Sustainability Sustainability & ESG

Why the GHG Protocol is Essential for Sustainability Reporting

The GHG Protocol is one of the most widely used standards for ESG reporting. Specifically designed for carbon accounting, this protocol will prepare your company to report your carbon emissions accurately and effectively.

The Greenhouse Gas (GHG) Protocol Corporate Standard is the most widely used standard for collecting and reporting corporate GHG emissions data. In 2016, 92% of Fortune 500 Companies reported emissions using the GHG Protocol Corporate Standard for the CDP Questionnaire.

Atrius Sustainability is a dedicated platform for carbon accounting that helps companies align with the GHG Protocol. Our data management and reporting platform is externally audited by the leading assurance company, Apex Companies, LLC for this purpose. Our platform follows the internationally standardized approach to reporting GHG emissions defined by the GHG Protocol. Using Atrius Sustainability, companies can effectively improve their transparency around GHG emissions.   

Learn the essential facts about the GHG Protocol to understand how companies can prepare to report and align with this standard.  

GHG Protocol Key Facts 

The Greenhouse Gas (GHG) Protocol is a framework guiding organizations on measuring and reporting their GHG emissions. It supports a standardized approach to measuring these emissions, so tracking and monitoring an organization’s contributions to climate change in a comparable format is easier. 

The GHG Protocol is one of the longest standing sustainability frameworks, and it is used around the world for organizations of all sizes to report their carbon emissions. 

  • 1998 – GHG Protocol was established
  • 2001 – First version of the Corporate Standard published
  • 2009 – First GHG Protocol Value Chain (Scope 3) Standard published

Many well-known sustainability standards and frameworks align with the GHG Protocol for carbon emissions reporting: 

  • Global reporting Initiative (GRI)
  • Task Force on Climate Related Financial Disclosures (TCFD)
  • International Sustainability Standards Board (ISSB/IFRS)
  • CDP
  • Global Real Estate Sustainability Benchmark (GRESB)
  • ISO 14064 (Part 1) 

Who cares about GHG emissions data?

GHG emissions data is used by diverse groups of information users including investors, regulators, and business managers, among others. Business managers can use the data to optimize their operations, lower costs and respond to evolving energy transition risks. 

Investors increasingly seek high quality information on carbon emissions on par with the data quality standards used for financial statements. Though GHG emissions data is a non-financial metric, it can affect the financial prospects, performance and position of a business, based on climate-related market and policy shifts. Investors use sustainability data including GHG emissions in different ways: asset allocation, portfolio diversification, measuring climate risk-adjusted returns, and risk management.  

To respond to investor demands for high-quality sustainability information, regulators around the world are developing stronger reporting standards for this information. Approximately 30 countries have adopted or are expected to adopt climate-related disclosure regulations, which include GHG emissions. 

GHG Protocol Basics

Here are the essential details about the GHG Protocol both for measurement and reporting purposes. 

GHG Protocol Principles 

When measuring emissions or reporting emissions using the GHG Protocol, companies should follow certain principles: 

  • Relevance: Ensure measuring GHG emissions supports internal and external decision-making. 
  • Completeness: Include all GHG emissions in the chosen reporting boundaries and scopes. 
  • Consistency: Use consistent methodologies over time or report when these have changed, and the impact on the data. 
  • Transparency: Disclose data in a traceable format and include methodologies and assumptions. 
  • Accuracy: Minimize uncertainties in the data and ensure quantified GHG emissions accurately align with the actual emissions from organizational activities. 

GHG Inventory 

The main aim of the Standard is to provide a uniform method for businesses to conduct a GHG inventory according to their organizational boundary determined for reporting. The GHG inventory provides a transparent calculation of an organization’s emissions for a given time period, aiding comparisons for businesses, regions and industrial sectors.  

A GHG inventory using the Corporate Standard calculates the following GHGs: 

  • Carbon dioxide (CO2)
  • Methane (CH4)
  • Nitrous oxide (N2O)
  • Hydrofluorocarbons (HFCs)
  • Perfluorocarbons (PCFs)Sulphur hexafluoride (SF6) 
  • Nitrogen trifluoride (NF3) 

To reflect the climate change impact of each GHG in a comparable way, these GHGs are associated with a global warming potential that reflects their impact in terms of the CO2 equivalent (CO2e). 

Scope 1, 2 and 3 Emissions

A GHG inventory will also classify the reported emissions by Scopes 1, 2 and 3, which the GHG Protocol Corporate Standard defines. Under the GHG Protocol Corporate Standard, reporting Scope 1 and 2 emissions is required, while reporting Scope 3 emissions is not required, but strongly recommended. However, legal or regulatory requirements may require businesses to report on all three scopes, and businesses should adhere to such requirements where relevant. 

