Setting the Scope 3 Boundary

Summary: This is an extract of Chapter 6. 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.

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.

6.2 Boundary requirements

Companies shall account for all scope 3 emissions as defined in this standard 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 may include emissions from optional activities within

each category. Companies shall account for scope 3 emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs),

perfluorocarbons (PFCs), and sulphur hexafluoride (SF6), if they are emitted in the value chain. Companies may exclude scope 3 activities from the inventory, provided that any exclusion is disclosed and justified.

Biogenic CO2 emissions (e.g., CO2 from the combustion of biomass) 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. Any GHG removals (e.g., biological GHG sequestration) shall not be included in scope 3, but may be reported separately. (For more information, see section 6.5

and chapter 11.)

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. (See table 6.1 for a list of criteria for determining relevance.) 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. (See section 7.1 for guidance on prioritizing emissions.)

Companies are required to disclose and justify any exclusions in the public report (see chapter 11).

See box 6.1 for an example of disclosing and justifying exclusions.

6.4 Accounting for downstream emissions

The applicability of downstream scope 3 categories depends on whether products sold by the reporting company are final products or intermediate products (see section 5.6). In certain cases, the eventual end use of sold intermediate products may be unknown. For example, a company may produce an intermediate product with many potential downstream applications, each of which has a different GHG emissions profile, and be unable to reasonably estimate the downstream emissions associated with the various end uses of the intermediate product. In such a case, companies may disclose and justify the exclusion of downstream emissions from categories 9, 10, 11, and 12 in the report (but should not selectively exclude a subset of those categories).

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).

Scope 1, scope 2, and scope 3 inventories include only emissions, not removals. Any removals (e.g., biological GHG sequestration) may be reported separately from the scopes. See examples 6.1 and 6.2.

Example [6.1] Accounting for biogenic emissions

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).

Example [6.1] Accounting for biogenic emissions

A manufacturing company contracts with a third- party transportation provider that uses both diesel and biodiesel in its vehicle fleet. The manufacturer accounts for upstream GHG emissions from the combustion of diesel fuel in scope 3, category 4 (Upstream transportation and distribution), since emissions from diesel fuel are of fossil origin. The manufacturer reports biogenic CO2 emissions from the combustion of biodiesel separately. The manufacturer does not report any removals associated with the production of biodiesel in scope 3.

Example [6.2] Accounting for biogenic emissions and removals

A paper manufacturer purchases wood pulp from suppliers and sells finished paper products to consumers. The company accounts for GHG emissions from the production of wood pulp in scope 3, category 1 (Purchased goods and services). The company does not account for upstream CO2 removals from biological carbon sequestration that occurs in trees in scope 3, but instead may report CO2 removals separately. The company also does not account for downstream biogenic CO2 emissions from the incineration of sold paper products at the end of their life in scope 3, but instead reports those emissions separately.