Category 4 vs. Category 9: Understanding Transportation & Distribution Emissions
If your company directly contracts and pays a third-party carrier or 3PL, the emissions are always Category 4, regardless of which direction the goods are moving
One of the common misconceptions in Scope 3 reporting is how to classify transportation and distribution (T&D) emissions, namely when shipping goods to customers. Do emissions fall into Category 4 (Upstream T&D) or Category 9 (Downstream T&D)? Many users assume the distinction always follows the physical direction of goods where 'upstream' means goods transported towards the company and 'downstream' means away from the company - but there are some nuances to the allocation.
GHG Protocol Methodology
Category 4: Upstream Transportation & Distribution
- Emissions from all the transport of purchased goods from your supplier to you (upstream flow of physical goods).
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Emissions from all third-party transportation and distribution services purchased by your company, including inbound logistics, outbound logistics (e.g. of sold products), and transport between the company's own facilities. This applies regardless of the physical direction of goods - outbound logistics are classified as upstream because they are a purchased service.
See GHG Protocol Category 4 reference here.
Category 9: Downstream Transportation & Distribution
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Emissions from transportation and distribution of sold products between the reporting company and the end consumer, but only where your company is not paying for the transport service. This applies exclusively when the customer directly contracts and pays the carrier themselves.
See GHG Protocol Category 9 reference here.
💡Note: If you're using spend to calculate emissions, where products have been purchased from a supplier with shipping costs bundled into the product price and not separately invoiced, the associated upstream transport emissions are usually captured within Category 1 (Purchased Goods & Services), which is sufficient in most cases. However, if freight costs can be isolated for significant spend, for example where a supplier provides a separate freight line item on their invoice, these should be broken out and reported in Category 4 for greater accuracy.
| T&D Activity | Category |
|---|---|
| Transport in vehicles or facilities your company owns or operates | Scope 1 or 2 |
| Transport embedded in the cost of goods purchased from suppliers | Scope 3, Cat. 1 |
| Transport of purchased goods from your suppliers to your operations, using third-party carriers (if able to separate) | Scope 3, Cat. 4 |
| Any third-party carrier or 3PL your company directly contracts and pays for - inbound, outbound, or between your own sites | Scope 3, Cat. 4 |
| Delivery of your sold products to the end customer, where the customer arranges and pays for transport themselves | Scope 3, Cat. 9 |
See 'What Scope 3 categories do I need to measure?'
Trace Approach
Does the carrier or 3PL appear on your General Ledger? → Category 4, regardless of which direction the goods are travelling.
Does the customer directly contract and pay their own carrier? → Category 9
Do you purchase products from a supplier who provides a separate line item for transport? → Category 4
Do you only have a total spend on a product purchased from a supplier? → Category 1
💡Note: A customer paying a 'shipping fee' at checkout does not automatically make the transport Category 9. If your company contracted the carrier and is invoiced for the service (even if that cost is partially recovered from the customer through the product or shipping price), the emissions remain in Category 4. Only when the customer directly contracts and pays the carrier themselves does it become Category 9.