and tech companies face scrutiny here.

 13. Downstream Leased Assets

  • What it includes: Emissions from assets you lease to others (e.g., rental cars).
  • Examples:
    • Hertz’s rental car fleet, Grab’s taxis rented to drivers
    • Leased medical equipment
  • Why it matters: Growing focus in the sharing economy.

14. Franchises

  • What it includes: Emissions from franchisees using your brand.
  • Examples:
    • McDonald’s franchise locations
    • 7-Eleven stores
  • Why it matters: Major for global franchises.

 15. Investments

  • What it includes: Emissions from companies you invest in.
  • Examples:
    • A bank’s carbon footprint from oil/gas loans
    • Venture capital funds backing startups
  • Why it matters: Critical for ESG investors.



Which Categories Should Your Business Prioritize?

Industry

Top 3-5 Categories to Focus On

Manufacturing

1 (Purchased goods), 4 (Upstream transport), 11 (Product use)

Retail/E-commerce

1, 9 (Downstream transport), 12 (Packaging waste)

Tech/Software

1, 6 (Business travel), 11 (Data center energy use)

Professional Services

6, 7 (Commuting), 1 (Office supplies)

Key Takeaways

  1. Scope 3 is vast—but you don’t need to track all 15 categories at once.
  2. Start with high-impact areas (e.g., purchased goods, business travel).
  3. Use estimates where data is lacking—it’s better than ignoring them!

Next Step: Choose a calculation method based on your priority categories.

 


Step 2: Choosing a Scope 3 Calculation Method

Calculating Scope 3 emissions requires selecting the right method based on data availability and accuracy needs. Below, we explain the three primary approaches, their formulas, and real-world examples to help you decide which is best for your business.

1. Spend-Based Method (Simplest)

What It Is

Estimates emissions using financial spending data multiplied by industry-average emission factors (per dollar spent).

When to Use It

✔ Small businesses with limited supplier data
✔ Quick initial assessments
✔ Low-priority categories (e.g., office supplies)

Formula

Emissions (kg CO₂e) = Money Spent ($) × Emission Factor (kg CO₂e/$)

Example

  • Activity: Spent $50,000 on laptops last year.
  • Emission Factor: 0.5 kg CO₂e per $1 spent on electronics (from EPA EEIO).
  • Calculation:

$50,000 × 0.5 kg CO₂e/$ = 25,000 kg CO₂e (25 metric tons)


Pros & Cons

Pros

Cons

✅ Fast, low-effort

❌ Less accurate (uses averages)

✅ No supplier engagement needed

❌ Misses supplier-specific efforts (e.g., renewable

 

2. Hybrid Method (Balanced Approach)

What It Is

Combines supplier-specific data (where available) with spend-based estimates for the rest.

When to Use It

✔ Mid-sized businesses with some supplier collaboration
✔ High-impact categories (e.g., raw materials)

Formula

Total Emissions=(∑Supplier-Specific Data) + (∑Spend-Based Estimates)

Example

  • Activity: Purchased $200,000 worth of steel last year.
    • Supplier A (provides carbon data): 100 tons steel × 1.85 kg CO₂e/kg = 185,000 kg CO₂e.
    • Supplier B (no data): $100,000 × 0.3 kg CO₂e/$ (industry avg.) = 30,000 kg CO₂e.
  • Total:

185,000 kg + 30,000 kg = 215,000 kg CO₂e (215 metric tons)

 

Pros & Cons

Pros

Cons

✅ More accurate than spend-based

❌ Requires supplier engagement

✅ Flexible for partial data

❌ Still uses estimates for gaps

 

3. Physical Unit Method (Most Accurate)

What It Is

Calculates emissions using actual quantities (kg, liters, km) multiplied by physical emission factors.

When to Use It

✔ Large companies with detailed supplier data
✔ High-stakes categories (e.g., product lifecycles)

Formula

Emissions (kg CO₂e)=Quantity Used×Emission Factor (kg CO₂e/unit)

Example

  • Activity: Shipped 10,000 kg of goods via air freight.
  • Emission Factor: 8.5 kg CO₂e/kg of air freight (from DEFRA).
  • Calculation:

10,000 kg × 8.5 kg CO₂e/kg = 85,000 kg CO₂e (85 metric tons)


Pros & Cons

Pros

Cons

✅ Highest accuracy

❌ Requires granular data

✅ Recognized by auditors

❌ Time-intensive to collect


How to Choose the Right Method

Factor

Spend-Based

Hybrid

Physical Units

Effort Required

Low

Medium

High

Data Needs

Only $ spent

Partial supplier data

Full supplier data

Best For

SMEs, early stages

Growing businesses

Large enterprises



Real-World Example: Patagonia’s Hybrid Approach

  1. Spend-based: Used for low-impact items (e.g., office supplies).
  2. Physical units: Tracked cotton, nylon, and freight emissions per kg.
  3. Result: Identified that 83% of emissions came from raw materials, leading to a switch to organic cotton.

 

Step 3: Finding Emission Factors for Scope 3 – The Ultimate Guide

Emission factors (EFs) are the "conversion rates" that turn your business activities (like shipping goods or buying materials) into measurable carbon emissions. Choosing the right factors is critical for accurate Scope 3 accounting. 



