How to calculate your Scope 3 using SWC MRIO emission factors
This guide is for carbon accountants, in-house or consultants, who want to complete an upstream Scope 3 carbon footprint, starting with a spend-based analysis.
This step-by-step guide to our easy-to-use emission factors will help you avoid some of the common pitfalls in Scope 3 analysis and give you best-practice answers to common decisions.
Spend-based emissions factors, like those in our SWC MRIO, are an essential part of your supply chain carbon assessment. If you only use spend-based factors, you’ll get a simple and fairly generic assessment. But without them, you’ll never include the entirety of your organisation’s supply chain emissions, so you have to start your Scope 3 assessment with a spend-based analysis.
There’s a lot to think about:
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Does your spend data include distributor margins, taxes and subsidies?
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How will you account for spend on capital infrastructure?
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Do you include non-C02 effects of aviation in your emission totals?
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Which country will you choose if you know where the goods are made as well as purchased from?
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If you have activity or product carbon footprint data, how can you use it without double-counting or missing far end of the supply chain emissions?
With this guide and our transparent methodology, you’ll have easy answers to all those questions, making your carbon assessment audit-ready.
Crucially, we’ll show you how to bring supplier, activity and product data into your spend-based analysis and maintain a complete and consistent system boundary, something PCF alone fail to do. We’ll stop you getting into a methodological tangle by simply mixing approaches together.
Step 1: Set the assessment boundary
Your boundary sets out what you are covering in your assessment, and should include:
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The timeframe (12-months aligned with your financial reporting is standard).
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The organisational boundary. This could include multiple businesses or exclude certain business components.
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The different greenhouse gases, and the timeframe over which they are calculated as the equivalent CO2. A 100-year timeframe is standard, as is including all seven gases covered by the GHGP.
Within your boundary, all the upstream emissions from your supply chain (emissions from the production and transportation of goods and services you buy) should be included. These are the GHGP categories for upstream emissions and the types of data you will need:
Cat 3.1 Purchased Goods and Services
Extraction, production, and transportation of all goods and services acquired, up to the point of purchase by the reporting company.
Data: Purchase ledger, invoices and purchase orders, details of suppliers and breakdown of typical purchases.
Cat 3.3 Fuel and Energy Related Activities
Even though burning fuel and the direct emissions from power plants are accounted for in Scope 1 and 2 reporting, there are additional emissions from energy supply chains that you need to include in Scope 3, e.g. the operations of oil rigs, or renewable electricity sources.
Data: The amounts of fuels burnt and electricity used. These will usually have been collected for your Scope 1 and 2 - utility bills, meter readings, fuel tracking and/or vehicle mileage.
Cat 3.5 Waste Generated in Operations
Disposal and treatment of waste generated in the company's facilities.
Data: Spend with third-party waste management and recycling companies.
Cat 3.7 Employee Commuting
Transportation of employees between their homes and their work places.
Data: Staff surveys on modes and distance of regular commuting.
Cat 3.2 Capital Goods
Extraction, production, and transportation of capital goods (e.g., buildings, machinery) acquired in the reporting year.
Data: Fixed asset register showing asset acquisition cost and date, depreciation schedule project accounts and company accounts.
Cat 3.4 Upstream Transportation and Distribution
Transportation and storage of products purchased by the company from suppliers.
Data: Transport costs and ideally mileage for both third-party transport and in-house transport and distribution.
Cat 3.6 Business Travel
Transportation of employees for business-related activities.
Data: Flights, train travel, taxis and private mileage in distance as well as costs.
Cat 3.8 Upstream Leased Assets
Operation of assets leased by the reporting company, and not included in Scope 1 or 2.
Data: Lease payments for offices, warehouses, machinery, PCs and company vehicles.
Step 2: Collect your spend data
You'll never have perfect data, and while it’s likely that more reliable and more granular data will become available over time, start with the data you have. It’s best to spend most of your effort on areas where improved data will have the greatest impact on the realism of your assessment.
You will need comprehensive data on organisational spending and on physical consumption in key areas. Ask for:
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Procurement ledgers
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Energy bills
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Invoices and purchase orders
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Freight distances and vehicle types and staff commuting surveys
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Product names for any significant purchasing areas
What can I leave out of my Scope 3 footprint?
Step 3: Choose the right emission factors and calculate your organisation's emissions
Using spend-based data and the SWC MRIO, you’ll be able to get a system-complete first sketch of your organisational footprint, counting all emissions from your full supply chain. You can only capture all emissions using a spend-based method first.
