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What are Capital Goods Emissions in Scope 3?

Capital Goods emissions fall under Category 2 of Scope 3 in the Greenhouse Gas (GHG) Protocol. These emissions refer to the upstream carbon footprint associated with the production of capital goods purchased by a company.

Capital goods are defined as physical assets that are used by an organisation to produce goods or services and have a lifespan of more than one year. Unlike purchased goods and services, capital goods are not consumed within a single reporting period but are long-term investments. 

 

Examples of Capital Goods Activities: 

  • Machinery and equipment used in manufacturing. 
  • Vehicles purchased for company operations (excluding leased assets). 
  • Buildings and facilities constructed or acquired. 
  • IT infrastructure, such as servers and large hardware systems. 
  • Furniture and fixtures for offices or production sites. 

These emissions cover the entire lifecycle up to the point of delivery—including raw material extraction, manufacturing, and transportation of the capital goods to the reporting company. 

 

How Are Capital Goods Emissions Calculated? 

Emissions from capital goods are generally calculated using: 

  • Spend-based method: Applying emission factors per monetary value spent on capital goods categories. 
  • Supplier-specific data: Where available, using actual emissions data from manufacturers. 
  • Lifecycle assessment (LCA) data: For high-impact assets, companies may use detailed cradle-to-gate LCA data. 

Note: Under the GHG Protocol, companies must account for the full embodied emissions of capital goods in the year of acquisition, rather than spreading emissions over the asset’s useful life. 

 

Why Are Capital Goods Emissions Important? 

For asset-intensive industries, capital goods can represent a significant share of Scope 3 emissions. Addressing these emissions helps companies to: 

  • Make lower-carbon procurement choices when investing in equipment or infrastructure. 
  • Influence suppliers to adopt sustainable manufacturing practices. 
  • Improve overall value chain emissions reporting accuracy. 
  • Align with climate targets by considering the long-term impact of capital investments. 

Understanding and managing capital goods emissions is essential for companies aiming to reduce their upstream carbon footprint and embed sustainability into procurement and investment decisions.