Understanding Scope 3 emissions: Category 10 Processing of sold products and Category 11 Use of sold products

Scope 3 emissions, as defined by the Greenhouse Gas Protocol (GHGP), arise from an organization’s activities but occur from sources not owned or directly controlled by the organization. These emissions are divided into 15 categories, representing various upstream and downstream value chain activities.

Categories 10 and 11 focus specifically on downstream emissions from products sold by the reporting organization. While Category 10 addresses emissions from intermediate products, Category 11 deals with emissions related to the use of final goods and services.

Category 10: Processing of Sold Products

Category 10 emissions occur when intermediate products sold by an organization are processed further into final products by the buyer. This category is most relevant to businesses in industries such as natural resources, chemicals, life sciences, or industrial manufacturing.

Key Considerations:

1. Is the Product Intermediate or Final? - The key difference between an intermediate and final product is consideration of the final end user. Intermediate products require further processing, transformation, or inclusion in another product before use by the end user.
2. Who is the End User Relative to the Organization? - In certain cases, the end user of a sold product may be unknown.? For example, an organization may produce a product with many potential downstream applications, each of which has different emissions profiles.?According to GHGP, if an organization cannot reasonably estimate the downstream emissions associated with the various end uses of the product, it may exclude category 10 from its report, if it discloses and justifies the reason for this exclusion.

Example:

MyGlass Inc. sells glass to Luxury Co., which transforms it into windshields for luxury cars.

• For MyGlass Inc., emissions related to the processing of the glass into windshields fall under Category 10.
• For Luxury Co., emissions from the use of the luxury cars are recorded in Category 11. Category 11: Use of Sold Products

Category 11 emissions refer to those generated when end users use goods or services sold by the organization. This category applies to industries such as consumer goods, retail, energy, healthcare, and final-product manufacturing.

Understanding who the end user is can help organizations understand how to classify the emissions related to the use of their goods or services.?

Although MyGlass Inc. sells its finished good, the glass, to Luxury Co., the glass still requires additional processing to be ultimately used by the end customer. Therefore, to MyGlass Inc., the emissions related to the use of the glass are scope 3, category 10 emissions.?

Luxury Co. adds the glass to its product, the luxury car, and eventually, the luxury car is ready to be sold to an end user. As Luxury Co.’s luxury car is sold to end users, it would record the use of the luxury car in scope 3 category, 11 emissions.

Key Considerations:

1. Direct vs. Indirect Use-Phase
2. Example of Emissions Reporting

Calculating Category 10 Emissions

Deciding the most appropriate calculation method

The GHGP?Technical Guidance for Calculating Scope 3 Emissions?details two methods to calculate emissions from category 10: the site-specific and the average-data method.

The calculation method an organization selects depends on two considerations:

1. Is the activity significant to scope 3 emissions or is the activity relevant to any of the organization’s goals?
2. What data sources does the organization have? Primary of secondary?

The two different calculation methods allow for flexibility in calculating category 10 emissions based on the data sources available to an organization. Data sources can include primary and secondary data.

Primary data?is data provided directly from value chain partners. Examples for category 10 include:

• Data provided directly from customers?
• Sales records obtained directly from the organization’s IT systems?

Secondary data?is general data that’s available, such as industry-average data. This type of data is used to estimate scope 10 emissions when primary data is unavailable. Examples for category 10 include:

• Third-party research on use of product
• Data on estimated average lifetime of product?
• Average emission factors for processing activities

The GHGP Technical Guidance for Calculating Scope 3 Emissions offers two methods to calculate emissions for Category 10:

1. Site-Specific Method:

This method calculates emissions using primary data provided directly by value chain partners, such as customers.

When to Use:

• When emissions from sold products significantly impact scope 3 emissions.
• When primary data is available.

Data Required:

• Customer Scope 1 and Scope 2 emissions.
• Fuel and electricity data by type and amount.
• Waste generation data from processing activities.

Example:

Resin Inc. manufactures resin, which is further processed by WoodTech Co. into seals and wood finishes.

• Data collected from Wood Tech Co. includes Natural gas consumption: 1,750 kWh Electricity consumption: 1,250 kWh Waste generated: 25 kg
• Emission factors: Natural Gas: 0.1 kg CO2e/kWh Electricity: 0.25 kg CO2e/kWh Waste: 0.5 kg CO2e/kg
• Total emissions: Natural Gas: 1,750 x 0.1 = 175 kg CO2eElectricity: 1,250 x 0.25 = 312.5 kg CO2eWaste: 25 x 0.5 = 12.5 kg CO2e. Total = 500 kg CO2e

2. Average-Data Method:

This method uses industry-average data when primary data is unavailable.

When to Use:

• When emissions from sold products are less significant.
• When primary data cannot be collected.

Data Required:

• Sales records.
• Industry-average data and emission factors.

Example:

Sweet Supplies produces sugar and sells 17,000 kg to CandyLand Co.

• Emission factor for sugar processing: 0.3 kg CO2e/kg.
• Total emissions = 17,000 x 0.3 = 5,100 kg CO2e.

The decision tree here summarizes which method to use

Calculating Category 11 Emissions

Category 11 emissions depend on the product's use-phase, classified as direct or indirect.

Direct Use-Phase:

Includes products that:

1. Directly consume energy (e.g., vehicles, appliances).
2. Contain or emit GHGs (e.g., air conditioners, fertilizers).
3. Involve fuels or feedstocks (e.g., coal, petroleum).

