Category 4: Upstream transportation and distribution

Author

Shel

Introduction

This category includes emissions from the transportation and distribution of products (excluding fuel and energy products) purchased or acquired by a reporting company, as well as other transportation and distribution services purchased by the reporting company (including both inbound and outbound logistics).

Emissions from this category may arise from air transport, rail transport, road transport, marine transport and storage of purchased products in warehouses, distribution centers, and retail facilities.

Activities in this category include:

Transportation and distribution services purchased by a reporting company, between the reporting company’s tier 1 suppliers¹ and its own operations, in vehicles and facilities not owned or controlled by the reporting company.
Transportation and distribution services purchased by the reporting company, either directly or through an intermediary, including inbound logistics², outbound logistics³, and transportation and distribution between a reporting company’s own facilities in vehicles and facilities not owned or controlled by the reporting company.

Outbound logistics services purchased by the reporting company are categorized as upstream because they are a purchased service.

This category excludes emissions from:

Transportation and distribution in vehicles and facilities owned or controlled by the reporting company. These emissions fall in scope 1 (for fuel use) and scope 2 (for electricity use).
Transportation and distribution in vehicles and facilities leased by and operated by the reporting company (and not already included in scope 1 or 2).These emissions fall in category 8 of scope 3 (Upstream leased assets).
Transportation and distribution of purchased products, upstream of the reporting company’s tier 1 suppliers (e.g. transportation between a reporting company’s tier 2⁴ and tier 1 suppliers). These emissions fall in category 1 (purchased goods and services) since emissions from transportation are already included in the cradle-to-gate emissions of purchased products.
Production of vehicles e.g. ships, trucks, planes purchased or acquired by the reporting company. These emissions fall in category 2 (capital goods) since they account for the upstream emissions associated with manufacturing vehicles.
Transportation of fuels and energy consumed by the reporting company. These emissions fall in category 3 (Fuel- and energy-related emissions not included in scope 1 or scope 2).
Transportation and distribution of products sold by the reporting company between the reporting company’s operations and the end consumer (if not paid for by the reporting company), including retail and storage in vehicles and facilities not owned or controlled by the reporting company. These are included in category 9 (Downstream transportation and distribution)

A reporting company’s scope 3 emissions from upstream transportation and distribution include scope 1 and scope 2 emissions of third-party transportation companies.

Transportation

There are three main methods used to calculate emissions from upstream transportation:

Fuel-based method. This involves determining the amount of fuel used and applying the appropriate emission factor for that fuel. The amount of fuel used is obtained from scope 1 and scope 2 emissions of transport providers.
Distance-based method. This determines the distance traveled, mass and mode of shipment, then applying the appropriate mass-distance emission factor for the vehicle used.
Spend-based method. This involves the amount of money spent to transport goods and applying EEIO (secondary) emission factors.

CO₂ is better estimated from fuel use while CH₄ and N₂O are better estimated from distance travelled.

Companies should use life cycle emission factors when calculating emissions from upstream transportation.

The following decision tree acts as a guide to determine which method to use.

Source: Corporate Value Chain (Scope 3) Accounting and Reporting Standard

Method 1: Fuel-based

This method should be used when companies can obtain fuel use data from transport providers, and data from refrigerant leakage if necessary. Companies may optionally calculate emissions from the return journey of empty vehicles⁵.

In cases where fuel use data is not available, it can be derived by using any of the following:

The amount spent on fuels and the average price of fuels.
The distance traveled and the vehicle’s fuel efficiency.
The amount spent on transportation services, fuel cost share (as a percentage of the total cost of transportation services) and the average price of fuels.

This method is more accurate than the distance-based method when calculating CO₂ since fuel consumption is directly related to emissions. It is also preferred if the vehicle exclusively ships products for the reporting company. If the vehicle ships goods for different companies, emissions should be allocated to the companies.

Each mode of transport has a default limiting factor. Emissions should be allocated based on these factors.

Road transport: Mass-based allocation
Marine transport: Volume-based allocation
Air transport: Mass-based allocation
Rail transport: Mass-based

Distance should be used as a means of allocation in a case where a transport leg involves multiple shipments.

The activity data ⁶ needed here includes quantities of fuel consumed, the amount spent on fuels and the quantity of fugitive emissions (e.g., from air conditioning and refrigeration). If applicable, the reporting company should also obtain data on the distance traveled, the average fuel efficiency of the vehicle (expressed in units of litres of fuel consumed per tonne per kilometer transported), the cost of fuels, volume and/or mass of purchased goods in the vehicle and information on whether the products are refrigerated while being transported. This data can be obtained from aggregated fuel receipts, purchase records (provided by transportation providers) or internal transport management systems.

The emission factors⁷ needed include:

Fuel emission factors, expressed in units of emissions per unit of energy consumed (e.g., kg CO₂e/litres).
For electric vehicles, electricity emission factors expressed in units of emissions per unit of electricity consumed (e.g. kg CO₂e/kWh).
Fugitive emission factors, expressed in units of emissions per unit (e.g., kg CO₂/kg refrigerant leakage).

These emission facors can be obtained from transportation carriers, government agencies, the GHG Protocol website or industry associations.

The emission factors used in this category should include fuel combustion emission factors and where possible cradle-to-gate⁸ emission factors.

The general formula for calculating upstream transportation emissions is as shown below:

Technical Guidance for Calculating Scope 3 Emissions

Where fuel consumption data is unavailable, it can be estimated using either the amount spent on fuel and the average fuel price,

… or the distance traveled and the fuel efficiency of the vehicle.

In cases where allocation is needed, emissions can be allocated as follows.

Emissions from the return journey of an empty vehicle can also be calculated, as shown below.

The example below shows how the fuel-based method can be applied to calculate emissions, when the quantity of fuel is available and allocation of emissions is not needed.

