I. Under the GHG Protocol Guidelines: How Should Companies Address Scope 3 Downstream Transportation Emissions? 

In recent years, global attention to carbon emissions management has continued to grow. In particular, driven by climate-related disclosure requirements under IFRS S2, companies are required to disclose carbon emissions data more transparently in their ESG (Environmental, Social, and Governance) reporting. Among these, Scope 3 emissions—covering upstream and downstream activities across a company’s value chain—have become one of the most significant challenges in corporate carbon management.

Within Scope 3, downstream transportation and distribution (Scope 3, Category 9) has long been a focal point for companies. Many firms believe that if transportation costs are paid by customers, the associated transportation emissions can be excluded from the company’s carbon inventory. However, according to international carbon accounting standards, specifically the Greenhouse Gas Protocol (GHG Protocol), this view is incorrect.

As global supply-chain decarbonization accelerates, companies can no longer focus solely on Scope 1 (direct emissions) and Scope 2 (indirect energy emissions). The completeness of Scope 3 reporting has become a key concern for investors, regulators, and markets. As a critical component of Scope 3, downstream transportation emissions should be actively included in corporate carbon inventories to ensure comprehensive climate risk management.

When addressing Scope 3 downstream transportation emissions, companies should consider how their actions influence supply-chain partners in order to improve data transparency and accuracy. For example, companies can collaborate with logistics providers to develop low-carbon transportation strategies and adopt transport modes with lower carbon footprints (such as rail or maritime transport instead of air freight). At the same time, companies can establish internal carbon pricing mechanisms and incorporate transportation-related carbon emissions into cost calculations, thereby more closely integrating sustainability strategies with corporate financial decision-making. 

II. How does the GHG Protocol define downstream transportation emissions? 

According to the GHG Protocol Scope 3 Standard, when companies calculate emissions under Scope 3, Category 9 (Downstream Transportation and Distribution), they should include:

• The transportation and distribution of sold products, from the reporting company’s operations to the final consumer (when the transportation is not paid for by the reporting company), including retail and warehousing activities that use vehicles and facilities not owned or controlled by the reporting company.

This means that even if a company does not pay for the transportation costs, the resulting transportation emissions are still generated as a consequence of the company’s sales activities and therefore should be included within the company’s carbon emissions reporting boundary.

Practical case analysis: GHG annual reporting company — export of products overseas

Based on the file “Annual Reporting Company Scope 3 Definitions.xlsx”, the annual reporting company has clearly delineated the emissions boundaries for different types of transportation and fully complies with the GHG Protocol Scope 3 guidance. Specifically:

📌 Case Illustration

1. Assumption: The reporting company is an electronics manufacturer, with its primary markets in Taiwan and Europe. The company exports its products to a retailer in France, and the transportation process involves the following regions and scopes:

2. Domestic land transportation in Taiwan (company-paid):
   Transport from manufacturing sites to the port is carried out by local logistics providers in Taiwan. This stage falls under Scope 3, Category 4 (Upstream Transportation and Distribution).

3. Ocean freight to France (customer-paid):
   The customer arranges and pays for the ocean transportation. This stage falls under Scope 3, Category 9 (Downstream Transportation and Distribution).

4. Domestic logistics within France (customer-paid):
   After arrival at the French port, the products are transported by local logistics providers to the retailer. This stage also falls under Scope 3, Category 9 (Downstream Transportation and Distribution).

5. Product storage and warehousing emissions:
   Products are stored in distribution centers in France. This process may involve additional energy consumption, and the company should consider including the associated emissions in its calculations.

6. Last-mile delivery (customer-paid):
   When products are delivered from the retailer to end consumers, the associated logistics activities still fall under Scope 3, Category 9 and should be accounted for.

📌 Recommended Approach

According to the GHG Protocol, even if transportation costs in stages 2, 3, and 5 are paid by the customer, the reporting company is still required to account for the associated emissions and classify them under Scope 3, Category 9.

In addition, companies should establish internal emissions data integration mechanisms to ensure that emissions data across different transportation modes are comparable and verifiable. Through continuous monitoring and disclosure, companies can ensure that transportation-related emissions information is consistent, transparent, and decision-useful.

III. Does the GHG Protocol Allow Companies to Exclude These Emissions? 

One of the core principles of the GHG Protocol is Completeness, which requires companies to include all emission sources relevant to their value chain when conducting greenhouse gas inventories. Therefore, the GHG Protocol does not allow companies to arbitrarily exclude Scope 3 emissions.

However, companies may disclose and justify the exclusion of certain Scope 3 categories in their reports under specific conditions, including the following:

1. Immateriality

If emissions from a particular Scope 3 category are negligible, accounting for less than 1% of the company’s total emissions, the company may choose to exclude them, provided that the rationale for exclusion is clearly disclosed.

2. Data Unavailability

If a company is unable to obtain downstream transportation data from customers, it may use proxy data or industry average data to estimate emissions, rather than excluding them entirely.

3. Not Applicable

If the company’s business model does not involve a specific Scope 3 category—for example, companies that provide only digital services and do not sell physical products—the category may be reasonably excluded.

📌Key Takeaways

The GHG Protocol does not allow companies to arbitrarily exclude Scope 3 emissions. However, it does allow companies to disclose and justify exclusions within a reasonable scope, and encourages the use of estimated or proxy data whenever possible for reporting purposes.

