GHG Protocol Revised

The Greenhouse Gas Protocol
— 390
— 370
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— 270 ppm
Year: 1000 1500 2000
A Corporate Accounting and Reporting Standard

REVISED EDITION
WORLD
RESOURCES
INSTITUTE
GHG Protocol Initiative Team
Janet Ranganathan World Resources Institute
Laurent Corbier World Business Council for Sustainable Development
Pankaj Bhatia World Resources Institute
Simon Schmitz World Business Council for Sustainable Development
Peter Gage World Resources Institute
Kjell Oren World Business Council for Sustainable Development
Revision Working Group

Brian Dawson & Matt Spannagle Australian Greenhouse Office
Mike McMahon BP
Pierre Boileau Environment Canada
Rob Frederick Ford Motor Company
Bruno Vanderborght Holcim
Fraser Thomson International Aluminum Institute
Koichi Kitamura Kansai Electric Power Company
Chi Mun Woo & Naseem Pankhida KPMG
Reid Miner National Council for Air and Stream Improvement
Laurent Segalen PricewaterhouseCoopers
Jasper Koch Shell Global Solutions International B.V.
Somnath Bhattacharjee The Energy Research Institute
Cynthia Cummis US Environmental Protection Agency
Clare Breidenich UNFCCC
Rebecca Eaton World Wildlife Fund
Core Advisors
Michael Gillenwater Independent Expert
Melanie Eddis KPMG
Marie Marache PricewaterhouseCoopers
Roberto Acosta UNFCCC
Vincent Camobreco US Environmental Protection Agency
Elizabeth Cook World Resources Institute
Table of Contents
Introduction The Greenhouse Gas Protocol Initiative 2
Chapter 1 GHG Accounting and Reporting Principles S T A N D A R D G U I D A N C E 6
Chapter 2 Business Goals and Inventory Design G U I D A N C E 10
Chapter 3 Setting Organizational Boundaries S T A N D A R D G U I D A N C E 16
Chapter 4 Setting Operational Boundaries S T A N D A R D G U I D A N C E 24
Chapter 5 Tracking Emissions Over Time S T A N D A R D G U I D A N C E 34
Chapter 6 Identifying and Calculating GHG Emissions G U I D A N C E 40
Chapter 7 Managing Inventory Quality G U I D A N C E 48
Chapter 8 Accounting for GHG Reductions G U I D A N C E 58
Chapter 9 Reporting GHG Emissions S T A N D A R D G U I D A N C E 62
Chapter 10 Verification of GHG Emissions G U I D A N C E 68
Chapter 11 Setting GHG Targets G U I D A N C E 74
Appendix A Accounting for Indirect Emissions from Electricity 86
Appendix B Accounting for Sequestered Atmospheric Carbon 88
Appendix C Overview of GHG Programs 90
Appendix D Industry Sectors and Scopes 92
Acronyms 95
Glossary 96
References 103
Contributors 104
Introduction
T he Greenhouse Gas Protocol Initiative is a multi-stakeholder partnership of
businesses, non-governmental organizations (NGOs), governments, and others
convened by the World Resources Institute (WRI), a U.S.-based environmental
NGO, and the World Business Council for Sustainable Development (WBCSD), a
Geneva-based coalition of 170 international companies. Launched in 1998, the
Initiative’s mission is to develop internationally accepted greenhouse gas (GHG)
accounting and reporting standards for business and to promote their broad adoption.
The GHG Protocol Initiative comprises two separate but linked standards:
• GHG Protocol Corporate Accounting and Reporting Standard (this document, which
provides a step-by-step guide for companies to use in quantifying and reporting their
GHG emissions)
• GHG Protocol Project Quantification Standard (forthcoming; a guide for quantifying
reductions from GHG mitigation projects)
2
INTRODUCTION 3
The first edition of the GHG Protocol Corporate Accounting and The business value of a GHG inventory
Reporting Standard (GHG Protocol Corporate Standard), published in Global warming and climate change have come to the fore as a
September 2001, enjoyed broad adoption and acceptance around the key sustainable development issue. Many governments are taking
globe by businesses, NGOs, and governments. Many industry, NGO, steps to reduce GHG emissions through national policies that
and government GHG programs1 used the standard as a basis for include the introduction of emissions trading programs, voluntary
their accounting and reporting systems. Industry groups, such programs, carbon or energy taxes, and regulations and standards
as the International Aluminum Institute, the International Council on energy efficiency and emissions. As a result, companies must
of Forest and Paper Associations, and the WBCSD Cement be able to understand and manage their GHG risks if they are to
Sustainability Initiative, partnered with the GHG Protocol Initiative ensure long-term success in a competitive business environment,
to develop complementary industry-specific calculation tools. and to be prepared for future national or regional climate policies.
Widespread adoption of the standard can be attributed to the inclu-
A well-designed and maintained corporate GHG inventory can
sion of many stakeholders in its development and to the fact that
serve several business goals, including:
it is robust, practical, and builds on the experience and expertise of
numerous experts and practitioners. • Managing GHG risks and identifying reduction opportunities
This revised edition of the GHG Protocol Corporate Standard is the • Public reporting and participation in voluntary GHG programs
culmination of a two-year multi-stakeholder dialogue, designed
• Participating in mandatory reporting programs
to build on experience gained from using the first edition. It includes
additional guidance, case studies, appendices, and a new chapter • Participating in GHG markets
on setting a GHG target. For the most part, however, the first edition
• Recognition for early voluntary action.
of the Corporate Standard has stood the test of time, and the
changes in this revised edition will not affect the results of most
GHG inventories.
Who should use this standard?
This GHG Protocol Corporate Standard provides standards and This standard is written primarily from the perspective of a busi-
guidance for companies and other types of organizations2 ness developing a GHG inventory. However, it applies equally to
preparing a GHG emissions inventory. It covers the accounting other types of organizations with operations that give rise to GHG
and reporting of the six greenhouse gases covered by the Kyoto emissions, e.g., NGOs, government agencies, and universities.3
Protocol — carbon dioxide (CO2), methane (CH4 ), nitrous oxide It should not be used to quantify the reductions associated with
(N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), GHG mitigation projects for use as offsets or credits—the
and sulphur hexafluoride (SF6). The standard and guidance were forthcoming GHG Protocol Project Quantification Standard will
designed with the following objectives in mind: provide standards and guidance for this purpose.
• To help companies prepare a GHG inventory that represents Policy makers and architects of GHG programs can also use rele-
a true and fair account of their emissions, through the use of vant parts of this standard as a basis for their own accounting
standardized approaches and principles and reporting requirements.
• To simplify and reduce the costs of compiling a GHG inventory
• To provide business with information that can be used to build

an effective strategy to manage and reduce GHG emissions
• To provide information that facilitates participation in voluntary

and mandatory GHG programs
• To increase consistency and transparency in GHG accounting

and reporting among various companies and GHG programs.
Both business and other stakeholders benefit from converging

on a common standard. For business, it reduces costs if their GHG
inventory is capable of meeting different internal and external
information requirements. For others, it improves the consistency,
transparency, and understandability of reported information,
making it easier to track and compare progress over time.
Introduction
Relationship to other GHG programs GHG calculation tools

It is important to distinguish between the GHG Protocol Initiative To complement the standard and guidance provided here,
and other GHG programs. The GHG Protocol Corporate Standard a number of cross-sector and sector-specific calculation tools
focuses only on the accounting and reporting of emissions. It does are available on the GHG Protocol Initiative website
not require emissions information to be reported to WRI or WBCSD. (www.ghgprotocol.org), including a guide for small office-based
In addition, while this standard is designed to develop a verifiable organizations (see chapter 6 for full list). These tools provide step-
inventory, it does not provide a standard for how the verification by-step guidance and electronic worksheets to help users
process should be conducted. calculate GHG emissions from specific sources or industries. The
tools are consistent with those proposed by the Intergovernmental
The GHG Protocol Corporate Standard has been designed to be
Panel on Climate Change (IPCC) for compilation of emissions
program or policy neutral. However, many existing GHG programs
at the national level (IPCC, 1996). They have been refined to be
use it for their own accounting and reporting requirements and it
user-friendly for non-technical company staff and to increase the
is compatible with most of them, including:
accuracy of emissions data at a company level. Thanks to help
• Voluntary GHG reduction programs, e.g., the World Wildlife Fund from many companies, organizations, and individual experts
(WWF) Climate Savers, the U.S. Environmental Protection through an intensive review of the tools, they are believed to
Agency (EPA) Climate Leaders, the Climate Neutral Network, represent current “best practice.”
and the Business Leaders Initiative on Climate Change (BLICC)
• GHG registries, e.g., California Climate Action Registry (CCAR),

Reporting in accordance with the
World Economic Forum Global GHG Registry
GHG Protocol Corporate Standard
• National and regional industry initiatives, e.g., New Zealand The GHG Protocol Initiative encourages the use of the GHG Protocol
Business Council for Sustainable Development, Taiwan Business Corporate Standard by all companies regardless of their experience
Council for Sustainable Development, Association des entreprises in preparing a GHG inventory. The term “shall” is used in the
pour la réduction des gaz à effet de serre (AERES) chapters containing standards to clarify what is required to prepare
and report a GHG inventory in accordance with the GHG Protocol
• GHG trading programs,4 e.g., UK Emissions Trading Scheme (UK
Corporate Standard. This is intended to improve the consistency
ETS), Chicago Climate Exchange (CCX), and the European Union
with which the standard is applied and the resulting information
Greenhouse Gas Emissions Allowance Trading Scheme (EU ETS)
that is publicly reported, without departing from the initial intent of
• Sector-specific protocols developed by a number of industry asso- the first edition. It also has the advantage of providing a verifiable
ciations, e.g., International Aluminum Institute, International standard for companies interested in taking this additional step.
Council of Forest and Paper Associations, International Iron and
Steel Institute, the WBCSD Cement Sustainability Initiative, and
the International Petroleum Industry Environmental Conservation Overview of main changes to the first edition
Association (IPIECA). This revised edition contains additional guidance, case studies,
and annexes. A new guidance chapter on setting GHG targets
Since GHG programs often have specific accounting and reporting
has been added in response to many requests from companies
requirements, companies should always check with any relevant
that, having developed an inventory, wanted to take the
programs for any additional requirements before developing
next step of setting a target. Appendices have been added on
their inventory.
accounting for indirect emissions from electricity and on
accounting for sequestered atmospheric carbon.
4 INTRODUCTION
INTRODUCTION 5
Changes to specific chapters include: Frequently asked questions…

• C H A P T E R 1 : Minor rewording of principles. Below is a list of frequently asked questions, with directions to the
relevant chapters.
• C H A P T E R 2 : Goal-related information on operational bound-
aries has been updated and consolidated. • What should I consider when setting out to
account for and report emissions? CHAPTER 2
• C H A P T E R 3 : Although still encouraged to account for
emissions using both the equity and control • How do I deal with complex company structures
approaches, companies may now report using and shared ownership? CHAPTER 3
one approach. This change reflects the fact
• What is the difference between direct and indirect
that not all companies need both types of infor-
emissions and what is their relevance? CHAPTER 4
mation to achieve their business goals. New
guidance has been provided on establishing • Which indirect emissions should I report? CHAPTER 4
control. The minimum equity threshold for
• How do I account for and report outsourced and
reporting purposes has been removed to enable
leased operations? CHAPTER 4
emissions to be reported when significant.
• What is a base year and why do I need one? CHAPTER 5
• CHAPTER 4: The definition of scope 2 has been revised to
exclude emissions from electricity purchased • My emissions change with acquisitions and
for resale—these are now included in scope 3. divestitures. How do I account for these? CHAPTER 5
This prevents two or more companies from
• How do I identify my company’s emission sources? C H A P T E R 6
double counting the same emissions in the
same scope. New guidance has been added on • What kinds of tools are there to help me
accounting for GHG emissions associated with calculate emissions? CHAPTER 6
electricity transmission and distribution losses.
• What data collection activities and data management
Additional guidance provided on Scope 3
issues do my facilities have to deal with? CHAPTER 6
categories and leasing.
• What determines the quality and credibility of my
• C H A P T E R 5 : The recommendation of pro-rata adjustments
emissions information? CHAPTER 7
was deleted to avoid the need for two adjust-
ments. More guidance has been added on • How should I account for and report GHG offsets
adjusting base year emissions for changes in that I sell or purchase? CHAPTER 8
calculation methodologies.
• What information should be included in a GHG
• CHAPTER 6: The guidance on choosing emission factors public emissions report? CHAPTER 9
has been improved.
• What data must be available to obtain external
• C H A P T E R 7 : The guidance on establishing an inventory verification of the inventory data? C H A P T E R 10
quality management system and on the applica-
• What is involved in setting an emissions target and
tions and limitations of uncertainty assessment
how do I report performance in relation to my target? C H A P T E R 11
has been expanded.
• C H A P T E R 8 : Guidance has been added on accounting for NOTES

and reporting project reductions and offsets in 1
GHG program is a generic term used to refer to any voluntary or mandatory
order to clarify the relationship between the international, national, sub-national government or non-governmental
GHG Protocol Corporate and Project Standards. authority that registers, certifies, or regulates GHG emissions or removals.
2
Throughout the rest of this document, the term “company” or “busi-
• C H A P T E R 9 : The required and optional reporting categories ness” is used as shorthand for companies, businesses and other types
have been clarified. of organizations.
3
• C H A P T E R 1 0 : Guidance on the concepts of materiality and For example, WRI uses the GHG Protocol Corporate Standard to publicly
report its own emissions on an annual basis and to participate in the
material discrepancy has been expanded. Chicago Climate Exchange.
• C H A P T E R 1 1 : New chapter added on steps in setting a target 4
Trading programs that operate at the level of facilities primarily use the
and tracking and reporting progress. GHG Protocol Initiative calculation tools.
1 GHG Accounting and Reporting Principles
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A s with financial accounting and reporting, generally accepted GHG
accounting principles are intended to underpin and guide GHG
accounting and reporting to ensure that the reported information represents a
faithful, true, and fair account of a company’s GHG emissions.
S T A N D A R D
G U I D A N C E
6
CHAPTER 1: GHG Accounting and Reporting Principles 7
GHG accounting and reporting practices are evolving and are new to many
businesses; however, the principles listed below are derived in part from
generally accepted financial accounting and reporting principles. They also
reflect the outcome of a collaborative process involving stakeholders from
a wide range of technical, environmental, and accounting disciplines.
GHG accounting and reporting shall be based on the following principles:
R E L E VA N C E Ensure the GHG inventory appropriately reflects the GHG emissions of the company and
serves the decision-making needs of users – both internal and external to the company.
COMPLETENESS Account for and report on all GHG emission sources and activities within the chosen
inventory boundary. Disclose and justify any specific exclusions.
CONSISTENCY Use consistent methodologies to allow for meaningful comparisons of emissions over time.
Transparently document any changes to the data, inventory boundary, methods, or any other
relevant factors in the time series.
TRANSPARENCY Address all relevant issues in a factual and coherent manner, based on a clear audit trail.
Disclose any relevant assumptions and make appropriate references to the accounting and
calculation methodologies and data sources used.
ACCURACY Ensure that the quantification of GHG emissions is systematically neither over nor under
actual emissions, as far as can be judged, and that uncertainties are reduced as far as
practicable. Achieve sufficient accuracy to enable users to make decisions with reasonable
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assurance as to the integrity of the reported information.
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GHG Accounting and Reporting Principles
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hese principles are intended to underpin all aspects bias in estimates (i.e., an underestimate). Although it
of GHG accounting and reporting. Their application appears useful in theory, the practical implementation of
will ensure that the GHG inventory constitutes a true such a threshold is not compatible with the completeness
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and fair representation of the company’s GHG emissions. principle of the GHG Protocol Corporate Standard. In order
Their primary function is to guide the implementation of to utilize a materiality specification, the emissions
the GHG Protocol Corporate Standard, particularly when from a particular source or activity would have to be
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the application of the standards to specific issues or situa- quantified to ensure they were under the threshold.
tions is ambiguous. However, once emissions are quantified, most of the
benefit of having a threshold is lost.
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A threshold is often used to determine whether an error

Relevance
or omission is a material discrepancy or not. This is
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For an organization’s GHG report to be relevant means

not the same as a de minimis for defining a complete
that it contains the information that users —both
inventory. Instead companies need to make a good faith
internal and external to the company—need for their
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effort to provide a complete, accurate, and consistent

decision making. An important aspect of relevance is the
accounting of their GHG emissions. For cases where
selection of an appropriate inventory boundary that
emissions have not been estimated, or estimated at an
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reflects the substance and economic reality of the

insufficient level of quality, it is important that this is
company’s business relationships, not merely its legal
transparently documented and justified. Verifiers can
form. The choice of the inventory boundary is dependent
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determine the potential impact and relevance of the exclu-

on the characteristics of the company, the intended
sion, or lack of quality, on the overall inventory report.
purpose of information, and the needs of the users. When
choosing the inventory boundary, a number of factors More information on completeness is provided in chap-
should be considered, such as: ters 7 and 10.
• Organizational structures: control (operational

and financial), ownership, legal agreements, joint
Consistency
ventures, etc.
Users of GHG information will want to track and
• Operational boundaries: on-site and off-site activities, compare GHG emissions information over time in order
processes, services, and impacts to identify trends and to assess the performance of
the reporting company. The consistent application of
• Business context: nature of activities, geographic loca-
accounting approaches, inventory boundary, and calcula-
tions, industry sector(s), purposes of information, and
tion methodologies is essential to producing comparable
users of information
GHG emissions data over time. The GHG information
More information on defining an appropriate inventory for all operations within an organization’s inventory
boundary is provided in chapters 2, 3, and 4. boundary needs to be compiled in a manner that ensures
that the aggregate information is internally consistent
and comparable over time. If there are changes in the
Completeness inventory boundary, methods, data or any other factors
All relevant emissions sources within the chosen affecting emission estimates, they need to be transpar-
inventory boundary need to be accounted for so that a ently documented and justified.
comprehensive and meaningful inventory is compiled.
More information on consistency is provided in
In practice, a lack of data or the cost of gathering
chapters 5 and 9.
data may be a limiting factor. Sometimes it is
tempting to define a minimum emissions accounting
threshold (often referred to as a materiality threshold)
stating that a source not exceeding a certain size
can be omitted from the inventory. Technically, such a
threshold is simply a predefined and accepted negative
8 CHAPTER 1
CHAPTER 1 GHG Accounting and Reporting Principles 9
Volkswagen:
Maintaining completeness over time Accuracy
Data should be sufficiently precise to enable intended
Volkswagen is a global auto manufacturer and the largest
users to make decisions with reasonable assurance that
automaker in Europe. While working on its GHG inventory,
the reported information is credible. GHG measure-
Volkswagen realized that the structure of its emission sources had
ments, estimates, or calculations should be systemically
undergone considerable changes over the last seven years.
neither over nor under the actual emissions value, as far
Emissions from production processes, which were considered to be
as can be judged, and that uncertainties are reduced as
irrelevant at a corporate level in 1996, today constitute almost
far as practicable. The quantification process should be
20 percent of aggregated GHG emissions at the relevant plant
conducted in a manner that minimizes uncertainty.
sites. Examples of growing emissions sources are new sites for
Reporting on measures taken to ensure accuracy in the
engine testing or the investment into magnesium die-casting
accounting of emissions can help promote credibility
equipment at certain production sites. This example shows that
while enhancing transparency.
emissions sources have to be regularly re-assessed to maintain a
complete inventory over time. More information on accuracy is provided in chapter 7.
Transparency
Transparency relates to the degree to which information
on the processes, procedures, assumptions, and limita-
tions of the GHG inventory are disclosed in a clear,
factual, neutral, and understandable manner based on The Body Shop: Solving the trade-off
clear documentation and archives (i.e., an audit trail). between accuracy and completeness
Information needs to be recorded, compiled, and
analyzed in a way that enables internal reviewers and As an international, values-driven retailer of skin, hair, body care,
external verifiers to attest to its credibility. Specific and make-up products, the Body Shop operates nearly 2,000 loca-
exclusions or inclusions need to be clearly identified and tions, serving 51 countries in 29 languages. Achieving both
justified, assumptions disclosed, and appropriate refer- accuracy and completeness in the GHG inventory process for such
G
ences provided for the methodologies applied and the a large, disaggregated organization, is a challenge. Unavailable
data sources used. The information should be sufficient data and costly measurement processes present significant
to enable a third party to derive the same results if obstacles to improving emission data accuracy. For example, it is
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provided with the same source data. A “transparent” difficult to disaggregate energy consumption information for
report will provide a clear understanding of the issues in shops located within shopping centers. Estimates for these shops
the context of the reporting company and a meaningful are often inaccurate, but excluding sources due to inaccuracy I
assessment of performance. An independent external creates an incomplete inventory.
verification is a good way of ensuring transparency and
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The Body Shop, with help from the Business Leaders Initiative on
determining that an appropriate audit trail has been
Climate Change (BLICC) program, approached this problem with
established and documentation provided.
a two-tiered solution. First, stores were encouraged to actively
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More information on transparency is provided in chap- pursue direct consumption data through disaggregated data or
ters 9 and 10. direct monitoring. Second, if unable to obtain direct consumption
data, stores were given standardized guidelines for estimating
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emissions based on factors such as square footage, equipment

type, and usage hours. This system replaced the prior fragmentary
approach, provided greater accuracy, and provided a more
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complete account of emissions by including facilities that previ-

ously were unable to calculate emissions. If such limitations in
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the measurement processes are made transparent, users of the

information will understand the basis of the data and the trade -
off that has taken place.
2 Business Goals and Inventory Design
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I mproving your understanding of your company’s GHG emissions by compiling
a GHG inventory makes good business sense. Companies frequently cite the
following five business goals as reasons for compiling a GHG inventory:
• Managing GHG risks and identifying reduction opportunities
• Public reporting and participation in voluntary GHG programs
• Participating in mandatory reporting programs
• Participating in GHG markets
• Recognition for early voluntary action
G U I D A N C E
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CHAPTER 2 Business Goals and Inventory Design 11
Companies generally want their GHG inventory to be Appendix C provides an overview of various GHG
capable of serving multiple goals. It therefore makes programs—many of which are based on the GHG Protocol
sense to design the process from the outset to provide Corporate Standard. The guidance sections of chapters 3
information for a variety of different users and and 4 provide additional information on how to design
uses—both current and future. The GHG Protocol an inventory for different goals and uses.
Corporate Standard has been designed as a comprehensive
GHG accounting and reporting framework to provide
the information building blocks capable of serving most Managing GHG risks
business goals (see Box 1). Thus the inventory data and identifying reduction opportunities
collected according to the GHG Protocol Corporate Compiling a comprehensive GHG inventory improves
Standard can be aggregated and disaggregated for a company’s understanding of its emissions profile
various organizational and operational boundaries and and any potential GHG liability or “exposure.” A
for different business geographic scales (state, country, company’s GHG exposure is increasingly becoming a
Annex 1 countries, non-Annex 1 countries, facility, management issue in light of heightened scrutiny by the
business unit, company, etc.). insurance industry, shareholders, and the emergence of
environmental regulations/policies designed to reduce
GHG emissions.
BOX 1. Business goals served by GHG inventories In the context of future GHG regulations, significant
Managing GHG risks and identifying reduction opportunities GHG emissions in a company’s value chain may result in
• Identifying risks associated with GHG constraints in the future increased costs (upstream) or reduced sales (down-
stream), even if the company itself is not directly subject
• Identifying cost effective reduction opportunities to regulations. Thus investors may view significant indi-
• Setting GHG targets, measuring and reporting progress rect emissions upstream or downstream of a company’s
operations as potential liabilities that need to be
Public reporting and participation in voluntary GHG programs managed and reduced. A limited focus on direct emis-
• Voluntary stakeholder reporting of GHG emissions and progress sions from a company’s own operations may miss major
towards GHG targets GHG risks and opportunities, while leading to a misin-
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• Reporting to government and NGO reporting programs, terpretation of the company’s actual GHG exposure.
including GHG registries On a more positive note, what gets measured gets
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• Eco-labelling and GHG certification managed. Accounting for emissions can help identify
the most effective reduction opportunities. This can
Participating in mandatory reporting programs drive increased materials and energy efficiency as well I
• Participating in government reporting programs at the national, as the development of new products and services that
regional, or local level reduce the GHG impacts of customers or suppliers. This
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Participating in GHG markets in turn can reduce production costs and help differen-
• Supporting internal GHG trading programs tiate the company in an increasingly environmentally
conscious marketplace. Conducting a rigorous GHG
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• Participating in external cap and trade allowance trading programs inventory is also a prerequisite for setting an internal
• Calculating carbon/GHG taxes or public GHG target and for subsequently measuring
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and reporting progress.

Recognition for early voluntary action
• Providing information to support “baseline protection” and/or
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credit for early action

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Business Goals and Inventory Design
Public reporting and participation

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IBM: The role of renewable energy

in reducing GHG emissions in voluntary GHG programs
As concerns over climate change grow, NGOs, investors,
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Indirect emissions associated with the consumption of purchased and other stakeholders are increasingly calling for
electricity are a required element of any company’s accounting and greater corporate disclosure of GHG information. They
reporting under the GHG Protocol Corporate Standard. Because are interested in the actions companies are taking and
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purchased electricity is a major source of GHG emissions for compa- in how the companies are positioned relative to their
nies, it presents a significant reduction opportunity. IBM, a major competitors in the face of emerging regulations. In
information technology company and a member of the WRI’s Green response, a growing number of companies are preparing
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Power Market Development Group, has systematically accounted for stakeholder reports containing information on GHG
these indirect emissions and thus identified the significant potential emissions. These may be stand-alone reports on GHG
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to reduce them. The company has implemented a variety of strategies emissions or broader environmental or sustainability
that would reduce either their demand for purchased energy or the reports. For example, companies preparing sustainability
GHG intensity of that purchased energy. One strategy has been to reports using the Global Reporting Initiative guidelines
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pursue the renewable energy market to reduce the GHG intensity of its should include information on GHG emissions in accor-
purchased electricity. dance with the GHG Protocol Corporate Standard (GRI,
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2002). Public reporting can also strengthen relation-

IBM succeeded in reducing its GHG emissions at its facility in
ships with other stakeholders. For instance, companies
Austin, Texas, even as energy use stayed relatively constant, through
can improve their standing with customers and with the
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a contract for renewable electricity with the local utility company,

public by being recognized for participating in voluntary
Austin Energy. Starting in 2001, this five-year contract is for 5.25
GHG programs.
million kWhs of wind-power per year. This zero emission power
lowered the facility’s inventory by more than 4,100 tonnes of CO2 Some countries and states have established GHG
compared to the previous year and represents nearly 5% of the registries where companies can report GHG emissions
facility’s total electricity consumption. Company-wide, IBM’s 2002 in a public database. Registries may be administered by
total renewable energy procurement was 66.2 million kWh, which governments (e.g., U.S. Department of Energy 1605b
represented 1.3% of its electricity consumption worldwide and Voluntary Reporting Program), NGOs (e.g., California
31,550 tonnes of CO2 compared to the previous year. Worldwide, IBM Climate Action Registry), or industry groups (e.g., World
purchased a variety of sources of renewable energy including wind, Economic Forum Global GHG Registry). Many GHG
biomass and solar. programs also provide help to companies setting volun-
tary GHG targets.
By accounting for these indirect emissions and looking for associ-
ated reduction opportunities, IBM has successfully reduced an Most voluntary GHG programs permit or require the
important source of its overall GHG emissions. reporting of direct emissions from operations (including
all six GHGs), as well as indirect GHG emissions from
purchased electricity. A GHG inventory prepared
in accordance with the GHG Protocol Corporate Standard
will usually be compatible with most requirements
(Appendix C provides an overview of the reporting
requirements of some GHG programs). However, since
the accounting guidelines of many voluntary programs
are periodically updated, companies planning to partici-
pate are advised to contact the program administrator
to check the current requirements.
12 CHAPTER 2
Participating in mandatory reporting programs Participating in GHG markets

Some governments require GHG emitters to report their Market-based approaches to reducing GHG emissions
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emissions annually. These typically focus on direct emis- are emerging in some parts of the world. In most
sions from operations at operated or controlled facilities places, they take the form of emissions trading
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in specific geographic jurisdictions. In Europe, facilities programs, although there are a number of other
falling under the requirements of the Integrated approaches adopted by countries, such as the taxation
Pollution Prevention and Control (IPPC) Directive must approach used in Norway. Trading programs can be I
report emissions exceeding a specified threshold for each implemented on a mandatory (e.g., the forthcoming
of the six GHGs. The reported emissions are included in EU ETS) or voluntary basis (e.g., CCX).
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a European Pollutant Emissions Register (EPER), a

Although trading programs, which determine compliance
publicly accessible internet-based database that permits
by comparing emissions with an emissions reduction
comparisons of emissions from individual facilities or
target or cap, typically require accounting only for
A
industrial sectors in different countries (EC-DGE, 2000).

direct emissions, there are exceptions. The UK ETS, for
In Ontario, Ontario Regulation 127 requires the
example, requires direct entry participants to account
reporting of GHG emissions (Ontario MOE, 2001).
N
for GHG emissions from the generation of purchased

electricity (DEFRA, 2003). The CCX allows its
members the option of counting indirect emissions asso-
C
ciated with electricity purchases as a supplemental

reduction commitment. Other types of indirect emissions
can be more difficult to verify and may present
E
challenges in terms of avoiding double counting. To

facilitate independent verification, emissions trading
Business Goals and Inventory Design
E
may require participating companies to establish an

audit trail for GHG information (see chapter 10).
GHG trading programs are likely to impose additional

C
layers of accounting specificity relating to which

approach is used for setting organizational boundaries;
N
which GHGs and sources are addressed; how base

years are established; the type of calculation method-
ology used; the choice of emission factors; and the
A
monitoring and verification approaches employed.

The broad participation and best practices incorporated
into the GHG Protocol Corporate Standard are likely
D
to inform the accounting requirements of emerging

Tata Steel: Development of institutional
programs, and have indeed done so in the past.
capacity in GHG accounting and reporting
I
For Tata Steel, Asia’s first and India’s largest integrated private
Recognition for early voluntary action sector steel company, reducing its GHG emissions through energy
U
A credible inventory may help ensure that a corpora- efficiency is a key element of its primary business goal: the
tion’s early, voluntary emissions reductions are acceptability of its product in international markets. Each year, in
G
recognized in future regulatory programs. To illustrate, pursuit of this goal, the company launches several energy effi-
suppose that in 2000 a company started reducing its ciency projects and introduces less-GHG-intensive processes. The
GHG emissions by shifting its on-site powerhouse boiler company is also actively pursuing GHG trading markets as a
fuel from coal to landfill gas. If a mandatory GHG means of further improving its GHG performance. To succeed in
reduction program is later established in 2005 and it these efforts and be eligible for emerging trading schemes, Tata
sets 2003 as the base against which reductions are to Steel must have an accurate GHG inventory that includes all
be measured, the program might not allow the emissions processes and activities, allows for meaningful benchmarking,
reductions achieved by the green power project prior to measures improvements, and promotes credible reporting.
2003 to count toward its target.
Tata Steel has developed the capacity to measure its progress in
However, if a company’s voluntary emissions reductions reducing GHG emissions. Tata Steel’s managers have access to
have been accounted for and registered, they are more on-line information on energy usage, material usage, waste and
likely to be recognized and taken into account when byproduct generation, and other material streams. Using this
regulations requiring reductions go into effect. For data and the GHG Protocol calculation tools, Tata Steel generates
instance, the state of California has stated that it will two key long-term, strategic performance indicators: specific
use its best efforts to ensure that organizations that energy consumption (Giga calorie / tonne of crude steel) and GHG
register certified emission results with the California intensity (tonne of CO2equivalent / tonne of crude steel). These
Climate Action Registry receive appropriate considera- indicators are key sustainability metrics in the steel sector world-
tion under any future international, federal, or state wide, and help ensure market acceptability and competitiveness.
regulatory program relating to GHG emissions. Since the company adopted the GHG Protocol Corporate Standard,
tracking performance has become more structured and stream-
lined. This system allows Tata Steel quick and easy access to its
GHG inventory and helps the company maximize process and
material flow efficiencies.
14 CHAPTER 2
Ford Motor Company: Experiences

using the GHG Protocol Corporate Standard
When Ford Motor Company, a global automaker, embarked on an divestitures? What emission factors should be used? And
effort to understand and reduce its GHG impacts, it wanted to perhaps most importantly, how could their methodology be
track emissions with enough accuracy and detail to manage deemed credible with stakeholders? Although the team had no
them effectively. An internal cross-functional GHG inventory team shortage of opinions, there also seemed to be no clearly right or
was formed to accomplish this goal. Although the company was wrong answers.
already reporting basic energy and carbon dioxide data at the
The GHG Protocol Corporate Standard helped answer many of
corporate level, a more detailed understanding of these emis-
these questions and the Ford Motor Company now has a more
sions was essential to set and measure progress against
robust GHG inventory that can be continually improved to fulfill
performance targets and evaluate potential participation in
its rapidly emerging GHG management needs. Since adopting the
external trading schemes.
GHG Protocol Corporate Standard, Ford has expanded the
For several weeks, the team worked on creating a more compre- coverage of its public reporting to all of its brands globally; it now
hensive inventory for stationary combustion sources, and quickly includes direct emissions from sources it owns or controls and
found a pattern emerging. All too often team members left meet- indirect emissions resulting from the generation of purchased
ings with as many questions as answers, and the same questions electricity, heat, or steam. In addition, Ford is a founding member
kept coming up from one week to the next. How should they of the Chicago Climate Exchange, which uses some of the GHG
draw boundaries? How do they account for acquisitions and Protocol calculation tools for emissions reporting purposes.
G
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3 Setting Organizational Boundaries
D
R
A
D
N
A
T
S
B usiness operations vary in their legal and organizational structures;
they include wholly owned operations, incorporated and non-incorporated
joint ventures, subsidiaries, and others. For the purposes of financial accounting,
they are treated according to established rules that depend on the structure of the
organization and the relationships among the parties involved. In setting organi-
zational boundaries, a company selects an approach for consolidating GHG
emissions and then consistently applies the selected approach to define those
businesses and operations that constitute the company for the purpose of
accounting and reporting GHG emissions.
S T A N D A R D
G U I D A N C E
16
CHAPTER 3 Setting Organizational Boundaries 17
For corporate reporting, two distinct approaches can be Control approach

used to consolidate GHG emissions: the equity share and Under the control approach, a company accounts for
the control approaches. Companies shall account for and 100 percent of the GHG emissions from operations over
report their consolidated GHG data according to either which it has control. It does not account for GHG emis-
the equity share or control approach as presented below. sions from operations in which it owns an interest but
If the reporting company wholly owns all its operations, has no control. Control can be defined in either financial
its organizational boundary will be the same whichever or operational terms. When using the control approach
approach is used.1 For companies with joint operations, to consolidate GHG emissions, companies shall choose
the organizational boundary and the resulting emissions between either the operational control or financial
may differ depending on the approach used. In both control criteria.
wholly owned and joint operations, the choice of
In most cases, whether an operation is controlled by the
approach may change how emissions are categorized
company or not does not vary based on whether the finan-
when operational boundaries are set (see chapter 4).
cial control or operational control criterion is used. A
notable exception is the oil and gas industry, which often
has complex ownership / operatorship structures. Thus,
Equity share approach
the choice of control criterion in the oil and gas industry
Under the equity share approach, a company accounts for
can have substantial consequences for a company’s GHG
GHG emissions from operations according to its share of
inventory. In making this choice, companies should
equity in the operation. The equity share reflects economic
take into account how GHG emissions accounting and
interest, which is the extent of rights a company has to the
reporting can best be geared to the requirements of
risks and rewards flowing from an operation. Typically, the
emissions reporting and trading schemes, how it can be
share of economic risks and rewards in an operation is
aligned with financial and environmental reporting,
aligned with the company’s percentage ownership of that
and which criterion best reflects the company’s actual
operation, and equity share will normally be the same as
power of control.
the ownership percentage. Where this is not the case, the
economic substance of the relationship the company has • Financial Control. The company has financial control
with the operation always overrides the legal ownership over the operation if the former has the ability to direct
S
form to ensure that equity share reflects the percentage the financial and operating policies of the latter with a
of economic interest. The principle of economic view to gaining economic benefits from its activities.2
substance taking precedent over legal form is consistent For example, financial control usually exists if the
T
with international financial reporting standards. The company has the right to the majority of benefits of the
staff preparing the inventory may therefore need to operation, however these rights are conveyed. Similarly,
consult with the company’s accounting or legal staff to a company is considered to financially control an A
ensure that the appropriate equity share percentage is operation if it retains the majority risks and rewards
applied for each joint operation (see Table 1 for definitions of ownership of the operation’s assets.
N
of financial accounting categories).

