Scope 3 Frequently Asked Questions

Disclaimer: These responses are meant to be helpful but are not intended to be the final word on how to interpret GHG Protocol standards. For the authoritative source, please refer to the relevant GHG Protocol standards. Neither WBCSD, WRI, nor other individuals who contributed to this response assume responsibility for any consequences or damages resulting directly or indirectly from its application in a specific use case.

Table of Contents

1. How are scope 3 emissions organized?
2. Is there guidance on conducting and interpreting a scope 3 screening exercise?
3. How do GHG Protocol standards prevent double counting of emissions within a company's GHG inventory?
4. How should companies address double counting of scope 3 emissions within a company's GHG inventory?
5. What are the minimum and optional boundaries of each scope 3 category?
6. What are the minimum boundaries for Category 15 (Investments)?
7. Should I report emissions associated with equity investments in subsidiaries or join ventures in scope 3, Category 15?
8. How do I account for emissions from teleworking?
9. How should companies account emissions from intermediate products in a scope 3 inventory?

1. How are scope 3 emissions organized?

The GHG Protocol Corporate Standard divides a company’s emissions into direct and indirect emissions.

• Direct emissions are emissions from sources that are owned or controlled by the reporting company.
• Indirect emissions are emissions that are a consequence of the activities of the reporting company but occur at sources owned or controlled by another company.

Emissions are further divided into three scopes (see table below). Direct emissions are included in scope 1. Indirect emissions are included in scope 2 and scope 3. While a company has control over its direct emissions, it has influence over its indirect emissions. A complete GHG inventory therefore includes scope 1, scope 2 and scope 3.

Overview of the scopes

Source: Scope 3 Standard, Table 5.1 (Overview of the scopes), p. 28

The Scope 3 Standard categorizes scope 3 emissions into 15 distinct categories. The categories are intended to provide companies with a systematic framework to organize, understand and report on the diversity of scope 3 activities within a corporate value chain.  
The categories are designed to be mutually exclusive, such that, for any one reporting company, there is no double counting of emissions between categories. Each scope 3 category is comprised of multiple scope 3 activities that individually result in emissions. Each category is described in detail in the Scope 3 Standard (Chapter 5).  
The scope 3 categories are organized into upstream and downstream emissions. The distinction is based on the financial transactions of the reporting company: 

• Upstream emissions are indirect GHG emissions related to purchased or acquired goods and services.
• Downstream emissions are indirect GHG emissions related to sold goods and services. Downstream emissions also include emissions from products that are distributed but not sold (i.e., without receiving payment). Finally, downstream emissions include emissions attributable to investments.

List of Scope 3 categories

Source: Scope 3 Standard, Table 5.3 (List of Scope 3 categories), p. 32

2. Is there guidance on conducting and interpreting a scope 3 screening exercise?

Calculation methods for each scope 3 category that can be used for screening are provided in the Scope 3 Calculation Guidance. Refer to the Introduction of the Scope 3 Technical Guidance, particularly “Screening to prioritize data collection,” starting on p. 11, and the Scope 3 Standard, section 7.1. Further, refer to guidance on using environmentally-extended input-output (EEIO) data and proxy data on p. 17 and 18 of the Scope 3 Technical Guidance.

To summarize:

Companies may use a combination of approaches and criteria to identify priority activities. For example, companies may seek higher quality data for all activities that are significant in size, activities that present the most significant risks and opportunities in the value chain, and activities where more accurate data can be easily obtained. Companies may choose to rely on relatively less accurate data for activities that are expected to have insignificant emissions or where accurate data is difficult to obtain. (See Appendix C for guidance on developing a data management plan, including strategies for obtaining more accurate data over time).