Companies should avoid underestimating emissions due to data gaps and should instead work collaboratively with supply chain partners to improve data availability and accuracy. This approach not only strengthens ESG compliance, but also helps companies maintain a competitive advantage in capital markets.

📢 If your company is seeking GHG Protocol–aligned carbon accounting and decarbonization strategies, feel free to contact us — let’s work together toward a net-zero future.

IV. Same Transportation Activity, Why Different Emissions? 

An Analysis under the GHG Protocol: Scope 1 vs. Scope 3 (Downstream Customer-Paid Transportation) 

I. Introduction: Carbon Disclosure Is Not Only About Emissions, but Also About Responsibility Attribution

As carbon inventories and greenhouse gas disclosures increasingly become a standard component of corporate sustainability management, accurately classifying emissions attribution in accordance with international standards is no longer merely a technical issue. It also reflects a company’s transparency obligations across the supply chain and responsibility chain.

Transportation, as one of the most common emission activities for enterprises, often results in significant differences in emission classification under the GHG Protocol due to variations in operational control and logistics roles. This is particularly evident in the distinction between company-operated transportation and third-party logistics.

This section uses two common transportation scenarios as examples and applies identical transportation conditions—10 metric tons of goods transported over 100 kilometers—to simulate emissions data and compare attribution logic. The aim is to clearly illustrate how emission responsibility is assigned and calculated under Scope 1 and Scope 3 (Category 9: Downstream Transportation).

II. Two Transportation Scenario Setups (Supplementary Explanation)

To clarify why emission responsibility attribution differs under the same goods and transportation conditions, the following assumptions are established:

• All goods are manufactured by the reporting company

• The destination is the reporting company’s final customer (located off-site)

• Transportation distance is 100 km, with a total cargo weight of 10 metric tons

• Transportation vehicles are 10-ton commercial diesel trucks, with actual fuel consumption of 20 liters

• The only difference: the entity executing and controlling the transportation differs (company-owned vs. third-party logistics)=

III. Why Do the Two Scenarios Result in Different Emissions Responsibilities?

The core issue lies in who controls the emission source.

• Scenario 1: The reporting company operates its own trucks, which are a direct emissions source (mobile combustion). Therefore, the diesel consumed and the resulting CO₂ emissions are included in the reporting company’s Scope 1.

• Scenario 2: Although the transportation activity is still carried out by trucks, the emission source is outside the reporting company’s control boundary. As a result, the reporting company cannot classify these emissions as Scope 1. Instead, in accordance with the GHG Protocol, the emissions must be disclosed under Scope 3, Category 9 (Downstream Transportation).

The GHG Protocol clearly states that if a company does not control the transportation activity, but the activity is triggered by the company’s sale of products, the associated emissions fall under Scope 3, Category 9.

The core issue lies in who controls the emission source.

• Scenario 1: The reporting company operates its own trucks, which are a direct emissions source (mobile combustion). Therefore, the diesel consumed and the resulting CO₂ emissions are included in the reporting company’s Scope 1.

• Scenario 2: Although the transportation activity is still carried out by trucks, the emission source is outside the reporting company’s control boundary. As a result, the reporting company cannot classify these emissions as Scope 1. Instead, in accordance with the GHG Protocol, the emissions must be disclosed under Scope 3, Category 9 (Downstream Transportation).

The GHG Protocol clearly states that if a company does not control the transportation activity, but the activity is triggered by the company’s sale of products, the associated emissions fall under Scope 3, Category 9.

IV. Why Is There No Difference in the Total Emissions Data?

Under the assumed conditions, both scenarios use:

• a 10-ton truck,

• transporting 10 tons of goods,

• over a distance of 100 km,

• with diesel consumption of 20 liters.

Using the IPCC diesel emission factor:

1. Combusting 1 liter of diesel emits approximately 2.69 kg CO₂ (Tier 1 factor).

2. Total emissions = 20 × 2.69 = 53.8 kg CO₂, equivalent to 0.0538 tCO₂e.

• In Scenario 1, this emission amount is classified as the reporting company’s Scope 1.

• In Scenario 2, the same emission amount is included in the logistics company’s Scope 1, while the reporting company must disclose an equivalent amount under Scope 3, Category 9.

Although the total carbon emissions are identical from a global perspective, the allocation of responsibility and disclosure logic under ESG and GHG reporting differs fundamentally.

V. International Standards Referenced

The following international standards form the basis for the emissions attribution discussed above:

• GHG Protocol — Corporate Standard, Chapter 4

• GHG Protocol — Scope 3 Standard, Chapter 5.5 (Category 9)

• ISO 14064-1:2018 — Section 5.2: Boundary and Responsibility Clarification

VI. Conclusions and Recommendations

This practical example demonstrates that even when transport distance, vehicle type, and cargo conditions are identical, differences in the transportation entity and control rights can lead to different emissions classifications for the reporting company.

It is therefore recommended that companies, when conducting greenhouse gas inventories, place particular emphasis on clearly defining the boundaries of “control” and “induced activities.” In accordance with the GHG Protocol, emissions under Category 9 (Downstream Transportation) should be properly identified and disclosed to ensure the completeness of emissions reporting.

As supply chain transparency and ESG-related greenhouse gas management increasingly become standard disclosure requirements, companies should develop the capability to accurately interpret different emissions attribution scenarios. This is essential for reliably planning decarbonization pathways and meeting international disclosure and compliance expectations.