Under this criterion, the economic substance of the
relationship between the company and the operation
D
takes precedence over the legal ownership status, so

that the company may have financial control over the
A
operation even if it has less than a 50 percent interest

in that operation. In assessing the economic substance
of the relationship, the impact of potential voting
R
rights, including both those held by the company and

those held by other parties, is also taken into account.
This criterion is consistent with international financial
D
accounting standards; therefore, a company has finan-

cial control over an operation for GHG accounting
purposes if the operation is considered as a group
company or subsidiary for the purpose of financial
Setting Organizational Boundaries
D
consolidation, i.e., if the operation is fully consolidated Table 2 in the guidance section of this chapter illustrates
in financial accounts. If this criterion is chosen to the selection of a consolidation approach at the corpo-
determine control, emissions from joint ventures where rate level and the identification of which joint operations
R
partners have joint financial control are accounted for will be in the organizational boundary depending on the
based on the equity share approach (see Table 1 for choice of the consolidation approach.
definitions of financial accounting categories).
A
• Operational Control. A company has operational

Consolidation at multiple levels
control over an operation if the former or one of its
D
The consolidation of GHG emissions data will only result

subsidiaries (see Table 1 for definitions of financial
in consistent data if all levels of the organization follow
accounting categories) has the full authority to
the same consolidation policy. In the first step, the
introduce and implement its operating policies at the
N
management of the parent company has to decide on a

operation. This criterion is consistent with the current
consolidation approach (i.e., either the equity share or
accounting and reporting practice of many compa-
the financial or operational control approach). Once a
A
nies that report on emissions from facilities, which

corporate consolidation policy has been selected, it shall
they operate (i.e., for which they hold the operating
be applied to all levels of the organization.
license). It is expected that except in very rare
T
circumstances, if the company or one of its

subsidiaries is the operator of a facility, it will have
State-ownership
the full authority to introduce and implement its
S
The rules provided in this chapter shall also be applied

operating policies and thus has operational control.
to account for GHG emissions from industry joint
operations that involve state ownership or a mix of
Under the operational control approach, a company
private/state ownership.
accounts for 100% of emissions from operations over
which it or one of its subsidiaries has operational control.
It should be emphasized that having operational BP: Reporting on the basis of equity share
control does not mean that a company necessarily
has authority to make all decisions concerning an BP reports GHG emissions on an equity share basis, including
operation. For example, big capital investments will those operations where BP has an interest, but where BP is not the
likely require the approval of all the partners that operator. In determining the extent of the equity share reporting
have joint financial control. Operational control does boundary BP seeks to achieve close alignment with financial
mean that a company has the authority to introduce accounting procedures. BP’s equity share boundary includes all
and implement its operating policies. operations undertaken by BP and its subsidiaries, joint ventures
and associated undertakings as determined by their treatment in
More information on the relevance and application the financial accounts. Fixed asset investments, i.e., where BP
of the operational control criterion is provided in has limited influence, are not included.
petroleum industry guidelines for reporting GHG
GHG emissions from facilities in which BP has an equity share
emissions (IPIECA, 2003).
are estimated according to the requirements of the BP Group
Sometimes a company can have joint financial control Reporting Guidelines for Environmental Performance (BP 2000).
over an operation, but not operational control. In such In those facilities where BP has an equity share but is not the
cases, the company would need to look at the contractual operator, GHG emissions data may be obtained directly from the
arrangements to determine whether any one of the part- operating company using a methodology consistent with the BP
ners has the authority to introduce and implement its Guidelines, or is calculated by BP using activity data provided by
operating policies at the operation and thus has the the operator.
responsibility to report emissions under operational
BP reports its equity share GHG emissions every year. Since
control. If the operation itself will introduce and imple-
2000, independent external auditors have expressed the opinion
ment its own operating policies, the partners with joint
that the reported total has been found to be free from material
financial control over the operation will not report any
misstatement when audited against the BP Guidelines.
emissions under operational control.
18 CHAPTER 3
TABLE 1. Financial accounting categories

ACCOUNTING FINANCIAL ACCOUNTING DEFINITION ACCOUNTING FOR GHG EMISSIONS ACCORDING TO
CATEGORY GHG PROTOCOL CORPORATE STANDARD
BASED ON BASED ON
EQUITY SHARE FINANCIAL CONTROL
Group companies / The parent company has the ability to direct the financial and Equity share of 100% of
subsidiaries operating policies of the company with a view to gaining GHG emissions GHG emissions
economic benefits from its activities. Normally, this category
also includes incorporated and non-incorporated joint ventures
and partnerships over which the parent company has financial
control. Group companies/subsidiaries are fully consolidated,
which implies that 100 percent of the subsidiary’s income,
expenses, assets, and liabilities are taken into the parent
company’s profit and loss account and balance sheet, respec-
tively. Where the parent’s interest does not equal 100 percent,
the consolidated profit and loss account and balance sheet
shows a deduction for the profits and net assets belonging to
minority owners.
Associated / The parent company has significant influence over the operating Equity share of 0% of
affiliated and financial policies of the company, but does not have finan- GHG emissions GHG emissions
companies cial control. Normally, this category also includes incorporated
and non-incorporated joint ventures and partnerships over which
the parent company has significant influence, but not financial
control. Financial accounting applies the equity share method
to associated/affiliated companies, which recognizes the parent
company’s share of the associate’s profits and net assets.
Non-incorporated Joint ventures/partnerships/operations are proportionally Equity share of Equity share of
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joint ventures / consolidated, i.e., each partner accounts for their propor- GHG emissions GHG emissions
partnerships / tionate interest of the joint venture’s income, expenses,
operations where assets, and liabilities.
T
partners have joint
financial control
A
Fixed asset The parent company has neither significant influence nor financial 0% 0%
investments control. This category also includes incorporated and non-
N
incorporated joint ventures and partnerships over which the parent

company has neither significant influence nor financial control.
Financial accounting applies the cost/dividend method to fixed
D
asset investments. This implies that only dividends received are

recognized as income and the investment is carried at cost.
A
Franchises Franchises are separate legal entities. In most cases, the fran- Equity share of 100% of
chiser will not have equity rights or control over the franchise. GHG emissions GHG emissions
Therefore, franchises should not be included in consolidation of
R
GHG emissions data. However, if the franchiser does have equity

rights or operational/financial control, then the same rules
D
for consolidation under the equity or control approaches apply.
NOTE: Table 1 is based on a comparison of UK, US, Netherlands and International Financial Reporting Standards (KPMG, 2000).
W
E
hen planning the consolidation of GHG data, it is • Government reporting and trading programs may
important to distinguish between GHG accounting require that data be consolidated within certain
and GHG reporting. GHG accounting concerns the geographic and operational boundaries (e.g., the U.K.
C
recognition and consolidation of GHG emissions from Emissions Trading Scheme)

operations in which a parent company holds an interest
• To demonstrate the company’s account to wider stake-
(either control or equity) and linking the data to specific
N
holders, companies may engage in voluntary public

operations, sites, geographic locations, business
reporting, consolidating GHG data at a corporate level
processes, and owners. GHG reporting, on the other
in order to show the GHG emissions of their entire
hand, concerns the presentation of GHG data in formats
A
business activities.
tailored to the needs of various reporting uses and users.
Most companies have several goals for GHG reporting,

D
e.g., official government reporting requirements, emissions Contracts that cover GHG emissions
trading programs, or public reporting (see chapter 2). To clarify ownership (rights) and responsibility (obliga-
I
In developing a GHG accounting system, a fundamental tions) issues, companies involved in joint operations may
consideration is to ensure that the system is capable of draw up contracts that specify how the ownership of
meeting a range of reporting requirements. Ensuring emissions or the responsibility for managing emissions
U
that data are collected and recorded at a sufficiently and associated risk is distributed between the parties.
disaggregated level, and capable of being consolidated Where such arrangements exist, companies may option-
G
in various forms, will provide companies with maximum ally provide a description of the contractual arrangement
flexibility to meet a range of reporting requirements. and include information on allocation of CO2 related
risks and obligations (see Chapter 9).
Double counting
When two or more companies hold interests in the same Using the equity share or control approach
joint operation and use different consolidation approaches Different inventory reporting goals may require different
(e.g., Company A follows the equity share approach while data sets. Thus companies may need to account for their
Company B uses the financial control approach), emissions GHG emissions using both the equity share and the
from that joint operation could be double counted. This control approaches. The GHG Protocol Corporate Standard
may not matter for voluntary corporate public reporting makes no recommendation as to whether voluntary
as long as there is adequate disclosure from the company public GHG emissions reporting should be based on the
on its consolidation approach. However, double counting equity share or any of the two control approaches, but
of emissions needs to be avoided in trading schemes and encourages companies to account for their emissions
certain mandatory government reporting programs. applying the equity share and a control approach sepa-
rately. Companies need to decide on the approach best
suited to their business activities and GHG accounting
Reporting goals and level of consolidation and reporting requirements. Examples of how these may
Reporting requirements for GHG data exist at various drive the choice of approach include the following:
levels, from a specific local facility level to a more
• Reflection of commercial reality. It can be argued that
aggregated corporate level. Examples of drivers for
a company that derives an economic profit from a
various levels of reporting include:
certain activity should take ownership for any GHG
• Official government reporting programs or certain emissions generated by the activity. This is achieved
emissions trading programs may require GHG data to by using the equity share approach, since this
be reported at a facility level. In these cases, consoli- approach assigns ownership for GHG emissions on the
dation of GHG data at a corporate level is not relevant basis of economic interest in a business activity. The
control approaches do not always reflect the full GHG
emissions portfolio of a company’s business activities,
but have the advantage that a company takes full
ownership of all GHG emissions that it can directly
influence and reduce.
20 CHAPTER 3
• Government reporting and emissions trading programs. • Cost of administration and data access. The equity
Government regulatory programs will always need to share approach can result in higher administrative
monitor and enforce compliance. Since compliance costs than the control approach, since it can be diffi-
responsibility generally falls to the operator (not cult and time consuming to collect GHG emissions
equity holders or the group company that has financial data from joint operations not under the control of the
control), governments will usually require reporting reporting company. Companies are likely to have
on the basis of operational control, either through a better access to operational data and therefore greater
facility level-based system or involving the consolida- ability to ensure that it meets minimum quality
tion of data within certain geographical boundaries standards when reporting on the basis of control.
(e.g. the EU ETS will allocate emission permits to the
• Completeness of reporting. Companies might find it
operators of certain installations).
difficult to demonstrate completeness of reporting
• Liability and risk management. While reporting and when the operational control criterion is adopted,
compliance with regulations will most likely continue since there are unlikely to be any matching records or
to be based directly on operational control, the ulti- lists of financial assets to verify the operations that
mate financial liability will often rest with the group are included in the organizational boundary.
company that holds an equity share in the operation or
has financial control over it. Hence, for assessing risk,
GHG reporting on the basis of the equity share and
financial control approaches provides a more complete
picture. The equity share approach is likely to result in
the most comprehensive coverage of liability and risks.
In the future, companies might incur liabilities for
GHG emissions produced by joint operations in which
they have an interest, but over which they do not have Royal Dutch/Shell:
financial control. For example, a company that is an Reporting on the basis of operational control
equity shareholder in an operation but has no financial
In the oil and gas industry, ownership and control structures are
control over it might face demands by the companies
G
often complex. A group may own less than 50 percent of a
with a controlling share to cover its requisite share of
venture’s equity capital but have operational control over the
GHG compliance costs.
venture. On the other hand, in some situations, a group may hold
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• Alignment with financial accounting. Future financial a majority interest in a venture without being able to exert opera-
accounting standards may treat GHG emissions as tional control, for example, when a minority partner has a veto
liabilities and emissions allowances / credits as assets. vote at the board level. Because of these complex ownership and I
To assess the assets and liabilities a company creates control structures, Royal Dutch/Shell, a global group of energy
by its joint operations, the same consolidation rules and petrochemical companies, has chosen to report its GHG emis-
D
that are used in financial accounting should be applied sions on the basis of operational control. By reporting 100 percent
in GHG accounting. The equity share and financial of GHG emissions from all ventures under its operational control,
control approaches result in closer alignment between irrespective of its share in the ventures’ equity capital, Royal
A
GHG accounting and financial accounting. Dutch/Shell can ensure that GHG emissions reporting is in line
with its operational policy including its Health, Safety and
• Management information and performance tracking.
N
Environmental Performance Monitoring and Reporting Guidelines.

For the purpose of performance tracking, the control
Using the operational control approach, the group generates data
approaches seem to be more appropriate since
that is consistent, reliable, and meets its quality standards.
managers can only be held accountable for activities
C
under their control.

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FIGURE 1. Defining the organizational boundary of Holland Industries

E
100%
100% HOLLAND
C
100% SWITZERLAND
41.5%
N
0% BGB
50% (50% OWNED)
83%
A
100% HOLLAND
100% AMERICA
D
62.25%
100% IRW
100% (75% OWNED)
I
33.3%
100% KAHUNA
33.3% CHEMICALS
U
HOLLAND
INDUSTRIES
G
43%
100% QUICKFIX
100%
56%
0% NALLO
0%
0%
0%
SYNTAL Equity share
0%
Operational control
Financial control
A N I L L U S T R AT I O N :
THE EQUITY SHARE AND CONTROL APPROACHES
Holland Industries is a chemicals group comprising corporate level. It then determines which operations at
a number of companies/joint ventures active in the the corporate level meet its selected consolidation
production and marketing of chemicals. Table 2 outlines approach. Based on the selected consolidation approach,
the organizational structure of Holland Industries and the consolidation process is repeated for each lower
shows how GHG emissions from the various wholly operational level. In this process, GHG emissions are
owned and joint operations are accounted for under first apportioned at the lower operational level
both the equity share and control approaches. (subsidiaries, associate, joint ventures, etc.) before they
are consolidated at the corporate level. Figure 1 pres-
In setting its organizational boundary, Holland
ents the organizational boundary of Holland Industries
Industries first decides whether to use the equity or
based on the equity share and control approaches.
control approach for consolidating GHG data at the
22 CHAPTER 3
TABLE 2. Holland Industries - organizational structure and GHG emissions accounting

WHOLLY LEGAL ECONOMIC CONTROL TREATMENT IN EMISSIONS ACCOUNTED FOR AND REPORTED
OWNED AND STRUCTURE INTEREST OF HOLLAND INDUSTRIES’ BY HOLLAND INDUSTRIES
JOINT AND PARTNERS HELD BY OPERATING FINANCIAL ACCOUNTS
OPERATIONS HOLLAND POLICIES (SEE TABLE 1) EQUITY SHARE CONTROL APPROACH
OF HOLLAND INDUSTRIES APPROACH
Holland Incorporated 100% Holland Wholly owned subsidiary 100% 100% for
Switzerland company Industries operational control
100% for
financial control
Holland Incorporated 83% Holland Subsidiary 83% 100% for
America company Industries operational control
100% for
financial control
BGB Joint venture, 50% by Rearden via Holland America 41.5% 0% for
partners have Holland (83% x 50%) operational control
joint financial America
control other 50% for financial
partner Rearden control (50% x 100%)
IRW Subsidiary of 75% by Holland via Holland America 62.25% 100% for
Holland America Holland America operational control
America
(83% x 75%) 100% for
financial control
Kahuna Non-incorporated 33.3% Holland Proportionally 33.3% 100% for
Chemicals joint venture; Industries consolidated joint venture operational control
partners have
joint financial 33.3% for
control; two other financial control
partners: ICT
and BCSF
G
QuickFix Incorporated joint 43% Holland Subsidiary 43% 100% for
venture, other Industries operational control
partner Majox (Holland Industries has
financial control since 100% for
U
it treats Quick Fix as a financial control
subsidiary in its financial
accounts)
0% for
I
Nallo Incorporated joint 56% Nallo Associated company 56%
venture, other (Holland Industries does operational control
partner Nagua Co. not have financial control
D
0% for
since it treats Nallo as an financial control
Associated company in its
financial accounts)
A
Syntal Incorporated 1% Erewhon Fixed asset investment 0% 0% for

company, Co. operational control
subsidiary of
N
Erewhon Co. 0% for

financial control
C
In this example, Holland America (not Holland Industries) holds

a 50 percent interest in BGB and a 75 percent interest in IRW. If NOTES
1
The term “operations” is used here as a generic term to denote any
E
the activities of Holland Industries itself produce GHG emissions

kind of business activity, irrespective of its organizational, gover-
(e.g., emissions associated with electricity use at the head office), nance, or legal structures.
then these emissions should also be included in the consolidation 2
Financial accounting standards use the generic term “control” for what
at 100 percent. is denoted as “financial control” in this chapter.
4 Setting Operational Boundaries
D
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A fter a company has determined its organizational boundaries in terms
of the operations that it owns or controls, it then sets its operational
boundaries. This involves identifying emissions associated with its operations,
categorizing them as direct and indirect emissions, and choosing the scope of
accounting and reporting for indirect emissions.
S T A N D A R D
G U I D A N C E
24
CHAPTER 4 Setting Operational Boundaries 25
For effective and innovative GHG management, setting Scope 1: Direct GHG emissions
operational boundaries that are comprehensive with Direct GHG emissions occur from sources that
respect to direct and indirect emissions will help a are owned or controlled by the company, for example,
company better manage the full spectrum of GHG risks emissions from combustion in owned or controlled
and opportunities that exist along its value chain. boilers, furnaces, vehicles, etc.; emissions from chemical
production in owned or controlled process equipment.
Direct GHG emissions are emissions from sources that
are owned or controlled by the company.1 Direct CO2 emissions from the combustion of biomass
shall not be included in scope 1 but reported separately
Indirect GHG emissions are emissions that are a
(see chapter 9).
consequence of the activities of the company but occur
at sources owned or controlled by another company. GHG emissions not covered by the Kyoto Protocol, e.g.
CFCs, NOx, etc. shall not be included in scope 1 but may
What is classified as direct and indirect emissions is
be reported separately (see chapter 9).
dependent on the consolidation approach (equity share
or control) selected for setting the organizational
boundary (see chapter 3). Figure 2 below shows the
Scope 2: Electricity indirect GHG emissions
relationship between the organizational and operational
Scope 2 accounts for GHG emissions from the genera-
boundaries of a company.
tion of purchased electricity2 consumed by the company.
Purchased electricity is defined as electricity that is
purchased or otherwise brought into the organizational
Introducing the concept of “ scope”
boundary of the company. Scope 2 emissions physically
To help delineate direct and indirect emission sources,
occur at the facility where electricity is generated.
improve transparency, and provide utility for different
types of organizations and different types of climate poli-
cies and business goals, three “scopes” (scope 1, scope
Scope 3: Other indirect GHG emissions
2, and scope 3) are defined for GHG accounting and
Scope 3 is an optional reporting category that allows
reporting purposes. Scopes 1 and 2 are carefully defined
for the treatment of all other indirect emissions. Scope
in this standard to ensure that two or more companies
S
3 emissions are a consequence of the activities of the
will not account for emissions in the same scope. This
company, but occur from sources not owned or
makes the scopes amenable for use in GHG programs
controlled by the company. Some examples of scope 3
T
where double counting matters.
activities are extraction and production of purchased
Companies shall separately account for and report on materials; transportation of purchased fuels; and use of
scopes 1 and 2 at a minimum. sold products and services. A
N
FIGURE 2. Organizational and operational boundaries of a company
}
O R G A N I Z AT I O N A L
Parent Company
BOUNDARIES
Company A Company B Company C Company D
}
R
Ship fleet Power Owned/ Car fleet Leased factory Owned/

O P E R AT I O N A L
BOUNDARIES
generation unit Controlled Controlled

building building
D
Leased building Direct and indirect emissions

Setting Operational Boundaries
Accounting and reporting on scopes
A
E
n operational boundary defines the scope of direct

and indirect emissions for operations that fall within Companies account for and report emissions from
a company’s established organizational boundary. scope 1 and 2 separately. Companies may further
C
The operational boundary (scope 1, scope 2, scope 3) is subdivide emissions data within scopes where this aids
decided at the corporate level after setting the organiza- transparency or facilitates comparability over time.
tional boundary. The selected operational boundary is then For example, they may subdivide data by business
N
uniformly applied to identify and categorize direct and unit/facility, country, source type (stationary combustion,
indirect emissions at each operational level (see Box 2). process, fugitive, etc.), and activity type (production
The established organizational and operational bound- of electricity, consumption of electricity, generation or
A
aries together constitute a company’s inventory boundary. purchased electricity that is sold to end users, etc.).
In addition to the six Kyoto gases, companies may also

D
BOX 2. Organizational and operational boundaries provide emissions data for other GHGs (e.g., Montreal
Protocol gases) to give context to changes in emission
Organization X is a parent company that has full ownership and
I
levels of Kyoto Protocol gases. Switching from a CFC

financial control of operations A and B, but only a 30% non- to HFC, for example, will increase emissions of Kyoto
operated interest and no financial control in operation C. Protocol gases. Information on emissions of GHGs other
U
Setting Organizational Boundary: X would decide whether to than the six Kyoto gases may be reported separately
account for GHG emissions by equity share or financial control. If from the scopes in a GHG public report.
G
the choice is equity share, X would include A and B, as well as 30% Together the three scopes provide a comprehensive
of C’s emissions. If the approach chosen is financial control, X accounting framework for managing and reducing
would count only A and B’s emissions as relevant and subject to direct and indirect emissions. Figure 3 provides an
consolidation. Once this has been decided, the organizational overview of the relationship between the scopes and
boundary has been defined. the activities that generate direct and indirect emissions
Setting Operational Boundary: Once the organizational boundary along a company’s value chain.
is set, X then needs to decide, on the basis of its business goals, A company can benefit from efficiency gains throughout
whether to account only for scope 1 and scope 2, or whether to the value chain. Even without any policy drivers,
include relevant scope 3 categories for its operations. accounting for GHG emissions along the value chain may
Operations A, B and C (if the equity approach is selected) account reveal potential for greater efficiency and lower costs
for the GHG emissions in the scopes chosen by X, i.e., they apply the (e.g., the use of fly ash as a clinker substitute in the
corporate policy in drawing up their operational boundaries. manufacture of cement that reduces downstream emis-
sions from processing of waste fly ash, and upstream
FIGURE 3. Overview of scopes and emissions across a value chain
CO2 SF6 CH4 N2O HFCs PFCs
SCOPE 1
DIRECT
SCOPE 2 SCOPE 3
INDIRECT INDIRECT
EMPLOYEE BUSINESS TRAVEL
PRODUCTION OF
PURCHASED ELECTRICITY PURCHASED MATERIALS
Adopted from NZBCSD, 2002
FOR OWN USE

WASTE DISPOSAL
COMPANY OWNED
PRODUCT
VEHICLES
USE CONTRACTOR OWNED
VEHICLES
FUEL COMBUSTION OUTSOURCED ACTIVITIES
26 CHAPTER 4
emissions from producing clinker). Even if such “win- Scope 2: Electricity indirect GHG emissions
win” options are not available, indirect emissions Companies report the emissions from the generation of
reductions may still be more cost effective to accomplish purchased electricity that is consumed in its owned or
than scope 1 reductions. Thus accounting for indirect controlled equipment or operations as scope 2. Scope 2
emissions can help identify where to allocate limited emissions are a special category of indirect emissions. For
resources in a way that maximizes GHG reduction and many companies, purchased electricity represents one of
return on investment. the largest sources of GHG emissions and the most signifi-
cant opportunity to reduce these emissions. Accounting
Appendix D lists GHG sources and activities along the
for scope 2 emissions allows companies to assess the risks
value chain by scopes for various industry sectors.
and opportunities associated with changing electricity and
GHG emissions costs. Another important reason for
companies to track these emissions is that the information
Scope 1: Direct GHG emissions
may be needed for some GHG programs.
Companies report GHG emissions from sources they own
or control as scope 1. Direct GHG emissions are princi- Companies can reduce their use of electricity by investing
pally the result of the following types of activities in energy efficient technologies and energy conservation.
undertaken by the company: Additionally, emerging green power markets4 provide
opportunities for some companies to switch to less GHG
• Generation of electricity, heat, or steam. These emis-
intensive sources of electricity. Companies can also install
sions result from combustion of fuels in stationary
an efficient on site co-generation plant, particularly if it
sources, e.g., boilers, furnaces, turbines
replaces the purchase of more GHG intensive electricity
• Physical or chemical processing.3 Most of these emis- from the grid or electricity supplier. Reporting of scope 2
sions result from manufacture or processing of chemicals emissions allows transparent accounting of GHG emis-
and materials, e.g., cement, aluminum, adipic acid, sions and reductions associated with such opportunities.
ammonia manufacture, and waste processing
• Transportation of materials, products, waste, and

INDIRECT EMISSIONS
employees. These emissions result from the combus-
A S S O C I AT E D W I T H T R A N S M I S S I O N A N D D I S T R I B U T I O N
G
tion of fuels in company owned/controlled mobile
Electric utility companies often purchase electricity from
combustion sources (e.g., trucks, trains, ships,
independent power generators or the grid and resell it to
airplanes, buses, and cars)
U
end-consumers through a transmission and distribution
• Fugitive emissions. These emissions result from inten- (T&D) system.5 A portion of the electricity purchased
tional or unintentional releases, e.g., equipment leaks by a utility company is consumed (T&D loss) during its
from joints, seals, packing, and gaskets; methane transmission and distribution to end-consumers (see Box 3).
I
emissions from coal mines and venting; hydrofluoro-
Consistent with the scope 2 definition, emissions from the
D
carbon (HFC) emissions during the use of refrigeration

generation of purchased electricity that is consumed
and air conditioning equipment; and methane leakages
during transmission and distribution are reported in
from gas transport.
scope 2 by the company that owns or controls the T&D
A
operation. End consumers of the purchased electricity do

not report indirect emissions associated with T&D losses
S A L E O F O W N - G E N E R AT E D E L E C T R I C I T Y
N
in scope 2 because they do not own or control the T&D

Emissions associated with the sale of own-generated
operation where the electricity is consumed (T&D loss).
electricity to another company are not deducted/netted
from scope 1. This treatment of sold electricity is consis-
C
tent with how other sold GHG intensive products are BOX 3. Electricity balance
accounted, e.g., emissions from the production of sold Purchased electricity consumed
E
clinker by a cement company or the production of scrap by the utility company during T&D
G E N E R AT E D
steel by an iron and steel company are not subtracted
ELECTRICITY
= +
from their scope 1 emissions. Emissions associated with Purchased electricity consumed
the sale/transfer of own-generated electricity may be by end consumers
reported in optional information (see chapter 9).
E
This approach ensures that there is no double counting Example one (Figure 4): Company A is an independent
within scope 2 since only the T&D utility company will power generator that owns a power generation plant.
account for indirect emissions associated with T&D The power plant produces 100 MWh of electricity and
C
losses in scope 2. Another advantage of this approach is releases 20 tonnes of emissions per year. Company B
that it adds simplicity to the reporting of scope 2 emis- is an electricity trader and has a supply contract with
sions by allowing the use of commonly available emission company A to purchase all its electricity. Company B re-
N
factors that in most cases do not include T&D losses. sells the purchased electricity (100 MWh) to company C,
End consumers may, however, report their indirect emis- a utility company that owns / controls the T&D system.
sions associated with T&D losses in scope 3 under the Company C consumes 5 MWh of electricity in its T&D
A
category “generation of electricity consumed in a T&D system and sells the remaining 95 MWh to company D.
system.” Appendix A provides more guidance on Company D is an end user who consumes the purchased
D
accounting for emissions associated with T&D losses. electricity (95 MWh) in its own operations. Company A
reports its direct emissions from power generation
under scope 1. Company B reports emissions from the
I
O T H E R E L E C T R I C I T Y- R E L AT E D I N D I R E C T E M I S S I O N S purchased electricity sold to a non-end-user as optional

Indirect emissions from activities upstream of a information separately from scope 3. Company C reports
U
company’s electricity provider (e.g., exploration, drilling, the indirect emissions from the generation of the part of
flaring, transportation) are reported under scope 3. the purchased electricity that is sold to the end-user
Emissions from the generation of electricity that has been under scope 3 and the part of the purchased electricity
G
purchased for resale to end-users are reported in scope 3 that it consumes in its T&D system under scope 2. End-
under the category “generation of electricity that is user D reports the indirect emissions associated with its
purchased and then resold to end users.” Emissions from own consumption of purchased electricity under scope 2
the generation of purchased electricity for resale to non- and can optionally report emissions associated with
end-users (e.g., electricity traders) may be reported sepa- upstream T&D losses in scope 3. Figure 4 shows the
rately from scope 3 in “optional information.” accounting of emissions associated with these transactions.
The following two examples illustrate how GHG emissions Example two: Company D installs a co-generation unit
are accounted for from the generation, sale, and and sells surplus electricity to a neighboring company E
purchase of electricity. for its consumption. Company D reports all direct emis-
sions from the co-generation unit under scope 1. Indirect
emissions from the generation of electricity for export to
Seattle City Light: Accounting for the E are reported by D under optional information separately
purchase of electricity sold to end users
Seattle City Light (SCL), Seattle’s municipal utility company, sells demand, but the production does not match load in all months. So
electricity to its end-use customers that is either produced at its SCL accounts for both purchases from the market and sales into the
own hydropower facilities, purchased through long-term contracts, market. SCL also includes the scope 3 upstream emissions from
or purchased on the short-term market. SCL used the first edition of natural gas production and delivery, operation of SCL facilities,
the GHG Protocol Corporate Standard to estimate its year 2000 and vehicle fuel use, and airline travel.
year 2002 GHG emissions, and emissions associated with genera-
SCL believes that sales to end-users are a critical part of the emis-
tion of net purchased electricity sold to end-users was an important
sions profile for an electric utility company. Utility companies need
component of that inventory. SCL tracks and reports the amount of
to provide information on their emissions profile to educate end-
electricity sold to end-users on a monthly and annual basis.
users and adequately represent the impact of their business, the
SCL calculates net purchases from the market (brokers and other providing of electricity. End-use customers need to rely on their
utility companies) by subtracting sales to the market from utility company to provide electricity, and except in some instances
purchases from the market, measured in MWh. This allows a (green power programs), do not have a choice in where their elec-
complete accounting of all emissions impacts from its entire oper- tricity is purchased. SCL meets a customer need by providing
ation, including interactions with the market and end-users. On an emissions information to customers who are doing their own emis-
annual basis, SCL produces more electricity than there is end-use sions inventory.
28 CHAPTER 4
from scope 3. Company E reports indirect emissions • Electricity-related activities not included in scope 2
associated with the consumption of electricity purchased (see Appendix A)
from the company D’s co-generation unit under scope 2. • Extraction, production, and transportation of fuels
consumed in the generation of electricity (either
For more guidance, see Appendix A on accounting for
purchased or own generated by the reporting company)
indirect emissions from purchased electricity.
• Purchase of electricity that is sold to an end user
(reported by utility company)
• Generation of electricity that is consumed in a T&D
Scope 3: Other indirect GHG emissions
system (reported by end-user)
Scope 3 is optional, but it provides an opportunity to be
innovative in GHG management. Companies may want to • Leased assets, franchises, and outsourced activities—
focus on accounting for and reporting those activities that emissions from such contractual arrangements are
are relevant to their business and goals, and for which they only classified as scope 3 if the selected consolidation
have reliable information. Since companies have discretion approach (equity or control) does not apply to them.
over which categories they choose to report, scope 3 may Clarification on the classification of leased assets
not lend itself well to comparisons across companies. This should be obtained from the company accountant (see
section provides an indicative list of scope 3 categories section on leases below).
and includes case studies on some of the categories.
• Use of sold products and services
Some of these activities will be included under scope 1 if the
• Waste disposal
pertinent emission sources are owned or controlled by the
• Disposal of waste generated in operations
company (e.g., if the transportation of products is done in
• Disposal of waste generated in the production of
vehicles owned or controlled by the company). To determine
purchased materials and fuels
if an activity falls within scope 1 or scope 3, the company
• Disposal of sold products at the end of their life
should refer to the selected consolidation approach (equity
or control) used in setting its organizational boundaries.
• Extraction and production of purchased materials ACCOUNTING FOR SCOPE 3 EMISSIONS

and fuels6 Accounting for scope 3 emissions need not involve a
G
full-blown GHG life cycle analysis of all products and
• Transport-related activities
operations. Usually it is valuable to focus on one or two
• Transportation of purchased materials or goods
U
major GHG-generating activities. Although it is diffi-
• Transportation of purchased fuels
cult to provide generic guidance on which scope 3
• Employee business travel
emissions to include in an inventory, some general steps
• Employees commuting to and from work I
can be articulated:
• Transportation of sold products
• Transportation of waste
D
FIGURE 4. GHG accounting from the sale and purchase of electricity