Products or services that directly consume energy during use

When an organization sells products or services that directly consume energy during use, these are considered direct use-phase products. For example, if an?organization sells airplanes, motors, electronics, or web-based software, all of these products or services ultimately rely on energy for use.

• An airplane consumes fuel during flight.
• A motor consumes fuel during use.
• An electronic device, like a computer, uses electricity.
• A web-based software utilizes the internet, which requires electricity.

Fuel and feedstock

When an organization sells fuel or feedstock, these are considered direct use-phase products.?Coal, petroleum, natural gas, and oil are some examples of fuels or feedstocks.

Product where GHGs are emitted

There are 7 types of GHGs: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3).? When an organization directly sells these gases or when an organization sells products that contain or form GHGs, these are considered direct use products. For example, air-conditioners typically release HFCs, fertilizers typically release N2O, and fire extinguishers typically release CO2.

Example:

Static Inc. produces gas appliances:

• Sold 9,500 Model A ovens (1.5 gallons/use; 750 uses/lifetime).
• Gas emission factor: 0.7 kg CO2e.
• Emissions = 9,500 x 750 x 1.5 x 0.7 = 7,481,250 kg CO2e.

Each direct use-phase product category is calculated differently.?

• Products that directly consume energy during use:? The method involves determining the lifetime number of uses of a product multiplied by the total number of products sold and the emissions factor related to the energy source used by the product.?
• Fuels and feedstocks: This is a bit simpler of a process as the product is already measured in units of fuel. This method involves the quantities of fuels or feedstocks multiplied by the relevant fuel or feedstock combustion emission factors.
• GHGs or products that contain or form GHGs: This method requires data on the quantity of GHGs contained in products and the relevant GHG emissions factors.?

Indirect Use-Phase:

This method involves creating or obtaining a typical use-phase profile over the lifetime of the product and the emissions factor related to the energy source used by the product.

What data is needed?

• Average number of uses over lifetime of product
• Average use-phase scenarios?
• Quantity of fuel consumed in use-phase?
• Electricity consumed in use-phase
• Refrigerant leakage in use-phase
• GHGs emitted indirectly in use-phase

Are indirect use-phase emissions required to be reported?

No, organizations are not required to report indirect use-phase emissions to comply with category 11 but should do so if emissions are expected to be significant.

Direct-use method Example:

Static Inc. is a manufacturer of gas appliances. Since gas appliances directly consume energy during use, Gas Inc. utilizes the method for direct use-phase products that directly consume energy during use and records these emissions in category 11.

Step 1 : Gather data

Gas Inc. collects its sales records to obtain the total gas appliances sold in the reporting year. The organization also conducts consumer report studies to determine the average lifetime of each of their products and electricity consumed per use. Gas Inc. sold:

• 9,500?model A ovens, which have lifetimes of?750?uses and consume?1.5?gallons of fuel per use
• 3,000?model B ovens, which have lifetimes of?1,100?uses and consume?1.0?gallon of gas per use
• 1,000?stoves, which have lifetimes of?10,000?uses and consume?0.3?gallons of gas per use

Step 2: Gather emissions factor

As the appliances require gas for use, Static Co. obtains the emission factor for gas.

• Gas emission factor:?0.7?kg CO2e

Step 3: Calculate emissions

Now that Static Inc. has the activity and emission factor data, it can now calculate its category 11 emissions.?

• Model A ovens:?750 uses x 9,500 units x 1.5 gallons x 0.7 kg CO2e?=?7,481,250?kg CO2e?
• Model B ovens:?1,100 uses x 3,000 units x 1.0 gallons × 0.7 kg CO2e =?2,310,000?kg CO2e?
• Stoves:?10,000 uses x 1,000 units x 0.3 gallon × 0.7 kg CO2e =?2,100,000?kg CO2e?

Total emissions =?11,891,250 kg CO2e

Indirect use-phase method

Wooler Corp. produces wool dryer balls. The wool dryer balls require a dryer to be used and the organization has conducted a use-phase assessment to determine what heat settings are typically used with their product. Therefore, the wool dryer balls are an indirect use-phase product with its emissions recorded in category 11. Wooler Corp. gathers data from studies on average consumer behavior and its internal records.

Wooler Corp. found that the wool dryer balls are used under 2 different temperature settings:

• 45°C and?75°C

The organization also collected data on the use of each temperature setting per customer and the electricity consumed under each setting, respectively shown below:

• 20%?and?80%
• 0.4?kWh and?1.2?kWh

The organization then calculated the typical lifespan of their wool dryer balls and obtained sales records on the number of wool dryer balls sold in the reporting year:

• 150?uses
• 4,000?units sold

• Sold 4,000 units, used 150 times/unit.
• Use-phase electricity consumption: 20% at 0.4 kWh.80% at 1.2 kWh.
• Emission factor: 0.8 kg CO2e/kWh.
• Emissions: Low temp: 4,000 x 20% x 150 x 0.4 x 0.8 = 38,400 kg CO2e. High temp: 4,000 x 80% x 150 x 1.2 x 0.8 = 460,800 kg CO2e.

Total = 499,200 kg CO2e.

The decision tree here summarizes when a product is a direct use-phase product or indirect use-phase product to calculate category 11 emissions.

Key Takeaways

1. Category 10 focuses on emissions from processing intermediate products.
2. Category 11 addresses emissions from the use of final products.
3. Accurate emissions reporting depends on data availability and the relevance of activities to business goals.
4. Methods such as site-specific and average-data approaches ensure flexibility in calculation.

By understanding and applying these principles, organizations can enhance transparency in their value chain emissions and contribute meaningfully to global sustainability goals.