Measuring Scope 3 Emissions with the Spend-Based Approach

The scope of data collection for this category should include inventory purchases (e.g., raw materials or finished goods) and operating expenses incurred during the reporting period. Please note that this category should exclude long-term assets, for which acquisition costs are recorded in capitalized expenses (CapEx) and their associated GHG emissions are accounted for in a separate scope 3, category 2 - capital goods (see the next section).

Overall, required expenses can be obtained from the procurement team or the finance department consolidating the company's financial statements. Ideally, all expenses can also be tied to the vendor's name to enable a more meaningful supplier analysis later. It is important to emphasize that once the full list of purchases is obtained, owners of the company's scope 3 program should be prepared to exclude various expenses. Exclusions are performed either due to expense irrelevance or the risk of double counting of emissions.

Apart from the already explained exclusion of purchased long-term assets, other irrelevant expenses include operating expenses that are not directly linked to a purchased good or service, such as taxes or salaries. Examples of expenses with the risk of double-counting emissions include flight fares for business trips or incurred fees for product shipping and warehousing, which should be accounted for in scope 3, category 6 (business travel) and category 4 (upstream transportation and distribution), respectively. Similarly, intercompany transactions can cause double counting, too, and they should be omitted from further analysis.