It is commonly reported among businesses attempting to compile their Scope 3 inventories for the first time that downstream categories cause the greatest difficulties, often citing insufficient guidance and a lack of readily available data. In this article we address several downstream categories associated with a business’ sold products and their typical data requirements. These categories are:
- Category 10: Processing of Sold Products
- Category 11: Use of Sold Products
- Category 12: End-of Life Treatment of Sold Products
Why do companies quantify downstream Scope 3 categories?
Meeting internal sustainability goals – Ongoing recalculation of a business’ emissions is essential for monitoring decarbonisation progress and assessing the effectiveness of ongoing sustainability efforts.
Compliance and voluntary disclosure requirements
The full quantification of Scope 3 emissions is required for a range of both voluntary and mandatory reporting frameworks, such as the SBTi, BCorp and the EU Corporate Sustainability Reporting Directive (CSRD).
Requirements from value chain partners
Companies are facing increasing pressure from both their up-and downstream supply chain partners to provide carbon data surrounding their operations. These requests are often driven by these stakeholder’s own sustainability reporting requirements, which in turn can often stem from their own value-chain partners.
What is reported under the categories?
The time boundary for Categories 10, 11 and 12 cover the reporting year and future years when assessing the emissions from products sold by the reporting entity in the reporting year:
- Category 10: Processing of Sold Products - emissions arising from subsequent third-party processing of intermediate products sold in the reporting year.
- Category 11: Use of Sold Products - lifetime use-phase emissions of products sold in the reporting year.
- Category 12: End of Life Treatment of Sold Products - emissions arising from end-of-life disposal of products sold in the reporting year.
How should companies identify applicability?
Typically, the first exercise an organisation must undertake when addressing a Scope 3 category is to assess the applicability each category in relation to their business activities. When a business sells physical products, Category 12 (End of Life Treatment) can be broadly assumed to be applicable.
However, when screening the applicability Categories 10 (Processing of Sold Products) and 11 (Use of Sold Products) an organisation should consider:
Category 10: Processing of Sold Products
If an organisation sells intermediate products, the Scope 3 category – Processing of Sold Products will likely be applicable.
The GHG Protocol defines intermediate products as the 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.
Category 11: Use of Sold Products
If an organisation sells any products that generate emissions during its use-phase, then these emissions will be reported under Category 11. Only direct use-phase emissions are currently mandatory under the GHG Protocol; although it advises that any indirect emissions deemed significant also be included in reporting.
Direct use-phase emissions: Emissions arising from products that either directly consume fuels, electricity or otherwise release greenhouse gases during their use.
Note, in certain cases where the eventual end use of sold intermediate products is unknown, businesses may disclose and justify the exclusion of downstream emissions from Categories 9, 10, 11 and 12 in their report as outlined in the GHG Protocol’s Corporate Value Chain (Scope 3) Accounting and Reporting Standard section 6.4. A business should not, however, selectively exclude a subset of these categories.
What key activity data should a business collect?
Category 10: Processing of Sold Products
Quantity of intermediate products sold in the reporting year by product type, GHG impact of subsequent processing steps per product type.
Example: a reporting company sells lumber which undergoes further processing by its customer to produce planks before being sold on to the end user as a finished product. The company records the quantity of lumber sold as an intermediate product in the reporting year and obtains activity data on the emissions generated by the further processing steps undertaken. When unable to collect this information from customers, the business makes suitable assumptions to estimate the emissions impact based on industry averages, publications, the performance of comparable organisations and where relevant, its own operations.
Category 11: Use of Sold Products
Number of products with use-phase emissions sold in reporting year, data or assumptions for product lifetimes and product energy consumption/use-phase emissions.
Example: a reporting company sells a variety of fuel products. The company collects the quantity and type of fuels sold in the reporting year. It then calculates the emissions impact of the combustion of fuel sold in the reporting year using relevant emission factors.
Category 12: End-of-Life Treatment
Quantity and type of products sold in the reporting year, the total mass of the sold products and associated packaging materials (including for transport) and where known the disposal method of sold products.
Example: a reporting company sells toys. It records the number and type of toys sold in the reporting year. It obtains information on the mass of products sold in the reporting year and the associated packaging materials. Considering a range of possible disposal outcomes (landfill, recycling, incineration etc.) the company applies relevant disposal emission factors to calculate end-of-life disposal emissions for its products.
How can NUS help?
NUS has a team of Energy and Sustainability Service (ESS) consultants who can help your business report your Scope 3 emissions in alignment with best-practice and selected reporting standards. NUS works with a diverse range of industrial and commercial organisations to support with the in-depth reporting of Scope 3 emissions relating to manufactured products. If you wish to speak further about your company’s carbon reporting or any other additional compliance / sustainability matter, please contact us.