Chapter 6 — GHG Protocol Scope 3 Standard

6.2 Boundary Requirements

Scope 3 Standard, Chapter 6, “Setting the Scope 3 Boundary,” Page 59

Determining which scope 3 emissions to include in the inventory (i.e., setting the boundary) is a critical decision in the inventory process. The GHG Protocol Corporate Standard allows companies flexibility in choosing which, if any, scope 3 activities to include in the GHG inventory when the company defines its operational boundaries. The GHG Protocol Scope 3 Standard is designed to create additional completeness and consistency in scope 3 accounting and reporting by defining scope 3 boundary requirements.

Determining which Scope 3 emissions to include in a company’s GHG inventory (i.e., setting the boundary) is an important step in the inventory process. The Corporate Standard allows flexibility for companies in deciding which, if any, Scope 3 activities to include in their GHG inventory. For example, a company reporting under the Corporate Standard could elect to voluntarily report only Category 6 (business travel) and Category 7 (employee commuting), without reporting any other Scope 3 categories. However, if companies choose to report under the Scope 3 Standard, they are required to prepare a GHG inventory that represents a true and fair account of their Scope 3 emissions and, therefore, to report all Scope 3 emissions, subject to a relevance assessment. A reporting company is required to disclose its justification for excluding any Scope 3 emissions that it has determined not to be relevant. See Section 6.2.4 for more information about exclusions from Scope 3 inventory.

Discussed below are the Scope 3 Standard’s boundary requirements, including (1) criteria for identifying relevant Scope 3 activities, (2) the time boundary of Scope 3 categories, (3) exclusions from Scope 3 inventory, and (4) biogenic emissions.

6.2.1 Overall Requirements

Scope 3 Standard, Chapter 6, “Setting the Scope 3 Boundary,” Pages 59–60

Requirements in This Chapter

Companies shall account for all scope 3 emissions and disclose and justify any exclusions.
Companies shall account for emissions from each scope 3 category according to the minimum boundaries provided in table 5.4.
Companies shall account for scope 3 emissions of CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3,[1] if they are emitted in the value chain.
Biogenic CO2 emissions that occur in the reporting company’s value chain shall not be included in the scopes, but shall be included and separately reported in the public report.

6.1 Mapping the Value Chain

Companies should map the value chain as a first step toward identifying the scope 3 activities that are included in the inventory. This step is a useful internal exercise to help companies identify scope 3 activities. To the extent possible, companies should create a complete value chain map and/or a complete list of activities in the company’s value chain that includes:

Each of the scope 3 categories and activities included in table 5.4
A list of purchased goods and services and a list of sold goods and services
A list of suppliers and other relevant value chain partners (either by name, type, or spend category).

Because supply chains are dynamic and a company’s supply chain partners can change frequently throughout the reporting year, companies may find it useful to choose a fixed point in time (such as December 31 of the reporting year) or use a representative average of products and suppliers over the course of the reporting year.

Companies should strive for completeness in mapping the value chain, but it is acknowledged that achieving 100 percent completeness may not be feasible. Companies may establish their own policy for mapping the value chain, which may include creating representative, rather than exhaustive, lists of purchased products, sold products, suppliers, and other value chain partners.

To begin identifying the Scope 3 activities to be included in its GHG inventory, a reporting company is encouraged to map its value chain. Specifically, the Scope 3 Standard recommends creating either or both of the following:

A complete value chain map.
A complete list of activities in the company’s value chain that reflects:
- Each of the 15 Scope 3 categories. For more information about these categories, see Section 6.3 (upstream emissions) and Section 6.4 (downstream emissions).
- Purchased goods and services.
- Sold goods and services.
- Suppliers and other relevant value chain partners (by name, type, or spend category).

Acknowledging that it may not always be possible to map a value chain in its entirety, the Scope 3 Standard allows a value chain to be mapped in accordance with a policy the reporting company has established. For example, the reporting company’s mapping policy may include compiling a representative,2 rather than a complete, list of activities related to purchased goods and services, sold goods and services, suppliers, and other value chain partners.

Further, since supply chains can be dynamic (i.e., companies may switch supply chain partners during the reporting year), the Scope 3 Standard recommends that companies consider limiting the suppliers they map or list to either of the following:

Suppliers that existed at a fixed point in time (e.g., December 31 of the reporting year).
A representative average of suppliers over the course of the reporting year.

The example below illustrates how a reporting company may identify a representative average of suppliers.

Example 6-1

Company A, a manufacturer with a dynamic supply chain, develops its first Scope 3 inventory in the current year. To begin this process, A compiles a complete list of activities in its value chain. This list includes raw materials received from suppliers.