A
A’s Scope 1 C’s Scope 2 D’s Scope 2

emissions = 20t emissions = 1t emissions = 19t
N
➡
➡
➡
100 MWh 100 MWh 95 MWh
➡ ➡ ➡
C
Generator A Electricity Utility End-user D

Trader B Company C
emission factor emission factor emission factor
= 0.2 t/MWh = 0.2 t/MWh = 0.2 t/MWh
E
➡
➡
➡
B’s Optional Information = 20t C’s Scope 3 emissions = 19t D’s Scope 3 emissions = 1t
E
1. Describe the value chain. Because the assessment of

DHL Nordic Express: The business case for
scope 3 emissions does not require a full life cycle
accounting for outsourced transportation services
assessment, it is important, for the sake of transparency,
As a major transportation and logistics company in northern Europe,
C
to provide a general description of the value chain and

DHL Express Nordic serves large loads and special transport needs
the associated GHG sources. For this step, the scope 3
as well as world wide express package and document deliveries and
categories listed can be used as a checklist. Companies
N
offers courier, express, parcel, systemized and specialty business

usually face choices on how many levels up- and down-
services. Through participation in the Business Leaders Initiative on
stream to include in scope 3. Consideration of the
Climate Change, the company found that 98 percent of its emissions
company’s inventory or business goals and relevance of
A
in Sweden originate from the transport of goods via outsourced

the various scope 3 categories will guide these choices.
partner transportation firms. Each partner is required, as an element
2. Determine which scope 3 categories are relevant. Only of the subcontract payment scheme, to enter data on vehicles used,
D
some types of upstream or downstream emissions cate- distance traveled, fuel efficiency, and background data. This data is
gories might be relevant to the company. They may be used to calculate total emissions via a tailored calculation tool for
I
relevant for several reasons: outsourced transportation which gives a detailed picture of its scope
• They are large (or believed to be large) relative to the 3 emissions. Linking data to specific carriers allows the company to
company’s scope 1 and scope 2 emissions screen individual carriers for environmental performance and affect
U
decisions based on each carrier’s emissions performance, which is

• They contribute to the company’s GHG risk exposure
seen through scope 3 as DHL’s own performance.
G
• They are deemed critical by key stakeholders (e.g.,

By including scope 3 and promoting GHG reductions throughout the
feedback from customers, suppliers, investors, or
value chain, DHL Express Nordic increased the relevance of its
civil society)
emissions footprint, expanded opportunities for reducing its
• There are potential emissions reductions that could be impacts and improved its ability to recognize cost saving opportu-
undertaken or influenced by the company. nities. Without scope 3, DHL Express Nordic would have lacked
much of the information needed to be able to understand and effec-
The following examples may help decide which scope 3
tively manage its emissions.
categories are relevant to the company.
SCOPE E M I S S I O N S ( t C O 2)
• If fossil fuel or electricity is required to use the
company’s products, product use phase emissions may Scope 1 7,265
be a relevant category to report. This may be espe-
Scope 2 52
cially important if the company can influence product
design attributes (e.g., energy efficiency) or customer Scope 3 327,634
behavior in ways that reduce GHG emissions during
Total 334,951
the use of the products.
FIGURE 5. Accounting of emissions from leased assets

O R G A N I Z AT I O N A L
}
Parent Company
BOUNDARIES
Company A Company B
}
Leased car fleet Leased building Leased car fleet
O P E R AT I O N A L
(selected consolidation (selected consolidation (selected consolidation criterion

BOUNDARIES
criterion applies) criterion applies) does not apply)
Scope 1 Scope 1 Scope 2 Scope 3
30 CHAPTER 4
• Outsourced activities are often candidates for scope 3

IKEA: Customer transportation
emissions assessments. It may be particularly important
to and from its retail stores
to include these when a previously outsourced activity
contributed significantly to a company’s scope 1 or IKEA, an international home furniture and furnishings retailer,
scope 2 emissions. decided to include scope 3 emissions from customer travel when
it became clear, through participation in the Business Leaders
• If GHG-intensive materials represent a significant
Initiative on Climate Change (BLICC) program, that these emis-
fraction of the weight or composition of a product
sions were large relative its scope 1 and scope 2 emissions.
used or manufactured (e.g., cement, aluminum),
Furthermore, these emissions are particularly relevant to IKEA’s
companies may want to examine whether there are
store business model. Customer travel to its stores, often from
opportunities to reduce their consumption of the
long distances, is directly affected by IKEA’s choice of store loca-
product or to substitute less GHG-intensive materials.
tion and the warehouse shopping concept.
• Large manufacturing companies may have significant
Customer transportation emission calculations were based on
emissions related to transporting purchased materials
customer surveys at selected stores. Customers were asked for
to centralized production facilities.
the distance they traveled to the store (based on home postal
• Commodity and consumer product companies may code), the number of customers in their car, the number of other
want to account for GHGs from transporting raw stores they intended to visit at that shopping center that day, and
materials, products, and waste. whether they had access to public transportation to the store.
Extrapolating this data to all IKEA stores and multiplying distance
• Service sector companies may want to report on emis-
by average vehicle efficiencies for each country, the company
sions from employee business travel; this emissions
calculated that 66 percent of its emissions inventory was from
source is not as likely to be significant for other kinds
scope 3 customer travel. Based on this information, IKEA will have
of companies (e.g., manufacturing companies).
significant influence over future scope 3 emissions by considering
3. Identify partners along the value chain. GHG emissions when developing public transportation options
Identify any partners that contribute potentially and home delivery services for its existing and new stores.
significant amounts of GHGs along the value chain
(e.g., customers /users, product designers /manufac-
G
turers, energy providers, etc.). This is important when
trying to identify sources, obtain relevant data, and Leased assets, outsourcing, and franchises
The selected consolidation approach (equity share or one
U
calculate emissions.
of the control approaches) is also applied to account for
4. Quantify scope 3 emissions. While data availability and categorize direct and indirect GHG emissions from
and reliability may influence which scope 3 activities contractual arrangements such as leased assets, I
are included in the inventory, it is accepted that data outsourcing, and franchises. If the selected equity or
accuracy may be lower. It may be more important control approach does not apply, then the company may
D
to understand the relative magnitude of and possible account for emissions from the leased assets,
changes to scope 3 activities. Emission estimates are outsourcing, and franchises under scope 3. Specific guid-
acceptable as long as there is transparency with regard
A
ance on leased assets is provided below:

to the estimation approach, and the data used for the
analysis are adequate to support the objectives of the • U S I N G E Q U I T Y S H A R E O R F I N A N C I A L C O N T R O L : The
lessee only accounts for emissions from leased assets
N
inventory. Verification of scope 3 emissions will often

be difficult and may only be considered if data is of that are treated as wholly owned assets in financial
reliable quality. accounting and are recorded as such on the balance
C
sheet (i.e., finance or capital leases).

E
Double counting
E
• U S I N G O P E R AT I O N A L C O N T R O L : The lessee only

accounts for emissions from leased assets that it oper- Concern is often expressed that accounting for indirect
ates (i.e., if the operational control criterion applies). emissions will lead to double counting when two
C
different companies include the same emissions in their

Guidance on which leased assets are operating and
respective inventories. Whether or not double counting
which are finance leases should be obtained from the
occurs depends on how consistently companies with
N
company accountant. In general, in a finance lease, an

shared ownership or trading program administrators
organization assumes all rewards and risks from the
choose the same approach (equity or control) to set the
leased asset, and the asset is treated as wholly owned
organizational boundaries. Whether or not double
A
and is recorded as such on the balance sheet. All

counting matters, depends on how the reported informa-
leased assets that do not meet those criteria are oper-
tion is used.
ating leases. Figure 5 illustrates the application of
D
consolidation criteria to account for emissions from Double counting needs to be avoided when compiling
leased assets. national (country) inventories under the Kyoto Protocol,
I
but these are usually compiled via a top-down exercise

using national economic data, rather than aggregation
of bottom-up company data. Compliance regimes are
U
more likely to focus on the “point of release” of emis-

sions (i.e., direct emissions) and/or indirect emissions
G
from use of electricity. For GHG risk management and

voluntary reporting, double counting is less important.
World Resources Institute:

Innovations in estimating employee commuting emissions
The World Resources Institute has a long-standing commitment to benefit was that employees felt a certain amount of pride at having
reduce its annual GHG emissions to net zero through a combination contributed to the inventory development process. The experience
of internal reduction efforts and external offset purchases. WRI’s also provided a positive internal communications opportunity.
emissions inventory includes scope 2 indirect emissions associ-
WRI has developed a guide consistent with GHG Protocol Corporate
ated with the consumption of purchased electricity and scope 3
Standard to help office-based organizations understand how to
indirect emissions associated with business air travel, employee
track and manage their emissions. Working 9 to 5 on Climate Change:
commuting, and paper use. WRI has no scope 1 direct emissions.
An Office Guide is accompanied by a suite of calculation tools,
Collecting employee commuting activity data from WRI’s 140 staff including one for using a survey method to estimate employee
can be challenging. The method used is to survey employees once commuting emissions. The Guide and tools can be downloaded from
each year about their average commuting habits. In the first two the GHG Protocol Initiative website (www.ghgprotocol.org).
years of the initiative, WRI used an Excel spreadsheet accessible
Transportation-related emissions are the fastest growing GHG
to all employees on a shared internal network, but only achieved
emissions category in the United States. This includes commercial,
a 48 percent participation rate. A simplified, web-based survey
business, and personal travel as well as commuting. By accounting
that downloaded into a spreadsheet improved participation to
for commuting emissions, companies may find that several
65 percent in the third year. Using feedback on the survey design,
practical opportunities exist for reducing them. For example, when
WRI further simplified and refined survey questions, improved user
WRI moved to new office space, it selected a building located close
friendliness, and reduced the time needed to complete the survey to
to public transportation, reducing the need for employees to drive
less than a minute. Employee participation rate rose to 88 percent.
to work. In its lease, WRI also negotiated access to a locked bike
Designing a survey that was easily navigable and had clearly artic- room for those employees who cycle to work. Finally, telework
ulated questions significantly improved the completeness and programs significantly reduce commuting emissions by avoiding or
accuracy of the employee commuting activity data. An added decreasing the need to travel.
32 CHAPTER 4
For participating in GHG markets or obtaining GHG ABB: Calculating product use phase
credits, it would be unacceptable for two organizations emissions associated with electrical appliances
to claim ownership of the same emissions commodity
and it is therefore necessary to make sufficient ABB, an energy and automation technology company based in
provisions to ensure that this does not occur between Switzerland, produces a variety of appliances and equipment,
participating companies (see chapter 11). such as circuit breakers and electrical drives, for industrial appli-
cations. ABB has a stated goal to issue Environmental Product
Declarations (EPDs) for all its core products based on life cycle
SCOPES AND DOUBLE COUNTING assessment. As a part of its committment, ABB reports both
The GHG Protocol Corporate Standard is designed to manufacturing and product use phase GHG emissions for a
prevent double counting of emissions between different variety of its products using a standardized calculation method
companies within scope 1 and 2. For example, the and set of assumptions. For example, product use phase calcula-
scope 1 emissions of company A (generator of tions for ABB’s 4 kW DriveIT Low Voltage AC drive are based on a
electricity) can be counted as the scope 2 emissions of 15-year expected lifetime and an average of 5,000 annual oper-
company B (end-user of electricity) but company A’s ating hours. This activity data is multiplied by the average
scope 1 emissions cannot be counted as scope 1 emis- electricity emission factor for OECD countries to produce total
sions by company C (a partner organization of lifetime product use emissions.
company A) as long as company A and company C
Compared with manufacturing emissions, product use phase
consistently apply the same control or equity share
emissions account for about 99 percent of total life cycle emis-
approach when consolidating emissions.
sions for this type of drive. The magnitude of these emissions and
Similarly, the definition of scope 2 does not allow double ABB’s control of the design and performance of this equipment
counting of emissions within scope 2, i.e., two different clearly give the company significant leverage on its customers’
companies cannot both count scope 2 emissions from emissions by improving product efficiency or helping customers
the purchase of the same electricity. Avoiding this type design better overall systems in which ABB’s products are
of double counting within scope 2 emissions makes it a involved. By clearly defining and quantifying significant value
useful accounting category for GHG trading programs chain emissions, ABB has gained insight into and influence over
that regulate end users of electricity. its emissions footprint.
G
When used in external initiatives such as GHG trading,
the robustness of the scope 1 and 2 definitions combined
U
with the consistent application of either the control or
NOTES
equity share approach for defining organizational bound- 1
The terms “direct” and “indirect” as used in this document should not
aries allows only one company to exercise ownership of be confused with their use in national GHG inventories where ‘direct’ I
scope 1 or scope 2 emissions. refers to the six Kyoto gases and ‘indirect’ refers to the precursors NOx,
NMVOC, and CO.
D
2
The term “electricity” is used in this chapter as shorthand for elec-
tricity, steam, and heating/cooling.
3
For some integrated manufacturing processes, such as ammonia manu-
A
facture, it may not be possible to distinguish between GHG emissions from

the process and those from the production of electricity, heat, or steam.
4
Green power includes renewable energy sources and specific clean energy
N
technologies that reduce GHG emissions relative to other sources of energy

that supply the electric grid, e.g., solar photovoltaic panels, geothermal
energy, landfill gas, and wind turbines.
C
5
A T&D system includes T&D lines and other T&D equipment
(e.g., transformers).
E
6
“Purchased materials and fuels” is defined as material or fuel that is
purchased or otherwise brought into the organizational boundary of
the company.
5 Tracking Emissions Over Time
D
R
A
D
N
A
T
S
C ompanies often undergo significant structural changes such as
acquisitions, divestments, and mergers. These changes will alter a
company’s historical emission profile, making meaningful comparisons over
time difficult. In order to maintain consistency over time, or in other words,
to keep comparing “like with like”, historic emission data will have to
be recalculated.
S T A N D A R D
G U I D A N C E
34
CHAPTER 5 Tracking Emissions Over Time 35
Companies may need to track emissions over time in Recalculating base year emissions
response to a variety of business goals, including: Companies shall develop a base year emissions recalcu-
lation policy, and clearly articulate the basis and
• Public reporting
context for any recalculations. If applicable, the policy
• Establishing GHG targets shall state any “significance threshold” applied for
deciding on historic emissions recalculation. “Significance
• Managing risks and opportunities
threshold” is a qualitative and/or quantitative criterion
• Addressing the needs of investors and other stakeholders used to define any significant change to the data, inven-
tory boundary, methods, or any other relevant factors.
A meaningful and consistent comparison of emissions
It is the responsibility of the company to determine
over time requires that companies set a performance
the “significance threshold” that triggers base year
datum with which to compare current emissions. This
emissions recalculation and to disclose it. It is the
performance datum is referred to as the base year1
responsibility of the verifier to confirm the company’s
emissions. For consistent tracking of emissions over
adherence to its threshold policy. The following cases
time, the base year emissions may need to be recalcu-
shall trigger recalculation of base year emissions:
lated as companies undergo significant structural
changes such as acquisitions, divestments, and mergers. • Structural changes in the reporting organization that
have a significant impact on the company’s base year
The first step in tracking emissions, however, is the selec-
emissions. A structural change involves the transfer
tion of a base year.
of ownership or control of emissions-generating activ-
ities or operations from one company to another.
While a single structural change might not have a
Choosing a base year
significant impact on the base year emissions, the
Companies shall choose and report a base year for which
cumulative effect of a number of minor structural
verifiable emissions data are available and specify their
changes can result in a significant impact. Structural
reasons for choosing that particular year.
changes include:
Most companies select a single year as their base year.
• Mergers, acquisitions, and divestments
However, it is also possible to choose an average of
S
annual emissions over several consecutive years. For • Outsourcing and insourcing of emitting activities
example, the U.K. ETS specifies an average of
• Changes in calculation methodology or improvements
T
1998–2000 emissions as the reference point for tracking
in the accuracy of emission factors or activity data
reductions. A multi-year average may help smooth out
that result in a significant impact on the base year
unusual fluctuations in GHG emissions that would make
a single year’s data unrepresentative of the company’s
emissions data A
typical emissions profile. • Discovery of significant errors, or a number of cumu-
N
lative errors, that are collectively significant.

The inventory base year can also be used as a basis for
setting and tracking progress towards a GHG target in In summary, base year emissions shall be retroactively
which case it is referred to as a target base year (see recalculated to reflect changes in the company that
D
chapter 11). would otherwise compromise the consistency and rele-

vance of the reported GHG emissions information. Once
A
a company has determined its policy on how it will recal-

culate base year emissions, it shall apply this policy in a
consistent manner. For example, it shall recalculate for
R
both GHG emissions increases and decreases.

D
Tracking Emissions Over Time
Choosing a base year
S
E
election and recalculation of a base year should

relate to the business goals and the particular Companies should choose as a base year the earliest rele-
context of the company: vant point in time for which they have reliable data.
C
Some organizations have adopted 1990 as a base year in

• For the purpose of reporting progress towards volun-
order to be consistent with the Kyoto Protocol. However,
tary public GHG targets, companies may follow the
obtaining reliable and verifiable data for historical base
N
standards and guidance in this chapter

years such as 1990 can be very challenging.
• A company subject to an external GHG program may
If a company continues to grow through acquisitions, it
face external rules governing the choice and recalcu-
A
may adopt a policy that shifts or “rolls” the base year

lation of base year emissions
forward by a number of years at regular intervals.
• For internal management goals, the company may Chapter 11 contains a description of such a “rolling
D
follow the rules and guidelines recommended in this base year,” including a comparison with the fixed base
document, or it may develop its own approach, which year approach described in this chapter. A fixed base
I
should be followed consistently. year has the advantage of allowing emissions data to be
compared on a like-with-like basis over a longer time
period than a rolling base year approach. Most emis-
U
sions trading and registry programs require a fixed base

year policy to be implemented.
G
FIGURE 6. Base year emissions recalculation for an acquisition
Facility C
Facility C Unit B
emissions
15 20 20
Unit A
➡
Recalculated Figures
Figures reported in respective years
20 20 20
15
GAMMA EMISSIONS
30 30 30 30
25 25
30 30 30 30
25 25
1 2 3 1 2 3
Base Year
Increase in Gamma
Production Acquires C
Company Gamma consists of two business units (A and B). In its base year (year one), each business unit emits 25 tonnes CO2. In year two,
the company undergoes “organic growth,” leading to an increase in emissions to 30 tonnes CO2 per business unit, i.e., 60 tonnes CO2 in
total. The base year emissions are not recalculated in this case. At the beginning of year three, the company acquires production facility C
from another company. The annual emissions of facility C in year one were 15 tonnes CO2, and 20 tonnes CO2 in years two and three. The
total emission of company Gamma in year three, including facility C, are therefore 80 tonnes CO2. To maintain consistency over time, the
company recalculates its base year emissions to take into account the acquisition of facility C. The base year emissions increase by
15 tonnes CO2—the quantity of emissions produced by facility C in Gamma’s base year. The recalculated base year emissions are
65 tonnes CO2. Gamma also (optionally) reports 80 tonnes CO2 as the recalculated emissions for year two.
36 CHAPTER 5
FIGURE 7. Base year emissions recalculation for a divestment

Unit C
Unit B
30
Unit A
➡
Figures reported in respective years
Recalculated figures
30 30
BETA EMISSIONS
25
30 30 30 30
25 25
25 30 30 25 30 30
1 2 3 1 2 3
Base Year Increase in Beta
Production Divests C
Company Beta consists of three business units (A, B, and C). Each business unit emits 25 tonnes CO2 and the total emissions for the
company are 75 tonnes CO2 in the base year (year one). In year two, the output of the company grows, leading to an increase in emissions
to 30 tonnes CO2 per business unit, i.e., 90 tonnes CO2 in total. At the beginning of year three, Beta divests business unit C and its annual
emissions are now 60 tonnes, representing an apparent reduction of 15 tonnes relative to the base year emissions. However, to maintain
consistency over time, the company recalculates its base year emissions to take into account the divestment of business unit C. The base
year emissions are lowered by 25 tonnes CO2—the quantity of emissions produced by the business unit C in the base year. The recalcu-
lated base year emissions are 50 tonnes CO2, and the emissions of company Beta are seen to have risen by 10 tonnes CO2 over the three
years. Beta (optionally) reports 60 tonnes CO2 as the recalculated emissions for year two.
G
U
Significance thresholds for recalculations phere, for example, an acquisition or divestment only
Whether base year emissions are recalculated depends transfers existing GHG emissions from one company’s
on the significance of the changes. The determination of inventory to another. I
a significant change may require taking into account the
Figures 6 and 7 illustrate the effect of structural
cumulative effect on base year emissions of a number
changes and the application of this standard on recalcu-
D
of small acquisitions or divestments. The GHG Protocol

lation of base year emissions.
Corporate Standard makes no specific recommenda-
tions as to what constitutes “significant.” However,
A
some GHG programs do specify numerical significance

Timing of recalculations for structural changes
thresholds, e.g., the California Climate Action
When significant structural changes occur during the
Registry, where the change threshold is 10 percent of
N
middle of the year, the base year emissions should be

the base year emissions, determined on a cumulative
recalculated for the entire year, rather than only for the
basis from the time the base year is established.
remainder of the reporting period after the structural
C
change occurred. This avoids having to recalculate base

year emissions again in the succeeding year. Similarly,
Base year emissions
E
current year emissions should be recalculated for the

recalculation for structural changes
entire year to maintain consistency with the base year
Structural changes trigger recalculation because they
recalculation. If it is not possible to make a recalcula-
merely transfer emissions from one company to another
tion in the year of the structural change (e.g., due to
without any change of emissions released to the atmos-
Tracking Emissions Over Time
lack of data for an acquired company), the recalculation No base year emissions recalculations
E
may be carried out in the following year.2 for facilities that did not exist in the base year
Base year emissions are not recalculated if the company
makes an acquisition of (or insources) operations that
C
Recalculations for changes in calculation did not exist in its base year. There may only be a recal-
methodology or improvements in data accuracy culation of historic data back to the year in which the
N
A company might report the same sources of GHG emis- acquired company came into existence. The same applies
sions as in previous years, but measure or calculate to cases where the company makes a divestment of (or
them differently. For example, a company might have outsources) operations that did not exist in the base year.
A
used a national electric power generation emissions

Figure 8 illustrates a situation where no recalculation of
factor to estimate scope 2 emissions in year one of
base year emissions is required, since the acquired
reporting. In later years, it may obtain more accurate
D
facility came into existence after the base year was set.
utility-specific emission factors (for the current as well
as past years) that better reflect the GHG emissions
I
associated with the electricity that it has purchased.

No recalculation for “ outsourcing/insourcing”
If the differences in emissions resulting from such a
if reported under scope 2 and/or scope 3
change are significant, historic data is recalculated
U
Structural changes due to “outsourcing” or “insourcing”

applying the new data and/or methodology.
do not trigger base year emissions recalculation if the
Sometimes the more accurate data input may not reason- company is reporting its indirect emissions from relevant
G
ably be applied to all past years or new data points may outsourced or insourced activities. For example,
not be available for past years. The company may then outsourcing production of electricity, heat, or steam
have to backcast these data points, or the change in data does not trigger base year emissions recalculation, since
source may simply be acknowledged without recalcula- the GHG Protocol Corporate Standard requires scope 2
tion. This acknowledgement should be made in the report reporting. However, outsourcing/insourcing that shifts
each year in order to enhance transparency; otherwise, significant emissions between scope 1 and scope 3 when
new users of the report in the two or three years after the scope 3 is not reported does trigger a base year emis-
change may make incorrect assumptions about the sions recalculation (e.g., when a company outsources
performance of the company. the transportation of products).
Any changes in emission factor or activity data that In case a company decides to track emissions over time
reflect real changes in emissions (i.e., changes in fuel separately for different scopes, and has separate base
type or technology) do not trigger a recalculation. years for each scope, base year emissions recalculation
for outsourcing or insourcing is made.
Optional reporting for recalculations

Optional information that companies may report on ENDESA: Recalculation of base year
recalculations includes: emissions because of structural changes
• The recalculated GHG emissions data for all years
The GHG Protocol Corporate Standard requires setting a base year for
between the base year and the reporting year
comparing emissions over time. To be able to compare over time, the
• All actual emissions as reported in respective years in base year emissions must be recalculated if any structural changes
the past, i.e., the figures that have not been recalcu- occur in the company. In a deal completed January 2002, the
lated. Reporting the original figures in addition to the ENDESA Group, a power generation company based in Spain, sold its
recalculated figures contributes to transparency since 87.5 percent holding in Viesgo, a part of its Spanish power genera-
it illustrates the evolution of the company’s structure tion business, to ENEL, an Italian power company. To account for this
over time. structural change, historical emissions from the six power plants
included in the sale were no longer accounted for in the Endesa GHG
inventory and therefore removed from its base year emissions. This
recalculation provides ENDESA with a complete and comparable
picture of its historical emissions.
38 CHAPTER 5
FIGURE 8. Acquisition of a facility that came into existence after the base year was set
Facility C
Unit B
20
15 Unit A
➡
Figures reported in respective years Recalculated figures
20 15 20
TETA EMISSIONS
30 30 30 30
25 25
25 30 30 25 30 30
1 2 3 1 2 3
Base Year Increase in Teta
Production Acquires C
Company Teta consists of two business units (A and B). In its base year (year one), the company emits 50 tonnes CO2. In year two, the
company undergoes organic growth, leading to an increase in emissions to 30 tonnes CO2 per business unit, i.e., 60 tonnes CO2 in total.
The base year emissions are not recalculated in this case. At the beginning of year three, Teta acquires a production facility C from
another company. Facility C came into existence in year two, its emissions being 15 tonnes CO2 in year two and 20 tonnes CO2 in year
three. The total emissions of company Teta in year three, including facility C, are therefore 80 tonnes CO2. In this acquisition case, the
base year emissions of company Teta do not change because the acquired facility C did not exist in year one when the base year of Teta
was set. The base year emissions of Teta therefore remain at 50 tonnes CO2. Teta (optionally) reports 75 tonnes as the recalculated figure
for year two emissions.
G
No recalculation for organic growth or decline
Base year emissions and any historic data are not
U
recalculated for organic growth or decline. Organic
growth/decline refers to increases or decreases in
production output, changes in product mix, and closures I
and openings of operating units that are owned or
controlled by the company. The rationale for this is
D
that organic growth or decline results in a change of

emissions to the atmosphere and therefore needs to be
counted as an increase or decrease in the company’s
A
emissions profile over time.

N
NOTES
1
Terminology on this topic can be confusing. Base year emissions should
C
be differentiated from the term “baseline,” which is mostly used in the

context of project-based accounting. The term base year focuses on a
comparison of emissions over time, while a baseline is a hypothetical
scenario for what GHG emissions would have been in the absence of
E
a GHG reduction project or activity.

2
For more information on the timing of base year emissions recalcula-
tions, see the guidance document “Base year recalculation
methodologies for structural changes” on the GHG Protocol website
(www.ghgprotocol.org).
6 Identifying and Calculating GHG Emissions
E
C
N
A
D
I
U
G
O nce the inventory boundary has been established, companies generally
calculate GHG emissions using the following steps:
1. Identify GHG emissions sources
2. Select a GHG emissions calculation approach
3. Collect activity data and choose emission factors
4. Apply calculation tools
5. Roll-up GHG emissions data to corporate level.
This chapter describes these steps and the calculation tools developed by the GHG
Protocol. The calculation tools are available on the GHG Protocol Initiative website
at www.ghgprotocol.org.
G U I D A N C E
40
CHAPTER 6 Identifying and Calculating GHG Emissions 41
To create an accurate account of their emissions, FIGURE 9.

companies have found it useful to divide overall emis- Steps in identifying and calculating GHG emissions
sions into specific categories. This allows a company
to use specifically developed methodologies to accu- Identify Sources
rately calculate the emissions from each sector and
source category. Select Calculation Approach
Identify GHG emissions sources Collect Data and Choose Emission Factors
The first of the five steps in identifying and calculating
a company’s emissions as outlined in Figure 9 is to
Apply Calculation Tools
categorize the GHG sources within that company’s
boundaries. GHG emissions typically occur from the
following source categories: Roll-up Data to Corporate Level
• Stationary combustion: combustion of fuels in

stationary equipment such as boilers, furnaces,
burners, turbines, heaters, incinerators, engines, sions and own or control a power production facility will
flares, etc. likely have direct emissions from all the main source
categories. Office-based organizations may not have any
• Mobile combustion: combustion of fuels in trans- direct GHG emissions except in cases where they own or
portation devices such as automobiles, trucks, buses, operate a vehicle, combustion device, or refrigeration
trains, airplanes, boats, ships, barges, vessels, etc. and air-conditioning equipment. Often companies are
• Process emissions: emissions from physical or chem- surprised to realize that significant emissions come
ical processes such as CO2 from the calcination step from sources that are not initially obvious (see United
in cement manufacturing, CO2 from catalytic cracking Technologies case study).
in petrochemical processing, PFC emissions from
aluminum smelting, etc.
G
IDENTIFY SCOPE 2 EMISSIONS
• Fugitive emissions: intentional and unintentional The next step is to identify indirect emission sources from
releases such as equipment leaks from joints, seals, the consumption of purchased electricity, heat, or steam.
U
packing, gaskets, as well as fugitive emissions from Almost all businesses generate indirect emissions due to the
coal piles, wastewater treatment, pits, cooling towers, purchase of electricity for use in their processes or services.
gas processing facilities, etc. I
Every business has processes, products, or services that
generate direct and/or indirect emissions from one or IDENTIFY SCOPE 3 EMISSIONS
D
more of the above broad source categories. The GHG This optional step involves identification of other indirect
Protocol calculation tools are organized based on these emissions from a company’s upstream and downstream
activities as well as emissions associated with
A
categories. Appendix D provides an overview of direct

and indirect GHG emission sources organized by scopes outsourced/contract manufacturing, leases, or franchises
and industry sectors that may be used as an initial guide not included in scope 1 or scope 2.
N
to identify major GHG emission sources. The inclusion of scope 3 emissions allows businesses to
expand their inventory boundary along their value chain
C
and to identify all relevant GHG emissions. This provides

IDENTIFY SCOPE 1 EMISSIONS a broad overview of various business linkages and
As a first step, a company should undertake an exer- possible opportunities for significant GHG emission
E
cise to identify its direct emission sources in each of reductions that may exist upstream or downstream of a
the four source categories listed above. Process emis- company’s immediate operations (see chapter 4 for an
sions are usually only relevant to certain industry overview of activities that can generate GHG emissions
sectors like oil and gas, aluminum, cement, etc. along a company’s value chain).
Manufacturing companies that generate process emis-
Identifying and Calculating GHG Emissions
Select a calculation approach Collect activity data

E
Direct measurement of GHG emissions by monitoring and choose emission factors

concentration and flow rate is not common. More often, For most small to medium-sized companies and for many
C
emissions may be calculated based on a mass balance or larger companies, scope 1 GHG emissions will be calcu-
stoichiometric basis specific to a facility or process. lated based on the purchased quantities of commercial
However, the most common approach for calculating fuels (such as natural gas and heating oil) using
N
GHG emissions is through the application of documented published emission factors. Scope 2 GHG emissions will
emission factors. These factors are calculated ratios primarily be calculated from metered electricity
relating GHG emissions to a proxy measure of activity at consumption and supplier-specific, local grid, or other
A
an emissions source. The IPCC guidelines (IPCC, 1996) published emission factors. Scope 3 GHG emissions will
refer to a hierarchy of calculation approaches and tech- primarily be calculated from activity data such as fuel
D
niques ranging from the application of generic emission use or passenger miles and published or third-party
factors to direct monitoring. emission factors. In most cases, if source- or facility-
specific emission factors are available, they are
I
In many cases, particularly when direct monitoring is

preferable to more generic or general emission factors.
either unavailable or prohibitively expensive, accurate
emission data can be calculated from fuel use data. Even Industrial companies may be faced with a wider range
U
small users usually know both the amount of fuel of approaches and methodologies. They should seek
consumed and have access to data on the carbon content guidance from the sector-specific guidelines on the
G
of the fuel through default carbon content coefficients or GHG Protocol website (if available) or from their
through more accurate periodic fuel sampling. industry associations (e.g., International Aluminum
Companies should use the most accurate calculation Institute, International Iron and Steel Institute,
approach available to them and that is appropriate for American Petroleum Institute, WBCSD Sustainable
their reporting context. Cement Initiative, International Petroleum Industry
Environmental Conservation Association).
United Technologies Corporation: Apply calculation tools