The most rigorous approach to identifying priority activities is to use initial GHG estimation methods to determine which scope 3 activities are expected to be most significant in size. A quantitative approach gives the most accurate understanding of the relative magnitudes of various scope 3 activities. To prioritize activities based on their expected GHG emissions, companies should: 

• use initial GHG estimation (or screening) methods to estimate the emissions from each scope 3 activity (e.g., by using industry-average data, environmentally-extended input output data (see box 7.1 in the Scope 3 Standard, p. 66), proxy data, or rough estimates); and
• rank all scope 3 activities from largest to smallest according to their estimated GHG emissions to determine which scope 3 activities have the most significant impact.

Companies may choose to prioritize scope 3 activities based on their relative financial significance or other criteria (Scope 3 Standard, p. 66), including activities that:

• the company has influence over;
• contribute to the company’s risk exposure;
• stakeholders deem critical;
• have been identified as significant by sector-specific guidance; or
• meet any additional criteria developed by the company or industry sector (Scope 3 Standard, Table 6.1, p. 61)

For more information and further reading:

• Scope 3 Standard, Chapter 7 (Collecting Data)
• Scope 3 Standard, Table 6.1 (Criteria for identifying relevant Scope 3 activities), p. 61
• Scope 3 Calculation Guidance “Screening to prioritize data collection,” starting on p. 11

3. How do GHG Protocol standards prevent double counting of emissions within a company's GHG inventory?

By properly accounting for emissions as scope 1, 2, or 3, and adhering to the GHG Protocol Scope 3 Standard, a company can ensure its emissions are recorded separately in different categories, avoiding double counting across scopes and scope 3 categories.

Scope 1, scope 2 and scope 3 are mutually exclusive for the reporting company, such that there is no double counting of emissions between the scopes. A company’s scope 3 inventory does not include any emissions already accounted for as scope 1 or scope 2 by the same company (Scope 3 Standard, p. 27). “If a company identifies any potential double counting of emissions between scope 3 categories or within a scope 3 category, the company should avoid double counting by only reporting scope 3 emissions from the activity once, clearly explaining where the emissions are reported, and providing cross-references, if needed” (Scope 3 Standard, footnote 3, p. 57). The scope 3 “categories are designed to be mutually exclusive, such that, for any one reporting company, there is no double counting of emissions between categories” (Scope 3 Standard, p. 31). Scope 3 Standard, p. 27). The scope 3 “categories are designed to be mutually exclusive, such that, for any one reporting company, there is no double counting of emissions between categories” (Scope 3 Standard, p. 31). “If a company identifies any potential double counting of emissions between scope 3 categories or within a scope 3 category, the company should avoid double counting by only reporting scope 3 emissions from the activity once, clearly explaining where the emissions are reported, and providing cross-references, if needed” (Scope 3 Standard, footnote 3, p. 57).

For more information and further reading: 

• Scope 3 Standard, Chapter 5 (Identifying Scope 3 Emissions)

4. How should companies address double counting of scope 3 emissions and reductions across value chain partners?

Scope 3 emissions occur from sources owned or controlled by other entities in the value chain (e.g., materials suppliers, third-party logistics providers, waste management suppliers, etc.). As such, multiple entities may account for the same scope 3 emissions within the same value chain, typically in a different scope or scope 3 category.  

For example: the scope 1 emissions of a power generator are the scope 2 emissions of an electrical appliance user, which are in turn the scope 3 emissions of both the appliance manufacturer and the appliance retailer. This type of overlap is a natural feature of a value chain. Moreover, each of these four companies has different and often mutually exclusive opportunities to reduce emissions. The appliance manufacturer can increase the efficiency of the appliance it produces. The product retailer can offer more energy-efficient product choices. And the electrical appliance user can use the appliance more efficiently, using less energy. Each entity, by accounting for value chain emissions, can plan and manage decarbonization activities accordingly. Scope 3 accounting facilitates the simultaneous action of multiple entities to reduce emissions throughout society. Because of this type of double counting, scope 3 emissions should not be aggregated across companies to determine total emissions in a given region.

