The Greenhouse Gas Protocol or GHG protocol is a regulatory reference framework for defining the 3 scopes.
Several non-financial reporting frameworks that have recently come into force refer to the GHG Protocol.
What information should be included in your GHG emissions reporting according to the reference frameworks?
GHG emissions reporting is a major challenge for companies: it involves identifying the relevant data and methodologies for communicating on emissions. After decades of voluntary initiatives, regulatory frameworks are developing to provide a framework for this type of reporting. However, there are still differences of opinion on the scope of climate-related information to be communicated.
Numerous regulatory reporting frameworks are emerging.
The Greenhouse Gas Protocol or GHG protocol is the reference framework for carbon accounting in organisations. Aimed at establishing a regulatory framework to better define GHG emissions, it defines the 3 scopes (Scope 1, Scope 2 and Scope 3) of carbon accounting. This consultative protocol is supported by the WRI (World Resource Institute) and the World Business Council for Sustainable Development (WBCSD).
Several non-financial reporting frameworks that have recently come into force are based on the GHG Protocol methodology:
- IFRS S2 Climate-related Disclosures, published by the International Sustainability Standards Board (ISSB), the sustainability standard-setting office of the IFRS Foundation
- European Sustainability Reporting Standards (ESRS) mandated by the European Corporate Sustainability Reporting Directive (CSRD)
- The Enhancement and Standardization of Climate-Related Disclosures for Investors Rule, a climate reporting framework for listed companies imposed by the SEC, the U.S. federal agency that regulates and monitors financial markets.
For more information on these different frameworks, see our previous articles on IFRS and ESRS, as well as the SEC announcements.
The GHG Protocol uses the notion of “boundaries” to define the limits of carbon accounting.
As a minimum, the GHG Protocol recommends that companies report Scope 1 and Scope 2 emissions.
A common methodological framework based on the concepts of “scope” and “boundaries”.
The GHG Protocol was designed to provide an international standard for estimating and reporting greenhouse gas emissions. In particular, this carbon accounting standard has established key definitions to build a standardised measurement framework.
Defining the boundaries of carbon accounting.
The GHG Protocol uses the notion of “boundaries” to define the limits of carbon accounting.
- The organisational boundaries refer to the scope of analysis applied during a GHG assessment. It involves answering the following questions: which organisational structures are taken into account? Which subsidiaries, sites and facilities fall within the scope of the company’s carbon footprint? The Greenhouse Gas Protocol provides a methodology for answering these questions, with a choice of two consolidation approaches: “equity share” or “control”.
- The operational scope raises the following question: which emissions should be taken into account when drawing up a GHG emissions assessment? Scope 1, Scope 2, Scope 3: the standard defines three fields of application for accounting and presenting GHGs.
Scope 1, Scope 2 and Scope 3: the three fields of application for accounting and presenting GHG emissions.
- Scope 1 corresponds to direct greenhouse gas emissions. These direct emissions come from sources owned or controlled by the organisation. They are mainly the result of activities such as the production of electricity, heat or steam, physical or chemical processing, the transportation of materials, products, waste and employees, as well as fugitive emissions.
- Scope 2 covers GHG emissions resulting from the import or export of electricity, steam or heat. This scope accounts for emissions associated with the production of imported or purchased energy, and with energy exported or sold. These indirect emissions are essential for many companies, for whom electricity consumption represents one of the main sources of GHG emissions reduction.
- Scope 3 covers indirect emissions resulting from the organisation’s activities, which originate from sources belonging to or under the control of another company. These indirect emissions notably come from employee business travel, product transport, subcontracted activities, product and service life-cycle emissions, and employee commuting.
As a minimum, the GHG Protocol recommends that companies report Scope 1 and Scope 2 emissions. The regulatory framework also encourages registrants to account for and report Scope 3 emissions. The protocol considers that these three fields of application offer significant opportunities for reducing greenhouse gas emissions.
The Greenhouse Gas Protocol has published a map offering a detailed view of the climate regulations that incorporate its methodology and recommendations.
The report provides a summary of the areas of alignment between the GHG Protocol and climate reporting requirements.
Information required depending on whether you are subject to SEC, IFRS or CSRD regulations.
How do you find your way around the carbon footprint regulatory landscape? In March 2024, the Greenhouse Gas Protocol published a map providing a detailed overview of the climate regulations that incorporate its methodology and recommendations.
Thus, the report provides a summary of the areas of alignment between the GHG Protocol and climate reporting requirements:
To see the whole table, use the scroll bar to the right.
| Reference | GHG Protocol application required | Organizational scope | Operating perimeter | Scope 2 | Scope 3 | Land management |
|---|---|---|---|---|---|---|
| GHG Protocol | – | Choice of consolidation approach. | Scope 1, 2 and 3 (Scope 3 optional for companies) | Dual approach required. | Scope 3 reporting required in Scope 3 Standard; 15 categories. | Reporting biogenic and negative emissions separately from scopes |
| IFRS S2 | Application required, unless otherwise specified by the competent authorities. | Choice of consolidation approach. | Scope 1, 2 and 3 | Location-based approach required and market-based approach optional. | Scope 3 reporting required with grace period for 1st reporting period; 15 categories. | Not mentioned |
| ESRS E1 | Choose between GHG Protocol and ISO 14064: 2018. | Control approach required. | Scope 1, 2 and 3 | Dual approach required. | Scope 3 reporting required with grace period for 1st reporting period; 15 categories. | Reporting biogenic and negative emissions separately from scopes |
| U.S. SEC Climate Rule | Use the standard of your choice. | Choice of consolidation approach. | Scope 1 and 2 emissions considered material for investors | Location-based, market-based or dual approach. | Scope 3 reporting not required. | Not mentioned |
To carry out your first GHG assessment, we recommend you refer to the standards, definitions and methodologies of the Greenhouse Gas Protocol.
Aligning GHG reporting with GHG Protocol methods facilitates alignment with other emerging international regulations.
What reporting methodology should you use to start preparing your GHG balance sheet report?
To carry out your first GHG assessment, we recommend you refer to the standards, definitions and methodologies of the Greenhouse Gas Protocol. Although this protocol is not a regulation, it is widely recognised for its efforts to standardize carbon accounting. By 2022, the Harvard Business Review estimates that over 90% of Fortune 500 companies will be using the GHG Protocol as part of their ESG reporting.
In addition, aligning GHG reporting with GHG Protocol methods facilitates alignment with other emerging international regulations. For example, IFRS S2 Climate-related Disclosures and the European Sustainability Reporting Standards (ESRS) both require the application of the GHG Protocol (or ISO 14064 for ESRS, a standard also based on the GHG Protocol).
It should be noted that there are still a few differences between the GHG Protocol and the two non-financial reporting standards.
- For example, ESRS E1 imposes a “control” approach to determining the organizational perimeter, whereas the Protocol leaves this choice open.
- Previously only encouraged by the GHG Protocol’s corporate standard, ESRS E1 and IFRS S2 also impose Scope 3 reporting after a one-year grace period.
- IFRS S2 also stands out for its approach to Scope 2, for which the location-based approach is required, but the market-based approach remains optional.
- Finally, IFRS S2 makes no mention of biogenic and negative emissions, which are detailed by the GHG Protocol in a different section from Scope 1, 2 and 3.
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