Downstream emissions: The what, the how and the why
Every day, we hear from companies about the importance of getting downstream Scope 3 emission calculations right. It’s no longer a question of whether we should calculate them. It’s how do I do so with greater accuracy?
This article, contributed to by Emitwise’s Head of Environmental Data & Analytics, David Turner, will cover how downstream emissions of products sold are calculated, why companies care about doing it better, and the pitfalls to avoid. But first, let’s define downstream emissions.
What are downstream emissions?
Downstream emissions occur after a product or service leaves the direct control of the company that created it. Downstream emissions form part of your Scope 3 carbon inventory.
The GHG Protocol breaks downstream emissions into four different Scope 3 categories:
- Category 9 – Downstream transportation and distribution
- Category 10 – Processing of sold products
- Category 11 – Use of sold products
- Category 12 – End-of-life treatment of sold products
A working example of downstream emissions
Lithium-ion batteries are used in various electronic goods, from laptops to electric cars. The company that manufactures lithium batteries sells them to a computer hardware manufacturer, who arranges transportation to them for incorporation into the laptops they produce.
The final product is then sold and used for 5 years by the end consumer, with the laptop and your lithium-ion battery within it being charged daily throughout that period. However, after 5 years, the Wi-Fi connection stops working, so the laptop is thrown away alongside the lithium-ion battery inside.
Your downstream emission calculation incorporates the carbon released at every step in the lifecycle since your lithium-ion battery left your building.
How are downstream emissions calculated?
The methodologies used to estimate emissions in each category are different, so there’s no hard and fast method for calculating downstream emissions; it takes a combination of different approaches.
For Category 9- Downstream transportation and distribution.
You would need to know the distance between your production facility and the customer’s processing plant, storage facility or distribution centre, alongside the types of transport modes used and, if possible, the fuel types of those vehicles and the weight of the goods being transported.
For Category- 10 Processing of sold products.
You would approach calculating these emissions in the same way as advised by the GHG Protocol for your own operations. Gathering data on the electricity and fuel use, for instance, at the downstream processing facility or sourcing appropriate emission factors. For intermediate products that are incorporated as components or elements of other products, you’ll need to allocate a portion of these processing emissions to your product based on, for instance, the relative weight of each component.
For Category 11- Use of sold products.
Data needs gathering on, amongst other things, the product’s expected lifetime, whether it needs charging or fuel to work, whether it embodies emissions that will be released during use, how it will be used, and by whom.
Let’s take the lithium-ion battery example from earlier. There’s a wide range of uses that you’d be creating it for, e.g. laptops, phones, and cars, and the downstream emissions are greatly affected by the intended end use. A phone typically has a shorter life than a car and likely generates fewer emissions during its lifetime.
The other thing to consider is the geographical region in which the products are used and sold to make assumptions about the electricity source that will charge it and how frequently it is likely to be used according to societal norms/averages.
For Category 12- End-of-life treatment of sold products
Emission estimations need to be gathered for the transportation to the end-of-life site, alongside the emissions for treating, destroying or recycling it.
Here, you need to understand how the product will likely be treated at the end of life, e.g. does it get recycled or incinerated? The treatment mix for a given product can vary greatly by geography, so it’s important to consider which markets the product is being sold into, as this will largely determine how it will be treated at the end of its life. You then need to source emission factors that represent the average emissions of treating your waste product.
The allocation conundrum
Underpinning all four categories is the concept of allocation. If your product is sold as is, without integration into a different product, allocation is largely avoided here as your product is the sole contributor to downstream emissions. However, where products are used as components in other composite products, e.g. batteries in laptops, the downstream emissions of the laptop need to be allocated among the components. The question is, what portion of responsibility is applied to your product for the emissions generated?
Often companies allocate emissions based on mass, which is relatively simple, assigning an emission value based on the percentage of the total mass of the product it sits in.
But this doesn’t tell the whole truth. For example, at the end of its life, many laptop components can be recycled or reused. Still, the battery can’t be, so attributing emissions based purely on weight proportion doesn’t truly reflect the reality of the battery’s downstream emissions.
Considerations for calculating downstream emissions
Many companies need to pay more attention to the complexity of accounting for downstream emissions accurately. When put into the context of a complex global distribution system, it can become a lot more work to track and account for the emissions of your product, with varying factors affecting the measurement, such as electric grid power or recycling programmes.
The point is the amount of information you need to gather on downstream emissions and to what depth depends on the type of product or service you are offering.
How do you get the necessary data?
In reality, you can use two data streams for downstream emission calculations.
- Primary data- emission data collected directly from customers and consumers. This granularity can generate emission factors bespoke to your specific product and its later-stage lifecycle, increasing the accuracy of your modelling and calculations. For products with expected high Category 9-12 Scope 3 emissions, this level of detail should be ideal, with companies striving to obtain this granularity over time.
- Modelled data- Where customers don’t track their emissions or aren’t in a position to share them, downstream emissions can be modelled from public data. There’s a lot of average industry, material, and user data available, but this is best used for companies looking to generate a quick downstream estimate or whose products and services are likely to be less emission-intensive.
In reality, the latter is an excellent way to get started. Modelled data highlights where you need greater granularity, and many companies are at the point where a hybrid of both data approaches suffices.
Here are some questions to ask when setting out what level of data granularity you need for downstream emission calculations:
- Does your product go for further processing?
- Will it be part of another product?
- Will it require fuel or charging to work?
- Will it result directly in emissions when used, for example, a petrol lawn mower or limestone, which is used to create chemical reactions that result in CO2 release?
- Does the product contain embodied carbon?
If you answered yes on 3 out of 5, putting a plan in place to gather as much primary data as possible is essential.
Knowing the risks
It’s worth noting that by streamlining your data requests and working predominantly with average data, you can be at risk of greenwashing claims due to potentially misleading information. Especially if you use downstream emission data to help market your product as a ‘greener alternative’ to customers or consumers, tying in with Scope 4 avoided emissions.
When it comes to ensuring downstream emissions are greenwashing-proof, the product data needs to be granular to understand, particularly its end-of-life emissions.
If it’s so tricky to do, why do companies measure downstream emissions?
There’s cause to measure downstream emissions, especially for manufacturers of physical goods, from consumer goods, construction materials, and clothing to electronic hardware, where a significant portion of Scope 3 emissions are created when the item has left the building.
Carbon-conscious consumers want to understand more about the products they buy, their impact on the planet, and their personal carbon footprint.
Plus, by tracking downstream emissions effectively, companies can make data-led decisions to build carbon into their R&D programmes, developing products that produce fewer emissions in the later stages of their lifecycle. This is significant for the triple bottom line- people, planet and profit.
However, it isn’t just the consumer and customer pressure to understand downstream emissions accurately. It’s regulations too. The new ISSB legislation and the soon-to-be-released ISO standards have baked-in downstream accounting provisions. So this is becoming less of a choice and more of a requirement.
It’s worth saying it’s rare for companies that do the modelling themselves to get downstream emission calculations right the first time, which is not surprising with all this complexity. This is where verification can be helpful to highlight holes in your data or approach so that you can increase its accuracy next time.
- Reflect on the type of goods you sell to define the granularity of data you need to gather. You can ask yourself the questions we shared above to support this decision-making process.
- There are easier ways to streamline downstream calculations, which are appropriate for companies that don’t produce high-emitting products or services. Doing these to know where to dig in for more data is a practical time-saver.
- Ask your customers to share their data to increase your accuracy. Many are likely working under the same consumer or regulatory pressures as yourself, so they probably have information to hand. Together you may be able to share insights that spark low-carbon innovations that benefit the entire value chain.