Greenhouse Gas Protocol - Corporate Standards

Protocol Overview

The Greenhouse Gas Protocol (GHG Protocol) Corporate Accounting and Reporting Standard is the world's most widely used framework for measuring and reporting organizational greenhouse gas emissions. Developed jointly by the World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD), the protocol provides a comprehensive methodology for quantifying direct and indirect emissions.

Adoption Scale:

• Used by 92% of Fortune 500 companies for GHG accounting
• Adopted in 90+ countries as de facto standard or regulatory requirement
• Integration: Foundation for CSRD, ISSB S2, SBTi, TCFD frameworks globally

Core Scope Classification System

Scope 1 - Direct Emissions

Definition: GHG emissions from sources owned or controlled by the reporting organization

Primary Categories:

• Stationary combustion: Fuel burned in boilers, furnaces, heaters (natural gas, coal, biomass)
• Mobile combustion: Emissions from company-owned vehicles (fleet, forklifts, generators)
• Process emissions: Chemical reactions producing GHG (cement production, refrigerant leaks, waste decomposition)
• Fugitive emissions: Unintentional releases (refrigerant leaks from AC/chillers, natural gas system leaks)

Example calculation:

Company A: Manufacturing facility
- Natural gas consumption: 500,000 m³/year × 1.96 kg CO₂e/m³ = 980 tonnes CO₂e
- Fleet vehicles: 10,000 liters gasoline/year × 2.31 kg CO₂e/liter = 23 tonnes CO₂e
- Process emissions (metal fabrication): 500 tonnes CO₂e
Total Scope 1: 1,503 tonnes CO₂e

Scope 2 - Indirect Emissions from Purchased Energy

Definition: Emissions from purchased electricity, steam, hot water, or cooling used by the organization

Calculation Approaches:

• Location-based: Uses average grid emissions factor for the region
• Market-based: Uses actual emissions from specific power purchase agreements (PPAs), green energy certificates

Key consideration: Market-based approach incentivizes renewable energy procurement; location-based reflects true grid carbon intensity

Example calculation:

Company B: Office building
- Electricity consumption: 1,000,000 kWh/year

Location-based:
1,000,000 kWh × 0.40 kg CO₂e/kWh (grid average) = 400 tonnes CO₂e

Market-based (with 50% renewable PPAs):
500,000 kWh × 0.40 kg CO₂e/kWh = 200 tonnes CO₂e
500,000 kWh × 0 kg CO₂e/kWh (renewable) = 0 tonnes CO₂e
Total Scope 2 (market-based): 200 tonnes CO₂e

Scope 2 (location-based) is typically 2x higher if grid carbon intensity is high.

Scope 3 - Other Indirect Emissions

Definition: All other indirect emissions occurring in an organization's value chain (upstream, downstream, value chain, financed emissions)

15 Scope 3 Categories:

Scope 3 Examples - Detail:

Technology company manufacturing laptops:

• Category 1 (Purchased Goods): Semiconductors, display panels (60% of total Scope 3)
• Category 4 (Upstream Transportation): Ocean freight from Taiwan factories (8%)
• Category 9 (Downstream Transportation): Shipping to retailers globally (7%)
• Category 11 (Use of Sold Products): Electricity consumption over 4-year laptop life (25%)

Financial institution:

• Category 15 (Investments): Financed emissions from loan portfolio (98% of total Scope 3)
  • Calculation: Borrower Scope 1+2 emissions × loan allocation factor

Quantification Methodologies

Primary Data vs. Calculation

Primary data (highest accuracy):

• Direct measurement from meters, sensors, utility bills
• Supplier-provided emissions data
• Company purchase records with actual quantities

Secondary data (when primary unavailable):

• Industry average emission factors
• Regional grid carbon intensity
• Default conversion factors

Standard Calculation Formula

Activity Data × Emission Factor = GHG Emissions (tonnes CO₂e)

Example:
- Activity: 1,000 litres of gasoline consumed
- Emission Factor: 2.31 kg CO₂e/litre
- Result: 2.31 tonnes CO₂e

Scope 3 Quantification Approaches

1. Supplier-Specific Method (Most accurate):

• Collect facility-level Scope 1+2 emissions from suppliers
• Allocate based on company's purchase volume
• ~20% of large companies achieve >70% supplier data coverage

2. Average-Data Method (Industry standard):

• Use published industry average GHG intensity (kg CO₂e per $ spent, per unit product)
• Example: Chemical industry supplier average = 2.5 kg CO₂e per $ spent
• Multiplied by company's annual $ purchases = Scope 3 estimate

3. Spend-Based Method (Simplified):

• Use industry average for entire supplier base
• Works when suppliers are fragmented/diverse
• Highest uncertainty (±30-50%) but lowest cost to implement

Organizational Boundaries

Companies must declare emissions ownership based on three approaches:

Equity Share Approach

• Report % of emissions proportional to company's ownership stake
• Used by: Private equity firms, joint ventures, consortiums

Financial Control Approach

• Include all entities with financial/operating control authority
• Most common for corporations with subsidiaries

Operational Control Approach

• Include facilities where company operates day-to-day
• Used for leased operations, franchise businesses

Example:

ABC Corporation
- Headquarters (100% owned): Report 100% of emissions
- Joint venture factory (50% owned): Report 50% of emissions
- Leased office building (operated daily): Report 100% of emissions
- Franchise partner (partner owns/operates): Report 0% of emissions

Materiality & Scope 3 Inclusion Decision

GHG Protocol recommends companies evaluate Scope 3 materiality:

Include Scope 3 Category if:

• Represents >5% of total organizational emissions, OR
• Stakeholders request it specifically, OR
• Category is critical to climate strategy

Most commonly reported Scope 3 categories (% of reporting companies):

• Category 1 (Purchased Goods): 65%
• Category 4 (Upstream Transport): 58%
• Category 11 (Use of Sold Products): 42%
• Category 15 (Investments): 38% (financial services)

Implementation Roadmap

Phase 1: Organizational Design (Weeks 1-4)

• Define organizational boundaries (equity/financial/operational control)
• Document scope selection (Scope 1, 2, mandatory; Scope 3 materiality assessment)
• Identify significant emission sources

Phase 2: Data Collection (Weeks 5-12)

• Gather utility bills, fuel receipts, travel records
• Contact suppliers for emissions data (Scope 3)
• Estimate missing data using industry factors

Phase 3: Calculation & QA (Weeks 13-16)

• Apply GHG Protocol methodology and emission factors
• Perform sensitivity analysis (uncertainty ranges)
• Document all calculation assumptions

Phase 4: Verification & Reporting (Weeks 17-20)

• Engage ISO 14064-3 qualified verifier
• Publish GHG inventory with methodology disclosure
• Establish baseline for year-over-year tracking

Common Implementation Challenges

Regulatory Integration

Jurisdictions using GHG Protocol as regulatory baseline:

• EU: GHG Protocol forms foundation for CSRD/ESRS calculations
• UK: SECR (Streamlined Energy and Carbon Reporting) mandates GHG Protocol alignment
• US: EPA guidelines reference GHG Protocol methodologies
• Japan: GHG Protocol adopted in Keidanren Voluntary Action Plan
• Voluntary carbon markets: VCS, Gold Standard use GHG Protocol methodologies

Document Status

Last Updated: 2015 Corporate Standard (current edition); 2023 Corporate Value Chain (Scope 3) Accounting & Reporting Standard | Authority: World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD) | Public Access: Standards available free at ghgprotocol.org; calculation tools, guidance, sector-specific guidance documents