Scope 3 Category 2 covers the emissions embedded in capital goods — machinery, buildings, IT systems, vehicles — that your company purchases and capitalises on its balance sheet. For capital-intensive manufacturers, this can be a surprisingly significant Scope 3 source.
Key takeaways
- The dividing line between Category 1 and 2 is accounting treatment: expensed = Cat 1, capitalised = Cat 2
- No lifetime pro-rating — full embedded emissions allocated to the year of purchase
- Preferred calculation method: supplier-specific LCA data; acceptable fallback: spend-based emission factors
- Capital-intensive manufacturers (heavy equipment, precision machining) will often find Cat 2 material
- CSRD ESRS E1-6 requires Cat 2 disclosure if material after double materiality assessment
What counts as a Scope 3 Category 2 capital good?
A capital good, for Scope 3 purposes, is any purchased good that is treated as a fixed asset under your company's accounting policies — depreciated over time rather than expensed immediately. Common examples for manufacturers include:
- Production machinery and assembly equipment
- CNC machining centres, injection moulding machines, press brakes
- Industrial boilers, furnaces, and ovens
- Factory buildings and extensions
- Company vehicles and forklift fleets
- IT servers, data centre equipment, ERP systems with hardware
- Renewable energy installations (solar panels, wind turbines)
Leased assets follow the accounting treatment for the lease. Under IFRS 16, finance-leased assets appear on the balance sheet as right-of-use assets — these are typically included in Category 2. Operating leases that remain off-balance-sheet follow Category 8 (upstream leased assets).
Building your full Scope 3 inventory? Use our free Carbon Footprint Calculator to estimate your combined Scope 1, 2, and 3 emissions using spend-based methodology — a fast starting point before moving to supplier-specific data.
Calculation methods
The GHG Protocol lists three acceptable methods for Category 2, in order of preference:
1. Supplier-specific method (most accurate)
Request a product-level lifecycle assessment (LCA) or carbon footprint declaration from your capital equipment supplier. Many large equipment manufacturers now provide Environmental Product Declarations (EPDs) or Type III eco-labels with cradle-to-gate carbon data. This is the most accurate method and the one that will satisfy auditors most cleanly under CSRD.
2. Hybrid method
Use supplier-specific data where available, and fill gaps with industry-average LCA data from databases like Ecoinvent (ecoinvent.org) or PE International's GaBi database. Apply the relevant industry-average cradle-to-gate emission factor (tCO₂e per unit or per tonne of equipment) to the mass or quantity of capital goods purchased.
3. Spend-based method (least accurate, fastest to implement)
Multiply your capital expenditure (in your reporting currency) by a sector-specific economic input-output emission factor. Common factor databases: EXIOBASE (EU), Defra EEIO factors (UK), EPA USEEIO (US). The sector code matches the ISIC or SIC industry classification of the capital good supplier.
Spend-based Category 2 is the typical starting point for first-time reporters. Be aware that spend-based factors mix across multiple product types and geography and will have significant uncertainty ranges — always disclose the methodology and its limitations.
Is Category 2 material for your company?
Category 2 materiality depends on your capital intensity relative to other Scope 3 sources. Run a rough spend-based estimate first. For a manufacturer spending €5M/year on production equipment, at a typical machinery sector emission factor of ~0.7 kgCO₂e/€, Category 2 is approximately 3,500 tCO₂e — meaningful for many mid-sized manufacturers but often smaller than Category 1 (purchased goods) or Category 11 (use of sold products).
Sectors where Category 2 is almost always material: heavy manufacturing (blast furnaces, rolling mills), precision engineering (CNC machine shops with frequent equipment refresh), semiconductor fabs, and pharmaceutical manufacturers with large cleanroom equipment programmes.
CSRD and ESRS E1-6 requirements
Under CSRD, ESRS E1-6 requires disclosure of total Scope 3 emissions disaggregated by material categories. If your double materiality assessment identifies Category 2 as material, you must disclose it separately with the calculation methodology, data quality, and any limitations.
The ESRS standard does not prescribe a specific Scope 3 calculation method — it refers to the GHG Protocol Corporate Value Chain Standard as the acceptable methodology. However, the assurance provider will review whether the method chosen is appropriate and whether it is applied consistently across reporting years.
Frequently asked questions
What is the difference between Scope 3 Category 1 and Category 2?
Category 1 covers purchased goods and services expensed in the reporting period. Category 2 covers purchased goods capitalised on the balance sheet as fixed assets. The key distinction is accounting treatment: if it's on the asset register, it's Category 2.
Should Scope 3 Category 2 emissions be pro-rated over the asset lifetime?
No. Under GHG Protocol, full cradle-to-gate emissions of a capital good are allocated to the year of acquisition. This reflects when the manufacturing emissions were actually generated, regardless of how long you use the asset.
Is Scope 3 Category 2 typically material for manufacturers?
It depends on capital intensity. High-CapEx manufacturers (blast furnaces, CNC machine shops, semiconductor fabs) often find Category 2 material. Light manufacturers or service businesses with minimal equipment spend typically find it immaterial relative to other Scope 3 categories.
What emission factors should I use for capital goods?
In preference order: (1) Supplier-specific LCA/EPD data; (2) Industry-average lifecycle factors from Ecoinvent or GaBi; (3) Spend-based EEIO factors from EXIOBASE, Defra, or EPA USEEIO. Disclose the method and its limitations in your report.
Need help with your Scope 3 inventory?
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