Summary: This is an extract from Chapter 5.
Section 5.5
Category 1: Purchased goods and services
This category includes all upstream (i.e., cradle-to-gate) emissions from the production of products purchased or acquired by the reporting company in the reporting year. Products include both goods (tangible products) and services (intangible products).
This category includes emissions from all purchased goods and services not otherwise included in the other categories of upstream scope 3 emissions (i.e., category 2 through category 8). Specific categories of upstream emissions are separately reported in category 2 through category 8 to enhance the transparency and consistency of scope 3 reports.
Cradle-to-gate emissions include all emissions that occur in the life cycle of purchased products, up to the point of receipt by the reporting company (excluding emissions from sources that are owned or controlled by the reporting company). Cradle-to-gate emissions may include:
- Extraction of raw materials
- Agricultural activities
- Manufacturing, production, and processing
- Generation of electricity consumed by upstream activities
- Disposal/treatment of waste generated by upstream activities
- Land use and land-use change5
- Transportation of materials and products between suppliers
- Any other activities prior to acquisition by the reporting company
Emissions from the use of products purchased by the reporting company are accounted for in either scope 1 (e.g., for fuel use) or scope 2 (e.g., for electricity use), rather than scope 3.
Companies may find it useful to differentiate between purchases of production-related and non-production- related products. Doing so may be aligned with existing procurement practices and therefore may be a useful way to more efficiently organize and collect data (see box 5.2).
Companies may also find it useful to differentiate between purchases of intermediate products, final products, and capital goods (see box 5.3).
Box [5.2] Production-related and non-production-related procurement
A company’s purchases can be divided into two types:
- Production-related procurement
- Non-production-related procurement
Production-related procurement (often called direct procurement) consists of purchased goods that are directly related to the production of a company’s products. Production-related procurement includes:
- Intermediate goods (e.g., materials, components, and parts) that the company purchases to process, transform, or include in another product
- Final goods purchased for resale (for retail and distribution companies only)
- Capital goods (e.g., plant, property, and equipment) that the company uses to manufacture a product, provide a service, or sell, store, and deliver merchandise
Non-production-related procurement (often called indirect procurement) consists of purchased goods and services that are not integral to the company’s products, but are instead used to enable operations. Non-production-related procurement may include capital goods, such as furniture, office equipment, and computers. Non-production-related procurement includes:
- Operations resource management: Products used in office settings such as office supplies, office furniture, computers, telephones, travel services, IT support, outsourced administrative functions, consulting services, and janitorial and landscaping services
- Maintenance, repairs, and operations: Products used in manufacturing settings, such as spare parts and replacement parts
Box [5.3] Intermediate products, final products, and capital goods
Intermediate products 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.
Final products are goods and services that are consumed by the end user in their current form, without further processing, transformation, or inclusion in another product. Final products include:
- Products consumed by end consumers
- Products sold to retailers for resale to end consumers (e.g., consumer products)
- Products consumed by businesses in their current form (e.g., office supplies)
Capital goods are final goods that are not immediately consumed or further processed by the company, but are instead used in their current form by the company to manufacture a product, provide a service, or sell, store, and deliver merchandise. Scope 3 emissions from capital goods are reported in category 2 (Capital goods), rather than category 1 (Purchased goods and services).
Intermediate goods and capital goods are both inputs to a company’s operations. The distinction between intermediate goods and capital goods depends on the circumstances. For example, if a company includes an electrical motor in another product (e.g., a motor vehicle), the electrical motor is an intermediate good. If a company uses the electrical motor to produce other goods, it is a capital good consumed by the reporting company.