More than meets the eye This section provides an overview of the GHG calcula-
tion tools and guidance available on the GHG Protocol
In 1996, United Technologies Corporation (UTC), a global aero- Initiative website (www.ghgprotocol.org). Use of these
space and building systems technology corporation, appointed a tools is encouraged as they have been peer reviewed
team to set boundaries for the company’s new Natural Resource by experts and industry leaders, are regularly updated,
Conservation, Energy and Water Use Reporting Program. The team and are believed to be the best available. The tools,
focused on what sources of energy should be included in the however, are optional. Companies may substitute their
program's annual report of energy consumption. The team own GHG calculation methods, provided they are
decided jet fuel needed to be reported in the annual report; jet fuel more accurate than or are at least consistent with the
was used by a number of UTC divisions for engine and flight hard- GHG Protocol Corporate Standards approaches.
ware testing and for test firing. Although the amount of jet fuel
There are two main categories of calculation tools:
used in any given year was subject to wide variation due to
changing test schedules, the total amount consumed in an • Cross-sector tools that can be applied to different
average year was believed to be large and potentially small sectors. These include stationary combustion, mobile
enough to be specifically excluded. However, jet fuel consumption combustion, HFC use in refrigeration and air condi-
reports proved that initial belief incorrect. Jet fuel has accounted tioning, and measurement and estimation uncertainty.
for between 9 and 13 percent of the corporation's total annual use
• Sector-specific tools that are designed to calculate
of energy since the program commenced. Had UTC not included
emissions in specific sectors such as aluminum, iron
the use of jet fuel in annual data collection efforts, a significant
and steel, cement, oil and gas, pulp and paper, office-
emissions source would have been overlooked.
based organizations.
42 CHAPTER 6
Most companies will need to use more than one calcu- The guidance for each calculation tool includes the
lation tool to cover all their GHG emission sources. following sections:
For example, to calculate GHG emissions from an
• Overview: provides an overview of the purpose and
aluminum production facility, the company would use
content of the tool, the calculation method used in the
the calculation tools for aluminum production,
tool, and a process description
stationary combustion (for any consumption of
purchased electricity, generation of energy on-site, etc), • Choosing activity data and emission factors: provides
mobile combustion (for transportation of materials and sector-specific good practice guidance and references
products by train, vehicles employed on-site, employee for default emission factors
business travel, etc), and HFC use (for refrigeration,
• Calculation methods: describes different calculation
etc). See Table 3 for the full list of tools.
methods depending on the availability of site-specific
activity data and emission factors
S T R U C T U R E O F G H G P R O T O C O L C A L C U L AT I O N T O O L S • Quality control: provides good practice guidance

Each of the cross-sector and sector-specific calculation
• Internal reporting and documentation: provides
tools on the website share a common format and
guidance on internal documentation to support
include step-by-step guidance on measuring and calcu-
emissions calculations.
lating emissions data. Each tool consists of a guidance
section and automated worksheets with explanations on
how to use them.
ChevronTexaco: The SANGEATM accounting and reporting system
ChevronTexaco, a global energy company, has developed and imple- the software, easing updates when methodologies or default
mented energy utilization and GHG estimation and reporting factors change. Updates to this central reference are automati-
software consistent with the GHG Protocol Corporate Standard. This cally applied to the existing configuration and input data.
software is available free of charge and makes it easier, more accu- Updates will mirror the timing and content of updates to the
G
rate, and less costly to institute a corporate-wide GHG accounting American Petroleum Institute Compendium of GHG emission esti-
and reporting system in the oil and gas sector. Called the SANGEA™ mating methodologies.
Energy and Greenhouse Gas Emissions Estimating System, it is
U
• The system is auditable. The software requires detailed audit trail
currently in use at all ChevronTexaco facilities worldwide, comprising
information on data inputs and system users. There is docu-
more than 70 reporting entities.
mented accountability of who made any change to the system. I
The system is an auditable, Excel-and-Visual-Basic-based tool for
• Using one system saves money. Significant cost savings are
estimating GHG emissions and energy utilization. It streamlines corpo-
achieved by using the same system in all facilities, as compared
D
rate-level data consolidation by allowing the inventory coordinator at

to conventional, disparate systems.
each facility to configure a spreadsheet, enter monthly data, and send
quarterly reports to a centralized database. ChevronTexaco’s one-off investment in developing the SANGEA™ system
A
has already shown results: A rough cost estimate for ChevronTexaco's

In practice, the SANGEA™ system employs a variety of strategies to
Richmond, California, refinery indicates savings of more than 70
ensure consistent calculation methods and ease company-wide
percent over a five-year period compared with the conventional
N
standardization:
approaches based on locally developed reporting systems. SANGEA™ is
• Spreadsheet configuration and material input information for expected to reduce the long term expenses of maintaining a legacy
C
specific facilities can be carried over from year to year. Inventory system and hiring independent consultants. Employing a combination
specialists can easily modify configurations as a facility changes of the GHG Protocol Corporate Standards and SANGEA™ calculation
(due to new construction, retirement of units, etc.). software to replace a diverse and confusing set of accounting and
E
reporting templates yields significant efficiency and accuracy gains,

• Updates are efficient. Methodologies for estimating emissions,
and allows the company to more accurately manage GHG emissions
emission factors, and calculation equations are stored centrally in
and institute specific emissions improvements.
TABLE 3. Overview of GHG calculation tools available on the GHG Protocol website
E
CALCULATION TOOLS MAIN FEATURES.
Stationary Combustion • Calculates direct and indirect CO2 emissions from fuel combustion in stationary equipment
C
• Provides two options for allocating GHG emissions from a co-generation facility
• Provides default fuel and national average electricity emission factors

N
Mobile Combustion • Calculates direct and indirect CO2 emissions from fuel combustion in mobile sources
• Provides calculations and emission factors for road, air, water, and rail transport
A
CROSS-SECTOR TOOLS
HFC from Air Conditioning • Calculates direct HFC emissions during manufacture, use and disposal of refrigeration and air-
and Refrigeration Use conditioning equipment in commercial applications
D
• Provides three calculation methodologies: a sales-based approach, a life cycle stage based
approach, and an emission factor based approach
I
Measurement and Estimation • Introduces the fundamentals of uncertainty analysis and quantification
Uncertainty for GHG Emissions
U
• Calculates statistical parameter uncertainties due to random errors related to calculation of

GHG emissions
G
• Automates the aggregation steps involved in developing a basic uncertainty assessment for GHG
inventory data
Aluminum and other non- • Calculates direct GHG emissions from aluminum production (CO2 from anode oxidation, PFC emis-
Ferrous Metals Production sions from the “anode effect,” and SF6 used in non-ferrous metals production as a cover gas)
Iron and Steel • Calculates direct GHG emissions (CO2) from oxidation of the reducing agent, from the calcination
of the flux used in steel production, and from the removal of carbon from the iron ore and scrap
steel used
Nitric Acid Manufacture • Calculates direct GHG emissions (N2O) from the production of nitric acid
Ammonia Manufacture • Calculates direct GHG emissions (CO2) from ammonia production. This is for the removal of
carbon from the feedstock stream only; combustion emissions are calculated with the stationary
combustion module
Adipic Acid Manufacture • Calculates direct GHG emissions (N2O) from adipic acid production
SECTOR-SPECIFIC TOOLS
Cement • Calculates direct CO2 emissions from the calcination process in cement manufacturing (WBCSD
tool also calculates combustion emissions)
• Provides two calculation methodologies: the cement-based approach and the clinker-based approach
Lime • Calculates direct GHG emissions from lime manufacturing (CO2 from the calcination process)
HFC-23 from • Calculates direct HFC-23 emissions from production of HCFC-22

HCFC-22 Production
Pulp and Paper • Calculates direct CO2, CH4, and N2O emissions from production of pulp and paper. This includes
calculation of direct and indirect CO2 emissions from combustion of fossil fuels, bio-fuels, and
waste products in stationary equipment
Semi-Conductor • Calculates PFC emission from the production of semi-conductor wafers
Wafer Production
Guide for Small • Calculates direct CO2 emissions from fuel use, indirect CO2 emissions from electricity
Office-Based Organizations consumption, and other indirect CO2 emissions from business travel and commuting
44 CHAPTER 6
In the automated worksheet section, it is only necessary

BP: A standardized system
to insert activity data into the worksheets and to select
for internal reporting of GHGs
an appropriate emission factor or factors. Default emis-
sion factors are provided for the sectors covered, but it is BP, a global energy company, has been collecting GHG data from
also possible to insert customized emission factors that the different parts of its operations since 1997 and has consoli-
are more representative of the reporting company’s oper- dated its internal reporting processes into one central database
ations. The emissions of each GHG (CO2 , CH4 , N2O, etc.) system. The responsibility for reporting environmental emissions
are calculated separately and then converted to CO2 lies with about 320 individual BP facilities and business depart-
equivalents on the basis of their global warming potential. ments, which are termed “reporting units.” All reporting units have
to complete a standard Excel pro-forma spreadsheet every quarter,
Some tools, such as the iron and steel sector tool and the
stating actual emissions for the preceding three months and
HFC cross-sector tool, take a tiered approach, offering a
updates to forecasts for the current year and the next two years. In
choice between a simple and a more advanced calculation
addition, reporting units are asked to account for all significant
methodology. The more advanced methods are expected
variances, including sustainable reductions. The reporting units all
to produce more accurate emissions estimates but usually
use the same BP GHG Reporting Guidelines “Protocol” (BP, 2000)
require collection of more detailed data and a more
for quantifying their emissions of carbon dioxide and methane.
thorough understanding of a company’s technologies.
All pro-forma spreadsheets are e-mailed automatically by the
central database to the reporting units, and the completed e-mail
Roll-up GHG emissions data to corporate level returns are uploaded into the database by a corporate team, who
To report a corporation’s total GHG emissions, compa- check the quality of the incoming data. The data are then compiled,
nies will usually need to gather and summarize data by the end of the month following each quarter end, to provide the
from multiple facilities, possibly in different countries total emission inventory and forecasts for analysis against BP’s
and business divisions. It is important to plan this GHG target. Finally, the inventory is reviewed by a team of inde-
process carefully to minimize the reporting burden, pendent external auditors to provide assurance on the quality and
reduce the risk of errors that might occur while accuracy of the data.
compiling data, and ensure that all facilities are
collecting information on an approved, consistent basis.
G
Ideally, corporations will integrate GHG reporting with For internal reporting up to the corporate level, it is
their existing reporting tools and processes, and take recommended that standardized reporting formats
U
advantage of any relevant data already collected and be used to ensure that data received from different
reported by facilities to division or corporate offices, business units and facilities is comparable, and that
regulators or other stakeholders. internal reporting rules are observed (see BP case
study). Standardized formats can significantly reduce
I
The tools and processes chosen to report data will
the risk of errors.
depend upon the information and communication infra-
D
structure already in place (i.e., how easy is it to include

new data categories in corporate databases). It will also
depend upon the amount of detail that corporate head-
A
quarters wishes to be reported from facilities. Data

collection and management tools could include:
N
• Secure databases available over the company intranet

or internet, for direct data entry by facilities
C
• Spreadsheet templates filled out and e-mailed to a corpo-

rate or division office, where data is processed further
E
• Paper reporting forms faxed to a corporate or division

office where data is re-entered in a corporate data-
base. However, this method may increase the
likelihood of errors if there are not sufficient checks in
place to ensure the accurate transfer of the data.
Approaches for rolling up

E
DECENTRALIZED APPROACH:
GHG emissions data to corporate level I N D I V I D U A L FA C I L I T I E S C A L C U L AT E G H G E M I S S I O N S D ATA
There are two basic approaches for gathering data on GHG Asking facilities to calculate GHG emissions themselves
C
emissions from a corporation’s facilities (Figure 10): will help to increase their awareness and understanding
of the issue. However, it may also lead to resistance,
• Centralized: individual facilities report activity/fuel
increased training needs, an increase in calculation
N
use data (such as quantity of fuel used) to the corpo-

errors, and a greater need for auditing of calculations.
rate level, where GHG emissions are calculated.
Requesting that facilities calculate GHG emissions
• Decentralized: individual facilities collect activity/fuel themselves may be the preferred option if:
A
use data, directly calculate their GHG emissions

• GHG emission calculations require detailed knowledge
using approved methods, and report this data to the
of the kind of equipment being used at facilities;
D
corporate level.
• GHG emission calculation methods vary across a
FIGURE 10. Approaches to gathering data number of facilities;
I
SITE LEVEL C O R P O R AT E L E V E L
• Process emissions (in contrast to emissions from
CENTRALIZED
Sites report activity data burning fossil fuels) make up an important share of
➡
U
Activity data (GHG emissions calculated at

corporate level: activity data x total GHG emissions;
emissions factor = GHG emissions)
• Resources are available to train facility staff to
G
DECENTRALIZED
Activity data x conduct these calculations and to audit them;

➡
emission factor Sites report GHG emissions
= • A user-friendly tool is available to simplify the calcu-
GHG emissions lation and reporting task for facility-level staff; or
The difference between these two approaches is in where • Local regulations require reporting of GHG emissions
the emissions calculations occur (i.e., where activity data at a facility level.
is multiplied by the appropriate emission factors) and in
The choice of collection approach depends on the needs
what type of quality management procedures must be put
and characteristics of the reporting company. For
in place at each level of the corporation. Facility-level
example, United Technologies Corporation uses the
staff is generally responsible for initial data collection
centralized approach, leaving the choice of emission
under both approaches.
factors and calculations to corporate staff, while BP uses
Under both approaches, staff at corporate and lower the decentralized approach and follows up with audits to
levels of consolidation should take care to identify and ensure calculations are correct, documented, and follow
exclude any scope 2 or 3 emissions that are also approved methods. To maximize accuracy and minimize
accounted for as scope 1 emissions by other facilities, reporting burdens, some companies use a combination of
business units, or companies included in the emissions the two approaches. Complex facilities with process
inventory consolidation. emissions calculate their emissions at the facility level,
while facilities with uniform emissions from standard
sources only report fuel use, electricity consumption, and
CENTRALIZED APPROACH: travel activity. The corporate database or reporting tool
I N D I V I D U A L FA C I L I T I E S R E P O R T A C T I V I T Y / F U E L U S E D ATA then calculates total GHG emissions for each of these
This approach may be particularly suitable for office- standard activities.
based organizations. Requesting that facilities report
The two approaches are not mutually exclusive and
their activity/fuel use data may be the preferred option if:
should produce the same result. Thus companies
• The staff at the corporate or division level can calcu- desiring a consistency check on facility-level calcula-
late emissions data in a straightforward manner on tions can follow both approaches and compare the
the basis of activity/fuel use data; and results. Even when facilities calculate their own GHG
emissions, corporate staff may still wish to gather
• Emissions calculations are standard across a number
activity/fuel use data to double-check calculations and
of facilities.
explore opportunities for emissions reductions. These
46 CHAPTER 6
data should be available and transparent to staff at all

corporate levels. Corporate staff should also verify that
facility-reported data are based on well defined, consis-
tent, and approved inventory boundaries, reporting
periods, calculation methodologies, etc.
Common guidance on reporting to corporate level

Reports from facility level to corporate or division
offices should include all relevant information as speci-
fied in chapter 9. Some reporting categories are
common to both the centralized and decentralized
approaches and should be reported by facilities to their
corporate offices. These include:
• A brief description of the emission sources
• A list and justification of specific exclusion or inclu-

sion of sources
• Comparative information from previous years
• The reporting period covered
• Any trends evident in the data

REPORTING FOR THE DECENTRALIZED APPROACH
• Progress towards any business targets In addition to the GHG emissions data and aforemen-
tioned common categories of reporting data, individual
• A discussion of uncertainties in activity/fuel use or
facilities following the decentralized approach by
emissions data reported, their likely cause, and recom-
reporting calculated GHG emissions to the corporate
mendations for how data can be improved
G
level should also report the following:
• A description of events and changes that have an impact
• A description of GHG calculation methodologies and
on reported data (acquisitions, divestitures, closures,
U
any changes made to those methodologies relative to
technology upgrades, changes of reporting boundaries
previous reporting periods
or calculation methodologies applied, etc.).
• Ratio indicators (see chapter 9) I
• Details on any data references used for the calculations,
REPORTING FOR THE CENTRALIZED APPROACH
in particular information on emission factors used.
D
In addition to the activity/fuel use data and aforemen-

tioned common categories of reporting data, facilities Clear records of calculations undertaken to derive
following the centralized approach by reporting emissions data should be kept for any future internal or
A
activity/fuel use data to the corporate level should also external verification.
report the following:
N
• Activity data for freight and passenger transport

activities (e.g., freight transport in tonne-kilometers)
C
• Activity data for process emissions (e.g., tonnes of

fertilizer produced, tonnes of waste in landfills)
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• Clear records of any calculations undertaken to derive

activity/fuel use data
• Local emission factors necessary to translate fuel use

and/or electricity consumption into CO2 emissions.
7 Managing Inventory Quality
E
C
N
A
D
I
U
G
C ompanies have different reasons for managing the quality of their
GHG emissions inventory, ranging from identifying opportunities for
improvement to stakeholder demand to preparation for regulation. The GHG
Protocol Corporate Standard recognizes that these reasons are a function of a
company’s goals and its expectations for the future. A company’s goals for and
vision of the evolution of the GHG emissions issue should guide the design of
its corporate inventory, the implementation of a quality management system,
and the treatment of uncertainty within its inventory.
G U I D A N C E
48
CHAPTER 7 Managing Inventory Quality 49
A corporate GHG inventory program includes all institu- Defining inventory quality
tional, managerial, and technical arrangements made for The GHG Protocol Corporate Standard outlines five
the collection of data, preparation of the inventory, and accounting principles that set an implicit standard for
implementation of steps to manage the quality of the the faithful representation of a company’s GHG emission
inventory.1 The guidance in this chapter is intended to through its technical, accounting, and reporting efforts
help companies develop and implement a quality (see chapter 1). Putting these principles into practice
management system for their inventory. will result in a credible and unbiased treatment and pres-
entation of issues and data. For a company to follow
Given an uncertain future, high quality information will
these principles, quality management needs to be an
have greater value and more uses, while low quality
integral part of its corporate inventory program. The
information may have little or no value or use and may
goal of a quality management system is to ensure that
even incur penalties. For example, a company may
these principles are put into practice.
currently be focusing on a voluntary GHG program but
also want its inventory data to meet the anticipated
requirements of a future when emissions may have
monetary value. A quality management system
is essential to ensuring that an inventory continues
KPMG: The value of integrating
to meet the principles of the GHG Protocol Corporate
GHG management with existing systems
Standard and anticipates the requirements of future
GHG emissions programs. KPMG, a global services company, found that a key factor in the
derivation of reliable, verifiable GHG data is the integration of
Even if a company is not anticipating a future regulatory
GHG data management and reporting mechanisms with compa-
mechanism, internal and external stakeholders will
nies’ core operational management and assurance processes.
demand high quality inventory information. Therefore,
This is because:
the implementation of some type of quality management
system is important. However, the GHG Protocol Corporate • It is more efficient to widen the scope of existing embedded
Standard recognizes that companies do not have unlim- management and assurance processes than to develop a separate
ited resources, and, unlike financial accounting, function responsible for generating and reporting GHG information.
G
corporate GHG inventories involve a level of scientific
• As GHG information becomes increasingly monetized, it will
and engineering complexity. Therefore, companies should
attract the same attention as other key performance indicators
develop their inventory program and quality manage-
U
of businesses. Therefore, management will need to ensure
ment system as a cumulative effort in keeping with their
adequate procedures are in place to report reliable data. These
resources, the broader evolution of policy, and their own
procedures can most effectively be implemented by functions
corporate vision. I
within the organization that oversee corporate governance,
A quality management system provides a systematic internal audit, IT, and company reporting.
process for preventing and correcting errors, and
D
Another factor that is often not given sufficient emphasis is

identifies areas where investments will likely lead to
training of personnel and communication of GHG objectives. Data
the greatest improvement in overall inventory quality.
generation and reporting systems are only as reliable as the
A
However, the primary objective of quality management

people who operate them. Many well-designed systems fail
is ensuring the credibility of a company’s GHG inven-
because the precise reporting needs of the company are not
tory information. The first step towards achieving this
N
adequately explained to the people who have to interpret a

objective is defining inventory quality.
reporting standard and calculation tools. Given the complexity of
accounting boundaries and an element of subjectivity that must
C
accompany source inclusion and equity share, inconsistent inter-

pretation of reporting requirements is a real risk. It is also
important that those responsible for supplying input data are
E
aware of its use. The only way to minimize this risk is through
clear communication, adequate training and knowledge sharing.
Managing Inventory Quality
An inventory program framework

E
management, these processes and systems may be inte-

A practical framework is needed to help companies grated, where appropriate, with other corporate
conceptualize and design a quality management system processes related to quality.
C
and to help plan for future improvements. This frame-

D O C U M E N T AT I O N : This is the record of methods, data,
work focuses on the following institutional, managerial,
processes, systems, assumptions, and estimates used to
and technical components of an inventory (Figure 11):
N
prepare an inventory. It includes everything employees

M E T H O D S : These are the technical aspects of inventory need to prepare and improve a company’s inventory.
preparation. Companies should select or develop method- Since estimating GHG emissions is inherently technical
A
ologies for estimating emissions that accurately represent (involving engineering and science), high quality, trans-
the characteristics of their source categories. The GHG parent documentation is particularly important to
Protocol provides many default methods and calculation credibility. If information is not credible, or fails to be
D
tools to help with this effort. The design of an inventory effectively communicated to either internal or external
program and quality management system should provide stakeholders, it will not have value.
I
for the selection, application, and updating of inventory

Companies should seek to ensure the quality of these
methodologies as new research becomes available,
components at every level of their inventory design.
changes are made to business operations, or the impor-
U
tance of inventory reporting is elevated.
D AT A : This is the basic information on activity levels, Implementing an

G
emission factors, processes, and operations. Although inventory quality management system
methodologies need to be appropriately rigorous and A quality management system for a company’s inventory
detailed, data quality is more important. No method- program should address all four of the inventory compo-
ology can compensate for poor quality input data. The nents described above. To implement the system, a
design of a corporate inventory program should facilitate company should take the following steps:
the collection of high quality inventory data and the
1. Establish an inventory quality team. This team should
maintenance and improvement of collection procedures.
be responsible for implementing a quality manage-
I N V E N T O R Y P R O C E S S E S A N D S Y S T E M S : These are the ment system, and continually improving inventory
institutional, managerial, and technical procedures for quality. The team or manager should coordinate
preparing GHG inventories. They include the team and interactions between relevant business units,
processes charged with the goal of producing a high facilities and external entities such as government
quality inventory. To streamline GHG inventory quality agency programs, research institutions, verifiers, or
consulting firms.
FIGURE 11: Inventory quality management system
INVENTORY QUALITY MANAGEMENT SYSTEM
1. Establish Inventory Quality Team

➡
D AT A
7. Report, Document, and Archive 2. Develop Quality Management Plan
METHODS
➡
6. Institutionalize Formal Feedback Loops SYSTEMS 3. Perform Generic Quality Checks
D O C U M E N T AT I O N
➡
5. Review Final Inventory Estimates and Reports

➡ 4. Perform Source-Specific Quality Checks
F E E D B A C K
50 CHAPTER 7
2. Develop a quality management plan. This plan ISO procedures. To ensure accuracy, the bulk of the
describes the steps a company is taking to implement plan should focus on practical measures for imple-
its quality management system, which should be menting the quality management system, as
incorporated into the design of its inventory program described in steps three and four.
from the beginning, although further rigor and
3. Perform generic quality checks. These apply to data
coverage of certain procedures may be phased in
and processes across the entire inventory, focusing on
over multiple years. The plan should include proce-
appropriately rigorous quality checks on data handling,
dures for all organizational levels and inventory
documentation, and emission calculation activities
development processes—from initial data collection
(e.g., ensuring that correct unit conversions are used).
to final reporting of accounts. For efficiency and
Guidance on quality checking procedures is provided
comprehensiveness, companies should integrate (and
in the section on implementation below (see table 4).
extend as appropriate) existing quality systems to
cover GHG management and reporting, such as any
TABLE 4. Generic quality management measures
D AT A G AT H E R I N G , I N P U T, A N D H A N D L I N G A C T I V I T I E S
• Check a sample of input data for transcription errors
• Identify spreadsheet modifications that could provide additional controls or checks on quality
• Ensure that adequate version control procedures for electronic files have been implemented
• Others
DATA DOCUMENTATION
• Confirm that bibliographical data references are included in spreadsheets for all primary data
• Check that copies of cited references have been archived
G
• Check that assumptions and criteria for selection of boundaries, base years, methods, activity data, emission factors, and other
parameters are documented
U
• Check that changes in data or methodology are documented
• Others I
CALCULATING EMISSIONS AND CHECKING CALCULATIONS
D
• Check whether emission units, parameters, and conversion factors are appropriately labeled
• Check if units are properly labeled and correctly carried through from beginning to end of calculations
A
• Check that conversion factors are correct
• Check the data processing steps (e.g., equations) in the spreadsheets

N
• Check that spreadsheet input data and calculated data are clearly differentiated
• Check a representative sample of calculations, by hand or electronically

C
• Check some calculations with abbreviated calculations (i.e., back of the envelope calculations)
• Check the aggregation of data across source categories, business units, etc.
E
• Check consistency of time series inputs and calculations
• Others
E
4. Perform source-category-specific quality checks. This Practical measures for implementation

includes more rigorous investigations into the appro- Although principles and broad program design guidelines
C
priate application of boundaries, recalculation are important, any guidance on quality management
procedures, and adherence to accounting and would be incomplete without a discussion of practical
reporting principles for specific source categories, as inventory quality measures. A company should imple-
N
well as the quality of the data input used (e.g., ment these measures at multiple levels within the company,
whether electricity bills or meter readings are the best from the point of primary data collection to the final
source of consumption data) and a qualitative descrip- corporate inventory approval process. It is important to
A
tion of the major causes of uncertainty in the data. implement these measures at points in the inventory
The information from these investigations can also be program where errors are mostly likely to occur, such as
D
used to support a quantitative assessment of uncer- the initial data collection phase and during calculation and
tainty. Guidance on these investigations is provided in data aggregation. While corporate level inventory quality
the section on implementation below. may initially be emphasized, it is important to ensure
I
quality measures are implemented at all levels of disaggre-

5. Review final inventory estimates and reports. After
gation (e.g., facility, process, geographical, according to a
the inventory is completed, an internal technical
U
particular scope, etc) to be better prepared for GHG

review should focus on its engineering, scientific,
markets or regulatory rules in the future.
and other technical aspects. Subsequently, an
G
internal managerial review should focus on securing Companies also need to ensure the quality of their histor-
official corporate approval of and support for the ical emission estimates and trend data. They can achieve
inventory. A third type of review involving experts this by employing inventory quality measures to mini-
external to the company’s inventory program is mize biases that can arise from changes in the
addressed in chapter 10. characteristics of the data or methods used to calculate
historical emission estimates, and by following the stan-
6. Institutionalize formal feedback loops. The results of
dards and guidance of chapter 5.
the reviews in step five, as well as the results of every
other component of a company’s quality management The third step of a quality management system, as
system, should be fed back via formal feedback proce- described above, is to implement generic quality
dures to the person or team identified in step one. checking measures. These measures apply to all source
Errors should be corrected and improvements imple- categories and all levels of inventory preparation.
mented based on this feedback. Table 4 provides a sample list of such measures.
7. Establish reporting, documentation, and archiving The fourth step of a quality management system is
procedures. The system should contain record keeping source category-specific data quality investigations. The
procedures that specify what information will be docu- information gathered from these investigations can also
mented for internal purposes, how that information be used for the quantitative and qualitative assessment
should be archived, and what information is to be of data uncertainty (see section on uncertainty).
reported for external stakeholders. Like internal and Addressed below are the types of source-specific quality
external reviews, these record keeping procedures measures that can be employed for emission factors,
include formal feedback mechanisms. activity data, and emission estimates.
A company’s quality management system and overall

inventory program should be treated as evolving, in
keeping with a company’s reasons for preparing an
inventory. The plan should address the company’s
strategy for a multi-year implementation (i.e., recognize
that inventories are a long-term effort), including steps
to ensure that all quality control findings from previous
years are adequately addressed.
52 CHAPTER 7
E M I S S I O N FA C T O R S A N D O T H E R P A R A M E T E R S
Interface: Integration of emissions
For a particular source category, emissions calculations
and business data systems
will generally rely on emission factors and other parame-
ters (e.g., utilization factors, oxidation rates, methane Interface, Inc., is the world’s largest manufacturer of carpet tiles
conversion factors).2 These factors and parameters may and upholstery fabrics for commercial interiors. The company has
be published or default factors, based on company- established an environmental data system that mirrors its corpo-
specific data, site-specific data, or direct emission or rate financial data reporting. The Interface EcoMetrics system is
other measurements. For fuel consumption, published designed to provide activity and material flow data from business
emission factors based on fuel energy content are gener- units in a number of countries (the United States, Canada,
ally more accurate than those based on mass or volume, Australia, the United Kingdom, Thailand and throughout Europe)
except when mass or volume based factors have been and provides metrics for measuring progress on environmental
measured at the company- or site-specific level. Quality issues such as GHG emissions. Using company-wide accounting
investigations need to assess the representativeness and guidelines and standards, energy and material input data are
applicability of emission factors and other parameters to reported to a central database each quarter and made available
the specific characteristics of a company. Differences to sustainability personnel. These data are the foundation of
between measured and default values need to be qualita- Interface’s annual inventory and enable data comparison over
tively explained and justified based upon the company’s time in the pursuit of improved quality.
operational characteristics.
Basing emissions data systems on financial reporting helps
Interface improve its data quality. Just as financial data need to
A C T I V I T Y D AT A be documented and defensible, Interface’s emissions data are
The collection of high quality activity data will often be held to standards that promote an increasingly transparent,
the most significant limitation for corporate GHG inven- accurate, and high-quality inventory. Integrating its financial and
tories. Therefore, establishing robust data collection emissions data systems has made Interface’s GHG accounting
procedures needs to be a priority in the design of any and reporting more useful as it strives to be a “completely
company’s inventory program. The following are useful sustainable company” by 2020.
G
measures for ensuring the quality of activity data:
• Develop data collection procedures that allow the same

• Investigate activity data that is generated for purposes
U
data to be efficiently collected in future years.
other than preparing a GHG inventory. In doing so,
• Convert fuel consumption data to energy units before companies will need to check the applicability of this
applying carbon content emission factors, which may be data to inventory purposes, including completeness, I
better correlated to a fuel’s energy content than its mass. consistency with the source category definition, and
consistency with the emission factors used. For
• Compare current year data with historical trends. If
D
example, data from different facilities may be exam-

data do not exhibit relatively consistent changes from
ined for inconsistent measurement techniques,
year to year then the causes for these patterns should
operating conditions, or technologies. Quality control
A
be investigated (e.g., changes of over 10 percent from

measures (e.g., ISO) may have already been conducted
year to year may warrant further investigation).
during the data’s original preparation. These measures
N
• Compare activity data from multiple reference sources can be integrated with the company’s inventory quality
(e.g., government survey data or data compiled by management system.
trade associations) with corporate data when possible.
• Check that base year recalculation procedures have
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Such checks can ensure that consistent data is being

been followed consistently and correctly (see chapter 5).
reported to all parties. Data can also be compared
among facilities within a company. • Check that operational and organizational boundary
E
decisions have been applied correctly and consistently

to the collection of activity data (see chapters 3 and 4).
Inventory quality and inventory uncertainty

