In this article, we’ll explore the GHG protocol, the complexities surrounding carbon emissions data, and the importance of GHG metrics, considering evolving frameworks and regulations like the CSRD and IFRS.
The demand for a greener, more sustainable, and ethical world is only intensifying. And as it does, decarbonization become a global priority.
To achieve the Paris Agreement’s goal of limiting the temperature increase to 1.5-degree above pre-industrial levels and meet the UN’s goal of net zero by 2050, a reduction in greenhouse gas emissions of about 45% from 2010 levels by 2030 is needed. As a result, investors now consider decarbonization a critical determinant, calling on organizations to disclose carbon emissions and their plans to reduce them.
The thing is, measuring greenhouse gas (GHG) emissions is highly complex, both in terms of data gathering and producing the necessary emissions calculations.
In this article, we’ll explore the GHG protocol, the complexities surrounding carbon emissions data, and the importance of GHG metrics, considering evolving frameworks and regulations like the CSRD and IFRS.
What you’ll learn:
- Carbon emissions disclosure explained: The GHG Protocol and Scope 1, 2 & 3 emissions
- Why CFOs should prioritize carbon emissions disclosure
- Challenges of disclosing carbon emissions
- How CCH Tagetik supports carbon emissions disclosure
Carbon emissions disclosure explained: The GHG Protocol and Scope 1, 2 & 3 emissions
The GHG protocol is the greenhouse gas accounting standard most widely used by companies. It provides businesses and governments with standards, guidelines, tools, and training to help measure the greenhouse gas emissions that cause global warming. It’s also known as “carbon accounting” because it provides a standardized framework for measuring and reporting greenhouse gas emissions, similar to how financial accounting involves measuring and reporting financial transactions
Fast facts about the GHG protocol
- More than 9/10 Fortune 500 companies use the GHG protocol.
- The GHG protocol is an international protocol developed by the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI). It was developed with input from organizations and experts across more than 40 countries, making it one of the most globally collaborative environmental standards.
- The GHG protocol has been in use for over 20 years.
- Beyond businesses and governments, the GHG Protocol has been used by cities, universities, and even sports teams to measure and reduce their carbon footprints.
- The GHG protocol identifies six main greenhouse gases:
- Carbon dioxide (CO2)
- Methane (CH4)
- Nitrous oxide (N2O)
- Hydrofluorocarbons (HFCs)
- Perfluorocarbons (PFCs)
- Sulphur hexafluoride (SF6)
- By following the GHG protocol, companies are closer to aligning with the Paris Agreement’s goals.
- The GHG Protocol has inspired the development of innovative technologies and practices aimed at reducing emissions, such as more efficient manufacturing processes and greener supply chains.
The GHG protocol has three scopes
Scope 1 emissions
Scope 1 emissions are direct emissions. Direct emissions are from sources that are owned by a company and can include:
- Emissions from fleet vehicles
- Emissions from stationary sources like incinerators, furnaces, or boilers
- Manufacturing or processing emissions
- Chemical emissions
- Fugitive emissions, like methane from coal mines or electricity from burning coal
Scope 2 emissions
Scope 2 emissions are indirect emissions. Indirect emissions are released from purchased energy, e.g., electricity, steam, heating, and cooling. The actual emission is often produced at another facility, resulting from the company’s consumption.
Scope 3 emissions
Scope 3 emissions are further indirect emissions that are outside of the organization’s control but still a result of the organization’s operations, employees, and purchases.
Scope 3 emissions are categorized as upstream and downstream and further broken down into 15 categories:
| Upstream Emissions: Purchased Goods and Services Capital Goods Fuel- and Energy-Related Activities (Not Included in Scope 1 or Scope 2) Upstream Transportation and Distribution Waste Generated in Operations Business Travel Employee Commuting Upstream Leased Assets |
Downstream Emissions: Downstream Transportation and Distribution Processing of Sold Products Use of Sold Products End-of-Life Treatment of Sold Products Downstream Leased Assets Franchises Investments |
There are seven standards under the GHG Protocol, four of which apply to companies and organizations:
Corporate accounting reporting standard: Guidance for businesses disclosing emissions.
Project protocol: Guidance for measuring reductions from mitigation projects
Corporate value chain standard: Guidance for measuring and reporting Scope 3 emissions from the entire value chain, including both upstream and downstream activities.
Product standard: Guidance for businesses evaluating emissions from a product’s lifecycle
