GHG Protocol - Measuring downstream Scope 3 emissions

In the second half of 2023, our sustainability webinar series walks step-by-step through the GHG Protocol. Aletta Boshoff and Dylan Byrne summarise the key messages from our November webinar, which explains how to measure downstream Scope 3 emissions.

What are Scope 3 emissions?

Scope 3 emissions are indirect emissions that do not arise from an entity’s Scope 2 emissions (purchased electricity, steam, heating and cooling for own use). They relate to the entity’s upstream activities if the entity reports emissions on a ‘cradle-to-gate’ basis, and also downstream activities if the entity reports on a ‘cradle-to-grave’ basis. There are fifteen Scope 3 categories, shown in the diagram below.

Collecting Scope 3 data for downstream emissions

Scope 3 emissions cannot be measured unless data is collected for all of the fifteen categories in the diagram above. During the webinar, we focussed on collecting data for the seven categories of Scope 3 emissions which relate to an entity’s downstream activities. Last month’s webinar discussed how data is collected for upstream activities.

	Category	Description *(extracted from Table [5.4] in the* *Corporate Value Chain (Scope 3) Accounting and Reporting Standard*)	Examples of primary and secondary data (extracted from Table [7.4] in the *Corporate Value Chain (Scope 3) Accounting and Reporting Standard*)
9	Downstream transportation and distribution of sold goods	Transportation and distribution of products sold by the reporting company in the reporting year between the reporting company’s operations and the end consumer (if not paid for by the reporting company), including retail and storage (in vehicles and facilities not owned or controlled by the reporting company) Notes: Outbound transportation and distribution services purchased by the reporting company are included in category 4 (upstream transport and distribution). Category 9 only includes transport and distribution-related emissions that occur after the reporting company pays to produce and distribute its product.	Primary data Activity-specific energy use or emissions data from third-party transportation and distribution partners Activity-specific distance travelled Company-specific emission factors (e.g., per metric ton-km) Secondary data Estimated distance travelled based on industry-average data National average emission factors
10	Processing of sold products	Processing of intermediate products sold in the reporting year by downstream companies (e.g., manufacturers)	Primary data Site-specific energy use or emissions from downstream value chain partners Secondary data Estimated energy use based on industry-average data
11	Use of sold products	End use of goods and services sold by the reporting company in the reporting year Notes: End users include both consumers and business customers. The reporting company’s Scope 3 emissions from use of sold products include the Scope 1 and Scope 2 emissions of end users.	Primary data Specific data collected from consumers Secondary data Estimated energy used based on national average statistics on product use
12	End-of-life treatment of sold products	Waste disposal and treatment of products sold by the reporting company (in the reporting year) at the end of their life Notes: Includes total expected end-of-life emissions from all products sold during the year. The reporting company’s Scope 3 emissions from end-of-life treatment of sold products include the Scope 1 and Scope 2 emissions of waste management companies.	Primary data Specific data collected from consumers on disposal rates Specific data collected from waste management providers on emissions rates or energy use Secondary data Estimated disposal rates based on national average statistics Estimated emissions or energy use based on national average statistics
13	Downstream leased assets	Operation of assets owned by the reporting company (lessor) and leased to other entities in the reporting year, not included in Scope 1 and Scope 2 – reported by lessor Notes: This category applies to lessors. Entities that operate leased assets (lessees) should refer to Category 8 emissions (upstream leased assets). The reporting company’s Scope 3 emissions from downstream leased assets include the Scope 1 and Scope 2 emissions of lessees (depending on the consolidation approach).	Primary data Site-specific energy use data collected by utility bills or meters Secondary data Estimated emissions based on industry-average data (e.g., energy use per floor space by building type)
14	Franchises	Operation of franchises in the reporting year, not included in Scope 1 and Scope 2 – reported by franchisor Note: Franchisors should account for emissions that occur from operations of the franchises (i.e. the Scope 1 and Scope 2 emissions of franchisees).	Primary data Site-specific energy use data collected by utility bills or meters Secondary data Estimated emissions based on industry-average data (e.g., energy use per floor space by building type)
15	Investments	Operation of investments (including equity and debt investments and project finance) in the reporting year, not included in Scope 1 or Scope 2 Notes: This category applies to investors and companies that provide financial services. Tables [5.9] and [5.10] in Corporate Value Chain (Scope 3) Accounting and Reporting Standard) include details of mandatory and optional accounting approaches for determining Scope 3 emissions from different types of equity and debt investments and related services.	Primary data Site-specific energy use or emissions data Secondary data Estimated emissions based on industry-average data

Importance of engaging with your suppliers and customers

Entities need to engage with suppliers and customers throughout the supply chain to obtain the data necessary to calculate Scope 3 emissions. While industry averages (secondary data) may be readily available, this may often result in higher Scope 3 emissions than if primary data were used. It is therefore important that entities engage with suppliers (for Scope 3 upstream emissions) and customers (for Scope 3 downstream emissions) in order to obtain more precise and accurate primary data. An added benefit is that this engagement is likely to speed up the process of carbon emission reduction across the supply chain.

Want to understand more about the GHG Protocol? 

You can find more information about measuring Scope 3 GHG emissions in the Corporate Value Chain (Scope 3) Accounting and Reporting Standard and the Technical Guidance for Calculating Scope 3 Emissions.

You can also register now for more events in BDO's 2024 sustainability webinar series.

If you need a hand in identifying and measuring your Scope 3 emissions, our national sustainability team can help. Contact us today.