E
• Investigate whether biases or other characteristics that

could affect data quality have been previously identi- Preparing a GHG inventory is inherently both an
fied (e.g., by communicating with experts at a accounting and a scientific exercise. Most applications
C
particular facility or elsewhere). For example, a bias for company-level emissions and removal estimates
could be the unintentional exclusion of operations at require that these data be reported in a format similar to
smaller facilities or data that do not correspond financial accounting data. In financial accounting, it is
N
exactly with the company’s organizational boundaries. standard practice to report individual point estimates
(i.e., single value versus a range of possible values). In
• Extend quality management measures to cover any
contrast, the standard practice for most scientific studies
A
additional data (sales, production, etc.) used to esti-

of GHG and other emissions is to report quantitative
mate emission intensities or other ratios.
data with estimated error bounds (i.e., uncertainty). Just
D
like financial figures in a profit and loss or bank account

statement, point estimates in a corporate emission inven-
E M I S S I O N E S T I M AT E S
tory have obvious uses. However, how would or should
I
Estimated emissions for a source category can be

the addition of some quantitative measure of uncertainty
compared with historical data or other estimates to
to an emission inventory be used?
ensure they fall within a reasonable range. Potentially
U
unreasonable estimates provide cause for checking In an ideal situation, in which a company had perfect
emission factors or activity data and determining quantitative information on the uncertainty of its emis-
G
whether changes in methodology, market forces, or sion estimates at all levels, the primary use of this
other events are sufficient reasons for the change. In information would almost certainly be comparative.
situations where actual emission monitoring occurs Such comparisons might be made across companies,
(e.g., power plant CO2 emissions), the data from moni- across business units, across source categories, or
tors can be compared with calculated emissions using through time. In this situation, inventory estimates could
activity data and emission factors. even be rated or discounted based on their quality
before they were used, with uncertainty being the objec-
If any of the above emission factor, activity data, emis-
tive quantitative metric for quality. Unfortunately, such
sion estimate, or other parameter checks indicate a
objective uncertainty estimates rarely exist.
problem, more detailed investigations into the accuracy
of the data or appropriateness of the methods may be
required. These more detailed investigations can also
TYPES OF UNCERTAINTIES
be utilized to better assess the quality of data. One
Uncertainties associated with GHG inventories can
potential measure of data quality is a quantitative and
be broadly categorized into scientific uncertainty and
qualitative assessment of their uncertainty.
estimation uncertainty. Scientific uncertainty arises
when the science of the actual emission and/or removal
Vauxhall Motors: process is not completely understood. For example,
The importance of accuracy checks many direct and indirect factors associated with global
warming potential (GWP) values that are used to
The experience of the U.K. automotive manufacturer Vauxhal combine emission estimates for various GHGs involve
Motors illustrates the importance of attention to detail in significant scientific uncertainty. Analyzing and quanti-
setting up GHG information collection systems. The company fying such scientific uncertainty is extremely problematic
wished to calculate GHG emissions from staff air travel. and is likely to be beyond the capacity of most company
However, when determining the impact of flight travel, it is inventory programs.
important to make sure that the round trip distance is used
when calculating emissions. Fortunately, Vauxhall’s review of
its assumptions and calculation methodologies revealed this
fact and avoided reporting emissions that were 50 percent
lower than the actual value.
54 CHAPTER 7
Estimation uncertainty arises any time GHG emissions

are quantified. Therefore all emissions or removal esti-
mates are associated with estimation uncertainty.
Estimation uncertainty can be further classified into two
types: model uncertainty and parameter uncertainty.3
Model uncertainty refers to the uncertainty associated

with the mathematical equations (i.e., models) used to
characterize the relationships between various parame-
ters and emission processes. For example, model
uncertainty may arise either due to the use of an incor-
rect mathematical model or inappropriate input into
the model. As with scientific uncertainty, estimating
model uncertainty is likely to be beyond most
company’s inventory efforts; however, some companies
may wish to utilize their unique scientific and engi-
neering expertise to evaluate the uncertainty in their
emission estimation models.
Parameter uncertainty refers to the uncertainty associ-

ated with quantifying the parameters used as inputs
(e.g., activity data and emission factors) into estima-
tion models. Parameter uncertainties can be evaluated
through statistical analysis, measurement equipment
precision determinations, and expert judgment.
Quantifying parameter uncertainties and then esti-
mating source category uncertainties based on these
parameter uncertainties will be the primary focus of
G
companies that choose to investigate the uncertainty in
their emission inventories.
U
L I M I T AT I O N S O F U N C E R T A I N T Y E S T I M AT E S
Given that only parameter uncertainties are within the I
feasible scope of most companies, uncertainty estimates
for corporate GHG inventories will, of necessity, be
D
imperfect. Complete and robust sample data will not

always be available to assess the statistical uncertainty4
in every parameter. For most parameters (e.g., liters of uncertainty estimates, companies will usually have
A
gasoline purchased or tonnes of limestone consumed), to rely on expert judgment.6 The problem with expert
only a single data point may be available. In some judgment, though, is that it is difficult to obtain in a
N
cases, companies can utilize instrument precision or comparable (i.e., unbiased) and consistent manner
calibration information to inform their assessment of across parameters, source categories, or companies.
statistical uncertainty. However, to quantify some of the
C
systematic uncertainties5 associated with parameters

and to supplement statistical
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E
For these reasons, almost all comprehensive estimates of Given these limitations, the role of qualitative and quan-
uncertainty for GHG inventories will be not only imper- titative uncertainty assessments in developing GHG
fect but also have a subjective component and, despite inventories include:
C
the most thorough efforts, are themselves considered

• Promoting a broader learning and quality
highly uncertain. In most cases, uncertainty estimates
feedback process.
cannot be interpreted as an objective measure of quality.
N
Nor can they be used to compare the quality of emission • Supporting efforts to qualitatively understand and
estimates between source categories or companies. document the causes of uncertainty and help identify
ways of improving inventory quality. For example,
A
Exceptions to this include the following cases in which it

collecting the information needed to determine the
is assumed that either statistical or instrument precision
statistical properties of activity data and emission
data are available to objectively estimate each para-
D
factors forces one to ask hard questions and to care-

meter’s statistical uncertainty (i.e., expert judgment is
fully and systematically investigate data quality.
not needed):
I
• Establishing lines of communication and feedback

• When two operationally similar facilities use identical
with data suppliers to identify specific opportunities
emission estimation methodologies, the differences in
to improve quality of the data and methods used.
U
scientific or model uncertainties can, for the most

part, be ignored. Then quantified estimates of statis- • Providing valuable information to reviewers, verifiers,
tical uncertainty can be treated as being comparable and managers for setting priorities for investments
G
between facilities. This type of comparability is what is into improving data sources and methodologies.
aimed for in some trading programs that prescribe
The GHG Protocol Corporate Standard has developed a
specific monitoring, estimation, and measurement
supplementary guidance document on uncertainty assess-
requirements. However, even in this situation, the
ments (“Guidance on uncertainty assessment in GHG
degree of comparability depends on the flexibility that
inventories and calculating statistical parameter uncer-
participants are given for estimating emissions, the
tainty”) along with an uncertainty calculation tool, both
homogeneity across facilities, as well as the level of
of which are available on the GHG Protocol website. The
enforcement and review of the methodologies used.
guidance document describes how to use the calculation
• Similarly, when a single facility uses the same estima- tool in aggregating uncertainties. It also discusses in
tion methodology each year, the systematic parameter more depth different types of uncertainties, the limita-
uncertainties — in addition to scientific and model tions of quantitative uncertainty assessment, and how
uncertainties — in a source’s emission estimates for uncertainty estimates should be properly interpreted.
two years are, for the most part, identical.7 Because
Additional guidance and information on assessing
the systematic parameter uncertainties then cancel
uncertainty— including optional approaches to devel-
out, the uncertainty in an emission trend (e.g., the
oping quantitative uncertainty estimates and eliciting
difference between the estimates for two years) is
judgments from experts — can also be found in EPA's
generally less than the uncertainty in total emissions
Emissions Inventory Improvement Program, Volume VI:
for a single year. In such a situation, quantified uncer-
Quality Assurance/Quality Control (1999) and in
tainty estimates can be treated as being comparable
chapter 6 of the IPCC’s Good Practice Guidance (2000a).
over time and used to track relative changes in the
quality of a facility’s emission estimates for that
source category. Such estimates of uncertainty in
emission trends can also be used as a guide to setting
a facility’s emissions reduction target. Trend uncer-
tainty estimates are likely to be less useful for setting
broader (e.g., company-wide) targets (see chapter 11)
because of the general problems with comparability
between uncertainty estimates across gases, sources,
and facilities.
56 CHAPTER 7
G
NOTES
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1
Although the term “emissions inventory” is used throughout this chapter, 5
Systematic parameter uncertainty occurs if data are systematically
the guidance equally applies to estimates of removals due to sink cate- biased. In other words, the average of the measured or estimated value is
gories (e.g., forest carbon sequestration). always less or greater than the true value. Biases arise, for example,
because emission factors are constructed from non-representative
2
Some emission estimates may be derived using mass or energy samples, all relevant source activities or categories have not been identi-
I
balances, engineering calculations, or computer simulation models. In fied, or incorrect or incomplete estimation methods or faulty measurement
addition to investigating the input data to these models, companies equipment have been used. Because the true value is unknown, such
should also consider whether the internal assumptions (including
D
systematic biases cannot be detected through repeated experiments and,

assumed parameters in the model) are appropriate to the nature of the therefore, cannot be quantified through statistical analysis. However, it is
company’s operations. possible to identify biases and, sometimes, to quantify them through data
quality investigations and expert judgments.
A
3
Emissions estimated from direct emissions monitoring will generally only
involve parameter uncertainty (e.g., equipment measurement error). 6
The role of expert judgment can be twofold: First, it can provide the data
4
Statistical uncertainty results from natural variations (e.g., random necessary to estimate the parameter. Second, it can help (in combination
with data quality investigations) identify, explain, and quantify both
N
human errors in the measurement process and fluctuations in measure-

ment equipment). Statistical uncertainty can be detected through statistical and systematic uncertainties.
repeated experiments or sampling of data. 7
It should be recognized, however, that biases may not be constant from
year to year but instead may exhibit a pattern over time (e.g., may be
C
growing or falling). For example, a company that continues to disinvest in

collecting high quality data may create a situation in which the biases in
its data get worse each year. These types of data quality issues are
E
extremely problematic because of the effect they can have on calculated

emission trends. In such cases, systematic parameter uncertainties
cannot be ignored.
8 Accounting for GHG Reductions
E
C
N
A
D
I
U
G
A s voluntary reporting, external GHG programs, and emission trading
systems evolve, it is becoming more and more essential for compa-
nies to understand the implications of accounting for GHG emissions changes
over time on the one hand, and, on the other hand, accounting for offsets or
credits that result from GHG reduction projects. This chapter elaborates on the
different issues associated with the term “GHG reductions.”
G U I D A N C E
58
CHAPTER 8 Accounting for GHG Reductions 59
The GHG Protocol Corporate Standard focuses on rate-wide scale, this information can also be used when
accounting and reporting for GHG emissions at the setting and reporting progress towards a corporate-wide
company or organizational level. Reductions in corpo- GHG target (see chapter 11).
rate emissions are calculated by comparing changes
In order to track and explain changes in GHG emissions
in the company’s actual emissions inventory over time
over time, companies may find it useful to provide
relative to a base year. Focusing on overall corporate
information on the nature of these changes. For
or organizational level emissions has the advantage of
example, BP asks each of its reporting units to provide
helping companies manage their aggregate GHG risks
such information in an accounting movement format
and opportunities more effectively. It also helps focus
using the following categories (BP 2000):
resources on activities that result in the most cost-
effective GHG reductions. • Acquisitions and divestments
In contrast to corporate accounting, the forthcoming • Closure

GHG Protocol Project Quantification Standard focuses on
• Real reductions (e.g., efficiency improvements,
the quantification of GHG reductions from GHG miti-
material or fuel substitution)
gation projects that will be used as offsets. Offsets are
discrete GHG reductions used to compensate for (i.e., • Change in production level
offset) GHG emissions elsewhere, for example to meet
• Changes in estimation methodology
a voluntary or mandatory GHG target or cap. Offsets
are calculated relative to a baseline that represents a • Other
hypothetical scenario for what emissions would have
This type of information can be summarized at the
been in the absence of the project.
corporate level to provide an overview of the company’s
performance over time.
Corporate GHG reductions

at facility or country level
Reductions in indirect emissions
From the perspective of the earth's atmosphere, it does not
Reductions in indirect emissions (changes in scope 2 or 3
matter where GHG emissions or reductions occur. From
G
emissions over time) may not always capture the actual
the perspective of national and international policymakers
emissions reduction accurately. This is because there is
addressing global warming, the location where GHG
not always a direct cause-effect relationship between the
U
reductions are achieved is relevant, since policies usually
activity of the reporting company and the resulting GHG
focus on achieving reductions within specific countries
emissions. For example, a reduction in air travel would
or regions, as spelled out, for example, in the Kyoto
reduce a company’s scope 3 emissions. This reduction is I
Protocol. Thus companies with global operations will
usually quantified based on an average emission factor
have to respond to an array of state, national, or regional
of fuel use per passenger. However, how this reduction
regulations and requirements that address GHGs from
D
actually translates into a change in GHG emissions to

operations or facilities within a specific geographic area.
the atmosphere would depend on a number of factors,
The GHG Protocol Corporate Standard calculates GHG including whether another person takes the “empty seat”
A
emissions using a bottom-up approach. This involves or whether this unused seat contributes to reduced air
calculating emissions at the level of an individual source traffic over the longer term. Similarly, reductions
N
or facility and then rolling this up to the corporate level. in scope 2 emissions calculated with an average grid
Thus a company’s overall emissions may decrease, even emissions factor may over- or underestimate the actual
if increases occur at specific sources, facilities, or opera- reduction depending on the nature of the grid.
C
tions and vice-versa. This bottom-up approach enables

Generally, as long as the accounting of indirect emissions
companies to report GHG emissions information at
over time recognizes activities that in aggregate change
different scales, e.g., by individual sources or facilities,
E
global emissions, any such concerns over accuracy

or by a collection of facilities within a given country.
should not inhibit companies from reporting their indi-
Companies can meet an array of government require-
rect emissions. In cases where accuracy is more
ments or voluntary commitments by comparing actual
important, it may be appropriate to undertake a more
emissions over time for the relevant scale. On a corpo-
Accounting for GHG Reductions
E
detailed assessment of the actual reduction using a • C O N S I D E R AT I O N O F R E V E R S I B I L I T Y. Some projects

project quantification methodology. achieve reductions in atmospheric carbon dioxide
levels by capturing, removing and/or storing carbon
C
or GHGs in biological or non-biological sinks (e.g.,

Project based reductions and offsets/credits forestry, land use management, underground reser-
Project reductions that are to be used as offsets should voirs). These reductions may be temporary in that
N
be quantified using a project quantification method, such the removed carbon dioxide may be returned to the
as the forthcoming GHG Protocol Project Quantification atmosphere at some point in the future through
Standard, that addresses the following accounting issues: intentional activities or accidental occurrences —
A
such as harvesting of forestland or forest fires, etc.2

• SELECTION OF A BASELINE SCENARIO AND EMISSION.
The risk of reversibility should be assessed, together
The baseline scenario represents what would have
D
with any mitigation or compensation measures

happened in the absence of the project. Baseline
included in the project design.
emissions are the hypothetical emissions associated
I
with this scenario. The selection of a baseline • AV O I D A N C E O F D O U B L E C O U N T I N G . To avoid double

scenario always involves uncertainty because it counting, the reductions giving rise to the offset must
represents a hypothetical scenario for what would occur at sources or sinks not included in the target or
U
have happened without the project. The project cap for which the offset is used. Also, if the reductions
reduction is calculated as the difference between occur at sources or sinks owned or controlled by
G
the baseline and project emissions. This differs from someone other than the parties to the project (i.e.,
the way corporate or organizational reductions are they are indirect), the ownership of the reduction
measured in this document, i.e., in relation to an should be clarified to avoid double counting.
actual historical base year.
Offsets may be converted into credits when used to meet
• D E M O N S T R AT I O N O F A D D I T I O N A L I T Y. This relates to an externally imposed target. Credits are convertible and
whether the project has resulted in emission reductions transferable instruments usually bestowed by an external
or removals in addition to what would have happened in GHG program. They are typically generated from an
the absence of the project. If the project reduction is activity such as an emissions reduction project and then
used as an offset, the quantification procedure should used to meet a target in an otherwise closed system, such
address additionality and demonstrate that the project as a group of facilities with an absolute emissions cap
itself is not the baseline and that project emissions are placed across them. Although a credit is usually based on
less than baseline emissions. Additionality ensures the the underlying reduction calculation, the conversion of an
integrity of the fixed cap or target for which the offset is offset into a credit is usually subject to strict rules, which
used. Each reduction unit from a project used as an may differ from program to program. For example, a
offset allows the organization or facility with a cap or Certified Emission Reduction (CER) is a credit issued by
target one additional unit of emissions. If the project the Kyoto Protocol Clean Development Mechanism. Once
were going to happen anyway (i.e., is non-additional), issued, this credit can be traded and ultimately used to
global emissions will be higher by the number of reduc- meet Kyoto Protocol targets. Experience from the “pre-
tion units issued to the project. compliance” market in GHG credits highlights the
importance of delineating project reductions that are to
• I D E N T I F I C AT I O N A N D Q U A N T I F I C AT I O N O F R E L E VA N T
be used as offsets with a credible quantification method
S E C O N D A R Y E F F E C T S . These are GHG emissions
capable of providing verifiable data.
changes resulting from the project not captured by the
primary effect(s).1 Secondary effects are typically the
small, unintended GHG consequences of a project and
Reporting project based reductions
include leakage (changes in the availability or quan-
It is important for companies to report their physical
tity of a product or service that results in changes in
inventory emissions for their chosen inventory bound-
GHG emissions elsewhere) as well as changes in GHG
aries separately and independently of any GHG trades
emissions up- and downstream of the project. If rele-
they undertake. GHG trades3 should be reported in its
vant, secondary effects should be incorporated into
public GHG report under optional information—either
the calculation of the project reduction.
in relation to a target (see chapter 11) or corporate
60 CHAPTER 8
CHAPTER 8 Accounting for GHG Reductions 61
inventory (see chapter 9). Appropriate information Alcoa: Taking advantage

addressing the credibility of purchased or sold offsets or of renewable energy certificates
credits should be included.
Alcoa, a global manufacturer of aluminum, is implementing a
When companies implement internal projects that reduce
variety of strategies to reduce its GHG emissions. One approach
GHGs from their operations, the resulting reductions are
has been to purchase renewable energy certificates, or RECs, to
usually captured in their inventory’s boundaries. These
offset some of the company’s GHG emissions. RECs, which repre-
reductions need not be reported separately unless they are
sent the environmental benefits of renewable energy unbundled
sold, traded externally, or otherwise used as an offset or
from the actual flow of electrons, are an innovative method of
credit. However, some companies may be able to make
providing renewable energy to individual customers. RECs repre-
changes to their own operations that result in GHG
sent the unbundled environmental benefits, such as avoided CO2
emissions changes at sources not included in their own
emissions, generated by producing electricity from renewable
inventory boundary, or not captured by comparing
rather than fossil sources. RECs can be sold bundled with the
emissions changes over time. For example:
electricity (as green power) or separately to customers interested
• Substituting fossil fuel with waste-derived fuel that in supporting renewable energy.
might otherwise be used as landfill or incinerated
Alcoa found that RECs offer a variety of advantages, including
without energy recovery. Such substitution may have
direct access to the benefits of renewable energy for facilities that
no direct effect on (or may even increase) a
may have limited renewable energy procurement options. In
company’s own GHG emissions. However, it could
October 2003, Alcoa began purchasing RECs equivalent to 100%
result in emissions reductions elsewhere by another
of the electricity used annually at four corporate offices in Tennessee,
organization, e.g., through avoiding landfill gas and
Pennsylvania, and New York. The RECs Alcoa is purchasing effec-
fossil fuel use.
tively mean that the four corporate centers are now operating on
• Installing an on-site power generation plant (e.g., a electricity generated by projects that produce electricity from land-
combined heat and power, or CHP, plant) that fill gas, avoiding the emission of more than 6.3 million kilograms
provides surplus electricity to other companies may (13.9 million pounds) of carbon dioxide annually. Alcoa chose
increase a company’s direct emissions, while RECs in part because the supplier was able to provide RECs to all
displacing the consumption of grid electricity by the four facilities through one contract. This flexibility lowered the
G
companies supplied. Any resulting emissions reduc- administrative cost of purchasing renewable energy for multiple
tions at the plants where this electricity would have facilities that are served by different utilities.
U
otherwise been produced will not be captured in the
For more information on RECs, see the Green Power Market
inventory of the company installing the on-site plant.
Development Group’s Corporate Guide to Green Power Markets:
• Substituting purchased grid electricity with an on-site Installment #5 (WRI, 2003). I
power generation plant (e.g., CHP) may increase a
company’s direct GHG emissions, while reducing the
D
GHG emissions associated with the generation of grid These reductions may be separately quantified, for
electricity. Depending on the GHG intensity and the example using the GHG Protocol Project Quantification
supply structure of the electricity grid, this reduction Standard, and reported in a company’s public GHG
A
may be over- or underestimated when merely report under optional information in the same way as
comparing scope 2 emissions over time, if the latter GHG trades described above.
N
are quantified using an average grid emission factor.
NOTES
C
1
Primary effects are the specific GHG reducing elements or activities
(reducing GHG emissions, carbon storage, or enhancing GHG removals)
that the project is intended to achieve.
E
2
This problem with the temporary nature of GHG reductions is sometimes
referred to as the “permanence” issue.
3
The term “GHG trades” refers to all purchases or sales of allowances,
offsets, and credits.
9 Reporting GHG Emissions
D
R
A
D
N
A
T
S
A credible GHG emissions report presents relevant information that
is complete, consistent, accurate and transparent. While it takes
time to develop a rigorous and complete corporate inventory of GHG emissions,
knowledge will improve with experience in calculating and reporting data. It is
therefore recommended that a public GHG report:
• Be based on the best data available at the time of publication, while being
transparent about its limitations
• Communicate any material discrepancies identified in previous years
• Include the company’s gross emissions for its chosen inventory boundary
separate from and independent of any GHG trades it might engage in.
S T A N D A R D
G U I D A N C E
62
CHAPTER 9 Reporting GHG Emissions 63
Reported information shall be “relevant, complete, Optional information

consistent, transparent and accurate.” The GHG Protocol A public GHG emissions report should include, when
Corporate Standard requires reporting a minimum of applicable, the following additional information:
scope 1 and scope 2 emissions.
I N F O R M AT I O N O N E M I S S I O N S A N D P E R F O R M A N C E
Required information • Emissions data from relevant scope 3 emissions activi-
A public GHG emissions report that is in accordance ties for which reliable data can be obtained.
with the GHG Protocol Corporate Standard shall include
• Emissions data further subdivided, where this aids
the following information:
transparency, by business units/facilities, country,
source types (stationary combustion, process, fugitive,
etc.), and activity types (production of electricity,
DESCRIPTION OF THE COMPANY AND INVENTORY BOUNDARY
transportation, generation of purchased electricity
• An outline of the organizational boundaries chosen,
that is sold to end users, etc.).
including the chosen consolidation approach.
• Emissions attributable to own generation of elec-
• An outline of the operational boundaries chosen, and if
tricity, heat, or steam that is sold or transferred to
scope 3 is included, a list specifying which types of
another organization (see chapter 4).
activities are covered.
• Emissions attributable to the generation of electricity,
• The reporting period covered.
heat or steam that is purchased for re-sale to non-end
users (see chapter 4).
I N F O R M AT I O N O N E M I S S I O N S • A description of performance measured against

• Total scope 1 and 2 emissions independent of any internal and external benchmarks.
GHG trades such as sales, purchases, transfers, or
• Emissions from GHGs not covered by the Kyoto
banking of allowances.
Protocol (e.g., CFCs, NOx ,), reported separately
• Emissions data separately for each scope. from scopes.
S
• Emissions data for all six GHGs separately (CO2, CH4, • Relevant ratio performance indicators (e.g. emissions
N2O, HFCs, PFCs, SF6) in metric tonnes and in tonnes per kilowatt-hour generated, tonne of material
T
of CO2 equivalent. production, or sales).
• Year chosen as base year, and an emissions profile over • An outline of any GHG management/reduction
time that is consistent with and clarifies the chosen programs or strategies.
A
policy for making base year emissions recalculations.
• Information on any contractual provisions addressing
N
• Appropriate context for any significant emissions GHG-related risks and obligations.
changes that trigger base year emissions recalculation
• An outline of any external assurance provided and a
(acquisitions/divestitures, outsourcing/insourcing,
D
copy of any verification statement, if applicable, of the

changes in reporting boundaries or calculation
reported emissions data.
methodologies, etc.).
A
• Emissions data for direct CO2 emissions from biologi-

cally sequestered carbon (e.g., CO2 from burning
biomass/biofuels), reported separately from the scopes.
R
• Methodologies used to calculate or measure emissions,

providing a reference or link to any calculation tools used.
D
• Any specific exclusions of sources, facilities,

and / or operations.
Reporting GHG Emissions
D
• Information on the causes of emissions changes that I N F O R M AT I O N O N O F F S E T S

did not trigger a base year emissions recalculation • Information on offsets that have been purchased or
(e.g., process changes, efficiency improvements, developed outside the inventory boundary, subdivided
R
plant closures). by GHG storage/removals and emissions reduction

projects. Specify if the offsets are verified/certified
• GHG emissions data for all years between the base
(see chapter 8) and/or approved by an external GHG
A
year and the reporting year (including details of and

program (e.g., the Clean Development Mechanism,
reasons for recalculations, if appropriate)
Joint Implementation).
D
• Information on the quality of the inventory (e.g., infor-

• Information on reductions at sources inside the inven-
mation on the causes and magnitude of uncertainties
tory boundary that have been sold/transferred as
in emission estimates) and an outline of policies in
offsets to a third party. Specify if the reduction has
N
place to improve inventory quality. (see chapter 7).

been verified/certified and/or approved by an external
• Information on any GHG sequestration. GHG program (see chapter 8).
A
• A list of facilities included in the inventory.
• A contact person.
T
S
64 CHAPTER 9
Double Counting
B
y following the GHG Protocol Corporate Standard
reporting requirements, users adopt a compre- Companies should take care to identify and exclude from
hensive standard with the necessary detail and reporting any scope 2 or scope 3 emissions that are
transparency for credible public reporting. The also reported as scope 1 emissions by other facilities,
appropriate level of reporting of optional information business units, or companies included in the emissions
categories can be determined by the objectives and inventory consolidation (see chapter 6).
intended audience for the report. For national or
voluntary GHG programs, or for internal management
purposes, reporting requirements may vary (Appendix C Use of ratio indicators
summarizes the requirements of various GHG programs). Two principal aspects of GHG performance are of
interest to management and stakeholders. One concerns
For public reporting, it is important to differentiate
the overall GHG impact of a company — that is the
between a summary of a public report that is, for
absolute quantity of GHG emissions released to the
example, published on the Internet or in Sustainability/
atmosphere. The other concerns the company’s GHG
Corporate Social Responsibility reporting (e.g.,
emissions normalized by some business metric that
Global Reporting Initiative) and a full public report
results in a ratio indicator. The GHG Protocol Corporate
that contains all the necessary data as specified by the
Standard requires reporting of absolute emissions;
reporting standard spelled out in this volume. Not
reporting of ratio indicators is optional.
every circulated report must contain all information
as specified by this standard, but a link or reference Ratio indicators provide information on performance
needs to be made to a publicly available full report relative to a business type and can facilitate compar-
where all information is available. isons between similar products and processes over time.
Companies may choose to report GHG ratio indicators
For some companies, providing emissions data for
in order to:
specific GHGs or facilities /business units, or reporting
ratio indicators, may compromise business confiden- • Evaluate performance over time (e.g., relate figures
tiality. If this is the case, the data need not be publicly from different years, identify trends in the data, and
reported, but can be made available to those auditing the show performance in relation to targets and base
G
GHG emissions data, assuming confidentiality is secured. years (see chapter 11).
Companies should strive to create a report that is as • Establish a relationship between data from different
U
transparent, accurate, consistent and complete as categories. For example, a company may want to
possible. Structurally, this may be achieved by adopting establish a relationship between the value that an
the reporting categories of the standard (e.g., required action provides (e.g., price of a tonne of product) and
description of the company and inventory boundary, its impact on society or on the environment (e.g.,
I
required information on corporate emissions, optional emissions from product manufacturing).
D
information on emissions and performance, and

• Improve comparability between different sizes of busi-
optional information on offsets) as a basis of the report.
ness and operations by normalizing figures (e.g., by
Qualitatively, including a discussion of the reporting
assessing the impact of different sized businesses on
A
company’s strategy and goals for GHG accounting,

the same scale).
any particular challenges or tradeoffs faced, the
context of decisions on boundaries and other accounting It is important to recognize that the inherent diversity
N
parameters, and an analysis of emissions trends of businesses and the circumstances of individual
may help provide a complete picture of the company’s companies can result in misleading indicators.
inventory efforts. Apparently minor differences in process, product, or
C
location can be significant in terms of environmental

effect. Therefore, it is necessary to know the business
E
context in order to be able to design and interpret

ratio indicators correctly.
Reporting GHG Emissions
E
Companies may develop ratios that make most sense P R O D U C T I V I T Y / E F F I C I E N C Y R AT I O S .

for their business and are relevant to their decision- Productivity/efficiency ratios express the value or
making needs. They may select ratios for external achievement of a business divided by its GHG impact.
C
reporting that improve the understanding and clarify Increasing efficiency ratios reflect a positive perform-
the interpretation of their performance for their ance improvement. Examples of productivity/efficiency
stakeholders. It is important to provide some perspec- ratios include resource productivity (e.g., sales per
N
tive on issues such as scale and limitations of GHG) and process eco-efficiency (e.g., production
indicators in a way that users understand the nature volume per amount of GHG).
A
of the information provided. Companies should

consider what ratio indicators best capture the bene-
fits and impacts of their business, i.e., its operations,
D
its products, and its effects on the marketplace and on

the entire economy. Some examples of different ratio
indicators are provided here.
I
U
G
MidAmerican:
Setting ratio indicators for a utility company
MidAmerican Energy Holdings Company, an energy company For example, in 2001, using CEM data and fuel calculations, the
based in Iowa, wanted a method to track a power plant’s GHG company’s Iowa utility business emitted roughly 23 million tonnes
intensity, while also being able to roll individual plant results of CO2, while generating approximately 21 million megawatt hours.
into a corporate “generation portfolio” GHG intensity indicator. Its 2001 GHG intensity indicator calculates to approximately
MidAmerican also wanted to be able to take into account the GHG 2,177 lbs/MWh of CO2, reflecting the Iowa utility company’s reliance
benefits from planned renewable generation, as well as measure on traditional coal-fired generation.
the impacts of other changes to its generation portfolio over time
By 2008, the Iowa utility company will have constructed a new
(e.g., unit retirements or new construction). The company adopted
790 MW coal-fueled plant, a 540 MW combined-cycle natural gas
a GHG intensity indicator that specifically measures pounds of
plant, and a 310 MW wind-turbine farm and added them to its
direct emissions over total megawatt hours generated (lbs/MWh).
generation portfolio. The utility company’s overall CO2 emissions
To measure its direct emissions, the company leverages data will increase, but so will its megawatt production. The combined
currently gathered to satisfy existing regulatory requirements emissions from the new coal- and gas-fired plants will be added
and, where gaps might exist, uses fuel calculations. For coal- to the GHG intensity indicator’s numerator, while the megawatt
fired units, that means mainly using continuous emissions production data from all three facilities will be added to the indi-
monitoring (CEM) data and the U.S. Environmental Protection cator’s denominator. More importantly, and the ratio indicator
Agency’s emission factors for natural gas- and fuel oil-fired illustrates this, over time MidAmerican’s GHG intensity will
units. Using the GHG Protocol Corporate Standard, the company decline as more efficient generation is brought online and older
completes an annual emission inventory for each of its fossil- power plants are used less or retired altogether.
fired plants, gathering together a) fuel volume and heat input
data, b) megawatt production data, c) CEMs data, and d) fuel
calculations using appropriate emission factors.
66 CHAPTER 9
I N T E N S I T Y R AT I O S . Intensity ratios express GHG

impact per unit of physical activity or unit of economic
output. A physical intensity ratio is suitable when aggre-
gating or comparing across businesses that have similar
products. An economic intensity ratio is suitable when
aggregating or comparing across businesses that
produce different products. A declining intensity ratio
reflects a positive performance improvement. Many
companies historically tracked environmental perform-
ance with intensity ratios. Intensity ratios are often
called “normalized” environmental impact data.
Examples of intensity ratios include product emission
intensity (e.g., tonnes of CO2 emissions per electricity
generated); service intensity (e.g., GHG emissions per
function or per service); and sales intensity (e.g., emis-
sions per sales).
P E R C E N T A G E S . A percentage indicator is a ratio

between two similar issues (with the same physical unit
in the numerator and the denominator). Examples of
percentages that can be meaningful in performance
reports include current GHG emissions expressed as a
percentage of base year GHG emissions.
For further guidance on ratio indicators refer to CCAR,

2003; GRI, 2002; Verfaillie and Bidwell, 2000.
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10 Verification of GHG Emissions
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V erification is an objective assessment of the accuracy and completeness
of reported GHG information and the conformity of this information to
pre-established GHG accounting and reporting principles. Although the practice
of verifying corporate GHG inventories is still evolving the emergence of widely
accepted standards, such as the GHG Protocol Corporate Standard and the forth-
coming GHG Protocol Project Quantification Standard, should help GHG verification
become more uniform, credible, and widely accepted.
G U I D A N C E
68
CHAPTER 10 Verification of GHG Emissions 69
This chapter provides an overview of the key elements of • Improvement of internal accounting and reporting
a GHG verification process. It is relevant to companies practices (e.g., calculation, recording and internal
who are developing GHG inventories and have planned reporting systems, and the application of GHG
for, or are considering, obtaining an independent verifi- accounting and reporting principles), and facilitating
cation of their results and systems. Furthermore, as the learning and knowledge transfer within the company
process of developing a verifiable inventory is largely the
• Preparation for mandatory verification requirements
same as that for obtaining reliable and defensible data,
of GHG programs.
this chapter is also relevant to all companies regardless
of any intention to commission a GHG verification.
Verification involves an assessment of the risks of mate- Internal assurance

rial discrepancies in reported data. Discrepancies relate While verification is often undertaken by an independent,
to differences between reported data and data generated external third party, this may not always be the case.
from the proper application of the relevant standards Many companies interested in improving their GHG
and methodologies. In practice, verification involves the inventories may subject their information to internal
prioritization of effort by the verifier towards the data verification by personnel who are independent of
and associated systems that have the greatest impact on the GHG accounting and reporting process. Both
overall data quality. internal and external verification should follow similar
procedures and processes. For external stakeholders,
external third part verification is likely to significantly
Relevance of GHG principles increase the credibility of the GHG inventory. However,
The primary aim of verification is to provide confidence independent internal verifications can also provide
to users that the reported information and associated valuable assurance over the reliability of information.
statements represent a faithful, true, and fair account of
Internal verification can be a worthwhile learning expe-
a company’s GHG emissions. Ensuring transparency and
rience for a company prior to commissioning an external
verifiability of the inventory data is crucial for verifica-
verification by a third party. It can also provide external
tion. The more transparent, well controlled and well
verifiers with useful information to begin their work.
documented a company’s emissions data and systems
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are, the more efficient it will be to verify. As outlined in
chapter 1, there are a number of GHG accounting and
The concept of materiality
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reporting principles that need to be adhered to when
The concept of “materiality” is essential to understanding
compiling a GHG inventory. Adherence to these princi-
the process of verification. Chapter 1 provides a useful
ples and the presence of a transparent, well-documented
interpretation of the relationship between the principle of I
system (sometimes referred to as an audit trail) is the
completeness and the concept of materiality. Information
basis of a successful verification.
is considered to be material if, by its inclusion or exclu-
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sion, it can be seen to influence any decisions or actions

taken by users of it. A material discrepancy is an error
Goals
(for example, from an oversight, omission or miscalcula-
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Before commissioning an independent verification, a

tion) that results in a reported quantity or statement
company should clearly define its goals and decide
being significantly different to the true value or meaning.
whether they are best met by an external verification.
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In order to express an opinion on data or information, a

