The difference between these terms relates to who controls/pays for transportation and the direction of product flow.
1. Inbound vs Outbound Freight
Inbound Freight: Transportation of goods coming into your company (from suppliers to your facilities).
Outbound Freight: Transportation of goods leaving your company (from your facilities to customers).
This distinction is primarily about direction and is commonly used in logistics operations.
2. Upstream vs Downstream Freight
Upstream Freight
It is the transportation that your company pays for and controls, regardless of direction. This includes all transportation you purchase (inbound deliveries from suppliers, outbound to customers, or between your own facilities).
While it may not always be obvious, the following scenarios do fall under upstream freight:
in the context of inbound deliveries from suppliers, although transportation costs are not paid directly by the customer, they are nonetheless embedded in the final product price. Consequently, the customer ultimately bears the cost of transport in an indirect manner.
even outbound transportation is considered upstream if your company pays for it.
In fact, all inbound freights are upstream.
2. Downstream freight
It is the transportation that your company does not pay for or control. This includes:
Transportation organized and paid for by your customers or other parties after point of sale.
Products being transported after you've sold them, where another entity is handling logistics.
3. How to determine the difference
The distinction isn't about the direction (inbound/outbound) but about who bears the cost:
If your company pays for transportation (whether bringing goods in or shipping them out), it's upstream freight.
If someone else pays (typically your customers arranging their own transport after purchase), it's downstream freight.
This distinction matters for carbon accounting because it determines which Scope 3 category applies (category 4 for upstream, category 9 for downstream) in GHG Protocol reporting.
Below, some examples:
Example 1: Manufacturing Company
You manufacture products and pay a logistics company to deliver them to your customers. This is outbound freight (direction = leaving your facility).
But since you're paying for it, it's categorized as upstream transportation.
Example 2: Retail Chain
You have stores and pay carriers to deliver products from your warehouse to your stores.
This is outbound freight (the products are leaving the warehouse).
But since you're paying for it, it counts as upstream transportation
Example 3: When You Would Have Downstream Transportation
You sell products to a retailer who arranges and pays for their own shipping from your facility to their stores.
You sell to customers with "customer pickup" or "FOB Origin" terms where they arrange shipping.
In these cases, you would have downstream transportation emissions (if you estimated them)