The Scope 3 Cheat Sheet: 15 Categories

C² Team
Jan 7
4 min read

The Structure of Scope 3

Scope 3 represents all indirect emissions (not included in Scope 2) that occur in the value chain of the reporting company. This includes both upstream and downstream emissions. At Csquare (C²), we often find this is where 90% of a company's carbon risk hides.

Upstream (Categories 1–8): Emissions related to purchased or acquired goods and services (Cradle-to-Gate).
Downstream (Categories 9–15): Emissions related to sold goods and services (Gate-to-Grave).

Part 1: Upstream Emissions

Category 1: Purchased Goods and Services

Definition: Extraction, production, and transportation of goods and services purchased or acquired by the reporting company in the reporting year.
Includes: All upstream emissions of purchased materials (e.g., steel, cotton) and services (e.g., consulting, cloud computing).
Calculation Method:
- Supplier-Specific Method: Collecting actual data from suppliers. Csquare helps clients automate this data collection to improve accuracy.
- Average-Data Method: Estimating emissions based on mass (e.g., kg of steel) x industry average emission factors.
- Spend-Based Method: Estimating emissions based on financial value. This is the least accurate method.
Nuance: This is typically the largest category for non-service companies. Csquare (C²) recommends moving away from spend-based data here as soon as possible.

Category 2: Capital Goods

Definition: Extraction, production, and transportation of capital goods purchased or acquired by the reporting company.
Includes: Machinery, buildings, facilities, vehicles, and IT infrastructure.
Crucial Accounting Rule: Unlike financial accounting where costs are amortized, 100% of the embodied carbon emissions are accounted for in the year of acquisition.

Category 3: Fuel- and Energy-Related Activities

Definition: Emissions related to the production of fuels and energy purchased and consumed by the reporting company that are not included in Scope 1 or Scope 2.
Includes: Mining coal, refining oil (Well-to-Tank), and Transmission & Distribution (T&D) losses on the grid.

Category 4: Upstream Transportation and Distribution

Definition: Transportation and distribution services purchased by the reporting company (inbound logistics).
Includes: Air, rail, road, and marine transport paid for by you.
Boundary Rule: If the supplier pays for transport, it is usually wrapped into Category 1.

Category 5: Waste Generated in Operations

Definition: Emissions from third-party disposal and treatment of waste generated in the reporting company’s operations.
Includes: Wastewater treatment, landfilling, incineration, recycling, and composting.

Category 6: Business Travel

Definition: Emissions from the transportation of employees for business-related activities in vehicles owned by third parties.
Includes: Commercial flights, rail travel, and hotel stays.
Exclusion: Travel in vehicles owned by the reporting company falls under Scope 1.

Category 7: Employee Commuting

Definition: Emissions from the transportation of employees between their homes and their worksites.
Includes: Bus, train, private car, and teleworking (remote work energy usage).

Category 8: Upstream Leased Assets

Definition: Operation of assets leased by the reporting company (lessee) not included in Scope 1 and Scope 2.
Nuance: If you use the Operational Control approach, most leased assets like your office fall under Scope 1 & 2. Csquare (C²) can help you determine which approach fits your reporting boundaries.

Part 2: Downstream Emissions

Category 9: Downstream Transportation and Distribution

Definition: Transportation and distribution of sold products in vehicles not owned by the reporting company.
Includes: Warehousing and customer delivery.
Boundary Rule: This applies when the customer pays for the freight.

Category 10: Processing of Sold Products

Definition: Emissions from processing of sold intermediate products by third parties.
Example: If you sell plastic pellets to a bottle manufacturer, the energy used to melt your pellets falls here.

Category 11: Use of Sold Products

Definition: Emissions from the use of goods and services sold by the reporting company.
Two Types:
- Direct Use-Phase: Products that burn fuel (e.g., cars). Mandatory to report.
- Indirect Use-Phase: Products that consume electricity (e.g., electronics).

Category 12: End-of-Life Treatment of Sold Products

Definition: Waste disposal and treatment of products sold by the reporting company at the end of their life.
Calculation: Requires assumptions about consumer recycling behavior. Csquare uses market-specific waste data to model this accurately.

Category 13: Downstream Leased Assets

Definition: Operation of assets owned by the reporting company (lessor) and leased to other entities.
Example: A property management company leasing space to tenants.

Category 14: Franchises

Definition: Operation of franchises in the reporting year.
Relevance: Critical for franchisors like fast-food chains.

Category 15: Investments

Definition: Emissions associated with the reporting company’s investments.
Relevance: The primary Scope 3 category for Financial Institutions. Csquare (C²) assists firms in aligning these calculations with the PCAF standard.

Summary Table: The "Minimum Boundary"

Category	Minimum Boundary
1. Purchased Goods & Services	All upstream emissions of purchased goods/services.
2. Capital Goods	All upstream emissions of purchased capital goods.
3. Fuel/Energy Activities	Upstream emissions of purchased fuel/electricity + T&D losses.
4. Upstream T&D	Transport services purchased by the reporting company.
5. Waste in Operations	Third-party disposal/treatment of waste.
6. Business Travel	Transport in vehicles not owned by the company.
7. Employee Commuting	Transport between home and work.
8. Upstream Leased Assets	Operation of assets leased by the reporting company.
9. Downstream T&D	Transport services purchased by the customer.
10. Processing of Sold Products	Processing by downstream companies.
11. Use of Sold Products	Direct use-phase emissions (Mandatory); Indirect (Optional).
12. End-of-Life Treatment	Waste disposal of sold products.
13. Downstream Leased Assets	Operation of assets leased to other entities.
14. Franchises	Operation of franchises.
15. Investments	Operation of investments (Equity, Debt, etc.).