Scope 3 Category 2 Overview: Capital Goods

Scope 3 Category 2 Overview: Capital Goods

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SCOPE 3 CATEGORY 2


Category 2 emissions include greenhouse gas (GHG) emissions from capital items. These are the emissions resulting from the manufacture and transportation of capital assets purchased by the reporting company within a particular year. Capital goods comprise equipment, machinery, buildings, and other large assets that are used for more than a year.


Category 2: Capital Goods


Definition and Boundaries


1.Capital Goods: These are long-term assets that an organization acquires and uses to produce goods or services. Manufacturing machinery, office buildings, cars, and information technology infrastructure are among examples.
2.Emissions Included: Emissions associated with the manufacture, processing, and transit of capital goods from the supplier to the reporting enterprise. This includes upstream activities in the supply chain.


Calculation

  1. Primary Data Collection: Involves gathering specific emissions data from suppliers of capital goods. This can be challenging due to the complexity and diversity of supply chains.
  1. Secondary Data Usage: Employs industry-average emission factors or proxy data when primary data is unavailable. Databases and tools like the Environmental Footprint database, eco-invent, or industry-specific reports can be useful.
  1. Hybrid Methods: Combine both primary and secondary data to enhance accuracy.


Challenges and Considerations


  1. Data Availability: Access to detailed, accurate emissions data from suppliers can be limited.


  1. Complexity of Supply Chains: The diverse and global nature of supply chains for capital goods complicates data collection.


  1. Accounting Practices: Ensuring that emissions from capital goods are not double-counted in other categories, such as purchased goods and services (Category 1) is crucial.


Example


A company purchases a new manufacturing robot costing $500,000. To calculate the Scope 3, Category 2 emissions:


  1. Identify Emission Factors: Use available databases to find the emission factors for the materials and manufacturing processes of the robot.


  1. Calculate Emissions: Multiply the quantity of each material by its emission factor and sum the total emissions.
  1. Steel (2000 kg) with an emission factor of 1.85 kg CO2e/kg: 2000 * 1.85 = 3700 kg CO2e
  2. Aluminum (500 kg) with an emission factor of 8.24 kg CO2e/kg: 500 * 8.24 = 4120 kg CO2e
  3. Total emissions: 3700 + 4120 = 7820 kg CO2e


Scope 3 Category 2 emissions require a detailed understanding of the supply chain and production processes for capital goods. Accurate data collection and careful calculation are essential for reporting these emissions accurately. As the procurement of capital goods is often a significant source of emissions, focusing on this category can provide substantial insights and opportunities for emission reductions.





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