Identifying which of the 15 Scope 3 categories are relevant to a company is the first substantive step in building a Scope 3 inventory. The standard requires companies to evaluate all 15 categories and include those that are significant — omitting categories is permitted only with disclosed justification.
The Two-Part Test for Relevance
A Scope 3 category is considered relevant if it is significant in size OR if stakeholders expect it to be reported. A category is significant if it contributes a meaningful share of total Scope 3 emissions or if it presents material risks or opportunities.
In practice, companies typically begin with a screening assessment — using publicly available emissions factors and internal spend or activity data — to estimate the rough order of magnitude for each category. Categories that appear large in the screening become candidates for higher-quality calculation.
The standard does not set a fixed materiality threshold. However, it states that a company should not exclude a category simply because data collection is difficult. If a category is likely significant, it must be included even if only with a rough estimate — and the uncertainty noted.
Overview of All 15 Categories
Category 1 — Purchased Goods and Services
Emissions from the extraction, production, and transportation of all goods and services purchased or acquired by the company in the reporting year. This is typically the largest upstream category for manufacturing companies.
Category 2 — Capital Goods
Emissions from the extraction, production, and transportation of capital goods purchased or acquired by the company. Capital goods are final products with an extended life — machinery, equipment, buildings, vehicles, and IT infrastructure. Unlike purchased goods (expensed in year of purchase), capital goods are depreciated over their useful life, but Scope 3 allocates the full lifecycle emission to the year of acquisition.
Category 3 — Fuel- and Energy-Related Activities (Not in Scope 1 or 2)
Emissions related to the production of fuels and energy purchased and consumed by the company, not already accounted for in Scope 1 or 2. This covers:
- Upstream emissions from extraction and processing of purchased fuels
- Upstream emissions from extraction, production, and transportation of purchased electricity
- Transmission and distribution losses for purchased electricity (T&D losses)
- Generation of electricity sold to the grid (for generators only)
Category 4 — Upstream Transportation and Distribution
Emissions from transportation and distribution of products purchased by the company (upstream) in vehicles not owned or controlled by the company. Also includes third-party warehousing. This covers the movement of goods between a company's tier 1 suppliers and the company itself.
Category 5 — Waste Generated in Operations
Emissions from third-party disposal and treatment of solid waste and wastewater generated in the company's operations. Covers landfill, incineration, composting, anaerobic digestion, recycling, and wastewater treatment — but only emissions occurring at the disposal facility, not inside the company's boundary (which is Scope 1).
Category 6 — Business Travel
Emissions from transportation of employees for business-related activities in vehicles not owned or operated by the company — flights, trains, buses, taxis, and rental cars.
Category 7 — Employee Commuting
Emissions from transportation of employees between their homes and their worksites in vehicles not owned or operated by the company.
Category 8 — Upstream Leased Assets
Emissions from the operation of assets leased by the company (lessee) not already included in Scope 1 or 2. This applies only when the company uses the equity share or financial control consolidation approach and does not already count leased assets in its Scope 1 and 2 inventory.
Categories 1–8 cover everything that "flows in" to the company — raw materials, capital, energy, transport, waste disposal, travel, and leased assets. Think of it as the upstream half of the value chain: before the company adds its own processing.
Category 9 — Downstream Transportation and Distribution
Emissions from transportation and distribution of products sold by the company (downstream) in vehicles not owned or controlled by the company, from point of sale to end consumer (including retail, wholesaler, and consumer delivery legs).
Category 10 — Processing of Sold Products
Emissions from processing of intermediate products sold by the company. This applies where the company's customers (typically manufacturers) further process the product before final sale. For example, a steel producer accounts for emissions from downstream manufacturers that cut and weld the steel into cars.
Category 11 — Use of Sold Products
Emissions from the use of goods and services sold by the company. This covers energy consumed by products in use (e.g., electricity consumed by appliances, fuel burned in sold vehicles, gas consumed in sold boilers) as well as emissions from products that directly emit GHGs during use (e.g., lubricants, fertilisers, refrigerants, aerosols).
Category 12 — End-of-Life Treatment of Sold Products
Emissions from waste disposal and treatment of products sold by the company at the end of their life, including landfill, incineration, recycling, and composting.
Category 13 — Downstream Leased Assets
Emissions from the operation of assets owned by the company and leased to other entities, not already included in Scope 1 or 2. Applies when the company is the lessor.
Category 14 — Franchises
Emissions from the operation of franchises not included in Scope 1 or 2. Applies to franchisors. Franchisees account for their own operations in Scope 1 and 2; the franchisor accounts for them here.
Category 15 — Investments
Emissions associated with the company's investments in the reporting year, not already included in Scope 1 or 2. This is the principal category for financial institutions — banks, insurance companies, and asset managers account here for the emissions financed through loans, bonds, equity stakes, and project finance.
Not all categories apply to every company. A software company typically has negligible Category 10 (processing of sold products) emissions and no Category 13 (downstream leased assets) emissions. However, every company must evaluate all 15 categories and explain any exclusions — they cannot simply ignore categories without justification.
Identifying Categories in Practice
The standard recommends a structured approach:
- Map business activities to the 15 categories using the category descriptions above.
- Perform a screening estimate using spend data and average emission factors.
- Rank categories by estimated emissions to identify the top 3–5 contributors.
- Invest in better data for the highest-ranked categories; retain screening estimates for minor categories.
- Document exclusions — for any category estimated to be negligible, record the basis for that conclusion.
In principle, the 15 categories are mutually exclusive — each emission belongs to exactly one category. In practice, boundary cases arise. For example, fuel used by a third-party logistics provider to transport raw materials to the company could be argued as either Category 1 (embedded in the purchased goods price) or Category 4 (upstream transport). The standard provides decision rules: Category 4 covers transport services purchased separately from the goods; emissions embedded in goods purchased from a supplier belong in Category 1. When in doubt, companies should document their classification choice and apply it consistently year over year.
Key Takeaways
- 1All 15 Scope 3 categories must be evaluated - companies cannot simply ignore categories without documented justification
- 2A category is relevant if it is significant in size or if stakeholders expect it to be reported - there is no fixed materiality threshold
- 3Begin with a spend-based screening estimate for all 15 categories, rank by estimated emissions, then invest in better data for the top 3-5 contributors
- 4Categories 1-8 cover upstream activities (what flows into the company), while Categories 9-15 cover downstream activities (what flows out)
- 5Boundary cases between categories exist (e.g., Category 1 vs. Category 4 for embedded transport) - document classification choices and apply them consistently