Companies may find double counting of scope 3 emissions between companies’ GHG inventories to be acceptable for purposes of reporting scope 3 emissions to stakeholders, driving reductions in value chain emissions, and tracking progress toward each reporting company’s scope 3 reduction target. To ensure transparency and avoid misinterpretation of data, companies should acknowledge any potential double counting of reductions or credits when making claims about scope 3 reductions. For example, a company may claim that it is working jointly with partners to reduce emissions, for example, in cases where multiple value chain partners achieve scope 3 reductions by the same action taken by one or more entities, rather than taking exclusive credit for the scope 3 reduction(s) resulting from the actions of other entities in the value chain.  

If GHG reductions take on a monetary value or receive credit via a GHG reduction program, companies should avoid double counting of credits from such reductions. To avoid double crediting, companies should specify exclusive ownership of reductions through contractual agreements (Scope 3 Standard, p. 108).

For more information and further reading:

• Scope 3 Standard, Chapter 5 (Identifying Scope 3 Emissions), p. 26-28
• Scope 3 Standard, section 9.6 (Addressing double counting of scope 3 reductions among multiple entities in a value chain), p. 108

5. What are the minimum and optional boundaries of each scope 3 category?

Table 5.4 in the Scope 3 Standard (p. 34), copied below, sets minimum boundaries for each category to standardize reporting. These boundaries help companies identify which activities' emissions must be included. Optional emissions are also noted for flexibility.

The minimum boundaries ensure significant activities are covered, without requiring companies to account for emissions endlessly across the value chain. Companies can include additional emissions beyond these boundaries where relevant or exclude emissions included in the minimum boundary, provided they clearly disclose and justify any exclusions (Scope 3 Standard, Chapter 6 (Setting the Scope 3 Boundary)).

Description and boundaries of scope 3 categories

Source: Scope 3 Standard, Table 5.4 (Description and boundaries of scope 3 categories), p. 34 

For more information and further reading:

• Scope 3 Standard, “Minimum boundaries of scope 3 categories”, p. 31 and Table 5.4 (Description and boundaries of scope 3 categories), p. 34-37.

6. What are the minimum boundaries for Category 15 (Investments)?

The Scope 3 Standard divides financial investments into four types:  

• Equity investments  
• Debt investments  
• Project finance  
• Managed investments and client services  

Table 5.9 and table 5.10 in the Scope 3 Standard provide GHG accounting guidance for each type of financial investment. Table 5.9 provides the types of investments included in the minimum boundary of category 15. Table 5.10 identifies types of investments that companies may optionally report, in addition to those provided in table 5.9.  

The minimum boundary for Category 15 includes an investor’s proportional share of scope 1 and scope 2 emissions from investees, covering equity investments (using company capital and balance sheet), debt investments with known use of proceeds, and project finance. Scope 3 emissions of investees or projects should also be included when relevant (Scope 3 Standard, p. 51-54; Scope 3 Calculation Guidance, Table 15.1, p. 138).  

Optional activities include debt investments without known use of proceeds, managed investments and client services, and other investments or financial services, which may be reported (Scope 3 Standard, p. 54).  

For more information and further reading:

• Scope 3 Standard, Category 15 (Investments), p. 51-54
• Scope 3 Calculation Guidance, Chapter 15 (Investments), p. 136-152

7. Should I report emissions associated with equity investments in subsidiaries or joint ventures in scope 3 Category 15?

The selection of a consolidation approach affects which activities in the company’s value chain are categorized as direct emissions (i.e., scope 1 emissions) and indirect emissions (i.e., scope 2 and scope 3 emissions). Operations or activities that are excluded from a company’s scope 1 and scope 2 inventories as a result of the organizational boundary definition (e.g., leased assets, investments, and franchises) may become relevant when accounting for scope 3 emissions.  

Scope 3 includes emissions from investments that are excluded from the company’s organizational boundary but that the company partially or wholly owns or controls.  For example, if a company selects the equity share approach, emissions from any asset the company partially or wholly owns are included in its direct emissions (i.e., scope 1), but emissions from any asset the company controls but does not partially or wholly own (e.g., a leased asset) are excluded from its direct emissions and should be included in its scope 3 inventory.