Because its supply chain is dynamic, A decides not to identify every supplier from which it received raw materials during the reporting year. Instead, A chooses to identify a representative average of suppliers it used over the course of the reporting year.

Note that alternatively, A could have chosen to identify the suppliers it used at a fixed point in time (e.g., A’s reporting year-end).

Under the Scope 3 Standard, once companies identify the Scope 3 activities that are to be included in their inventory boundaries, they are required to account for their Scope 3 emissions as follows:

“Companies shall account for all scope 3 emissions and disclose and justify any exclusions” — It is recommended that companies apply a relevance screening and avoid excluding any activity that is expected to be relevant (i.e., significant) to their total Scope 3 emissions. See Section 6.2.2 for more information about how to identify relevant activities. For each activity, companies must account for emissions of each of the seven so-called required GHGs (CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3) for which reporting is mandatory if they are emitted in the value chain. See Section 6.2.4 for further discussion of exclusions from Scope 3 inventory.
“Companies shall account for emissions from each scope 3 category according to the minimum boundaries” — See Section 6.3.1.1 for discussion of minimum boundaries.
“Biogenic CO2 emissions that occur in the reporting company’s value chain shall not be included in the scopes, but shall be included and separately reported in the public report” — See Section 6.2.5 for discussion of biogenic emissions.

6.2.2 Criteria for Identifying Relevant Scope 3 Activities

A reporting company’s Scope 3 boundary must appropriately reflect its GHG emissions to serve the decision-making needs of those inside and outside the reporting company that use its GHG report.

The table below, which is adapted from Table 6.1 of the Scope 3 Standard, lists the criteria for determining the relevance of Scope 3 activities.

Table 6-1 Criteria for Determining the Relevance of Scope 3 Activities

Criterion	Description
Size	The activities contribute significantly to the company’s total anticipated Scope 3 emissions
Influence	There are potential emission reductions that could be undertaken or influenced by the company
Risk	The activities contribute to the company’s risk exposure (e.g., climate-change-related risks such as financial, regulatory, supply-chain, product and customer, litigation, and reputational risks)
Stakeholders	The activities are deemed critical by key stakeholders (e.g., customers, suppliers, investors, or civil society)
Outsourcing	The activities are related to either of the following: Outsourced activities that were previously performed in-house. Activities outsourced by the reporting company that are typically performed in-house by other companies in the reporting company’s sector (and are therefore being reported in Scope 1 or Scope 2 by other companies).
Sector guidance	The activities have been identified as significant by sector-specific guidance
Other	The activities meet any additional criteria for determining relevance developed by the company or industry sector

Example 6-2

Company B, a package delivery company, is developing its first Scope 3 inventory in the current year. To begin the process, B creates a complete value chain map and list of activities in its value chain in a manner consistent with the operational control approach.

Through the Scope 3 inventory process, B learns that Scope 3 emissions account for most of its total GHG emissions. The company’s largest source of Scope 3 emissions is Category 4 (upstream transportation and distribution). The emissions in this category, which account for more than half of B’s Scope 3 emissions, are primarily attributable to subcontracted transportation. Because of the size of the emissions, there are potential emission reductions B could undertake that would also be relevant to stakeholders. In addition, although other companies in B’s sector may perform package delivery activities in-house, B outsources its delivery service to third-party providers. Therefore, on the basis of the size, influence, stakeholders, and outsourcing criteria above, emissions in Scope 3, Category 4, are relevant to B.

However, if a competitor of B that conducts package delivery activities mainly in-house performed the same analysis, the competitor might conclude on the basis of its own facts and circumstances that emissions in Scope 3, Category 4, are not relevant.

6.2.3 Time Boundary of Scope 3 Categories

Scope 3 Standard, Chapter 5, “Identifying Scope 3 Emissions,” Page 32 (Page 33 in E-Reader Version)

5.4 Overview of Scope 3 Categories . . .

Time Boundary of Scope 3 Categories

This standard is designed to account for all emissions related to the reporting company’s activities in the reporting year (e.g., emissions related to products purchased or sold in the reporting year). For some scope 3 categories, emissions occur simultaneously with the activity (e.g., from combustion of energy), so emissions occur in the same year as the company’s activities . . . . For some categories, emissions may have occurred in previous years. For other scope 3 categories, emissions are expected to occur in future years because the activities in the reporting year have long-term emissions impacts. For these categories, reported emissions have not yet happened, but are expected to happen as a result of the waste generated, investments made, and products sold in the reporting year. For these categories, the reported data should not be interpreted to mean that emissions have already occurred, but that emissions are expected to occur as a result of activities that occurred in the reporting year.