Here's exactly how to find and use them.

1. Types of Scope 3 Emission Factors

A. Spend-Based Factors

  • What they do: Convert dollars spent into CO₂e (kg CO₂e per $1).
  • Best for: Categories like purchased goods/services (Category 1), capital goods (Category 2).
  • Sources:

Example:

  • 100,000spentonmarketingservices×0.2kgCO2​e/ (EEIO factor) = 20,000 kg CO₂e

 

B. Physical Unit Factors

  • What they do: Convert measurable units (kg, km, kWh) into CO₂e.
  • Best for: Transportation, material use, energy.
  • Sources:

Example:

  • 10,000 kg of steel purchased × 1.85 kg CO₂e/kg = 18,500 kg CO₂e

 

C. Activity-Specific Factors

Specialized factors for common business activities:

Activity

Sample Factor

Source

Air travel (economy)

0.15 kg CO₂e/passenger-km

DEFRA

Sea freight

0.01 kg CO₂e/tonne-km

GLEC Framework

Landfill waste

0.1 kg CO₂e/kg

EPA WARM Model

Employee commuting

0.2 kg CO₂e/km (gasoline car)

DEFRA

 

2. Where to Find Reliable Factors

Free Databases

  1. General Materials & Services
  2. Transportation
  3. Energy & Waste

Paid Databases (More Detailed)

  • Ecoinvent: ~$2,000/year but covers 10,000+ materials
  • GaBi: Popular for product lifecycles
  • SimaPro: Used by Fortune 500s for LCAs

 

3. How to Select the Right Factor

Follow this decision tree:

  1. Is supplier-specific data available?
    • Yes → Use their reported factor (most accurate)
    • No → Proceed to step 2
  2. Can you measure physical units (kg, km, kWh)?
    • Yes → Use physical unit factors (e.g., DEFRA for transport)
    • No → Use spend-based factors (e.g., EPA EEIO)
  3. Does the factor match your region/year?
    • Always prefer localized and recent factors (e.g., 2023 U.S. factors vs. 2015 global averages)

 4. Applying Factors Correctly

Example 1: Shipping Goods (Physical Units)

  • Activity: 5,000 kg shipped 500 km by truck
  • Factor: 0.1 kg CO₂e/tonne-km (from GLEC)
  • Calculation:

5 tonnes × 500 km×0.1 kg CO₂e/tonne-km=250 kg CO₂e

 Example 2: Business Travel (Activity-Specific)

  • Activity: 10 employees fly 2,000 km each (economy)
  • Factor: 0.15 kg CO₂e/passenger-km (DEFRA)
  • Calculation:

10×2,000×0.15=3,000 kg CO₂e (3 metric tons)

 Example 3: Purchased Goods (Spend-Based)

  • Activity: $200,000 spent on plastic components
  • Factor: 0.4 kg CO₂e/$ (EPA EEIO for plastics manufacturing)
  • Calculation:

$200,000×0.4=80,000 kg CO₂e (80 metric tons)

 

Real-World Example: IKEA's Approach

  1. Uses physical unit factors for wood, cotton, and transport.
  2. Uses spend-based for low-impact items like office supplies.
  3. Publishes all factors in their Sustainability Report for transparency.

 

Step 4: Collecting Scope 3 Data 

Collecting data for Scope 3 emissions can feel overwhelming, but it doesn’t have to be. Here’s how to gather what you need without losing your mind, prioritized by feasibility and impact.

1. Start With the "Big Rocks" (Highest-Impact Categories)

Focus on 3-5 categories that typically contribute 80% of Scope 3 emissions for your industry:

Industry

Top Categories to Prioritize

Where to Find Data

Manufacturing

1 (Purchased goods), 4 (Transport), 11 (Product use)

Supplier invoices, logistics records

Retail/E-commerce

1, 9 (Downstream transport), 12 (Packaging waste)

Procurement spend, shipping contracts

Tech/Office-Based

6 (Business travel), 7 (Commuting), 1 (IT hardware)

Expense reports, HR surveys

Pro Tip: Use the Pareto Principle – 20% of effort will cover 80% of your footprint.

 

2. Data Collection Strategies by Category

A. Purchased Goods & Services (Category 1)

Low-Effort Approach (Spend-Based):

  • Pull annual spend data by category from accounting software (QuickBooks, SAP).
  • Apply EPA EEIO factors (kg CO₂e per $ spent).

Example:

  • $500,000 spent on "electronic equipment" × 0.3 kg CO₂e/$ = 150,000 kg CO₂e.

Higher-Accuracy Approach:

  • Ask top 5 suppliers (by spend) for carbon data via a simple email:

"Hi [Supplier], as part of our sustainability efforts, could you share the carbon footprint (kg CO₂e) per unit/product you supply us? Even rough estimates help!"

B. Business Travel (Category 6)

Automated Method:

  • Use corporate card data (Amex, Concur) or travel platforms (TripActions).
  • Multiply flight miles × DEFRA factors (e.g., 0.15 kg CO₂e/km for economy).

