Scope 3 Emissions for Building Portfolios: Where to Start

Buildings are a bigger slice of Canada's emissions than most teams assume. The built environment (residential, commercial, and institutional) accounts for roughly 17 to 18 percent of national greenhouse gas emissions once building electricity use is included, according to Natural Resources Canada analysis compiled by IISD and Canada's own emissions-by-sector reporting. For a portfolio owner or operator, that headline number is only the visible part. Most of the emissions attached to a building sit outside the walls you directly control.

That outside portion is Scope 3: indirect emissions across your value chain. Across sectors, Scope 3 typically represents 70 to 95 percent of a company's total footprint, and real estate is no exception. If a landlord meters common areas but tenants pay their own hydro and gas, most of the building's energy emissions are Scope 3 to the landlord, even though they happen in the same building.

This article explains what Scope 3 covers for a building portfolio, how it differs from Scope 1 and 2, which categories actually move the number, and the data foundation you need before you publish anything. The short version: you cannot estimate your way out of a weak measurement base, and utility data is where a defensible base begins.

Scope 1, 2, and 3 for a building portfolio: the quick distinction

The three scopes come from the GHG Protocol Corporate Standard, the accounting framework that Canadian and global disclosure standards point to. The boundary that matters is control, not geography.

The trap for real estate is that the same physical building can be Scope 1, 2, or 3 depending on who holds the lease and who pays the meter. A gas boiler in a landlord-operated building is Scope 1 to the landlord. The identical boiler in a triple-net-leased building, where the tenant controls and pays for it, becomes Scope 3 (downstream leased assets) to the landlord and Scope 1 to the tenant. Getting the lease structure right is half the accounting.

Why Scope 3 is the hard part for real estate

Scope 1 and 2 are hard mostly because bills are messy. Scope 3 is hard because the data often sits with someone else.

• Split incentives and split meters: in many commercial leases the tenant holds the utility account, so the landlord never sees the bill that drives the largest share of the building's emissions.
• Fifteen categories, not one: the Corporate Value Chain (Scope 3) Standard defines 15 categories, and a portfolio can touch most of them, from purchased goods to end-of-life treatment.
• Estimation risk: when primary data is missing, teams fall back on spend-based or intensity-based estimates, which are acceptable but weak, and they invite challenge from assurance providers and investors.
• Double counting and boundary confusion: the same tenant kilowatt-hour can appear in the tenant's Scope 2 and the landlord's Scope 3, which is expected, but it must be documented so the numbers are explainable.

The categories that matter most for building portfolios

You do not need all 15 categories to be material. For most owners and operators, a handful dominate.

Downstream leased assets (Category 13)

For a landlord, tenant energy use in space you own but do not operate is Category 13. This is usually the single largest Scope 3 line for a real-estate owner, because it captures the electricity and gas that tenants consume across the whole leased area. The activity data you need is the tenant utility bills, which is exactly the data that is hardest to collect and easiest to get wrong.

Purchased goods, services, and capital goods (Categories 1 and 2)

Construction materials, tenant improvements, and major equipment carry embodied emissions that land in Categories 1 and 2. For portfolios in a build or retrofit cycle, these can rival operational emissions in a given year. Early on, spend-based estimates are common; over time, teams move to supplier-specific and material-specific factors.

Waste, commuting, and upstream leased assets (Categories 5, 7, and 8)

Waste generated in operations (Category 5), employee commuting (Category 7), and space you lease from others (Category 8) round out the practical short list. They are smaller than tenant energy for most portfolios, but they are often required for a complete inventory and they are usually estimable from data you already hold.

Where to start: a practical sequence

You do not have to boil the ocean. A staged approach gets you a credible inventory faster than trying to perfect every category at once.

1. Map your leases first. For every property, record who controls and who pays for each energy source. This single step decides what is Scope 1, 2, and 3 and prevents the most common misclassification.
2. Prioritize by likely magnitude. Start with downstream leased assets (tenant energy), then purchased goods and capital goods if you are building or retrofitting.
3. Collect primary data where you can. Landlord-metered utility bills are primary data; tenant bills obtained through data-sharing or green-button-style access are the next best source.
4. Use transparent estimates only to fill gaps. Document the method (spend-based, average-data, or supplier-specific) for each estimated line.
5. Set a materiality threshold and a re-measurement cadence. Screen all 15 categories once, then focus effort where the numbers are largest and most volatile.

The data foundation Scope 3 needs

Every category above resolves to the same underlying pattern from the GHG Protocol: activity data multiplied by an emission factor. For buildings, the activity data is overwhelmingly energy: kilowatt-hours, cubic metres of gas, litres of fuel, gigajoules of steam. A Scope 3 program stands or falls on whether that activity data is complete, clean, and consistent.

• Completeness: every meter and account accounted for, including tenant accounts, with gaps flagged rather than silently zeroed.
• Consistency: usage normalized to consistent units and billing periods so month-over-month and site-over-site comparisons hold.
• Traceability: each figure traceable back to a specific bill, so an assurance provider can follow the number to its source.
• Correct factors: emission factors matched to the right jurisdiction and year, which for Canada means provincial grid factors that vary widely.

You cannot manage, reduce, or defend an emissions number you cannot trace back to a bill. Scope 3 makes that traceability harder, and more important.MartinAI Team

How MartinAI helps

MartinAI reads utility bills across every commodity (electricity, natural gas, water, steam, and fuels) and across the many formats issued by Canadian utilities. It reasons over each bill to pull out the usage, period, meter, and account details that Scope 3 accounting depends on, then validates those figures against expected ranges to catch errors before they enter your inventory.

For a building portfolio, that means landlord and tenant bills become structured activity data you can classify by scope and category, with each number traceable to its source document. Instead of a spreadsheet stitched together by hand, you get a clean, consistent activity-data layer that feeds Scope 1, 2, and 3 reporting and holds up under assurance. MartinAI does not sell you offsets or a single magic figure; it gives you the measured foundation that credible Scope 3 accounting requires.

The takeaway

Scope 3 is where most of a building portfolio's emissions live, and tenant energy use is usually the largest line. The work is less about clever modelling and more about disciplined data: map your leases, collect real bills wherever you can, estimate transparently where you cannot, and keep every number traceable. Start with the activity data, and the rest of the inventory follows.