A spend-based footprint removes any bias to what is covered, and can often reveal that overlooked aspects of your business have more significant emissions than you’d first thought. If you only attempt a bottom-up approach, you end up trying to quantify a footprint for every piece of stationery, every cup of coffee, and it quickly becomes infeasible.
The general principle of spend-based carbon accounting is to categorise each bit of your spend to the most relevant emission factor.
Spend (£) x Emission Factor (kgCO2e)
It’s important to identify the most relevant factor, and ensure your units are appropriate. This means not just the currency, but the ‘type of prices’ and the year of currency, as inflation, tax, etc. must be accounted for to avoid under or over-counting the footprint.
These next steps will help you decide which emission factor is the best one to use with your data:
3.1 Choose the correct year
Emission factors change year by year for multiple reasons; changes in the actual emissions of an industry, changes in the economic structure of an industry, and changes to prices (i.e. inflation).
These yearly changes mean the emission factors you use should be matched as closely as possible to the date of your purchase. Using older emission factors often results in over-estimates of emissions as inflation reduces the amount each £ buys, and many industries are seeing a general trend of decarbonising.
The SWC MRIO has specific emission factors for every year from 2016 to 2025 which account for changes in the economy.
Our emission factors are already adjusted for inflation, for each year in the model. For 2025, where economic data isn’t available yet, we’ve inflation-adjusted from the most recent data.
3.2 Align your currency to £GBP
The main SWC MRIO uses £GBP, so any spend in another currency should be converted to £GBP using an average for that year, or the conversion rate at the time the spend was made, if known.
Once you’ve selected the appropriate year, you need to allocate your spend to industry sectors, and where possible, countries.
3.3 Choose purchaser or basic prices
Purchaser prices are the total amount paid by the purchasers to take delivery of the goods or service and include taxes, transportation and non-deductible VAT, minus any subsidies.
Basic prices are the amount received by the producer for just the goods and services supplied.
Spend-based organisational carbon accounting is based on the purchased values, so it’s almost always purchaser prices that are used; if in doubt, this is your default.
The SWC MRIO has both purchaser and basic prices, so you can select the right one for each spend data you have.
3.4 Categorise your spend
How granular do you want your assessment to be? You could categorise every line of spend, if that’s 100s or 1000s it’ll be very granular but might lack clear descriptions. Or you could use top-level categories that will contain a large range of purchases. Your ideal balance should be where spend within a category is primarily reflected by a single industry sector or a simple weighed split of 2 or 3 sectors.
You can categorise at the nominal/general ledger code level if these are sufficiently detailed e.g. Nominal code: Legal Services -> Sector: Legal Activities. Or you can categorise at the supplier level, when the goods or services that the supplier provides are mostly in the same sector. e.g. Supplier: Deloitte -> Sector: Accounting, bookkeeping and auditing activities.
It can be worthwhile to footprint a single spend line if it’s a significant purchase, and poorly reflected by the supplier or nominal code.
You’ll probably have a long tail of small spends, which won’t contribute substantially to your overall spend. Consider the cost-benefit of improving the quality of your footprinting - we find that broad category mapping is usually sufficient.
3.5 Choose the industry sector the goods or services belong to
The SWC MRIO is divided into 103 industry sectors. You should categorise each spend against one of these sectors, or a weighted average of several sectors if the purchase is split between different sectors.
Many sectors are self-explanatory e.g. Marketing, Legal Services. For purchases or sectors that are more ambiguous, we recommend referring to a SIC code guide, such the UK Companies House guide.
Occasionally, another sector may better represent the majority of the supply chain for a particular product or service, in which case, document the rationale for your choice and be consistent in how you allocate sectors.
3.6 Choose the country as supply or demand
The country of demand is where the purchasing organisation is located. The country of supply is where the goods or services are produced. The SWC MRIO has both.
If you know the country of supply, this will give more reliable emission factors, as they will be generalised to that industry sector in that country. If you don’t know the country of supply, use the country of demand, which gives an average for all goods and services, both imported and home-manufactured, that the country of demand purchases.
If you know the country of supply for key goods and services it can give more realistic emission estimates. For the UK clothing sector, average emissions for all clothes bought in the UK is 0.370kg / CO₂e/£ (UK as country of demand). But if you know that your clothes are supplied from India, your emissions are over 3.5 times this average. Similarly if you know that your clothes are supplied by the UK, your emissions will be less than half that average.