Method 2: Distance-based

In this method, distance is multiplied by mass or volume of goods transported and the relevant emission factors. Emission factors for this method are typically represented in grams or kilograms of carbon dioxide equivalent per tonne-kilometer⁹ or TEU-kilometer¹⁰. This method is useful when an organization does not have access to fuel or mileage records from the transport vehicles, or has shipments smaller than those that would consume an entire vehicle or vessel.

Distance can be tracked using internal management systems or if these are unavailable, online maps.

The activity data needed to calculate emissions using this method include:

Mass or volume of the products sold.
Actual distance provided by the transportation supplier.
Online maps or calculators
Published port-to-port travel distances

This data can be sourced from:

Purchase orders
Specific carrier or mode operator
Internal management systems
Industry associations
Online maps and calculators

Emissions factors may be vehicle, regional, or country specific. They can be obtained by mode of transport or vehicle types expressed in units of greenhouse gases per unit of mass or volume traveled. Common forms of emission factors are kg CO₂e/tonne/km for road transport or kg CO₂/TEU/km for sea transport.

For air travel emission factors, multipliers or other corrections to account for radiative forcing may be applied to the GWP of emissions arising from aircraft transport.

These emission factors can be obtained from:

Transportation carriers
Government agencies
The GHG protocol website
Industry associations

To calculate emissions, companies should multiply the quantity of goods purchased in mass (including packaging and pallets), or volume by the distance traveled in the transport leg and then multiply this by an emission factor specific to the transport leg (either a transport mode- or vehicle type- specific emission factor).

The following formula should be used to calculate upstream transportation emissions, regardless of the transport mode.

An example of a calculation for upstream transportation is shown below:

Case study: Allocating emissions from transportation

Method 3: Spend-based

If the first two methods cannot be applied, companies should use the spend-based method to calculate the emissions from upstream transportation. Here, the amount spent on transportation is multiplied by the relevant EEIO emission factors. The amount spent on transportation may be identified through bills, invoice payments, or financial accounting systems.

Note! This method has high levels of uncertainty. The fuel-based and distance-based methods are recommended.

The activity data needed is the amount spent on transportation using market values while the emission factors needed are cradle-to-gate emission factors of the transportation type per unit of economic value (e.g., kg CO₂e/$). Where applicable, infaltion rates should be used to convert market values between the year of the EEIO emission factors and the year of the activity data.

Data sources for activity data include internal data systems, bills and invoices. EEIO emission factors should be derived from EEIO databases, such as these third party databases listed on the GHG Protocol website.

The formula for calculating upstream emissions using the spend-based formula is shown below.

The following example illustrates how the formula above is applied.

Distribution

Emissions from upstream distribution can be calculated using two methods:

Site-specific method which involves site-specific fuel, electricity and fugitive emissions data and applying the appropriate emission factors.
Average-data method which involves estimating emissions for each distribution activity, based on average data, e.g., average emissions per palette or cubic meter stored per day.

The following decision tree can be used as a guide to determine which method to use.

Method 1: Site-specific

The site specific method involves collecting site-specific fuel and energy data from the storage facility¹¹ or individual distribution activities and multiplying them by emission factors.

In a case where the storage facility stores goods for more than one company, emissions should be allocated to the reporting company.

The activity data needed to calculate emissions from upstream distribution include:

Site-specific fuel and electricity use.
Site-specific fugitive emissions i.e. air conditioning and refrigerant leakage.
The average occupancy rate of the storage facility i.e. the average total volume of goods stored.

This data can be obtained from utility bills, purchase records, meter readings or internal data systems.

The emission factors needed include:

Site or regional specific emission factors for energy sources (e.g., electricity and fuels) per unit of consumption (e.g., kg CO₂e/kWh for electricity, kg CO₂e/liter for diesel).
Emission factors of fugitive and process emissions (kg CO₂e/kg).

These emission factors can be obtained from life cycle databases, industry associations or companies can develop them themselves.

The formula for calculating emissions for a specific storage facility and allocating these emissions to different reporting companies is as shown below:

An example of how to calculate these emissions using the site-specific method is as shown below:

Method 2: Average-data

This method should be used when supply-chain specific data is unavailable.

The activity data needed here includes the volume of purchased goods stored or, the number of pallets needed to store purchased goods and the average number of days that goods are stored. This data can be sourced from supplier records or internal management systems.

The emission factors needed here should allow the calculation of emissions per unit and per time period stored. Examples include:

Emission factors per palette per day stored in a facility.
Emission factor per square meter or cubic meter per day stored in a facility.
Emission factor per twenty-foot equivalent unit (TEU) stored in a facility.

Emission factors can be sourced from life cycle databases, industry associations, academic publications or from companies that have developed them themselves.

The formula for calculating emissions using this method, along with its application, is shown below.

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Footnotes

Tier 1 suppliers are companies that provide goods or services directly to a business that produces the final product.↩︎
Inbound logistics bring supplies or materials into a business.↩︎
Outbound logistics deal with moving goods and products out to customers.↩︎
Tier 2 suppliers are a reporting company’s suppliers’ suppliers or companies that subcontract to a reporting company’s tier 1 suppliers.↩︎
This is often referred to as unladen backhaul.↩︎
This is a quantitative measure of a level of activity that results in GHG emissions.↩︎
An emission factor converts activity data into GHG emissions.↩︎
Emissions from extraction, processing, and transportation to the point of use.↩︎
Tonne-kilometer is a unit of measure representing one tonne of goods transported over 1 kilometer↩︎
TEU-kilometer is a unit of measure representing one twenty-foot container equivalent of goods transported over 1 kilometer.↩︎
A storage facility could be a warehouse or distribution center.↩︎