Common reasons for undertaking a verification include:
verifier would need to form a view on the materiality of
• Increased credibility of publicly reported emissions all identified errors or uncertainties.
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information and progress towards GHG targets,

While the concept of materiality involves a value judg-
leading to enhanced stakeholder trust
ment, the point at which a discrepancy becomes material
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• Increased senior management confidence in reported (materiality threshold) is usually pre-defined. As a rule of
information on which to base investment and target- thumb, an error is considered to be materially misleading
setting decisions
Verification of GHG Emissions
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if its value exceeds 5% of the total inventory for the part • The state of calibration and maintenance of meters
of the organization being verified. used, and the types of meters used
The verifier needs to assess an error or omission in the • Reliability and availability of input data
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full context within which information is presented. For

• Assumptions and estimations applied
example, if a 2% error prevents a company from
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achieving its corporate target then this would most likely • Aggregation of data from different sources
be considered material. Understanding how verifiers
• Other assurance processes to which the systems and
apply a materiality threshold will enable companies to
data are subjected (e.g., internal audit, external
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more readily establish whether the omissions of an indi-

reviews and certifications).
vidual source or activity from their inventory is likely to
raise questions of materiality.
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Materiality thresholds may also be outlined in the Establishing the verification parameters
requirements of a specific GHG program or determined The scope of an independent verification and the level of
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by a national verification standard, depending on who assurance it provides will be influenced by the company's
is requiring the verification and for what reasons. A goals and/or any specific jurisdictional requirements. It
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materiality threshold provides guidance to verifiers on is possible to verify the entire GHG inventory or specific
what may be an immaterial discrepancy so that they can parts of it. Discrete parts may be specified in terms of
concentrate their work on areas that are more likely geographic location, business units, facilities, and type of
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to lead to materially misleading errors. A materiality emissions. The verification process may also examine
threshold is not the same as de minimis emissions, or more general managerial issues, such as quality manage-
a permissible quantity of emissions that a company can ment procedures, managerial awareness, availability of
leave out of its inventory. resources, clearly defined responsibilities, segregation of
duties, and internal review procedures.
The company and verifier should reach an agreement up-

Assessing the risk of material discrepancy
front on the scope, level and objective of the verification.
Verifiers need to assess the risk of material discrepancy
This agreement (often referred to as the scope of work) will
of each component of the GHG information collection and
address issues such as which information is to be included
reporting process. This assessment is used to plan and
in the verification (e.g., head office consolidation only or
direct the verification process. In assessing this risk, they
information from all sites), the level of scrutiny to which
will consider a number of factors, including:
selected data will be subjected (e.g., desk top review or
• The structure of the organization and the approach on-site review), and the intended use of the results of the
used to assign responsibility for monitoring and verification). The materiality threshold is another item to
reporting GHG emissions be considered in the scope of work. It will be of key consid-
eration for both the verifier and the company, and is linked
• The approach and commitment of management to
to the objectives of the verification.
GHG monitoring and reporting
The scope of work is influenced by what the verifier actu-
• Development and implementation of policies and
ally finds once the verification commences and, as a result,
processes for monitoring and reporting (including
the scope of work must remain sufficiently flexible to
documented methods explaining how data is generated
enable the verifier to adequately complete the verification.
and evaluated)
A clearly defined scope of work is not only important
• Processes used to check and review calculation
to the company and verifier, but also for external
methodologies
stakeholders to be able to make informed and appro-
• Complexity and nature of operations priate decisions. Verifiers will ensure that specific
exclusions have not been made solely to improve the
• Complexity of the computer information system used
company’s performance. To enhance transparency and
to process the information
credibility companies should make the scope of work
publicly available.
70 C H A P T E R 10
Site visits Timing of the verification

Depending on the level of assurance required from The engagement of a verifier can occur at various points
verification, verifiers may need to visit a number of sites during the GHG preparation and reporting process.
to enable them to obtain sufficient, appropriate evidence Some companies may establish a semi-permanent
over the completeness, accuracy and reliability of internal verification team to ensure that GHG data stan-
reported information. The sites visited should be repre- dards are being met and improved on an on-going basis.
sentative of the organization as a whole. The selection of
Verification that occurs during a reporting period allows
sites to be visited will be based on consideration of a
for any reporting deficiencies or data issues to be
number of factors, including:
addressed before the final report is prepared. This may
• Nature of the operations and GHG sources at each site be particularly useful for companies preparing high
profile public reports. However, some GHG programs
• Complexity of the emissions data collection and
may require, often on a random selection basis, an inde-
calculation process
pendent verification of the GHG inventory following the
• Percentage contribution to total GHG emissions from submission of a report (e.g., World Economic Forum
each site Global GHG Registry, Greenhouse Challenge program in
Australia, EU ETS). In both cases the verification
• The risk that the data from sites will be
cannot be closed out until the final data for the period
materially misstated
has been submitted.
• Competencies and training of key personnel
• Results of previous reviews, verifications, and

uncertainty analyses.
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PricewaterhouseCoopers:
GHG inventory verification — lessons from the field
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PricewaterhouseCoopers (PwC), a global services company, has also easy to verify since most companies have reliable data on MWh
been conducting GHG emissions verifications for the past 10 years consumed and emission factors are publicly available.
in various sectors, including energy, chemicals, metals, semicon- I
However, experience has shown that for most companies, GHG data
ductors, and pulp and paper. PwC’s verification process involves
for 1990 is too unreliable to provide a verifiable base year for the
two key steps:
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purposes of tracking emissions over time or setting a GHG target.

1. An evaluation of whether the GHG accounting and reporting Challenges also remain in auditing GHG emissions embedded in
methodology (e.g., GHG Protocol Corporate Standard) has been waste fuels, co-generation, passenger travel, and shipping.
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correctly implemented
Over the past 3 years PwC has noticed a gradual evolution of
2. Identification of any material discrepancies. GHG verification practices from “customized” and “voluntary” to
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“standardized” and “mandatory.” The California Climate Action

The GHG Protocol Corporate Standard has been crucial in helping
Registry, World Economic Forum Global GHG Registry and the
PwC to design an effective GHG verification methodology. Since the
forthcoming EU ETS (covering 12,000 industrial sites in Europe)
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publication of the first edition, PwC has witnessed rapid improve-

require some form of emissions verification. In the EU ETS GHG
ments in the quality and verifiability of GHG data reported. In
verifiers will likely have to be accredited by a national body. GHG
particular the quantification on non-CO2 GHGs and combustion
verifier accreditation processes have already been established in
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emissions has dramatically improved. Cement sector emissions

the UK for its domestic trading scheme, and in California for regis-
verification has been made easier by the release of the WBCSD
tering emissions in the CCAR.
cement sector tool. GHG emissions from purchased electricity are
Verification of GHG Emissions
Selecting a verifier
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• Details of joint venture agreements, outsourcing and

Some factors to consider when selecting a verifier contractor agreements, production sharing agree-
include their: ments, emissions rights and other legal or contractual
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documents that determine the organizational and

• previous experience and competence in undertaking
operational boundaries
GHG verifications
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• Documented procedures for identifying sources of

• understanding of GHG issues including calculation
emissions within the organizational and operational
methodologies
boundaries
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• understanding of the company’s operations and

• Information on other assurance processes to which the
industry
systems and data are subjected (e.g. internal audit,
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• objectivity, credibility, and independence. external reviews and certifications)
It is important to recognize that the knowledge and qual- • Data used for calculating GHG emissions. This might,
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ifications of the individual(s) conducting the verification for example, include:

can be more important than those of the organization(s)
• Energy consumption data (invoices, delivery notes,
they come from. Companies should select organizations
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weigh-bridge tickets, meter readings: electricity,

based on the knowledge and qualifications of their actual
gas pipes, steam, and hot water, etc.)
verifiers and ensure that the lead verifier assigned to
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them is appropriately experienced. Effective verification • Production data (tonnes of material produced, kWh
of GHG inventories often requires a mix of specialized of electricity produced, etc.)
skills, not only at a technical level (e.g., engineering
• Raw material consumption data for mass balance
experience, industry specialists) but also at a business
calculations (invoices, delivery notes, weighbridge
level (e.g., verification and industry specialists).
tickets, etc.)
• Emission factors (laboratory analysis etc.).

Preparing for a GHG verification
• Description of how GHG emissions data have
The internal processes described in chapter 7 are likely
been calculated:
to be similar to those followed by an independent veri-
fier. Therefore, the materials that the verifiers need are • Emission factors and other parameters used and
similar. Information required by an external verifier is their justification
likely to include the following:
• Assumptions on which estimations are based
• Information about the company's main activities and
• Information on the measurement accuracy of
GHG emissions (types of GHG produced, description
meters and weigh-bridges (e.g., calibration records),
of activity that causes GHG emissions)
and other measurement techniques
• Information about the company/groups/organiza-
• Equity share allocations and their alignment with
tion (list of subsidiaries and their geographic
financial reporting
location, ownership structure, financial entities
within the organization) • Documentation on what, if any, GHG sources or
activities are excluded due to, for example, tech-
• Details of any changes to the company’s organiza-
nical or cost reasons.
tional boundaries or processes during the period,
including justification for the effects of these changes • Information gathering process:
on emissions data
• Description of the procedures and systems used to
collect, document and process GHG emissions data
at the facility and corporate level
• Description of quality control procedures applied

(internal audits, comparison with last year’s data,
recalculation by second person, etc.).
72 C H A P T E R 10
• Other information: As well as issuing an opinion on whether the reported

information is free from material discrepancy, the veri-
• Selected consolidation approach as defined in
fiers may, depending on the agreed scope of work, also
chapter 3
issue a verification report containing a number of recom-
• list of (and access to) persons responsible for mendations for future improvements. The process of
collecting GHG emissions data at each site and at verification should be viewed as a valuable input to the
the corporate level (name, title, e-mail, and tele- process of continual improvement. Whether verification
phone numbers) is undertaken for the purposes of internal review, public
reporting or to certify compliance with a particular
• information on uncertainties, qualitative and if
GHG program, it will likely contain useful information
available, quantitative.
and guidance on how to improve and enhance a
Appropriate documentation needs to be available to company’s GHG accounting and reporting system.
support the GHG inventory being subjected to external
Similar to the process of selecting a verifier, those
verification. Statements made by management for which
selected to be responsible for assessing and imple-
there is no available supporting documentation cannot be
menting responses to the verification findings should
verified. Where a reporting company has not yet imple-
also have the appropriate skills and understanding of
mented systems for routinely accounting and recording
GHG accounting and reporting issues.
GHG emissions data, an external verification will be
difficult and may result in the verifier being unable to
issue an opinion. Under these circumstances, the veri-
fiers may make recommendations on how current data
collection and collation process should be improved so
that an opinion can be obtained in future years.
Companies are responsible for ensuring the existence,

quality and retention of documentation so as to create
an audit trail of how the inventory was compiled. If
a company issues a specific base year against which it
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assesses its GHG performance, it should retain all
relevant historical records to support the base year data.
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These issues should be born in mind when designing and
implementing GHG data processes and procedures.
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Using the verification findings
Before the verifiers will verify that an inventory has met
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the relevant quality standard, they may require the

company to adjust any material errors that they identi-
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fied during the course of the verification. If the verifiers

and the company cannot come to an agreement
regarding adjustments, then the verifier may not be able
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to provide the company with an unqualified opinion. All

material errors (individually or in aggregate) need to be
amended prior to the final verification sign off.
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11 Setting a GHG Target
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S etting targets is a routine business practice that helps ensure that
an issue is kept on senior management’s “radar screen” and factored
into relevant decisions about what products and services to provide and what
materials and technologies to use. Often, a corporate GHG emission reduction
target is the logical follow-up to developing a GHG inventory.
G U I D A N C E
74
CHAPTER 11 Setting a GHG Target 75
This chapter provides guidance on the process of setting FIGURE 12. Steps in setting a GHG target
and reporting on a corporate GHG target. Although
the chapter focuses on emissions, many of the consid- 1. Obtain senior management commitment
·
erations equally apply to GHG sequestration (see
Appendix B). It is not the purpose of this chapter to
prescribe what a company’s target should be, rather the 2. Decide on the target type
focus is on the steps involved, the choices to be made, Set an absolute or intensity target?
and the implications of those choices.
➡
3. Decide on the target boundary
Why Set a GHG Target? Which GHGs to include?
Any robust business strategy requires setting targets for Which direct and indirect emissions?
revenues, sales, and other core business indicators, as Which geographical operations?
well as tracking performance against those targets. Treat business types separately?
➡
Likewise, effective GHG management involves setting
a GHG target. As companies develop strategies to reduce
the GHG emissions of their products and operations, 4. Choose the target base year
corporate-wide GHG targets are often key elements of Use a fixed or rolling approach?
these efforts, even if some parts of the company are Use a single or multi-year approach?
➡
or will be subject to mandatory GHG limits. Common
drivers for setting a GHG target include: 5. Define the target completion date
• MINIMIZING AND MANAGING GHG RISKS Set a long- or short-term target?
While developing a GHG inventory is an important
➡
step towards identifying GHG risks and opportunities,

a GHG target is a planning tool that can actually drive 6. Define the length of the target commitment period
GHG reductions. A GHG target will help raise internal Set a one-year or multi-year commitment period?
➡
awareness about the risks and opportunities presented
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by climate change and ensure the issue is on the busi-
ness agenda. This can serve to minimize and more 7. Decide on the use of offsets or credits
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effectively manage the business risks associated with
➡
climate change.
8. Establish a target double counting policy
• A C H I E V I N G C O S T S AV I N G S How to deal with double counting of reductions across companies? I
A N D S T I M U L AT I N G I N N O VAT I O N How does GHG trading affect target performance?
Implementing a GHG target can result in cost savings
➡
by driving improvements in process innovation and

resource efficiency. Targets that apply to products can 9. Decide on the target level
drive R&D, which in turn creates products and serv- What is business-as-usual? How far to go beyond that?
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ices that can increase market share and reduce How do all the above steps influence the decision?
emissions associated with the use of products.
➡
• P R E P A R I N G F O R F U T U R E R E G U L AT I O N S 10. Track and report progress

Internal accountability and incentive mechanisms that Make regular performance checks
are established to support a target’s implementation
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Report information in relation to the target

can also equip companies to respond more effectively
to future GHG regulations. For example, some compa-
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nies have found that experimenting with internal GHG

trading programs has allowed them to better under-
stand the possible impacts of future trading programs
on the company.
Setting a GHG Target
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• D E M O N S T R AT I N G L E A D E R S H I P
BOX 4. Comparing absolute and intensity targets
A N D C O R P O R AT E R E S P O N S I B I L I T Y
With the emergence of GHG regulations in many parts A B S O L U T E T A R G E T S reduce absolute emissions over time
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of the world, as well as growing concern about the (Example: reduce CO2 by 25 percent below 1994 levels by 2010)
effects of climate change, a commitment such as
Advantages
setting a public corporate GHG target demonstrates
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• Designed to achieve a reduction in a specified quantity of GHGs

leadership and corporate responsibility. This can
emitted to the atmosphere
improve a company’s standing with customers,
employees, investors, business partners, and the public, • Environmentally robust as it entails a commitment to reduce GHGs by
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and enhance brand reputation. a specified amount
• P A R T I C I P AT I N G I N V O L U N T A R Y P R O G R A M S • Transparently addresses potential stakeholder concerns about

D
A growing number of voluntary GHG programs are the need to manage absolute emissions
emerging to encourage and assist companies in
Disadvantages
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setting, implementing, and tracking progress toward

• Target base year recalculations for significant structural changes
GHG targets. Participation in voluntary programs
to the organization add complexity to tracking progress over time
can result in public recognition, may facilitate recog-
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nition of early action by future regulations, and • Does not allow comparisons of GHG intensity/efficiency
enhance a company’s GHG accounting and reporting
• Recognizes a company for reducing GHGs by decreasing produc-
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capacity and understanding.

tion or output (organic decline, see chapter 5)
• May be difficult to achieve if the company grows unexpectedly

Steps in Setting a Target and growth is linked to GHG emissions
Setting a GHG target involves making choices among
I N T E N S I T Y T A R G E T S reduce the ratio of emissions relative to
various strategies for defining and achieving a GHG
a business metric over time (Example: reduce CO2 by 12 percent per
reduction. The business goals, any relevant policy
tonne of clinker between 2000 and 2008)
context, and stakeholder discussions should inform
these choices. Advantages
• Reflects GHG performance improvements independent of organic
The following sections outline the ten steps involved.
growth or decline
Although presented sequentially, in practice target
setting involves cycling back and forth between the steps. • Target base year recalculations for structural changes are
It is assumed that the company has developed a GHG usually not required (see step 4)
inventory before implementing these steps. Figure 12
• May increase the comparability of GHG performance among companies
summarizes the steps.
Disadvantages
• No guarantee that GHG emissions to the atmosphere will be
1. Obtain senior management commitment reduced—absolute emissions may rise even if intensity goes
As with any corporate wide target, senior management down and output increases
buy-in and commitment particularly at the board/CEO
• Companies with diverse operations may find it difficult to define
level is a prerequisite for a successful GHG reduction
a single common business metric
program. Implementing a reduction target is likely to
necessitate changes in behavior and decision-making • If a monetary variable is used for the business metric, such as
throughout the organization. It also requires estab- dollar of revenue or sales, it must be recalculated for changes in
lishing an internal accountability and incentive system product prices and product mix, as well as inflation, adding
and providing adequate resources to achieve the target. complexity to the tracking process
This will be difficult, if not impossible, without senior
management commitment.
76 C H A P T E R 11
Royal Dutch/Shell: The target cascade

The Royal Dutch/Shell Group, a global energy corporation, discovered when implementing its voluntary GHG reduction target that one of
the biggest challenges was to cascade the target down to the actions of all employees who influence target performance. It was concluded
that successful implementation required different targets at different levels of the company. This is because each of the components that
underlie absolute GHG emissions is influenced by decision-making at various management levels (from the corporate level down to indi-
vidual businesses and facilities).
Absolute GHG emissions at a plant (tonnes of CO 2-e.) = Function (MP x BPE x PE)
MP Quantity of product manufactured by a facility. This is fundamental to the need to grow and is therefore controlled at corporate
level. GHG emissions are typically not managed by limiting this component.
BPE Best process energy use per tonne. The optimal (or theoretical) energy consumed (translates to emissions) by a particular
design of plant. The type of plant built is a business-level decision. Significant capital decisions may be involved in building a
new plant incorporating new technology. For existing plants, BPE is improved by significant design change and retrofitting. This
could also involve large capital expenditure.
PE Plant efficiency index. An index that indicates how the plant is actually performing relative to BPE. PE is a result of day-to-day
decisions taken by plant operators and technicians. It is improved also by the Shell Global Solutions EnergiseTM programme,
which typically requires low capital expenditure to implement.
Royal Dutch/Shell found that while this model is probably an oversimplification when it comes to exploration and production facilities, it
is suitable for manufacturing facilities (e.g., refineries and chemical plants). It illustrates that an absolute target could only be set at the
corporate level, while lower levels require intensity or efficiency targets.
TYPE OF TARGET A C T I O N S T H AT LEVEL OF DECISION-MAKING

REDUCE EMISSIONS (IN GENERAL AND ON TARGET)
Reduce absolute emissions See below Corporate
MP: not normally constrained All levels depending on scale

-------- (e.g. new venture, new plant, operational)
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Reduce GHG intensity See below Business in consultation with corporate
Improve BPE Building new plants Business
(efficiency) with new technology
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Retrofitting and changing
design of plants Business
Improve PE Increase plant Facility, supported by Shell Global Solutions EnergiseTM

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(efficiency) operating efficiency
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2. Decide on the target type Box 4 summarizes the advantages and disadvantages
There are two broad types of GHG targets: absolute and of each type of target. Some companies have both an
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intensity-based. An absolute target is usually expressed absolute and an intensity target. Box 5 provides exam-
in terms of a reduction over time in a specified quantity ples of corporate GHG targets. The Royal Dutch/Shell
of GHG emissions to the atmosphere, the unit typically case study illustrates how a corporate wide absolute
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being tonnes of CO2-e. An intensity target is usually target can be implemented by formulating a combina-
expressed as a reduction in the ratio of GHG emissions tion of intensity targets at lower levels of
relative to another business metric.1 The comparative decision-making within the company.
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metric should be carefully selected. It can be the output

of the company (e.g. tonne CO2-e per tonne product, per
3. Decide on the target boundary
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kWh, per tonne mileage) or some other metric such as

sales, revenues or office space. To facilitate transparency, The target boundary defines which GHGs, geographic oper-
companies using an intensity target should also report the ations, sources, and activities are covered by the target.
absolute emissions from sources covered by the target. The target and inventory boundary can be identical, or
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the target may address a specified subset of the sources

BOX 5. Selected corporate GHG targets
included in the company inventory. The quality of the GHG
inventory should be a key factor informing this choice. The ABSOLUTE TARGETS
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questions to be addressed in this step include the following: • ABB Reduce GHGs by 1 percent each year from 1998 through 2005
• W H I C H G H G S ? Targets usually include one or more of • Alcoa Reduce GHGs by 25 percent from 1990 levels by 2010, and
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the six major GHGs covered by the Kyoto Protocol. 50 percent from 1990 levels over same period, if inert anode tech-
For companies with significant non-CO2 GHG sources nology succeeds
it usually makes sense to include these to increase the
• BP Hold net GHGs stable at 1990 levels through 2012
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range of reduction opportunities. However, practical

monitoring limitations may apply to smaller sources. • Dupont Reduce GHGs by 65 percent from 1990 levels by 2010
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• W H I C H G E O G R A P H I C A L O P E R AT I O N S ? Only country • Entergy Stabilize CO2 from U.S. generating facilities at 2000
or regional operations with reliable GHG inventory levels through 2005
data should be included in the target. For companies
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• Ford Reduce CO2 by 4 percent over 2003-2006 timeframe

with global operations, it makes sense to limit the
based upon average 1998-2001 baseline as part of Chicago
target’s geographical scope until a robust and reli-
Climate Exchange
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able inventory has been developed for all operations.

Companies that participate in GHG programs • Intel Reduce PFCs by 10 percent from 1995 levels by 2010
involving trading2 will need to decide whether or not
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• Johnson & Johnson Reduce GHGs by 7 percent from 1990 levels by

to include the emissions sources covered in the trading
2010, with interim goal of 4 percent below 1990 levels by 2005
program in their corporate target. If common sources
are included, i.e., if there is overlap in sources covered • Polaroid Reduce CO2 emissions 20 percent below its 1994
between the corporate target and the trading program, emissions by year-end 2005; 25 percent by 2010
companies should consider how they will address
• Royal Dutch/Shell Manage GHG emissions so that they are still
any double counting resulting from the trading of
5 percent or more below the 1990 baseline by 2010, even while
GHG reductions in the trading program (see step 8).
growing the business
• WHICH DIRECT AND INDIRECT EMISSION SOURCES?
• Transalta Reduce GHGs to 1990 levels by 2000. Achieve zero net
Including indirect GHG emissions in a target will
GHGs from Canadian operations by 2024
facilitate more cost-effective reductions by increasing
the reduction opportunities available. However, INTENSITY TARGETS
indirect emissions are generally harder to measure • Holcim Ltd. Reduce by the year 2010 the Group average specific3
accurately and verify than direct emissions although net CO2 emissions by 20 percent from the reference year 1990
some categories, such as scope 2 emissions from
• Kansai Electric Power Company Reduce CO2 emissions per kWh
purchased electricity, may be amenable to accurate
sold in fiscal 2010 to approx. 0.34 kg-CO2 /kWh
measurement and verification. Including indirect
emissions can raise issues with regard to ownership • Miller Brewing Company Reduce GHGs by 18 percent per barrel
and double counting of reductions, as indirect emis- of production from 2001 to 2006
sions are by definition someone else’s direct emissions
• National Renewable Energy Laboratory Reduce GHGs by 10
(see step 8).
percent per square foot from 2000 to 2005
• SEPARATE TARGETS FOR DIFFERENT TYPES OF BUSINESSES?
COMBINED ABSOLUTE & INTENSITY TARGETS
For companies with diverse operations it may make
• SC Johnson GHG emissions intensity reduction of 23 percent
more sense to define separate GHG targets for
by 2005, which represents an absolute or actual GHG reduction
different core businesses, especially when using an
of 8 percent
intensity target, where the most meaningful business
metric for defining the target varies across business • Lafarge Reduce absolute gross CO2 emissions in Annex I countries
units (e.g., GHGs per tonne of cement produced or 10 percent below 1990 levels by the year 2010. Reduce worldwide
barrel of oil refined). average specific net CO2 emissions 20 percent below 1990 levels
by the year 2010 3
78 C H A P T E R 11
4. Choose the target base year considerations as described for multi-year average
For a target to be credible, it has to be transparent how base years in chapter 5 apply.
target emissions are defined in relation to past emissions. Chapter 5 provides standards on when and how to
Two general approaches are available: a fixed target base recalculate base year emissions in order to ensure
year or a rolling target base year. like-with-like comparisons over time when structural
• USING A FIXED TARGET BASE YEAR. Most GHG changes (e.g., acquisitions/divestitures) or changes in
targets are defined as a percentage reduction in emis- measurement and calculation methodologies alter the
sions below a fixed target base year (e.g., reduce CO2 emissions profile over time. In most cases, this will
emissions 25 percent below 1994 levels by 2010). also be an appropriate approach for recalculating data
Chapter 5 describes how companies should track emis- for a fixed target base year.
sions in their inventory over time in reference to a • USING A ROLLING TARGET BASE YEAR. Companies
fixed base year. Although it is possible to use different may consider using a rolling target base year if
years for the inventory base year and the target base obtaining and maintaining reliable and verifiable data
year, to streamline the inventory and target reporting for a fixed target base year is likely to be challenging
process, it usually makes sense to use the same year (for example, due to frequent acquisitions). With a
for both. As with the inventory base year, it is impor- rolling target base year, the base year rolls forward at
tant to ensure that the emissions data for the target regular time intervals, usually one year, so that emis-
base year are reliable and verifiable. It is possible to sions are always compared against the previous year.4
use a multi-year average target base year. The same However, emission reductions can still be collectively
TABLE 5. Comparing targets with rolling and fixed base years

FIXED TARGET BASE YEAR ROLLING TARGET BASE YEAR
How might the target be stated? A target might take the form “we will A target might take the form of “over the next X
emit X% less in year B than in year A” years we will reduce emissions every year by Y%
compared to the previous year”5
G
What is the target base year? A fixed reference year in the past The previous year
How far back is like-with-like The time series of absolute emissions If there have been significant structural changes the
U
comparison possible? will compare like with like time series of absolute emissions will not compare
like with like over more than two years at a time
What is the basis for comparing The comparison over time is based on The comparison over time is based on what was I
emissions between the target what is owned/controlled by the company owned/controlled by the company in the years the
base year and completion year? in the target completion year. information was reported6
D
(see also Figure 14)
How far back are Emissions are recalculated for all years Emissions are recalculated only for the year prior
A
recalculations made? back to the fixed target base year to the structural change, or ex-post for the year
of the structural change which then becomes the
base year.
N
How reliable are the target If a company with a target acquires a Data from an acquired company’s GHG emissions
base year emissions? company that did not have reliable GHG are only necessary for the year before the acquisi-
C
data in the target base year; back- tion (or even only from the acquisition onwards),
casting of emissions becomes necessary, reducing or eliminating the need for back-casting
reducing the reliability of the base year
E
When are recalculations made? The circumstances which trigger recalculations for structural changes etc. (see chapter 5) are
the same under both approaches
6. Define the length of the commitment period

E
stated over several years. An example would be “from

2001 through 2012, emissions will be reduced by one The target commitment period is the period of time
percent every year, compared to the previous year.” during which emissions performance is actually measured
C
When structural or methodological changes occur, against the target. It ends with the target completion
recalculations only need to be made to the previous date. Many companies use single-year commitment
year.7 As a result, like-with-like comparisons of periods, whereas the Kyoto Protocol, for example, speci-
N
emissions in the “target starting year” (2001 in the fies a multi-year “first commitment period” of five years
example) and “target completion year” (2012) (2008 –2012). The length of the target commitment
cannot be made because emissions are not recalcu- period is an important factor in determining a company’s
A
lated for all years back to the target starting year. level of commitment. Generally, the longer the target
commitment period, the longer the period during which
The definition of what triggers a base-year emissions
D
emissions performance counts towards the target.

recalculation is the same as under the fixed base year
approach. The difference lies in how far back emissions • EXAMPLE OF A SINGLE YEAR COMMITMENT PERIOD.
I
are recalculated. Table 5 compares targets using the Company Beta has a target of reducing emissions by
rolling and fixed base year approaches while Figure 14 10 percent compared to its target base year 2000, by
illustrates one of the key differences. the commitment year 2010. For Beta to meet its target,
U
it is sufficient for its emissions to be, in the year 2010,

no more than 90 percent of year 2000 emissions.
G
R E C A L C U L AT I O N S U N D E R I N T E N S I T Y T A R G E T S
• EXAMPLE OF A MULTI-YEAR COMMITMENT PERIOD.
While the standard in chapter 5 applies to absolute
Company Gamma has a target of reducing emissions
inventory emissions of companies using intensity
by 10 percent, compared to its target base year 2000,
targets, recalculations for structural changes for the
by the commitment period 2008 – 2012. For Gamma
purposes of the target are not usually needed unless the
to meet its target, its sum total emissions from
structural change results in a significant change in the
2008–2012 must not exceed 90 percent of year
GHG intensity. However, if recalculations for structural
2000 emissions times five (number of years in the
changes are made for the purposes of the target, they
should be made for both the absolute emissions and the
FIGURE 13. Defining the target completion date
business metric. If the target business metric becomes
irrelevant through a structural change, a reformulation
of the target might be needed (e.g., when a company Short-term
refocuses on a different industry but had used an
industry-specific business metric before).
EMISSIONS
5. Define the target completion date

The target completion date determines whether the
target is relatively short- or long-term. Long-term
targets (e.g., with a completion year ten years from the TIME
time the target is set) facilitate long-term planning for
large capital investments with GHG benefits. However, Long-term
they might encourage later phase-outs of less efficient
equipment. Generally, long-term targets depend on Uncertainty range
EMISSIONS
uncertain future developments, which can have opportu-

nities as well as risks, which is illustrated in Figure 13.
A five-year target period may be more practical for
organizations with shorter planning cycles.
TIME
80 C H A P T E R 11
FIGURE 14. Comparing a stabilization target under the fixed and rolling target base year approach
INCREASE
Company A
Fixed base year
➡
Company
B 1 2 3
EMISSIONS
A aquires B at
➡
the start of year 3 NO CHANGE
Company NO CHANGE
➡
1 2 3 Rolling base year

Company A
1 2 2 3
A stabilization target is one that aims to keep emissions constant over time. In this example, company A acquires company B, which has
experienced organic GHG growth since the target base year (or “starting” year). Under the rolling approach, emissions growth in the
acquired company (B) from year 1 to year 2 does not appear as an emissions increase in relation to the target of the acquiring company
(A). Thus company A would meet its stabilization target when using the rolling approach but not when using the fixed approach. In parallel
to the example in chapter 5, past GHG growth or decline in divested facilities (GHG changes before the divestment) would affect the target
performance under the rolling approach, while it would not be counted under the fixed approach.
commitment period). In other words, its average

emissions over those five years must not exceed Short vs. long commitment periods
G
FIGURE 15.
90 percent of year 2000 emissions.
Target commitment periods longer than one year can 1 year
U
be used to mitigate the risk of unpredictable events in
one particular year influencing performance against
EMISSIONS
the target. Figure 15 shows that the length of the I

target commitment period determines how many emis-
sions are actually relevant for target performance.
D
For a target using a rolling base year, the commitment

period applies throughout: emission performance is
A
continuously being measured against the target every TIME

year from when the target is set until the target
completion date. 5 years
N
EMISSIONS
8
7. Decide on the use of GHG offsets or credits
C
A GHG target can be met entirely from internal reduc-

tions at sources included in the target boundary or
E
through additionally using offsets that are generated

from GHG reduction projects that reduce emissions at
sources (or enhance sinks) external to the target TIME
boundary.9 The use of offsets may be appropriate when
the cost of internal reductions is high, opportunities for resulting difference is then divided by the corresponding
E
reductions limited, or the company is unable to meet its metric. It is important, however, that absolute emissions
target because of unexpected circumstances. When are still reported separately both from offsets and the
C
reporting on the target, it should be specified whether business metric (see step 9 below).
offsets are used and how much of the target reduction
was achieved using them.
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8. Establish a target double counting policy

This step addresses double counting of GHG reductions
CREDIBILITY OF OFFSETS AND TRANSPARENCY and offsets, as well as allowances issued by external
A
There are currently no generally accepted methodologies trading programs. It applies only to companies that
for quantifying GHG offsets. The uncertainties that engage in trading (sale or purchase) of GHG offsets or
D
surround GHG project accounting make it difficult to whose corporate target boundaries interface with other
establish that an offset is equivalent in magnitude to the companies’ targets or external programs.
internal emissions it is offsetting.10 This is why compa-
Given that there is currently no consensus on how such
I
nies should always report their own internal emissions

double counting issues should be addressed, companies
in separate accounts from offsets used to meet the
should develop their own “Target Double Counting
target, rather than providing a net figure (see step 10).
U
Policy.” This should specify how reductions and trades

