Scope three emissions—the greenhouse gases caused by suppliers, customers, and end users as a result of your company’s activities—can account for as much as 80% of your business’s total emissions. They’re also notoriously difficult to track.
These emissions cover everything from what you buy and how it’s shipped, to how employees commute and customers dispose of your products. They’re buried in complex global supply chains, most of which you don’t control and can’t easily see.
In other words, your scope three carbon accounting is only as strong as your suppliers’ data. Getting it right means tapping into comprehensive emissions databases and working closely with vendors to improve transparency.
This post covers the details of how these calculations work as well as the advantages and disadvantages of the different estimation methods.
How scope three emissions are calculated
When it comes to emissions, companies can take one of four approaches:
1. Spend-based estimation
Companies multiply the amount of money spent on a good or service by an emissions factor (EF) tied to that category of spend.
For example:
- €100,000 spent on IT equipment × EF for IT equipment (e.g., 0.3 kg CO₂e per € spent) = 30,000 kg CO₂e
This method relies on economic input-output (EEIO) databases, which assign average emissions values to different industries or sectors.
Learn more about EEIO databases
2. Activity-based estimation
When companies have access to operational data, they can use activity-based methods to calculate emissions based on the quantity of activities performed.
For example:
- Rooms per night in [location] × average emissions per room
- Short-haul flight/ average passenger × average emissions per flight
- Car size × km travelled x average emissions per kilometer by car size
Activity-based estimation ties emissions directly to a specific unit of activity rather than to dollars spent, which in some cases can make it more accurate and actionable.
For example, if you want to measure your company’s business travel emissions, then activity-based data—like miles flown, fare class, and aircraft type—can give you a deeper view into the real drivers of emissions. That way, you can identify more targeted ways to reduce them, such as choosing lower-emission flight routes when possible.
However, activity-based estimations require detailed data from across an organization’s operations and supply chain, which is often incomplete or difficult to access. It’s likely to only be feasible for certain specific activities, especially at first.
3. Supplier-specific data
In some situations, you can get primary emissions data directly from suppliers. This has the potential to be the most accurate approach — but it can require significant time and coordination, especially when suppliers aren’t yet tracking or reporting their own emissions.
For many companies, it helps to first get a bird’s-eye view of emissions hotspots so you can prioritize obtaining primary data from top-emitting suppliers.
4. Hybrid approach
Companies often choose to combine one or more of the approaches described above, using the best data available.
As your carbon accounting process matures, it’s likely that your methodology will evolve too. Dr. Sangwon Suh, Watershed’s Head Scientist, says that “as companies continue to measure emissions, it’s expected that the methodology used to calculate footprints will change over time.” These changes can come from three main sources:
- Updated emissions factors used in the measurement.
- Changes to the operational boundary considered for the footprint.
- Additional primary data incorporated into the footprint.
This evolution shouldn’t be seen as a problem, even if it causes fluctuation in your GHG emissions data. As Dr. Suh says, “This is a good thing, as it will gradually improve your understanding of the size of the problem.” Watershed has guidance on how to communicate these changes to your footprint when the underlying data changes here.