All Scope 3 emissions related to the reporting company’s activities are required to be reported in the reporting year in which the Scope 3 activities associated with the emissions are performed. Scope 3 emissions can occur at various times as follows:

Simultaneously with the activities (e.g., from combustion of energy). In this scenario, emissions occur in the same year in which the company’s activities are performed.
In one or more previous years.
In one or more future years because the activities performed in the reporting year have long-term emission impacts. Specifically, Categories 5 (waste generated in operations), 9 (downstream transportation and distribution), 10 (processing of sold products), 11 (use of sold products), 12 (end-of-life treatment of sold products), and 15 (investments) include Scope 3 emissions that have not yet occurred but are expected to do so as a result of the activities performed in the reporting year. Consequently, data reported for these categories include information about Scope 3 emissions that have not already occurred but are expected to occur as a result of activities performed in the reporting year (i.e., estimates of projected emissions).

The table below, which is adapted from Figure 5.3 of the Scope 3 Standard, shows the year(s) in which emissions can occur for each Scope 3 category.

Table 6-2 Time Boundary of Scope 3 Categories

Scope 3 Category	Previous Year(s)	Reporting Year	Future Year(s)
1. Purchased goods and services	X	X
2. Capital goods	X	X
3. Fuel- and energy-related activities	X	X
4. Upstream transportation and distribution	X	X
5. Waste generated in operations		X	X
6. Business travel		X
7. Employee commuting		X
8. Upstream leased assets		X
9. Downstream transportation and distribution		X	X
10. Processing of sold products		X	X
11. Use of sold products		X	X
12. End-of-life treatment of sold products		X	X
13. Downstream leased assets		X
14. Franchises		X
15. Investments		X	X

The example below illustrates how a time boundary would affect the reporting of emissions for a particular Scope 3 category.

Example 6-3

Company C, a computer manufacturer, purchases copper in the current reporting year to make computer products. The purchased copper was produced in a previous year. The emissions associated with the production of the purchased copper fall within Scope 3, Category 1 (purchased goods and services).

Although C purchased the copper in the current reporting year, the copper was produced in a previous year. Therefore, emissions from the production of the copper occurred in the previous year. Company C would report emissions associated with the copper in the year it purchased the copper even though those emissions were generated in a previous year.

6.2.4 Exclusions From Scope 3 Inventory

Scope 3 Standard, Chapter 6, “Setting the Scope 3 Boundary,” Page 60

6.3 Disclosing and Justifying Exclusions

Companies should strive for completeness, but it is acknowledged that accounting for all scope 3 emissions may not be feasible. Some categories may not be applicable to all companies. For example, some companies may not have leased assets or franchises. In such cases, companies should report zero emissions or “not applicable” for any categories that are not applicable.

In some situations, companies may have scope 3 activities, but be unable to estimate emissions due to a lack of data or other limiting factors. For example, companies may find that based on initial estimates, some scope 3 activities are expected to be insignificant in size (compared to the company’s other sources of emissions) and that for these activities, the ability to collect data and influence GHG reductions is limited. In such cases, companies may exclude scope 3 activities from the report, provided that any exclusion is disclosed and justified.

Companies should follow the principles of relevance, completeness, accuracy, consistency, and transparency when deciding whether to exclude any activities from the scope 3 inventory. Companies should not exclude any activity that would compromise the relevance of the reported inventory. . . . Companies should ensure that the scope 3 inventory appropriately reflects the GHG emissions of the company, and serves the decision-making needs of users, both internal and external to the company.

In particular, companies should not exclude any activity that is expected to contribute significantly to the company’s total scope 3 emissions. . . .

Companies are required to disclose and justify any exclusions in the public report.

While the Scope 3 Standard encourages companies to aim for completeness in reporting Scope 3 emissions, it recognizes that reporting all Scope 3 emissions is not always possible. Insufficient data or other limiting factors sometimes preclude companies from estimating certain Scope 3 emissions. In such cases, some Scope 3 activities may be excluded from GHG reports, provided that all exclusions are disclosed and justified. For example, if (1) a reporting company’s initial estimates indicate that certain Scope 3 activities can be expected to be insignificant in size compared with the company’s other emission sources and (2) the company finds that its ability to collect data on those Scope 3 activities is limited, the company may exclude those Scope 3 activities from its GHG report as long as it discloses the exclusions and its justifications for them.