Manual Method (No Tech Tools):

  • Sample 3 months of travel, extrapolate annually.

Example:

  • 100 flights × 1,000 km × 0.15 kg CO₂e/km = 15,000 kg CO₂e.

 C. Employee Commuting (Category 7)

Simple Survey Template:

1. How do you commute? (Car, bus, bike, etc.) 

2. Average round-trip distance: ____ km/miles 

3. Days worked onsite/week: ____ 

·       Use DEFRA factors (e.g., 0.2 kg CO₂e/km for gas cars).

Example:

·       50 employees × 20 km/day × 220 days × 0.2 kg CO₂e/km = 44,000 kg CO₂e.

D. Transportation & Distribution (Categories 4 & 9)

For Logistics Partners:

  • Request total tonne-km shipped (weight × distance) from carriers.
  • Apply GLEC factors (e.g., 0.1 kg CO₂e/tonne-km for trucking).

No Partner Data? Estimate:

  • # of shipments/year × average distance × typical truck capacity.

Pro Tips to Avoid Burnout

✅ Start with 1-2 categories (e.g., travel + purchased goods).
✅ Use estimates for now – refine later (e.g., "60% of shipments are by truck").
✅ Leverage existing reports (AP records, fuel cards, utility bills).
✅ Set a time limit (e.g., "2 hours/week for 4 weeks").

Real-World Example: How Patagonia Simplified

  1. Focused first on cotton, nylon, and freight (biggest impacts).
  2. Used:
    • Supplier data for key materials
    • Spend-based for everything else
  3. Cut data collection time by 70% while capturing 90% of emissions.


Step 5: Calculating & Summing Scope 3 Emissions

Now that you’ve collected data and emission factors, it’s time to crunch the numbers. Here’s how to calculate emissions for each category and roll them up into a total Scope 3 footprint—without overcomplicating it.

1. The Basic Calculation Formula

For each activity in your prioritized categories, use:

Emissions (kg CO₂e)=Activity Data × Emission Factor

Variables:

  • Activity Data: Quantity (kg, km, $) from Step 4.
  • Emission Factor: kg CO₂e per unit (from Step 3).

2. Category-by-Category Examples

A. Purchased Goods (Category 1)

Method: Spend-based

  • Data: $200,000 spent on office furniture.
  • Factor: 0.4 kg CO₂e/$ (EPA EEIO for "furniture manufacturing").
  • Calculation:

$200,000 × 0.4 = 80,000 kg CO₂e (80 metric tons)

B. Business Travel (Category 6)

Method: Physical units

  • Data: 50 flights × 1,500 km each (economy class).
  • Factor: 0.15 kg CO₂e/km (DEFRA).
  • Calculation:

50 × 1,500 × 0.15 = 11,250 kg CO₂e (11.25 metric tons)

C. Employee Commuting (Category 7)

Method: Hybrid

  • Survey Data:
    • 30 employees drive 20 km/day × 220 days/year = 132,000 km.
    • 20 employees take trains (10,000 km total).
  • Factors:
    • Car: 0.2 kg CO₂e/km (gasoline).
    • Train: 0.05 kg CO₂e/km (DEFRA).
  • Calculation:

(132,000×0.2) + (10,000×0.05 )= 26,400 + 500 = 26,900 kg CO₂e

 



Summing All Categories

Create a master table to tally your total Scope 3 emissions:

Category

Emissions (kg CO₂e)

Notes

1. Purchased goods

80,000

Spend-based estimate

6. Business travel

11,250

Flight distances × DEFRA

7. Employee commuting

26,900

Survey data × transport modes

Total Scope 3

118,150 (118.15 t)

Handling Partial Data

Don’t have full-year data? Use:

  • Sampling: Calculate 1 month × 12 (adjust for seasonality).
  • Proxies: If missing a facility, apply data from a similar one.

Example:

  • Only have Q1 shipping data? Assume Q1 = 25% of annual volume.

 

Real-World Example: Microsoft’s Approach

  1. Physical units for high-impact categories (e.g., cloud hardware).
  2. Spend-based for low-priority spend (e.g., office supplies).
  3. Total Scope 3 (2023): 15.3 million metric tons (78% of total footprint).


Calculating Scope 3 emissions isn’t just a compliance exercise—it’s a strategic superpower. By following this guide, you’ve learned how to:

  1. Identify your high-impact categories (like purchased goods, travel, and logistics).
  2. Gather data without perfectionism (using spend-based estimates, surveys, and sampling).
  3. Apply the right emission factors (from trusted sources like EPA, DEFRA, or suppliers).
  4. Calculate and sum emissions to see your total value chain footprint.

Do remember, you can:

1.      Start small, improve yearly: Even rough estimates are better than nothing.

2.      Engage suppliers: Simple emails can yield carbon data for your biggest spends.

3.      Set reduction goals: Align with the Science-Based Targets initiative (SBTi) for credibility.

"Scope 3 is where the real carbon footprint hides—and where the most impactful changes happen."

You’ve now got the tools to measure it. The next step? Reduce it. Whether through supplier partnerships, cleaner logistics, or product redesign, your Scope 3 work will separate the leaders from the laggards.







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