3.7 Calculate your emissions
Once you’ve selected the most appropriate emission factor, based on industry sector, county of supply or demand and basic or purchaser price, calculate the emissions:
Spend (£) x Emission Factor (kgCO2e) = emissions
Step 4: Filling the gaps
The data in your purchase ledger covers a wide range of your organisation’s impact, but you’ll need other data for the following two areas:
4.1 Capital Goods
4.2 Staff Commuting
“One key benefit of the SWC MRIO is being able to ask the team any queries about any of the emissions factors, and they can talk us through their methodology in detail, unlike other 'black box' datasets.”
Jane Hersey, Group Sustainability Reporting Manager, Savills.
Step 5: Improve your footprint with more specific data
You can make your carbon footprint more reflective of your actual emissions by iteratively improving the data you use.
5.1 Use suppliers’ published Scope 1 and 2 data
The SWC MRIO allows you to split your suppliers’ emissions into their Scopes 1, 2 and 3. Under SERC (Streamlined Energy and Carbon Reporting) legislation, it is mandatory for qualifying companies to report their Scope 1 and 2 emissions. Qualifying companies are those that meet two of the following criteria: a turnover of £36 million or more; a balance sheet of £18 million or more; 250 employees or more.
If your data shows purchases from large companies that have to publish their Scope 1 and 2 emissions under SERC, you can split the emission factor into the three separate Scopes and use their specific data for Scopes 1 and 2, to replace the industry average.
5.2 Identify areas where you can use physical consumption data in place of spend-based data
What are the significant areas of your carbon footprint? Look at the proportion of emissions, the proportion of overall spend, or by how important an activity is to the organisation’s operations to identify key areas. Which of these key areas is it practical to obtain and use activity-based data?
Your choice of areas should not be influenced by how much it may make your footprint increase or decrease.
Activity data gives you the physical amount of something used or consumed, rather than estimating the amount based on cost.
Step 6: Make product carbon footprints comparable
Product Carbon Footprints (PCF), or produce life cycle analysis can give you far more specific emission factors. If you can source trusted PCF for any of your significant purchases, there is a way to make them comparable with your spend-based foundation, so you can use them in the same carbon footprint.
Product Carbon Footprints suffer from missing emissions at the far end of their supply chains, called a truncation error. Truncation errors can mean that upto 50% of emissions are missing from a PCF.
But there is away to adjust a PCF, so it covers the whole supply chain. Read our quick guide to truncation errors and how to use truncation error adjustment factors.
Step 7: Report your results with context
To help your carbon footprint deliver the greatest insight and impact to your organisation, make sure you:
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Be clear about what is included in your carbon footprint and what is not.
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Create the clearest impression of where emissions come from, so attention can be focused on the areas of greatest significance.
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Give perspective to show the significance of your organisation’s emissions within its industry and the wider economy.
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Make the areas with the greatest emissions and significance the most prominent.
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Where appropriate, include wider environmental and social sustainability issues that are impacted by your organisation’s operations, so that carbon emissions are not seen as an isolated sustainability issue.
7.1 Define your boundary
Document the decisions you made in Step 1, defining what is included and excluded in the organisation boundary and the reasons why.
7.2 Separate Scopes 1, 2 and 3, and into functional categories
How you categorise your organisation’s emissions depends on how you intend to use the footprint. We always recommend reporting your Scope 1, 2 and 3 separately, as these are clearly defined, and each has different levers for decarbonising. You may want to split the Scope 3 emissions into the Greenhouse Gas Protocol categories e.g. S3.1 Purchased Goods and Services, but it’s often more useful to categorise your Scope 3 emissions in ways that are meaningful for the organisation.
We commonly split an organisation's emissions into categories that are used internally, such as departments or top-level purchase categories. Matching your reporting and your targets to the different teams that can control and influence them can make your action planning much easier.
It can also be useful to combine your Scope 1 and 2 emissions with S3.4 Fuel and Energy-Related Emissions. This shows the full lifecycle emissions of fuel and energy use, which will all reduce if you reduce your consumption.
7.3 Report your total emissions and show key hotspots
You should break down your results so that it is easy to identify key hotspots and management priorities.
You should report your emissions as one total emissions figure for Scope 3. You can also report your emission intensity, which is the amount of emissions per unit of output. This could be by unit of revenue, or by unit of physical output of the organisation’s products or services. It’s also possible to calculate intensity by the proportion of the total market or of the global economy.
7.4 State the emission factors you have used and the methodology behind them
State that you have used the SWC MRIO emission factors and reference our transparent SWC MRIO methodology document. In our methodology we detail how our emission factors have been derived, the data used, our assumptions and estimations, and how any emission factors adjustments have been made.
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