It is also important to carefully assess the credibility of
related to other targets and programs will be reconciled
offsets used to meet a target and to specify the origin
with their corporate target, and accordingly which types
G
and nature of the offsets when reporting. Information

of double counting situations are regarded as relevant.
needed includes:
Listed here are some examples of double counting that
• the type of project
might need to be addressed in the policy.
• geographic and organizational origin
• D O U B L E C O U N T I N G O F O F F S E T S . This can occur when
• how offsets have been quantified a GHG offset is counted towards the target by both the
selling and purchasing organizations. For example,
• whether they have been recognized by external
company A undertakes an internal reduction project
programs (CDM, JI, etc.)
that reduces GHGs at sources included in its own
One important way to ensure the credibility of offsets is target. Company A then sells this project reduction to
to demonstrate that the quantification methodology company B to use as an offset towards its target, while
adequately addresses all of the key project accounting still counting it toward its own target. In this case,
challenges in chapter 8. Taking these challenges into reductions are counted by two different organizations
account, the forthcoming GHG Protocol Project against targets that cover different emissions sources.
Quantification Standard aims to improve the consistency, Trading programs address this by using registries that
credibility, and rigor of project accounting. allocate a serial number to all traded offsets or credits
and ensuring the serial numbers are retired once
Additionally, it is important to check that offsets have
they are used. In the absence of registries this could
not also been counted towards another organization’s
be addressed by a contract between seller and buyer.
GHG target. This might involve a contract between the
buyer and seller that transfers ownership of the offset. • D O U B L E C O U N T I N G D U E T O T A R G E T O V E R L A P. 11
Step 8 provides more information on accounting for This can occur when sources included under a
GHG trades in relation to a corporate target, including company’s corporate target are also subject to limits
establishing a policy on double counting. by an external program or another company’s target.
Two examples:
• Company A has a corporate target that includes

OFFSETS AND INTENSITY TARGETS
GHG sources that are also regulated under a trading
When using offsets under intensity targets, all the above
program. In this case, reductions at the common
considerations apply. In order to determine compliance
sources are used by company A to meet both its
with the target, the offsets can be subtracted from the
corporate target and the trading program target.
figure used for absolute emissions (the numerator); the
82 C H A P T E R 11
• Company B has a corporate target to reduce its

direct emissions from the generation of electricity.12
Company C who purchases electricity directly from
company B also has a corporate target that
includes indirect emissions from the purchase of
electricity (scope 2). Company C undertakes energy
efficiency measures to reduce its indirect emissions
from the use of the electricity. These will usually
show up as reductions in both companies’ targets.13
These two examples illustrate that double counting is

inherent when the GHG sources where the reductions occur
are included in more than one target of the same or
different organizations. Without limiting the scope of
targets it may be difficult to avoid this type of double
counting and it probably does not matter if the double
counting is restricted to the organizations sharing the same
sources in their targets (i.e., when the two targets overlap).
• D O U B L E C O U N T I N G O F A L L O WA N C E S T R A D E D I N
E X T E R N A L P R O G R A M S . This occurs when a corporate
target overlaps with an external trading program and double counting policy and state any reasons for
allowances that cover the common sources are sold in choosing not to address some double counting situations.
the trading program for use by another organization The Holcim case study describes how one company has
and reconciled with the regulatory target, but not chosen to track performance towards its target and
reconciled with the corporate target. This example address double counting issues.
differs from the previous example in that double
counting occurs across two targets that are not over-
G
lapping (i.e., they do not cover the same sources). 9. Decide on the target level
This type of double counting could be avoided if the The decision on setting the target level should be
company selling the allowances reconciles the trade informed by all the previous steps. Other considerations
U
with its corporate target (see Holcim case study). to take into account include:
Whatever the company decides to do in this situation,
in order to maintain credibility, it should address • Understanding the key drivers affecting GHG emis- I
buying and selling of allowances in trading programs sions by examining the relationship between GHG
in a consistent way. For example, if it decides not to emissions and other business metrics, such as produc-
D
reconcile allowances that it sells in a trading program tion, square footage of manufacturing space, number
with its corporate target, it should also not count any of employees, sales, revenue, etc.
allowances of the same type that it purchases to meet • Developing different reduction strategies based on the
A
its corporate target. major reduction opportunities available and examining

Ideally a company should try to avoid double counting in their effects on total GHG emissions. Investigate how
N
its corporate target if this undermines the environmental emissions projections change with different mitigation
integrity of the target. Also, any prevented double strategies.
counting between two organizations provides an addi-
C
• Looking at the future of the company as it relates to

tional incentive for one of these companies to further GHG emissions.
reduce emissions. However, in practice the avoidance of
• Factoring in relevant growth factors such as production
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double counting can be quite challenging, particularly

for companies subject to multiple external programs and plans, revenue or sales targets, and Return on Investment
when indirect GHG emissions are included in the target. (ROI) of other criteria that drive investment strategy.
Companies should therefore be transparent about their
E
Holcim: Using a GHG balance sheet

to track performance towards the target
C
Holcim, a global cement producer, tracks its performance in target. Those companies whose voluntary cap overlaps with a
relation to its voluntary corporate target using a GHG balance regulatory cap (e.g., in Europe) must also demonstrate a
sheet. This balance sheet shows, for each commitment period neutral or positive balance towards the regulatory cap. GHG
N
and for each country business, on one side the actual GHG reductions in Europe are thus reported towards both targets
emissions and on the other side the GHG “assets” and (see second example of double counting in step 8).
“instruments.” These assets and instruments consist of the
A
Both sides of the country business balance sheets are consoli-

voluntary GHG target itself (the “voluntary cap”; in other
dated to group level. Credits and allowances traded within the
words, the allowances that Holcim provides for itself), a regu-
group simply cancel out in the asset column of the consoli-
D
latory target (“cap”) if applicable, plus the CDM credits

dated corporate level GHG balance sheet. Any credits or
purchased (added) or sold (subtracted), and any regulatory
allowances traded externally are reconciled with both the
emissions trading allowances purchased (added) or sold
voluntary and regulatory caps at the bottom line of the asset
I
(subtracted). Thus if any country business sells CDM credits

column of the balance sheet. This ensures that any sold
(generated at sources inside the voluntary target boundary), it
allowance is only counted by the buying organization (when
is ensured that only the buying organization counts the credit
U
Holcim’s target and that of the buying organization do not

(see first example of double counting in step 8).
overlap). A purchased allowance or credit is counted towards
At the end of the commitment period, every country business both the voluntary and regulatory targets of the European busi-
G
must demonstrate a neutral or positive balance towards Holcim’s ness (these two targets overlap).
GHG balance sheet (All values in tonnes CO2-e/year)
GHG ASSETS & INSTRUMENTS GHG EMISSIONS
Holcim (country A in Europe)
Voluntary cap (direct emissions) Emissions, direct, indirect + biomass
Regulatory cap (direct emissions)
Reg. allowances purchased (+) or sold (-)
CDM credits purchased (+) or sold (-)
Sum of voluntary cap, reg. allowances & credits Sum of direct emissions
Sum of regulatory cap, reg. allowances & credits Sum of direct emissions, according to EU ETS
Holcim (country X in Latin America)
Voluntary cap Emissions, direct, indirect + biomass
CDM credits purchased (+) or sold (-)
Sum of voluntary cap & credits Sum of direct emissions
Holcim Group
Sum of voluntary cap, reg. allowances & credits Sum of direct emissions
84 C H A P T E R 11
• Considering whether there are any existing environmental • R E P O R T I N F O R M AT I O N I N R E L AT I O N T O T H E T A R G E T.

or energy plans, capital investments, product/service Companies should include the following information when
changes, or targets that will affect GHG emissions. setting and reporting progress in relation to a target:
Are there plans already in place for fuel switching,
1. Description of the target
on site power generation, and/or renewable energy
• Provide an outline of the target boundaries chosen
investments that affect the future GHG trajectory?
• Specify target type, target base year, target
• Benchmarking GHG emissions with similar completion date, and length of commitment period
organizations. Generally, organizations that have • Specify whether offsets can be used to meet the
not previously invested in energy and other GHG target; if yes, specify the type and amount
reductions should be capable of meeting more aggres- • Describe the target double counting policy
sive reduction levels because they would have more • Specify target level.
cost-effective reduction opportunities.
2. Information on emissions and performance in rela-
tion to the target
• Report emissions from sources inside the target
10. Track and report progress
boundary separately from any GHG trades
Once the target has been set, it is necessary to track
• If using an intensity target, report absolute emis-
performance against it in order to check compliance,
sions from within the target boundary separately,
and also—in order to maintain credibility—to report
both from any GHG trades and the business metric
emissions and any external reductions in a consistent,
• Report GHG trades that are relevant to
complete and transparent manner.
compliance with the target (including how many
• C A R RY O U T R E G U L A R P E R F O R M A N C E C H E C K S . In order offsets were used to meet the target)
to track performance against a target, it is important • Report any internal project reductions sold or
to link the target to the annual GHG inventory process transferred to another organization for use as
and make regular checks of emissions in relation to an offset
the target. Some companies use interim targets for • Report overall performance in relation to
this purpose (a target using a rolling target base year the target.
automatically includes interim targets every year).
G
NOTES
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1
Some companies may formulate GHG efficiency targets by formulating 7
For further details on different recalculation methodologies, see the
this ratio the other way around. guidance document “Base year recalculation methodologies for struc-
2
tural changes” on the GHG Protocol website (www.ghgprotocol.org).
Examples include the U.K. ETS, the CCX, and the EU ETS.
3
Holcim’s and Lafarge’s target have been formulated using the termi-
8
As noted in chapter 8, offsets can be converted to credits. Credits are I
thus understood to be a subset of offsets. This chapter uses the term
nology of the WBCSD Cement CO2 Protocol (WBCSD, 2001), which offsets as a generic term.
uses“specific” to denote emissions per tonne of cement produced.
D
9
4
For the purposes of this chapter, the terms “internal” and “external”
It is possible to use an interval other than one year. However, the longer refer to whether the reductions occur at sources inside (internal) or
the interval at which the base year rolls forward, the more this approach outside (external) the target boundary.
becomes like a fixed target base year. This discussion is based on a
A
rolling target base year that moves forward at annual intervals. 10

This equivalence is sometimes referred to as “fungibility.” However,
5
“fungibility” can also refer to equivalence in terms of the value in
Note that simply adding the yearly emissions changes under the rolling meeting a target (two fungible offsets have the same value in meeting
base year yields a different result from the comparison over time made
N
a target, i.e., they can both be applied to the same target).

with a fixed base year, even without structural changes. In absolute
terms, an X% reduction every year over 5 years (compared to the 11
Overlap here refers to a situation when two or more targets include the
previous year) is not the same as an (X times 5) reduction in year 5 same sources in their target boundaries.
C
compared to year 1. 12
Similarly, company A in this example could be subject to a mandatory
6
Depending on which recalculation methodology is used when applying cap on its direct emissions under a trading program and engage in
the rolling base year, the comparison over time can include emissions trading allowances covering the common sources it shares with
E
that occurred when the company did not own or control the emission company B. In this case, the example in the section “Double counting
sources. However, the inclusion of this type of information is mini- of allowances traded in external programs” is more relevant.
mized. See also the guidance document “Base year recalculation 13
methodologies for structural changes” on the GHG Protocol website The energy efficiency measures implemented by company C may not
(www.ghgprotocol.org). always result in an actual reduction of company B’s emissions. See
chapter 8 for further details on reductions in indirect emissions.
A Accounting for Indirect Emissions from Purchased Electricity
T
his appendix provides guidance on how to account companies and electricity suppliers often exercise
for and report indirect emissions associated with choice over where they purchase electricity, this
X
the purchase of electricity. Figure A–1 provides provides them with an important
an overview of the transactions associated with
I
purchased electricity and the corresponding emissions. GHG reduction opportunity (see Seattle City Light case
study in chapter 4). Since scope 3 is optional, companies
that are unable to track their electricity sales in terms of
D
Purchased electricity for own consumption

end users and non-end users can choose not to report
Emissions associated with the generation of purchased
these emissions in scope 3. Instead, they can report the
electricity that is consumed by the reporting company
N
total emissions associated with purchased electricity that

are reported in scope 2. Scope 2 only accounts for the
is sold to both end- and non-end-users under optional
portion of the direct emissions from generating elec-
information in the category “generation of purchased
E
tricity that is actually consumed by the company. A

electricity, heat, or steam for re-sale to non-end users.”
company that purchases electricity and transports it in a
transmission and distribution (T&D) system that it owns
P
or controls reports the emissions associated with T&D

Purchased electricity for resale to intermediaries
losses under scope 2. However, if the reporting company
Emissions associated with the generation of purchased
owns or controls the T&D system but generates (rather
P
electricity that is resold to an intermediary (e.g.,

than purchases) the electricity transmitted through its
trading transactions) may be reported under optional
wires, the emissions associated with T&D losses are
information under the category “Generation of
A
not reported under scope 2, as they would already be

purchased electricity, heat, or steam for re-sale to non-
accounted for under scope 1. This is the case when
end users.” Examples of trading transactions include
generation, transmission, and distribution systems are
brokerage/trading room transactions involving purchased
vertically integrated and owned or controlled by the
electricity or any other transaction in which electricity is
same company.
purchased directly from one source or the spot market
and then resold to an intermediary (e.g., a non-end user).
These emissions are reported under optional information
Purchased electricity for resale to end-users
separately from scope 3 because there could be a
Emissions from the generation of purchased electricity
number of trading transactions before the electricity
for resale to end-users, for example purchases by a
finally reaches the end-user. This may cause duplicative
utility company, may be reported under scope 3 in the
reporting of indirect emissions from a series of electricity
category “generation of purchased electricity that is
trading transactions for the same electricity.
sold to end-users.” This reporting category is particu-
larly relevant for utility companies that purchase
wholesale electricity supplied by independent power
producers for resale to their customers. Since utility
FIGURE A– 1. Accounting for the indirect GHG emissions associated with purchased electricity
➡
Own consumption Scope 2
Indirect emissions from own consumption of purchased electricity
Scope 3
Purchased Electricity Resale to end-users
Indirect emissions from purchased electricity sold to end users
Resale to Optional Information

intermediaries Emissions from purchased electricity sold to non end users
86
APPENDIX A 87
GHG emissions upstream T O T A L C O 2 E M I S S I O N S FROM GENERATION

EFG =
of the generation of electricity ELECTRICITY GENERATED
Emissions associated with the extraction and production
of fuels consumed in the generation of purchased T O T A L C O 2 E M I S S I O N S FROM GENERATION
EFC =
electricity may be reported in scope 3 under the cate- ELECTRICITY CONSUMED
gory “extraction, production, and transportation of EFC and EFG are related as shown below.
fuels consumed in the generation of electricity.” These
emissions occur upstream of the generation of electricity. EFC x ELECTRICITY CONSUMED
=
Examples include emissions from mining of coal, EFG x ( E L E C T R I C I T Y C O N S U M E D + T & D L O S S E S )
refining of gasoline, extraction of natural gas, and
production of hydrogen (if used as a fuel).
T&D LOSSES
EFC = EFG x (1+ ELECTRICITY CONSUMED )
Choosing electricity emission factors
To quantify scope 2 emissions, the GHG Protocol As these equations indicate, EFC multiplied by the amount
Corporate Standard recommends that companies obtain of consumed electricity yields the sum of emissions attrib-
source/supplier specific emission factors for the elec- utable to electricity consumed during end use and
tricity purchased. If these are not available, regional transmission and distribution. In contrast, EFG multiplied
or grid emission factors should be used. For more by the amount of consumed electricity yields emissions
information on choosing emission factors, see the attributable to electricity consumed during end use only.
relevant GHG Protocol calculation tools available Consistent with the scope 2 definition (see chapter 4),
on the GHG Protocol website (www.ghgprotocol.org). the GHG Protocol Corporate Standard requires the use
of EFG to calculate scope 2 emissions. The use of
EFG ensures internal consistency in the treatment of
GHG emissions associated electricity related upstream emissions categories and
with the consumption of electricity in T&D avoids double counting in scope 2. Additionally, there
A
Emissions from the generation of electricity that is are several other advantages in using EFG:
consumed in a T&D system may be reported in scope 3
1) It is simpler to calculate and widely available in
P
under the category “generation of electricity that is
consumed in a T&D system” by end-users. Published published regional, national, and international sources.
electricity grid emission factors do not usually include 2) It is based on a commonly used approach to calculate
P
T&D losses. To calculate these emissions, it may be emissions intensity, i.e., emissions per unit of produc-
necessary to apply supplier or location specific T&D loss tion output.
factors. Companies that purchase electricity and trans- E
port it in their own T&D systems would report the 3) It ensures transparency in reporting of indirect emis-
portion of electricity consumed in T&D under scope 2. sions from T&D losses.
N
The formula to account for emissions associated with

T&D losses is the following:
Accounting for indirect emissions
D
associated with T&D losses EFG x INDIRECT EMISSIONS

ELECTRICITY CONSUMED = FROM CONSUMPTION OF
There are two types of electricity emission factors: DURING T&D ELECTRICITY DURING T&D
Emission factor at generation (EFG) and Emissions
I
factor at consumption (EFC). EFG is calculated from

CO2 emissions from generation of electricity divided In some countries such as Japan, local regulations may
X
by amount of electricity generated. EFC is calculated require utility companies to provide both EFG and EFC to
from CO2 emissions from generation divided by amount its consumers, and consumers may be required to use EFC
of electricity consumed. to calculate indirect emissions from the consumption of
purchased electricity. In this case, a company still needs to
use EFG to report its scope 2 emissions for a GHG report
A
prepared in accordance with GHG Protocol Corporate Standard.

B Accounting for Sequestered Atmospheric Carbon
A
key purpose of the GHG Protocol Corporate Standard Information on a company’s impacts on sequestered
X
is to provide companies with guidance on how to atmospheric carbon can be used for strategic planning, for
develop inventories that provide an accurate and educating stakeholders, and for identifying opportunities
I
complete picture of their GHG emissions both from for improving the company’s GHG profile. Opportunities
their direct operations as well as those along the value may also exist to create value from reductions created
chain.1 For some types of companies, this is not along the value chain by companies acting alone or in
D
possible without addressing the company’s impacts on partnership with raw material providers or customers.
sequestered atmospheric carbon.2
N
Accounting for sequestered carbon in the

Sequestered atmospheric carbon context of the GHG Protocol Corporate Standard
E
During photosynthesis, plants remove carbon (as CO2) Consensus methods have yet to be developed under the
from the atmosphere and store it in plant tissue. Until GHG Protocol Corporate Standard for accounting of
this carbon is cycled back into the atmosphere, it sequestered atmospheric carbon as it moves through the
P
resides in one of a number of “carbon pools.” These value chain of biomass-based industries. Nonetheless,
pools include (a) above ground biomass (e.g., vegeta- some issues that would need to be addressed when
P
tion) in forests, farmland, and other terrestrial addressing impacts on sequestered carbon in corporate
environments, (b) below ground biomass (e.g., roots), inventories can be examined in the context of existing
and (c) biomass-based products (e.g., wood products) guidance provided by the GHG Protocol Corporate
A
both while in use and when stored in a landfill. Standard as highlighted below.
Carbon can remain in some of these pools for long

periods of time, sometimes for centuries. An increase in
S E T T I N G O R G A N I Z AT I O N A L B O U N D A R I E S
the stock of sequestered carbon stored in these pools
The GHG Protocol Corporate Standard outlines two
represents a net removal of carbon from the atmos-
approaches for consolidating GHG data—the equity share
phere; a decrease in the stock represents a net addition
approach and the control approach. In some cases, it
of carbon to the atmosphere.
may be possible to apply these approaches directly to
emissions/removals associated with sequestered atmos-
pheric carbon. Among the issues that may need to be
Why include impacts on sequestered carbon
examined is the ownership of sequestered carbon under
in corporate GHG inventories?
the different types of contractual arrangements
It is generally recognized that changes in stocks of
involving land and wood ownership, harvesting rights,
sequestered carbon and the associated exchanges of
and control of land management and harvesting deci-
carbon with the atmosphere are important to national
sions. The transfer of ownership as carbon moves
level GHG emissions inventories, and consequently, these
through the value chain may also need to be addressed.
impacts on sequestered carbon are commonly addressed
In some cases, as part of a risk management program
in national inventories (UNFCCC, 2000). Similarly, for
for instance, companies may be interested in performing
companies in biomass-based industries, such as the forest
value chain assessments of sequestered carbon without
products industry, some of the most significant aspects of
regard to ownership or control just as they might do for
a company’s overall impact on atmospheric CO2 levels
scope 2 and 3 emissions.
will occur as a result of impacts on sequestered carbon in
their direct operations as well as along their value chain.
Some forest product companies have begun to address
S E T T I N G O P E R AT I O N A L B O U N D A R I E S
this aspect of their GHG footprint within their corporate
As with GHG emissions accounting, setting operational
GHG inventories (Georgia Pacific, 2002). Moreover,
boundaries for sequestered carbon inventories would help
WBCSD’s Sustainable Forest Products Industry Working
companies transparently report their impacts on
Group—which represents a significant cluster of inte-
sequestered carbon along their value chain. Companies
grated forestry companies operating internationally—is
may, for example, provide a description of the value
developing a project that will further investigate carbon
chain capturing impacts that are material to the results
measurement, accounting, reporting, and ownership
of the analysis. This should include which pools are
issues associated with the forest products value chain.
88
APPENDIX B 89
included in the analysis, which are not, and the Quantification Standard is designed to calculate project
rationale for the selections. Until consensus methods reductions that will be used as offsets, relative to a hypo-
are developed for characterizing impacts on thetical baseline scenario for what would have happened
sequestered atmospheric carbon along the value chain, without the project. In the forestry sector, projects take the
this information can be included in the “optional form of removal enhancements.
information” section of a GHG inventory compiled
Chapter 8 in this document addresses some of the issues
using the GHG Protocol Corporate Standard.
that must be addressed when accounting for offsets
from GHG reduction projects. Much of this guidance is
also applicable to removal enhancement projects. One
T R A C K I N G R E M O VA L S O V E R T I M E
example is the issue of reversibility of removals — also
As is sometimes the case with accounting for GHG emis-
briefly described in chapter 8.
sions, base year data for impacts on sequestered carbon
may need to be averaged over multiple years to accom-
modate the year-to-year variability expected of these
R E P O R T I N G G H G R E M O VA L S
systems. The temporal scale used in sequestered carbon
Until consensus methods are developed for character-
accounting will often be closely tied to the spatial scale
izing impacts on sequestered atmospheric carbon along
over which the accounting is done. The question of how
the value chain, this information can be included in
to recalculate base years to account for land acquisition
the “optional information” section of the inventory (See
and divestment, land use changes, and other activities
chapter 9). Information on sequestered carbon in the
also needs to be addressed.
company’s inventory boundary should be kept separate
from project-based reductions at sources that are not in
the inventory boundary. Where removal enhancement
I D E N T I F Y I N G A N D C A L C U L AT I N G G H G R E M O VA L S
projects take place within a company’s inventory
The GHG Protocol Corporate Standard does not include
boundary they would normally show up as an increase in
consensus methods for sequestered carbon quantifica-
carbon removals over time, but can also be reported in
tion. Companies should, therefore, explain the methods
optional information. However, they should also be iden-
used. In some instances, quantification methods used
tified separately to ensure that they are not double
in national inventories can be adapted for corporate-
counted. This is especially important when they are sold
level quantification of sequestered carbon. IPCC
as offsets or credits to a third party.
(1997; 2000b) provides useful information on how to
do this. In 2004, IPCC is expected to issue Good As companies develop experience using various
Practice Guidance for Land Use, Land Use Change methods for characterizing impacts on sequestered
and Forestry, with information on methods for quan- carbon, more information will become available on the
tification of sequestered carbon in forests and forest level of accuracy to expect from these methods. In the
products. Companies may also find it useful to consult early stages of developing this experience, however,
the methods used to prepare national inventories for companies may find it difficult to assess the uncer-
those countries where significant parts of their tainty associated with the estimates and therefore may
company’s value chain reside. need to give special care to how the estimates are
represented to stakeholders.
In addition, although corporate inventory accounting
differs from project-based accounting (as discussed
below), it may be possible to use some of the calculation
and monitoring methods derived from project level NOTES
accounting of sequestration projects. 1
In this Appendix, “value chain” means a series of operations and
entities, starting with the forest and extending through end-of-life
management, that (a) supply or add value to raw materials and inter-
mediate products to produce final products for the marketplace and (b)
A C C O U N T I N G F O R R E M O VA L E N H A N C E M E N T S are involved in the use and end-of-life management of these products.
A corporate inventory can be used to account for yearly 2
In this Appendix the term “sequestered atmospheric carbon” refers
removals within the corporate inventory boundary. exclusively to sequestration by biological sinks.
In contrast, the forthcoming GHG Protocol Project
C Overview of GHG Programs
NAME OF PROGRAM TYPE OF PROGRAM FOCUS GASES COVERED O R G A N I Z AT I O N A L

X
(Organization, PROJECT BOUNDARIES

project, facility)
I
California Climate Action Registry Voluntary registry Organization Organizations report Equity share or control for
www.climateregisty.org (Projects possible CO2 for first three California or US operations
in 2004) years of participa-
D
tion, all six

GHGs thereafter.
N
US EPA Climate Leaders Voluntary reduction Organization Six Equity share or control
www.epa.gov/climateleaders program for US operations
at a minimum
E
P
WWF Climate Savers Voluntary registry Organization CO2 Equity share or control
www.worldwildlife.org/climatesavers for worldwide operations
P
A
World Economic Forum Voluntary registry Organization Six Equity share or control for
Global GHG Register worldwide operations
www.weforum.org
EU GHG Emissions Allowance Mandatory allowance Facility Six Facilities in

Trading Scheme trading scheme selected sectors
www.europa.eu.int/comm/environment/
European Pollutant Mandatory registry Facility Six Kyoto gases Facilities that fall under
Emission Registry for large industrial as well as other EU IPPC directive
www.europa.eu.int/comm/environ- facilities pollutants
ment/ippc/eper/index.htm
Chicago Climate Exchange Voluntary allowance Organization Six Equity share

www.chicagoclimateexchange.com trading scheme and project
Respect Europe BLICC Voluntary reduction Organization Six Equity share or control for
www.respecteurope.com/rt2/blicc/ program worldwide operations
90
APPENDIX C 91
O P E R AT I O N A L N AT U R E / P U R P O S E BASE YEAR TARGET V E R I F I C AT I O N

BOUNDARIES OF PROGRAM
Scope 1 and 2 Baseline protection, Specific to each Encouraged but optional Required through certi-
required, scope 3 public reporting, organization, recalculation fied third party verifier
to be decided possible future targets consistent with GHG Protocol
Corporate Standard required
Scope 1 and 2 Public recognition, Year that organization joins Required, specific to Optional, provides
required, scope 3 assistance setting program, recalculation each organization guidance and checklist
optional targets and consistent with GHG Protocol of components that
achieving reductions Corporate Standard required should be included
if undertaken
Scope 1 and 2 Achieve targets, Chosen year since 1990, specific Required, specific to Third party verifier
required, scope 3 public recognition, to each organization, recalcula- each organization
optional expert assistance tion consistent with GHG Protocol
Corporate Standard required
Scope 1 and 2 Baseline protection, Chosen year since 1990, specific Encouraged but optional Third party verifier
required, scope 3 public reporting, to each organization, recalcula- or spot checks
optional targets encouraged tion consistent with GHG Protocol by WEF
but optional Corporate Standard required
Scope 1 Achieve annual caps Determined by member country Annual compliance with Third party verifier
through tradable for allowance allocation allocated and traded
allowance market, allowances, EU
initial period from committed to 8% overall
2005 to 2007 reduction below 1990
Scope 1 required Permit individual Not applicable Not applicable Local permitting
industrial facilities authority
Direct combustion Achieve annual Average of 1998 through 2001 1% below its baseline in Third party verifier
and process emis- targets through trad- 2003, 2% below baseline
sion sources and able allowance market in 2004, 3% below base-
indirect emissions line in 2005 and 4%
optional. below baseline in 2006
Scope 1 and 2 Achieve targets, Specific to each Mandatory, specific to Third party verifier
required, scope 3 public recognition, organization, recalculation each organization
strongly expert assistance consistent with GHG Protocol
encouraged Corporate Standard required
D Industry Sectors and Scopes
SECTOR SCOPE 1 EMISSION SOURCES SCOPE 2 SCOPE 3 EMISSION SOURCES 1

EMISSION SOURCES
X
ENERGY
Energy • Stationary combustion (boilers and turbines used • Stationary combustion • Stationary combustion (mining and extraction of fuels,
Generation in the production of electricity, heat or steam, fuel (consumption of energy for refining or processing fuels)
I
pumps, fuel cells, flaring) purchased electricity,

heat or steam) • Process emissions (production of fuels, SF6 emissions2)
• Mobile combustion (trucks, barges and trains for
transportation of fuels) • Mobile combustion (transportation of fuels/waste,
D
employee business travel, employee commuting)

• Fugitive emissions (CH4 leakage from transmission
and storage facilities, HFC emissions from LPG storage • Fugitive emissions (CH4 and CO2 from waste landfills,
pipelines, SF6 emissions)
N
facilities, SF6 emissions from transmission and distri-

bution equipment)
Oil and Gas3 • Stationary combustion (process heaters, engines, • Stationary combustion • Stationary combustion (product use as fuel or combus-
E
turbines, flares, incinerators, oxidizers, production of (consumption of tion for the production of purchased materials)
electricity, heat and steam) purchased electricity,
heat or steam) • Mobile combustion (transportation of raw
• Process emissions (process vents, equipment vents, materials/products/waste, employee business travel,
P
maintenance/turnaround activities, non-routine activities) employee commuting, product use as fuel)

• Mobile combustion (transportation of raw • Process emissions (product use as feedstock or emis-
materials/products/waste; company owned vehicles) sions from the production of purchased materials)
P
• Fugitive emissions (leaks from pressurized equipment, • Fugitive emissions (CH4 and CO2 from waste landfills
wastewater treatment, surface impoundments) or from the production of purchased materials)
A
Coal Mining • Stationary combustion (methane flaring and use, use • Stationary combustion • Stationary combustion (product use as fuel)
of explosives, mine fires) (consumption of
purchased electricity, • Mobile combustion (transportation of coal/waste,
• Mobile combustion (mining equipment, transportation heat or steam) employee business travel, employee commuting)
of coal)
• Process emissions (gasification)
• Fugitive emissions (CH4 emissions from coal mines
and coal piles)
METALS
Aluminum4 • Stationary combustion (bauxite to aluminum processing, • Stationary combustion • Stationary combustion (raw material processing and
coke baking, lime, soda ash and fuel use, on-site CHP) (consumption of coke production by second party suppliers, manufacture
purchased electricity, of production line machinery)
• Process emissions (carbon anode oxidation, electrol- heat or steam)
ysis, PFC) • Mobile combustion (transportation services, business
travel, employee commuting)
• Mobile combustion (pre- and post-smelting trans-
portation, ore haulers) • Process emissions (during production of purchased
materials)
• Fugitive emissions (fuel line CH4, HFC and PFC, SF6
cover gas) • Fugitive emissions (mining and landfill CH4 and CO2,
outsourced process emissions)
Iron and Steel5 • Stationary combustion (coke, coal and carbonate • Stationary combustion • Stationary combustion (mining equipment, production
fluxes, boilers, flares) (consumption of of purchased materials)
purchased electricity,
• Process emissions (crude iron oxidation, consumption of heat or steam) • Process emissions (production of ferroalloys)
reducing agent, carbon content of crude iron/ferroalloys)
• Mobile combustion (transportation of raw
• Mobile combustion (on-site transportation) materials/products/waste and intermediate products)
• Fugitive emission (CH4, N2O) • Fugitive emissions (CH4 and CO2 from waste landfills)
CHEMICALS
Nitric acid, • Stationary combustion (boilers, flaring, reductive • Stationary combustion • Stationary combustion (production of purchased mate-
Ammonia, Adipic furnaces, flame reactors, steam reformers) (consumption of rials, waste combustion)
acid, Urea, and purchased electricity,
Petrochemicals • Process emissions (oxidation/reduction of substrates, heat or steam) • Process emissions (production of purchased materials)
impurity removal, N2O byproducts, catalytic cracking,
myriad other emissions individual to each process) • Mobile combustion (transportation of raw
materials/products/waste, employee business travel,
• Mobile combustion (transportation of raw employee commuting)
materials/products/waste)
• Fugitive emissions (CH4 and CO2 from waste landfills
• Fugitive emissions (HFC use, storage tank leakage) and pipelines)
92
APPENDIX D 93
SECTOR SCOPE 1 EMISSION SOURCES SCOPE 2 SCOPE 3 EMISSION SOURCES

