When should expenses be categorised as capital goods?

What are capital goods?

Under the GHG Protocol, capital goods fall under Scope 3, Category 2 emissions.

The GHG Protocol defines capital goods as:
"Final products that have an extended life and are used by the company to manufacture a product, provide a service, or sell, store, and deliver merchandise." 

These are long-term assets that provide value over multiple years, rather than being consumed during day-to-day operations.

Capital goods are generally:

• Used over more than one reporting period
• Recorded as fixed assets in financial reporting
• Purchased to support business operations or growth

Common examples include:

• Office buildings or fit-outs
• Machinery and manufacturing equipment
• Computers, servers, and IT hardware
• Vehicles
• Solar panels or infrastructure upgrades

Because these purchases are long-term investments, they are reported separately from routine operational spending.

When should an expense be categorised as a capital good?

Classify a purchase under Capital Goods (Scope 3, Category 2) when it:

• Is a long-term business asset used over multiple years
• Is capitalised in your accounting or finance system as a fixed asset or PP&E

If your finance team treats the expense as capital expenditure (CapEx), it will typically fall under Category 2.

Purchased goods & services vs capital goods

A common source of confusion in emissions reporting is distinguishing between Purchased Goods & Services (Scope 3, Category 1) and Capital Goods (Scope 3, Category 2).