Similarly, if a company selects the operational control approach, emissions from any asset the company controls are included in its direct emissions (i.e., scope 1), but emissions from any asset the company wholly or partially owns but does not control (e.g., investments) are excluded from its direct emissions and should be included in its scope 3 inventory (Scope 3 Standard, p. 28-29).  

If emissions from equity investments are not included in scope 1 or scope 2 (because the reporting company uses either the operational control or financial control consolidation approach and does not have control over the investee), companies account for equity investments in scope 3, category 15 (Investments).

This includes equity investments in subsidiaries, associate companies, and joint ventures where partners have joint financial control. Refer to Table 5.9 (Scope 3 Standard, p. 52).

For reporting companies using the equity share consolidation approach, the scope 1 and scope 2 emissions of investees should be reported in the reporting company’s (investor’s) scope 1 and scope 2 emissions, respectively.  

For more information and further reading:  

• Scope 3 Standard, Category 15 (Investments), p. 51-54, Table 5.9 (Accounting for emissions from investments (required)), and Table 5.10 (Accounting for emissions from investments (optional))  
• Scope 3 Calculation Guidance, Chapter 15 (Investments), p. 136

8. How do I account for emissions from teleworking?

Companies may include emissions from teleworking (i.e., employees working remotely) in category 7 (Employee commuting). This includes emissions associated with energy used in teleworking, i.e., by an employee at home or other location not owned or controlled by the reporting company (e.g., Btu of gas or kWh of electricity consumed). 

To calculate these emissions, a baseline emissions scenario should first be established. Baseline emissions occur regardless of whether the employee was at home (e.g., energy consumed by the refrigerator). The reporting company should only account for the additional emissions resulting from working from home, for example the electricity usage as a result of running the air conditioner to stay cool.

For more information and further reading:  

• Scope 3 Calculation Guidance , Chapter 7 (Category 7: Employee Commuting) and Calculation formula [7.1] (Distance-based method), p. 89  
• Scope 3 Standard, Table [5.4] (Description and boundaries of scope 3 categories (continued)) on p. 34, section "Category 7: Employee commuting" on p. 46, and Table [9.7] (Illustrative examples of actions to reduce scope 3 emissions) on p. 110

9. How should companies account emissions from intermediate products in a scope 3 inventory?

Intermediate goods are “goods that are inputs to the production of other goods or services that require further processing, transformation, or inclusion in another product before use by the end consumer. Intermediate products are not consumed by the end user in their current form” (Scope 3 Standard, p. 39).

Section 5.6 “Applicability of downstream scope 3 categories to final and intermediate products” of the Scope 3 Standard provides guidance and states that: “The applicability of downstream scope 3 categories depends on whether products sold by the reporting company are final products or intermediate products. If a company produces an intermediate product (e.g., a motor), which becomes part of a final product (e.g., an automobile), the company accounts for downstream emissions associated with the intermediate product (the motor), not the final product (the automobile)” (p. 55).

According to Table 5.11 in the Scope 3 Standard (p. 56), companies should account for the following downstream emissions from intermediate products:

• Category 9: Downstream transportation and distribution of intermediate products
• Category 10: Processing of sold intermediate products by customers (e.g., manufacturers)
• Category 11: Direct use-phase emissions of sold intermediate products (i.e., emissions resulting from the use of sold intermediate products that directly consume fuel or electricity during use, fuels and feedstocks, and GHGs or products that contain GHGs that are released during use)
• Category 12: Emissions from disposing of sold intermediate products at the end of their life

If the final use of the intermediate product is unknown or has various potential downstream applications with different GHG profiles, companies may disclose and justify the exclusion of downstream emissions from these categories in their report. However, selective exclusion of specific categories is not permitted. (Scope 3 Standard, p. 60)

For more information and further reading:

• Scope 3 Standard, Chapter 5 (Identifying Scope 3 Emissions), including box 5.3 and section 5.6
• Scope 3 Standard, section 6.4