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Calculating Scope 3: Spend-Based vs Supplier-Specific


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The ISSB recently announced its decision to require company disclosures to include Scope 3 greenhouse gas (GHG) emissions. This means companies reporting using the IFRS Sustainability Disclosure Standards developed by the ISSB will have to report their Scope 3 emissions going forward. However, these companies aren’t the only ones who need to be concerned about Scope 3 reporting—as more governments around the world, like Canadathe USA, and the EU, implement more regulations and mandatory climate disclosures it’s only a matter of time before reporting Scope 3 becomes the future standard.

In this article, we break down what Scope 3 emissions are, the difference between spend-based and supplier-specific calculation methods, and the steps for calculating your Scope 3 emissions.

What are Scope 3 Emissions?

An organization’s GHG emissions are divided into 3 different classifications or scopes. Scope 1 and Scope 2 emissions cover direct and indirect GHGs released by an organization.

Scope 3 emissions are indirect emissions from sources owned or controlled by other companies, organizations, governments, or entities in the value chain such as:

  • Materials suppliers
  • Third-party logistics providers
  • Waste management suppliers
  • Travel suppliers
  • Lessees and lessors
  • Franchisees
  • Retailers
  • Employees
  • Customers

Scope 3 includes any indirect emissions, that are not covered under scope 2, that occur in the value chain of the reporting company, including both upstream and downstream emissions.

How many Scope 3 Categories Are There?

The GHG Protocol classifies Scope 3 emissions into 15 reporting categories of upstream and downstream emissions.

Upstream Scope 3 Reporting Categories:

  1. Purchased goods and services
  2. Capital goods
  3. Fuel- and energy-related activities (not included in scope 1 or scope 2)
  4. Upstream transportation and distribution
  5. Waste generated in operations
  • Employee commuting
  • Upstream leased assets

Downstream Scope 3 Reporting Categories:

  • Downstream transportation and distribution
  • Processing of sold products
  • Use of sold products
  • End-of-life treatment of sold products
  • Downstream leased assets
  • Franchises
  • Investments

These 15 categories are intended to provide companies with a framework to measure, manage, and reduce emissions across their value chain. They’re also designed to help companies avoid double-counting emissions across different categories.

What is the Spend-Based Calculation Method for Scope 3 Reporting?

Spend-Based takes the cost of a purchased good or service and multiplies it by a corresponding emission factor to estimate GHG emissions. This method requires the reporting company to use secondary data to estimate emissions.

Spend-Based Scope 3 Emissions= Cost (Purchased good or service) * Secondary Emission Factor

Secondary data includes industry-average data (e.g., from published databases, government statistics, literature studies, and industry associations), financial data, proxy data, and other generic data. The GHG Protocol website has a more comprehensive list of secondary data sources at:

The GHG Protocol recommends the Spend-Based calculation method be used for Scope 3 categories 1 (Purchased goods and services), 2 (Capital goods), 4 (Upstream transportation and distribution), 6 (Business travel), and 9 (Downstream transportation and distribution).

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What is the Supplier-Specific Calculation Method for Scope 3 Reporting?

Calculating emissions using the Supplier-Specific method involves gathering suppliers’ activity data, identifying the right emissions factor(s), and converting the activities to CO2e. This method requires the reporting company to collect operational data from its suppliers.

Supplier-Specific Scope 3 Emissions= Supplier Activity * Secondary Emission Factor

The GHG Protocol recommends the Supplier-Specific calculation method be used for Scope 3 categories 1(purchased goods and services), 2 (Capital goods), 3 (Fuel- and energy-related activities), and 5 (Waste generated in operations).

How to Select the Right Scope 3 Calculation Method?

The GHG Protocol has developed a reporting standard to make navigating Scope 3 reporting easier. This document provides extensive instructions on accounting for and reporting emissions from companies of all sectors, globally. The Corporate Value Chain (Scope 3) Accounting and Reporting Standard breaks down which calculation methods are recommended for each of the Scope 3 categories mentioned above. This allows organizations to easily calculate their emissions across their entire value chain.

Each calculation method has its advantages, for instance, the supplier-specific method utilizes operational data which provides more accurate calculations but also requires more effort to collect this data from suppliers and the rest of your value chain. On the other hand, the spend-based method utilizes estimates which makes it easier for an organization to start but also might not reflect if you work with suppliers with more sustainable operations than the estimates.

How to Calculate Scope 3 Emissions

The GHG Protocol’s Corporate Value Chain (Scope 3) Accounting and Reporting Standard provides a step-by-step guide to help companies understand their full value chain emissions impact. The standard outlines nine steps organizations can take to develop their scope 3 inventory:

  1. Define Business Goals
  2. Review Accounting & Reporting Principles
  3. Identify Scope 3 Activities
  4. Set The Scope 3 Boundary
  5. Collect Data
  6. Allocate Emissions
  7. Set A Target (Optional) & Track Emissions Over Time
  8. Assure Emissions (Optional)
  9. Report Emissions

The standard expands on each of these steps in detail to allow companies to start accounting and reporting their Scope 3 emissions.

Ready to tackle Scope 3 Reporting? FigBytes makes it easy to disclose all your emissions and manage your climate data, from one centralized platform. Contact us today to learn more.

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