Scope 1 emissions refer to the emissions from the direct operations of an organization, such as fuel burning for fleet transportation, fugitive emissions from refrigeration, or industrial process emissions. Scope 1 emissions include any emissions directly resulting from an owned or controlled piece of equipment such as a gas- or oil-burning furnace, a vehicle, or a processing plant that produces emissions. Most businesses have relatively low Scope 1 emissions apart from utilities, transportation companies, or industrial manufacturers who burn large amounts of fossil fuels to produce their products or perform their services.  

Scope 2 emissions refer to the emissions associated with the purchased energy or electricity used by an organization. This is considered an indirect source of emissions because Scope 2 emissions are typically generated off-site in a utility plant before delivering the purchased energy or electricity resources. Tracking Scope 2 emissions is relatively simple since emissions estimates can be generated directly from the information found on a utility receipt.    

Scope 3 emissions are the indirect emissions that occur as a result of the full value chain of a business, including its upstream production of products, employee transportation for commutes, tenant leases, or the downstream use or disposal of products, investments, and others. A total of 15 categories of Scope 3 emissions are defined by the GHG Protocol’s Value Chain (Scope 3) Standard

Organizational structure and boundaries

To satisfy the principle of accuracy in reporting GHG emissions, an organization should clearly define which business entities they include in their GHG inventory. 

Operational control: Operational control means either an entity or its subsidiaries have authority over the operations of the relevant businesses included in the report. 

While the GHG Protocol allows some flexibility for choosing between different boundary approaches, it’s important to note that the EU’s CSRD only allows the operational control boundary-setting approach, making it differ slightly from the GHG Protocol. 

Financial control: Financial control indicates that GHG emissions calculation aligns with the same group of entities included in consolidated financial statements. Where companies have financial control over the business activities of an entity, such as a group company or subsidiary, these entities will be included in GHG emissions calculations. For any joint ventures, the company will use the equity share approach to only report the percentage aligned with their degree of ownership.   

Equity share approach: Using this approach, businesses measure and report GHG emissions for any business entities where they own a percentage of equity shares. For each relevant business entity, companies will base their reported emissions using the percentage of the total calculated emissions for that entity that aligns with their equity share ownership. 

This approach may be used because equity share ownership usually aligns with company ownership. Where this is not the case, the financial interest in a business activity takes precedence over legal ownership in the GHG Protocol, in alignment with financial accounting principles. It also flexibly accounts for partial ownership in joint ventures.  

Once a company has chosen a certain boundary, they will map their operational equipment, facilities and assets across their portfolio of companies to determine which sources of emissions should be included within their GHG inventory boundary. This is important for knowing which business activities would fall under each of the three emissions Scopes.  

Tracking and Reporting GHG Emissions

Companies usually track and monitor their GHG emissions to understand and address their related climate change risks, set and pursue GHG emissions reduction goals, provide information based on investor or other stakeholder requests, or align with regulatory requirements. 

For any business starting its emissions calculation journey, they’ll need to select a base year for comparison. This is the first year they prepare a full GHG inventory according to their selected boundary and scopes. Using this base year, they can understand changes to their emissions depending on business growth, decline or operations decisions. Businesses will need to recalculate their baseline in some instances of significant structural change to their organization. However, organic growth or decline are not considered grounds for recalculating the baseline year. 

After establishing a baseline year, organizations typically measure and report their emissions on an annual basis using the following steps: 

Identify emissions sources: Determine all sources of emissions across Scopes 1, 2 and 3. 

Determine calculation approach: For each source of emissions, a company will choose a calculation methodology. While direct measurement is the most accurate approach, it is not the most common due to technical challenges. Most companies choose to calculate emissions based on emissions factors, which are averages based on scientific calculations of emissions for different business activities. Emissions factor databases are available from numerous authoritative sources such as the United Nations Intergovernmental Panel on Climate Change (IPCC) or the United States Environmental Protection Agency (EPA).  

Collect data: Data collection comes from various sources including fuel receipts, utility meter readings and other data related to business activities.  

Apply calculation tools: The GHG Protocol suggests using calculation tools it provides for either cross-sector or sector-specific GHG emissions calculation. These present guidelines for calculating with recommended emissions factors, methodologies and controls to ensure accuracy. Companies may use custom calculation tools when they are at least as accurate as the GHG Protocol recommended tools.  

Combine calculations for reporting: After calculating emissions data source by source at the operational level, businesses must “roll up” their data into totals across their entire reporting boundary. These combined totals will be recorded in a company’s annual ESG or sustainability report and/or their submissions to different reporting frameworks. 

Get the right tool for GHG Protocol alignment 

The GHG Protocol is the most commonly used ESG reporting standard, and Atrius Sustainability aligns with its recommendations. Using a verified carbon accounting tool like Atrius Sustainability is one of the most reliable ways to ensure accurate, transparent carbon emissions measurement and reporting.

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