The GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard defines fifteen upstream and downstream categories. For a sustainability team with finite resources, trying to measure all fifteen with equal rigour is neither practical nor necessary. The ESRS E1 materiality threshold — and frankly the audit economics — pushes you toward a different question: which three or four categories are likely to contain 70–80% of your total Scope 3 inventory, and where does your existing procurement data already give you most of what you need?
This piece focuses on the upstream categories most relevant to European mid-cap manufacturers and logistics companies, where to find the underlying activity data, and what the practical trade-off looks like between spend-based and supplier-specific methods.
Category 1: Purchased Goods and Services — The Dominant Category
For most manufacturers, Category 1 (purchased goods and services) will be the single largest Scope 3 contributor — often representing 50–70% of the total Scope 3 footprint. This encompasses all upstream extraction, production, and transportation of goods and services purchased or acquired in the reporting year.
Consider a mid-size food packaging company with approximately €180M annual procurement spend. Category 1 alone, estimated using DEFRA 2024 spend-based emission factors against the primary raw material spend lines (plastics: approximately 2.7 kg CO₂e per £ spend equivalent; aluminium: approximately 4.5 kg CO₂e per £ spend equivalent; board and paper: approximately 1.3 kg CO₂e per £ spend equivalent), can generate a Category 1 estimate in the range of 35,000–55,000 tCO₂e. That single number typically dwarfs Scope 1 and Scope 2 combined for a company of that profile.
The spend-based method using DEFRA or the ecoinvent database is not the most accurate approach — it assumes an average emissions intensity per euro of spend within a sector, which can diverge significantly from actual supplier performance. But it is the practical starting point, particularly for the long tail of suppliers that represent individually small spend but collectively significant emissions.
Categories 2 and 3: Capital Goods and Fuel- and Energy-Related Activities
Category 2 (capital goods) covers the extraction, production, and transportation of capital goods purchased or acquired — essentially your CapEx line items, including machinery, equipment, and buildings. For capital-intensive manufacturers, this can be material in a year of significant investment. The emissions are typically estimated using physical quantity or spend-based methods against engineering-sector emission factors from ecoinvent or the GaBi database.
Category 3 (fuel- and energy-related activities not in Scope 1 or 2) covers the upstream emissions from extraction, production, and transportation of purchased fuels and energy — including transmission and distribution losses for electricity and the upstream footprint of purchased steam. This is often overlooked but adds a meaningful correction factor to the Scope 2 number, particularly for companies in energy-intensive industries where the market-based Scope 2 may be close to zero (through Power Purchase Agreements) but the upstream Category 3 figure is not.
Category 4: Upstream Transportation and Distribution
Category 4 captures the transportation and distribution of purchased goods from suppliers to the reporting entity — freight where the reporting company pays for transportation, either directly or through a supplier arrangement where freight costs are part of the purchase price. For manufacturers sourcing materials internationally, this category can represent 5–15% of total Scope 3.
Freight transport emissions are typically calculated using tonne-kilometre activity data combined with vehicle-specific emission factors. Road freight: the DEFRA 2024 factor for an average rigid HGV is approximately 0.0767 kg CO₂e per tonne-km. Sea freight (bulk carrier, average laden): approximately 0.0117 kg CO₂e per tonne-km. Air freight: approximately 0.602 kg CO₂e per tonne-km — an order of magnitude higher than sea, which is why air freight from logistics data can dominate Category 4 even at low tonnage.
Bréchet Logistique SAS, a growing French freight forwarding operation with around 420 employees, found during their preliminary Scope 3 inventory that their Category 4 upstream transport — including air freight of high-value industrial components they procure for client supply chains — accounted for roughly 22,000 tCO₂e out of a total estimated Scope 3 of 310,000 tCO₂e. Modest in percentage terms but significant enough to make it material under their double materiality assessment, and the tonne-km data was already available from their transportation management system, making it one of the more tractable categories to measure accurately.
Category 6: Business Travel — Often Overestimated in Its Importance
Category 6 (business travel) is frequently the first Scope 3 category that companies measure, because the data is easy to obtain from travel expense systems and corporate credit card feeds. However, for industrial mid-caps, Category 6 rarely represents more than 0.5–2% of total Scope 3. An automotive parts manufacturer with 680 employees flying primarily within Europe will typically generate 400–1,200 tCO₂e from business travel — substantial from a reduction planning perspective but immaterial relative to a Category 1 figure in the range of 40,000+ tCO₂e.
We're not saying Category 6 should be ignored — it matters for decarbonisation planning and employee engagement, and it is required disclosure under ESRS E1 if it is material. What we are saying is that sustainability teams should resist the temptation to spend two months perfecting their business travel calculation while leaving Category 1 as a rough spend-based estimate. The measurement effort should be proportional to the emissions materiality.
Spend-Based vs. Supplier-Specific: The Hierarchy and When to Move Up It
The GHG Protocol Scope 3 Standard establishes a preference hierarchy: supplier-specific data (based on actual supplier emissions and product carbon footprints) is preferred over activity-based data (physical quantities multiplied by average emission factors), which is preferred over spend-based data (financial spend multiplied by economic emission intensity). ESRS E1 and EFRAG's implementation guidance reinforce this hierarchy, noting that the use of spend-based methods should be explained and that companies should aim to progressively improve data quality over reporting cycles.
In practice, moving from spend-based to supplier-specific for Category 1 requires either direct supplier engagement (requesting product carbon footprints in accordance with ISO 14067) or using industry-average datasets from ecoinvent or GaBi at the product level rather than the sector level. The former is the more accurate approach but takes time and depends on supplier capacity to respond. A phased approach typically looks like: spend-based for all suppliers in Year 1; activity-based physical quantities for the top 20 suppliers by spend value in Year 2; supplier-specific PCF data for the top 5–10 suppliers in Year 3 and beyond.
The key insight is that for a manufacturer with 400 active suppliers, the top 30 by spend value typically represent 70–80% of Category 1 by emissions value as well (the spend and emissions concentrations tend to correlate closely for materials-heavy procurement). Getting accurate data from those top 30 transforms the quality of the overall inventory even if the remaining 370 suppliers stay on spend-based estimates.
Downstream Categories: Where to Draw the Boundary for Mid-Caps
The downstream categories (Categories 9–15) cover the use and end-of-life treatment of sold products, downstream transportation, franchises, leased assets, and investments. For manufacturers of components or intermediate goods — where the product is incorporated into another company's product before reaching an end user — the use-phase emissions (Category 11) are often attributed to the downstream company rather than to the component manufacturer. This boundary question requires a judgment call that should be documented in the Scope 3 inventory methodology.
ESRS E1 requires disclosure of all material Scope 3 categories, with materiality assessed as part of the double materiality process. For most European industrial mid-caps, categories 1, 4, and potentially 11 will be the highest-priority downstream focus after the upstream work is complete. Categories 13 (downstream leased assets) and 15 (investments) are primarily relevant for financial institutions and holding companies — they are unlikely to be material for an industrial manufacturer or logistics company.
Author: Annika Baum, Co-Founder & Head of Product, CarbSynq. Published .