In addition, not all Scope 3 categories will necessarily apply to a particular reporting company. In such cases, the Scope 3 Standard (1) recommends reporting “not applicable” or zero emissions for any Scope 3 category that does not apply and (2) requires reporting companies to disclose and justify any conclusion that a Scope 3 category is inapplicable.

The Scope 3 Standard encourages companies that are deciding whether to exclude any activities from their Scope 3 inventory to make their determination on the basis of relevance, completeness, accuracy, consistency, and transparency. Key considerations related to this determination are as follows:

It would not be appropriate to exclude a Scope 3 activity if doing so would make the reported inventory significantly less relevant. See Table 6-1 for a list of criteria for determining relevance.
As the Scope 3 Standard indicates, it is important for the Scope 3 inventory to be reported in a way that (1) “appropriately reflects the GHG emissions of the company” and (2) “serves the decision-making needs” of those inside and outside the reporting company that use its GHG report.
The Scope 3 Standard further indicates that it would not be appropriate to “exclude any activity that is expected to contribute significantly to the company’s total scope 3 emissions.”

As the Scope 3 Standard indicates, seven GHGs (CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3) generally must be included in a company’s GHG report. However, the company may assess the materiality of these GHGs to determine whether it is appropriate for the company to exclude any of them from its report.

Example 6-4

After mapping its value chain, Company D, a manufacturer, uses initial GHG estimation methods to estimate the Scope 3 emissions from the various spend categories within Category 3 (fuel- and energy-related activities). The company finds that emissions from gasoline are significant compared with those from its other Category 3 sources (e.g., diesel, propane).

Company D determines that emissions from non-gasoline-related fuel and energy are difficult to calculate and are not expected to contribute significantly to total Scope 3 emissions. Consequently, D excludes emissions from non-gasoline-related fuel and energy from its GHG report. The company discloses the exclusion of those emissions and justifies it on the basis of (1) limited data availability and (2) the expected insignificant contribution of those emissions to total Scope 3 emissions.

6.2.5 Biogenic Emissions

Scope 3 Standard, Chapter 6, “Setting the Scope 3 Boundary,” Page 62 (Page 61 in E-Reader Version)

6.5 Accounting for Emissions and Removals From Biogenic Sources

The GHG Protocol Corporate Standard requires that direct CO2 emissions from the combustion of biomass be included in the public report, but reported separately from the scopes, rather than included in scope 1. The separate reporting requirement also applies to scope 3. Biogenic CO2 emissions (e.g., CO2 from the combustion of biomass) that occur in the reporting company’s value chain are required to be included in the public report, but reported separately from scope 3 (see chapter 11).

The requirement to report biogenic CO2 emissions separately refers to CO2 emissions from combustion or biodegradation of biomass only, not to emissions of any other GHGs (e.g., CH4 and N2O), or to any GHG emissions that occur in the life cycle of biomass other than from combustion or biodegradation (e.g., GHG emissions from processing or transporting biomass).

Corporate Standard, Appendix B, “Accounting for Sequestered Atmospheric Carbon,” Page 88

Sequestered Atmospheric Carbon

During photosynthesis, plants remove carbon (as CO2) from the atmosphere and store it in plant tissue. Until this carbon is cycled back into the atmosphere, it resides in one of a number of “carbon pools.” These pools include (a) above ground biomass (e.g., vegetation) in forests, farmland, and other terrestrial environments, (b) below ground biomass (e.g., roots), and (c) biomass-based products (e.g., wood products) both while in use and when stored in a landfill.

Biogenic emissions (e.g., CO2 from the burning of biomass or biofuels) that occur in the reporting company’s value chain must be included in the company’s GHG report but reported separately from Scope 3 emissions. This requirement applies only to CO2 emissions from the combustion or biodegradation of biomass (e.g., GHG emissions from processing or transporting biomass, which are distinct from GHG emissions that occur elsewhere in the biomass life cycle except those from combustion or biodegradation).

Example 6-5

Company E, an aircraft transportation company, uses both kerosene and sustainable aviation fuel in its vehicle fleet. The company accounts for the upstream GHG emissions from the combustion of kerosene in Scope 3, Category 3 (fuel- and energy-related activities) since the emissions from kerosene are of fossil origin.

Company E would report biogenic CO2 emissions from the combustion of sustainable aviation fuel separately. The company would not report any removals associated with the production of sustainable aviation fuel in Scope 3, but it may report such removals separately.

Footnotes

List of required GHGs as amended in February 2013.

Items in a representative list would closely resemble, and therefore accurately reflect, the total population of activities in the value chain.