EMISSION SOURCES
MINERALS
Cement and • Process emissions (calcination of limestone) • Stationary combustion • Stationary combustion (production of purchased mate-
Lime6 (consumption of rials, waste combustion)
• Stationary combustion (clinker kiln, drying of purchased electricity,
raw materials, production of electricity) heat or steam) • Process emissions (production of purchased clinker and lime)
• Mobile combustion (quarry operations, • Mobile combustion (transportation of raw
on-site transportation) materials/products/waste, employee business travel,
employee commuting)
• Fugitive emissions (mining and landfill CH4 and CO2,
outsourced process emissions)
WASTE 7
Landfills, Waste • Stationary combustion (incinerators, boilers, flaring) • Stationary combustion • Stationary combustion(recycled waste used as a fuel)
combustion, (consumption of
Water services • Process emissions (sewage treatment, nitrogen loading) purchased electricity, • Process emissions (recycled waste used as a feedstock)
• Fugitive emissions (CH4 and CO2 emissions from heat or steam) • Mobile combustion (transportation of waste/products,
waste and animal product decomposition) employee business travel, employee commuting)
• Mobile combustion (transportation of waste/products)
PULP & PAPER
Pulp and Paper8 • Stationary combustion (production of steam and elec- • Stationary combustion • Stationary combustion (production of purchased mate-
tricity, fossil fuel-derived emissions from calcination (consumption of rials, waste combustion)
of calcium carbonate in lime kilns, drying products with purchased electricity,
infrared driers fired with fossil fuels) heat or steam) • Process emissions (production of purchased materials)
• Mobile combustion (transportation of raw materials, prod- • Mobile combustion (transportation of raw
ucts, and wastes, operation of harvesting equipment) materials/products/waste, employee business travel,
employee commuting)
• Fugitive emissions (CH4 and CO2 from waste)
• Fugitive emissions (landfill CH4 and CO2 emissions)
H F C , P F C , S F6 & H C F C 2 2 P R O D U C T I O N 9 HFC, PFC, SF6 & HCFC 22 production
HCFC 22 • Stationary combustion(production of electricity, • Stationary combustion • Stationary combustion (production of purchased materials)
production heat or steam) (consumption of
purchased electricity, • Process emissions (production of purchased materials)
• Process emissions (HFC venting) heat or steam) • Mobile combustion (transportation of raw materials/prod-
• Mobile combustion (transportation of raw ucts/waste, employee business travel, employee commuting)
materials/products/waste)
• Fugitive emissions(fugitive leaks in product use, CH4
• Fugitive emissions (HFC use) and CO2 from waste landfills)
SEMICONDUCTOR PRODUCTION
Semiconductor • Process emissions (C2F6, CH4, CHF3, SF6, NF3, C3F8, • Stationary combustion • Stationary combustion (production of imported mate-
production C4F8, N2O used in wafer fabrication, CF4 created from (consumption of rials, waste combustion, upstream T&D losses of
C2F6 and C3F8 processing) purchased electricity, purchased electricity)
heat or steam)
• Stationary combustion (oxidation of volatile organic • Process emissions (production of purchased materials,
waste, production of electricity, heat or steam) outsourced disposal of returned process gases and
container remainder/heel)
• Fugitive emissions (process gas storage leaks,
container remainders/heel leakage) • Mobile combustion (transportation of raw materials/prod-
ucts/waste, employee business travel, employee commuting)
• Mobile combustion (transportation of raw
materials/products/waste) • Fugitive emissions (landfill CH4 and CO2 emissions, down-
stream process gas container remainder / heel leakage)
O T H E R S E C T O R S 10 Other Sectors
Service sector/ • Stationary combustion (production of electricity, heat or steam) • Stationary combustion • Stationary combustion (production of purchased materials)
Office based (consumption of
organizations10 • Mobile combustion (transportation of raw purchased electricity, • Process emissions (production of purchased materials)
materials/waste) heat or steam) • Mobile combustion (transportation of raw
• Fugitive emissions (mainly HFC emissions during use materials/products/ waste, employee business travel,
of refrigeration and air-conditioning equipment) employee commuting)
Appendix D
NOTES
1
Scope 3 activities of outsourcing, contract manufacturing, and fran- 6
The WBCSD Working Group Cement: Toward a Sustainable Cement
chises are not addressed in this table because the inclusion of specific Industry has developed The Cement CO2 Protocol: CO2 Emissions
GHG sources will depend on the nature of the outsourcing. Monitoring and Reporting Protocol for the Cement Industry (2002),
2
which includes guidelines and tools to calculate GHG emissions from
Guidelines on unintentional SF6 process emissions are to be developed. the cement sector.
3
The American Petroleum Institute’s Compendium of Greenhouse Gas 7
Guidelines for waste sector are to be developed.
Emissions Methodologies for the Oil and Gas Industry (2004) provides
guidelines and calculation methodology for calculating GHG emissions 8
The Climate Change Working Group of the International Council of
from the oil and gas sector. Forest and Paper Associations has developed Calculation Tools for
4
Estimating Greenhouse Gas Emissions from Pulp and Paper Mills
The International Aluminum Institute’s Aluminum Sector Greenhouse (2002), which includes guidelines and tools to calculate GHG emissions
Gas Protocol (2003), in cooperation with WRI and WBCSD, provides from the pulp and paper sector.
guidelines and tools for calculating GHG emissions from the
aluminum sector. 9
Guidelines for PFC and SF6 production are to be developed.
5
The International Iron and Steel Institute's Iron and Steel sector guide- 10
Businesses in “other sectors” can estimate GHG emissions using
lines, in cooperation with WRI and WBCSD, are under development. cross-sectoral estimation tools—stationary combustion, mobile
(transportation) combustion, HFC use, measurement and estimation
uncertainty, and waste.
11
WRI has developed Working 9 to 5 on Climate Change: An Office
Guide (2002) and www.Safeclimate.net, which include guidelines
and calculation tools for calculating GHG emissions from office-
based organizations.
94
95
Acronyms
CDM Clean Development Mechanism
CEM Continuous Emission Monitoring
CH4 Methane
CER Certified Emission Reduction
CCAR California Climate Action Registry
CCX Chicago Climate Exchange
CO2 Carbon Dioxide
C O 2- e Carbon Dioxide Equivalent
EPER European Pollutant Emission Register
E U E T S European Union Emissions Allowance Trading Scheme
GHG Greenhouse Gas
GAAP Generally Accepted Accounting Principles
HFCs Hydrofluorocarbons
IPCC Intergovernmental Panel on Climate Change
I P I E C A International Petroleum Industry

Environmental Conservation Association
ISO International Standards Organization
JI Joint Implementation
N 4O Nitrous Oxide
NGO Non-Governmental Organization
PFCs Perfluorocarbons
SF6 Sulfur Hexafluoride
T&D Transmission and Distribution
U K E T S United Kingdom Emission Trading Scheme
W B C S D World Business Council

for Sustainable Development
WRI World Resources Institute

Glossary
Absolute target A target defined by reduction in absolute emissions over time e.g., reduces CO2 emissions by 25%
below 1994 levels by 2010. (Chapter 11)
Additionality A criterion for assessing whether a project has resulted in GHG emission reductions or removals in
addition to what would have occurred in its absence. This is an important criterion when the goal of
the project is to offset emissions elsewhere. (Chapter 8)
Allowance A commodity giving its holder the right to emit a certain quantity of GHG. (Chapter 11)
Annex 1 countries Defined in the International Climate Change Convention as those countries taking on emissions
reduction obligations: Australia; Austria; Belgium; Belarus; Bulgaria; Canada; Croatia; Czech
Republic; Denmark; Estonia; Finland; France; Germany; Greece; Hungary; Iceland; Ireland; Italy; Japan;
Latvia; Liechtenstein; Lithuania; Luxembourg; Monaco; Netherlands; New Zealand; Norway; Poland;
Portugal; Romania; Russian Federation; Slovakia; Slovenia; Spain; Sweden; Switzerland; Ukraine;
United Kingdom; USA.
Associated/affiliated company The parent company has significant influence over the operating and financial policies of the
associated/affiliated company, but not financial control. (Chapter 3)
Audit Trail Well organized and transparent historical records documenting how an inventory was compiled.
Baseline A hypothetical scenario for what GHG emissions, removals or storage would have been in the absence
of the GHG project or project activity. (Chapter 8)
Base year A historic datum (a specific year or an average over multiple years) against which a company’s
emissions are tracked over time. (Chapter 5)
Base year emissions GHG emissions in the base year. (Chapter 5)
Base year emissions recalculation Recalculation of emissions in the base year to reflect a change in the structure of the company, or
to reflect a change in the accounting methodology used. This ensures data consistency over time, i.e.,
comparisons of like with like over time. (Chapter 5, 11)
Biofuels Fuel made from plant material, e.g. wood, straw and ethanol from plant matter (Chapter 4, 9, Appendix B)
Boundaries GHG accounting and reporting boundaries can have several dimensions, i.e. organizational, opera-
tional, geographic, business unit, and target boundaries. The inventory boundary determines which
emissions are accounted and reported by the company. (Chapter 3, 4, 11)
Cap and trade system A system that sets an overall emissions limit, allocates emissions allowances to participants, and
allows them to trade allowances and emission credits with each other. (Chapter 2, 8, 11)
Capital Lease A lease which transfers substantially all the risks and rewards of ownership to the lessee and is
accounted for as an asset on the balance sheet of the lessee. Also known as a Financial or Finance
Lease. Leases other than Capital/Financial/Finance leases are Operating leases. Consult an
accountant for further detail as definitions of lease types differ between various accepted financial
standards. (Chapter 4)
Carbon sequestration The uptake of CO2 and storage of carbon in biological sinks.
Clean Development Mechanism A mechanism established by Article 12 of the Kyoto Protocol for project-based emission reduction
(CDM) activities in developing countries. The CDM is designed to meet two main objectives: to address the
sustainability needs of the host country and to increase the opportunities available to Annex 1 Parties
to meet their GHG reduction commitments. The CDM allows for the creation, acquisition and transfer
of CERs from climate change mitigation projects undertaken in non-Annex 1 countries.
96
GLOSSARY 97
Certified Emission Reductions A unit of emission reduction generated by a CDM project. CERs are tradable commodities that can be
(CERs) used by Annex 1 countries to meet their commitments under the Kyoto Protocol.
Co-generation unit/Combined A facility producing both electricity and steam/heat using the same fuel supply. (Chapter 3)
heat and power (CHP)
Consolidation Combination of GHG emissions data from separate operations that form part of one company or group
of companies. (Chapter 3, 4)
Control The ability of a company to direct the policies of another operation. More specifically, it is defined as
either operational control (the organization or one of its subsidiaries has the full authority to introduce
and implement its operating policies at the operation) or financial control (the organization has the
ability to direct the financial and operating policies of the operation with a view to gaining economic
benefits from its activities). (Chapter 3)
Corporate inventory program A program to produce annual corporate inventories that are in keeping with the principles, standards,
and guidance of the GHG Protocol Corporate Standard. This includes all institutional, managerial and
technical arrangements made for the collection of data, preparation of a GHG inventory, and imple-
mentation of the steps taken to manage the quality of their emission inventory.
CO2 equivalent (CO2-e) The universal unit of measurement to indicate the global warming potential (GWP) of each of the six
greenhouse gases, expressed in terms of the GWP of one unit of carbon dioxide. It is used to evaluate
releasing (or avoiding releasing) different greenhouse gases against a common basis.
Cross-sector calculation tool A GHG Protocol calculation tool that addresses GHG sources common to various sectors, e.g.
emissions from stationary or mobile combustion. See also GHG Protocol calculation tools
(www.ghgprotocol.org).
Direct GHG emissions Emissions from sources that are owned or controlled by the reporting company. (Chapter 4)
Direct monitoring Direct monitoring of exhaust stream contents in the form of continuous emissions monitoring (CEM)
or periodic sampling. (Chapter 6)
Double counting Two or more reporting companies take ownership of the same emissions or reductions. (Chapter 3, 4, 8, 11)
Emissions The release of GHG into the atmosphere.
Emission factor A factor allowing GHG emissions to be estimated from a unit of available activity data (e.g. tonnes of
fuel consumed, tonnes of product produced) and absolute GHG emissions. (Chapter 6)
Emission Reduction Unit (ERU) A unit of emission reduction generated by a Joint Implementation (JI) project. ERUs are tradable
commodities which can be used by Annex 1 countries to help them meet their commitment under the
Kyoto Protocol.
Equity share The equity share reflects economic interest, which is the extent of rights a company has to the risks
and rewards flowing from an operation. Typically, the share of economic risks and rewards in an oper-
ation is aligned with the company's percentage ownership of that operation, and equity share will
normally be the same as the ownership percentage. (Chapter 3)
Estimation uncertainty Uncertainty that arises whenever GHG emissions are quantified, due to uncertainty in data inputs and
calculation methodologies used to quantify GHG emissions. (Chapter 7)
Finance lease A lease which transfers substantially all the risks and rewards of ownership to the lessee and is
accounted for as an asset on the balance sheet of the lessee. Also known as a Capital or Financial
Lease. Leases other than Capital/Financial/Finance leases are Operating leases. Consult an
accountant for further detail as definitions of lease types differ between various accepted accounting
principles. (Chapter 4)
Glossary
Fixed asset investment Equipment, land, stocks, property, incorporated and non-incorporated joint ventures, and partnerships
over which the parent company has neither significant influence nor control. (Chapter 3)
Fugitive emissions Emissions that are not physically controlled but result from the intentional or unintentional releases
of GHGs. They commonly arise from the production, processing transmission storage and use of fuels
and other chemicals, often through joints, seals, packing, gaskets, etc. (Chapter 4, 6)
Green power A generic term for renewable energy sources and specific clean energy technologies that emit fewer
GHG emissions relative to other sources of energy that supply the electric grid. Includes solar
photovoltaic panels, solar thermal energy, geothermal energy, landfill gas, low-impact hydropower,
and wind turbines. (Chapter 4)
Greenhouse gases (GHG) For the purposes of this standard, GHGs are the six gases listed in the Kyoto Protocol: carbon dioxide
(CO2); methane (CH4); nitrous oxide (N2O); hydrofluorocarbons (HFCs); perfluorocarbons (PFCs); and
sulphur hexafluoride (SF6).
GHG capture Collection of GHG emissions from a GHG source for storage in a sink.
GHG credit GHG offsets can be converted into GHG credits when used to meet an externally imposed target.
A GHG credit is a convertible and transferable instrument usually bestowed by a GHG program.
(Chapter 8, 11)
GHG offset Offsets are discrete GHG reductions used to compensate for (i.e., offset) GHG emissions elsewhere, for
example to meet a voluntary or mandatory GHG target or cap. Offsets are calculated relative to a
baseline that represents a hypothetical scenario for what emissions would have been in the absence
of the mitigation project that generates the offsets. To avoid double counting, the reduction giving
rise to the offset must occur at sources or sinks not included in the target or cap for which it is used.
GHG program A generic term used to refer to any voluntary or mandatory international, national, sub-national,
government or non-governmental authority that registers, certifies, or regulates GHG emissions or
removals outside the company. e.g. CDM, EU ETS, CCX, and CCAR.
GHG project A specific project or activity designed to achieve GHG emission reductions, storage of carbon, or
enhancement of GHG removals from the atmosphere. GHG projects may be stand-alone projects,
or specific activities or elements within a larger non-GHG related project. (Chapter 8, 11)
GHG Protocol calculation tools A number of cross-sector and sector-specific tools that calculate GHG emissions on the basis of
activity data and emission factors (available at www.ghgprotocol.org).
GHG Protocol Initiative A multi-stakeholder collaboration convened by the World Resources Institute and World Business Council
for Sustainable Development to design, develop and promote the use of accounting and reporting
standards for business. It comprises of two separate but linked standards — the GHG Protocol Corporate
Accounting and Reporting Standard and the GHG Protocol Project Quantification Standard.
GHG Protocol Project An additional module of the GHG Protocol Initiative addressing the quantification of GHG
Quantification Standard reduction projects. This includes projects that will be used to offset emissions elsewhere and/or
generate credits. More information available at www.ghgprotocol.org. (Chapter 8, 11)
GHG Protocol sector specific A GHG calculation tool that addresses GHG sources that are unique to certain sectors, e.g., process
calculation tools emissions from aluminum production. (see also GHG Protocol Calculation tools)
GHG public report Provides, among other details, the reporting company’s physical emissions for its chosen inventory
boundary. (Chapter 9)
98
GLOSSARY 99
GHG registry A public database of organizational GHG emissions and/or project reductions. For example, the US
Department of Energy 1605b Voluntary GHG Reporting Program, CCAR, World Economic Forum’s Global
GHG Registry. Each registry has its own rules regarding what and how information is reported.
(Introduction, Chapter 2, 5, 8, 10)
GHG removal Absorbtion or sequestration of GHGs from the atmosphere.
GHG sink Any physical unit or process that stores GHGs; usually refers to forests and underground/deep sea
reservoirs of CO2.
GHG source Any physical unit or process which releases GHG into the atmosphere.
GHG trades All purchases or sales of GHG emission allowances, offsets, and credits.
Global Warming Potential (GWP) A factor describing the radiative forcing impact (degree of harm to the atmosphere) of one unit of a
given GHG relative to one unit of CO2.
Group company / subsidiary The parent company has the ability to direct the financial and operating policies of a group
company/subsidiary with a view to gaining economic benefits from its activities. (Chapter 3)
Heating value The amount of energy released when a fuel is burned completely. Care must be taken not to confuse
higher heating values (HHVs), used in the US and Canada, and lower heating values, used in all other
countries (for further details refer to the calculation tool for stationary combustion available at
www.ghgprotocol.org).
Indirect GHG emissions Emissions that are a consequence of the operations of the reporting company, but occur at sources
owned or controlled by another company. (Chapter 4)
Insourcing The administration of ancillary business activities, formally performed outside of the company, using
resources within a company. (Chapter 3, 4, 5, 9)
Intensity ratios Ratios that express GHG impact per unit of physical activity or unit of economic value (e.g. tonnes of
CO2 emissions per unit of electricity generated). Intensity ratios are the inverse of productivity/effi-
ciency ratios. (Chapter 9, 11)
Intensity target A target defined by reduction in the ratio of emissions and a business metric over time e.g., reduce
CO2 per tonne of cement by 12% between 2000 and 2008. (Chapter 11)
Intergovernmental Panel on International body of climate change scientists. The role of the IPCC is to assess the scientific,
Climate Change (IPCC) technical and socio-economic information relevant to the understanding of the risk of human-induced
climate change (www.ipcc.ch).
Inventory A quantified list of an organization’s GHG emissions and sources.
Inventory boundary An imaginary line that encompasses the direct and indirect emissions that are included in the inven-
tory. It results from the chosen organizational and operational boundaries. (Chapter 3, 4)
Inventory quality The extent to which an inventory provides a faithful, true and fair account of an organization’s GHG
emissions. (Chapter 7)
Joint Implementation (JI) The JI mechanism was established in Article 6 of the Kyoto Protocol and refers to climate change miti-
gation projects implemented between two Annex 1 countries. JI allows for the creation, acquisition
and transfer of “emission reduction units” (ERUs).
Kyoto Protocol A protocol to the United Nations Framework Convention on Climate Change (UNFCCC). Once entered
into force it will require countries listed in its Annex B (developed nations) to meet reduction targets
of GHG emissions relative to their 1990 levels during the period of 2008–12.
Glossary
Leakage (Secondary effect) Leakage occurs when a project changes the availability or quantity of a product or service that results
in changes in GHG emissions elsewhere. (Chapter 8)
Life Cycle Analysis Assessment of the sum of a product’s effects (e.g. GHG emissions) at each step in its life cycle,
including resource extraction, production, use and waste disposal. (Chapter 4)
Material discrepancy An error (for example from an oversight, omission, or miscalculation) that results in the reported
quantity being significantly different to the true value to an extent that will influence performance or
decisions. Also known as material misstatement.(Chapter 10)
Materiality threshold A concept employed in the process of verification. It is often used to determine whether an error or
omission is a material discrepancy or not. It should not be viewed as a de minimus for defining a
complete inventory. (Chapter 10)
Mobile combustion Burning of fuels by transportation devices such as cars, trucks, trains, airplanes, ships etc. (Chapter 6)
Model uncertainty GHG quantification uncertainty associated with mathematical equations used to characterize the
relationship between various parameters and emission processes. (Chapter 7)
Non-Annex 1 countries Countries that have ratified or acceded to the UNFCC but are not listed under Annex 1 and are there-
fore not under any emission reduction obligation (see also Annex 1 countries).
Operation A generic term used to denote any kind of business, irrespective of its organizational, governance, or
legal structures. An operation can be a facility, subsidiary, affiliated company or other form of joint
venture. (Chapter 3, 4)
Operating lease A lease which does not transfer the risks and rewards of ownership to the lessee and is not recorded
as an asset in the balance sheet of the lessee. Leases other than Operating leases are
Capital/Financial/Finance leases. Consult an accountant for further detail as definitions of lease
types differ between various accepted financial standards. (Chapter 4)
Operational boundaries The boundaries that determine the direct and indirect emissions associated with operations owned or
controlled by the reporting company. This assessment allows a company to establish which operations
and sources cause direct and indirect emissions, and to decide which indirect emissions to include
that are a consequence of its operations. (Chapter 4)
Organic growth/decline Increases or decreases in GHG emissions as a result of changes in production output, product mix,
plant closures and the opening of new plants. (Chapter 5)
Organizational boundaries The boundaries that determine the operations owned or controlled by the reporting company,
depending on the consolidation approach taken (equity or control approach). (Chapter 3)
Outsourcing The contracting out of activities to other businesses. (Chapter 3, 4, 5)
Parameter uncertainty GHG quantification uncertainty associated with quantifying the parameters used as inputs to estima-
tion models. (Chapter 7)
Primary effects The specific GHG reducing elements or activities (reducing GHG emissions, carbon storage, or
enhancing GHG removals) that the project is intended to achieve. (Chapter 8)
Process emissions Emissions generated from manufacturing processes, such as the CO2 that is arises from the break-
down of calcium carbonate (CaCO3) during cement manufacture. (Chapter 4, Appendix D)
Productivity/efficiency ratios Ratios that express the value or achievement of a business divided by its GHG impact. Increasing effi-
ciency ratios reflect a positive performance improvement. e.g. resource productivity(sales per tonne
GHG). Productivity/efficiency ratios are the inverse of intensity ratios. (Chapter 9)
Ratio indicator Indicators providing information on relative performance such as intensity ratios or productivity/effi-
ciency ratios. (Chapter 9)
100
GLOSSARY 101
Renewable energy Energy taken from sources that are inexhaustible, e.g. wind, water, solar, geothermal energy, and biofuels.
Reporting Presenting data to internal management and external users such as regulators, shareholders, the
general public or specific stakeholder groups. (Chapter 9)
Reversibility of reductions This occurs when reductions are temporary, or where removed or stored carbon may be returned to the
atmosphere at some point in the future. (Chapter 8)
Rolling base year The process of shifting or rolling the base year forward by a certain number of years at regular inter-
vals of time. (Chapter 5, 11)
Scientific Uncertainty Uncertainty that arises when the science of the actual emission and/or removal process is not
completely understood. (Chapter 7)
Scope Defines the operational boundaries in relation to indirect and direct GHG emissions. (Chapter 4)
Scope 1 inventory A reporting organization’s direct GHG emissions. (Chapter 4)
Scope 2 inventory A reporting organization’s emissions associated with the generation of electricity, heating/ cooling, or
steam purchased for own consumption. (Chapter 4)
Scope 3 inventory A reporting organization’s indirect emissions other than those covered in scope 2. (Chapter 4)
Scope of works An up-front specification that indicates the type of verification to be undertaken and the level of
assurance to be provided between the reporting company and the verifier during the verification
process. (Chapter 10)
Secondary effects (Leakage) GHG emissions changes resulting from the project not captured by the primary effect(s). These are
typically the small, unintended GHG consequences of a project. (Chapter 8)
Sequestered atmospheric carbon Carbon removed from the atmosphere by biological sinks and stored in plant tissue. Sequestered
atmospheric carbon does not include GHGs captured through carbon capture and storage.
Significance threshold A qualitative or quantitative criteria used to define a significant structural change. It is the responsi-
bility of the company/ verifier to determine the “significance threshold” for considering base year
emissions recalculation. In most cases the “significance threshold” depends on the use of the infor-
mation, the characteristics of the company, and the features of structural changes. (Chapter 5)
Stationary Combustion Burning of fuels to generate electricity, steam, heat, or power in stationary equipment such as boilers,
furnaces etc.
Structural change A change in the organizational or operational boundaries of a company that result in the transfer of
ownership or control of emissions from one company to another. Structural changes usually result
from a transfer of ownership of emissions, such as mergers, acquisitions, divestitures, but can also
include outsourcing/ insourcing. (Chapter 5)
Target base year The base year used for defining a GHG target, e.g. to reduce CO2 emissions 25% below the target base
year levels by the target base year 2000 by the year 2010. (Chapter 11)
Target boundary The boundary that defines which GHG’s, geographic operations, sources and activities are covered by
the target. (Chapter 11)
Target commitment period The period of time during which emissions performance is actually measured against the target. It
ends with the target completion date. (Chapter 11)
Target completion date The date that defines the end of the target commitment period and determines whether the target is
relatively short- or long-term. (Chapter 11)
Glossary
Target double counting policy A policy that determines how double counting of GHG reductions or other instruments, such as
allowances issued by external trading programs, is dealt with under a GHG target. It applies only to
companies that engage in trading (sale or purchase) of offsets or whose corporate target boundaries
interface with other companies’ targets or external programs. (Chapter 11)
Uncertainty 1. Statistical definition: A parameter associated with the result of a measurement that characterizes
the dispersion of the values that could be reasonably attributed to the measured quantity. (e.g., the
sample variance or coefficient of variation). (Chapter 7)
2. Inventory definition: A general and imprecise term which refers to the lack of certainty in emissions-
related data resulting from any causal factor, such as the application of non-representative factors or
methods, incomplete data on sources and sinks, lack of transparency etc. Reported uncertainty
information typically specifies a quantitative estimates of the likely or perceived difference between
a reported value and a qualitative description of the likely causes of the difference. (Chapter 7).
United Nations Framework Signed in 1992 at the Rio Earth Summit, the UNFCCC is a milestone Convention on Climate Change
Convention on Climate Change treaty that provides an overall framework for international efforts to (UNFCCC) mitigate climate
(UNFCCC) change. The Kyoto Protocol is a protocol to the UNFCCC.
Value chain emissions Emissions from the upstream and downstream activities associated with the operations of the
reporting company. (Chapter 4)
Verification An independent assessment of the reliability (considering completeness and accuracy) of a GHG
inventory. (Chapter 10)
102
103
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Management in National Greenhouse Gas Inventories,
Intergovernmental Panel on Climate Change
Contributors
Structured Feedback Companies ( R E V I S E D EDITION)
AstraZeneca Philips & Yaming Co., Ltd.

Birka Energi Seattle City Light
Eastman Kodak Co. Simplex Mills Co. Ltd.
ENDESA Sony Corporation
IKEA International A / S STMicroelectronics
Interface, Inc. Tata Iron & Steel Company Ltd.
Kansai Electric Power Company Tokyo Electric Power Company
Nike, Inc. Tokyo Gas Co. Ltd.
Norsk Hydro We Energies
N.V. Nuon Renewable Energy
Road Testers (FIRST EDITION)
Baxter International Ontario Power Generation

BP Petro-Canada
CODELCO PricewaterhouseCoopers road tested with European
companies in the non-ferrous metal sector
Duncans Industries
Public Service Electric and Gas
Dupont Company
Shree Cement
Ford Motor Company
Shell Canada
Fortum Power and Heat
Suncor Energy
General Motors Corporation
Tokyo Electric Power Company
Hindalco Industries
Volkswagen
IBM Corporation
World Business Council for Sustainable Development
Maihar Cement
World Resources Institute
Nike, Inc.
500 PPM road tested with several small and medium
Norsk Hydro companies in Germany
WRI & WBCSD GHG Protocol Initiative Team ( F I R S T EDITION)
Janet Ranganathan World Resources Institute David Moorcroft World Business Council
Pankaj Bhatia World Resources Institute
Jasper Koch World Business Council
Project Management Team ( F I R S T EDITION)
Brian Smith Innovation Associates Sujata Gupta The Energy Research Institute
Hans Aksel Haugen Norsk Hydro Yasuo Hosoya Tokyo Electric Power Company
Vicki Arroyo Pew Center on Climate Change Rebecca Eaton World Wildlife Fund
Aidan J. Murphy Royal Dutch/ Shell
104
CONTRIBUTORS 105
Contributors
Heather Tansey 3M Corporation Britt Sahlestrom Birka Energi
Ingo Puhl 500 PPM David Evans BP
Dawn Fenton ABB Nick Hughes BP
Christian Kornevall ABB Tasmin Lishman BP
Paul-Antoine Lacour AFOCEL Mark Barthel British Standards Institution
Kenneth Martchek Alcoa JoAnna Bullock Business for Social Responsibility
Vince Van Son Alcoa Robyn Camp California Climate Action Registry
Ron Nielsen Alcan Jill Gravender California Climate Action Registry
Steve Pomper Alcan Dianne Wittenberg California Climate Action Registry
Pat Quinn Allegheny Energy David Cahn California Portland Cement
Joe Cascio Booz Allen & Hamilton Inc. Paul Blacklock Calor Gas Limited
David Jaber Alliance to Save Energy Julie Chiaravalli Cameron-Cole
Alain Bill Alstom Power Environment Connie Sasala Cameron-Cole
Robert Greco American Petroleum Institute Evan Jones Canada’s Climate Change Voluntary
Challenge and Registry Inc.
Walter C. Retzsch American Petroleum Institute
Alan D. Willis Canadian Institute of
Karen Ritter American Petroleum Institute Chartered Accountants
Tom Carter American Portland Cement Alliance Miguel A Gonzalez CEMEX
Dale Louda American Portland Cement Alliance Carlos Manuel CEMEX
Ted Gullison Anova Duarte Oliveira
J Douglas Akerson Aon Risk Services of Texas Inc Inna Gritsevich CENEf
(Center for Energy Efficiency)
John Molburg Argonne National Laboratory
Ellina Levina Center for Clean Air Policy
Sophie Jabonski Arthur Anderson
Steve Winkelman Center for Clean Air Policy
Fiona Gadd Arthur Andersen
Aleg Cherp Central European University (Hungary)
Christophe Scheitzky Arthur Andersen and ECOLOGIA
Scot Foster Arthur D. Little Mark Fallon CH2M Hill
Mike Isenberg Arthur D. Little Lisa Nelowet Grice CH2M Hill
Bill Wescott Arthur D. Little Arthur Lee ChevronTexaco
Keith Moore AstraZeneca William C. McLeod ChevronTexaco
Birgita Thorsin AstraZeneca Susann Nordrum ChevronTexaco
Thomas E. Werkem Atofina Chemicals Alice LeBlanc Chicago Climate Exchange
Jean-Bernard Carrasco Australian Greenhouse Office Charlene R. Garland Clean Air-Cool Planet
David Harrison Australian Greenhouse Office Donna Boysen Clean Energy Group
Bronwyn Pollock Australian Greenhouse Office Jennifer DuBose Climate Neutral Network
Linda Powell Australian Greenhouse Office Sue Hall Climate Neutral Network
James Shevlin Australian Greenhouse Office Karen Meadows Climate Neutral Network
Chris Loreti Battelle Memorial Institute Michael Burnett Climate Trust
Ronald E. Meissen Baxter International David Olsen Clipper Windpower
Göran Andersson Birka Energi Marco Bedoya Cimpor
Sofi Harms-Ringdahl Birka Energi Jose Guimaraes Cimpor
Contributors
Elizabeth Arner CO2e.com/Cantor Fitzgerald Paul Tebo DuPont Company

Fernando E. Toledo CODELCO Fred Whiting DuPont Company
Bruce Steiner Collier Shannon Scott Roy Wood Eastman Kodak Co.
Lynn Preston Collins & Aikman Jochen Harnisch ECOFYS
Annick Carpentier Confederation of Alan Tate Ecos Corporation
European Paper Industries
Pedro Moura Costa EcoSecurities
K.P. Nyati Confederation of Indian Industry
Justin Guest EcoSecurities
Sonal Pandya Conservation International
D. Gary Madden Emission Credit LLC
Michael Totten Conservation International
Kyle L. Davis Edison Mission Energy/
Dominick J. Mormile Consolidated Edison Company MidAmerican Energy Holdings Co.
John Kessels CRL Energy Ltd. Maria Antonia ENDESA
Abad Puértolas
Ian Lewis Cumming Cockburn Limited
David Corregidor Sanz ENDESA
Raymond P. Cote Dalhousie University
Elvira Elso Torralba ENDESA
Olivia Hartridge DEFRA/European Commission
Joel Bluestein Energy & Environmental Analysis, Inc.
Robert Casamento Deloitte & Touche
Y P Abbi The Energy Research Institute
Markus Lehni Deloitte & Touche
Girish Sethi The Energy Research Institute
Flemming Tost Deloitte & Touche
Vivek Sharma The Energy Research Institute
Philip Comer Det Norske Veritas
Crosbie Baluch Energetics Pty. Ltd.
Simon Dawes Det Norske Veritas
Marcus Schneider Energy Foundation
Trygve Roed Larsen Det Norske Veritas
David Crossley Energy Futures Australia Pty Ltd
Einar Telnes Det Norske Veritas
Patrick Nollet Entreprises pour l'Environnement
Kalipada Chatterjee Development Alternatives
James L. Wolf Envinta
Vivek Kumar Development Alternatives
Kenneth Olsen Environment Canada
Samrat Sengupta Development Alternatives
Adrian Steenkamer Environment Canada
Francesco Balocco The Dow Chemical Company
Millie Chu Baird Environmental Defense
Paul Cicio The Dow Chemical Company
Sarah Wade Environmental Defense
Frank Farfone The Dow Chemical Company
Satish Kumar Environmental Energy Technologies
Peter Molinaro The Dow Chemical Company
John Cowan Environmental Interface
Scott Noesen The Dow Chemical Company
Edward W. Repa Environmental Research
Stephen Rose The Dow Chemical Company and Education Foundation
Jorma Salmikivi The Dow Chemical Company Tatiana Bosteels Environmental Resources Management
Don Hames The Dow Chemical Company William B. Weil Environmental Resources Management
R. Swarup Duncans Industries Wiley Barbour Environmental Resources Trust
John B. Carberry DuPont Company Barney Brannen Environmental Resources Trust
David Childs DuPont Company Ben Feldman Environmental Resources Trust
John C. DeRuyter Dupont Company Al Daily Environmental Synergy
Tom Jacob DuPont Company Anita M. Celdran Environmental Technology
Mack McFarland DuPont Company Evaluation Center
Ed Mongan DuPont Company William E. Kirksey Environmental Technology

Evaluation Center
Ron Reimer DuPont Company
106
CONTRIBUTORS 107
James Bradbury EPOTEC Joseph Romm Global Environment

and Technology Foundation
Alan B. Reed EPOTEC
Arthur H Rosenfeld Global Environment
Daniele Agostini Ernst & Young and Technology Foundation
Juerg Fuessler Ernst Basler & Partners Dilip Biswas Government of India Ministry
Stefan Larsson ESAB of Environment & Forests
Lutz Blank European Bank for Reconstruction Matthew DeLuca Green Mountain Energy
and Development Richard Tipper Greenergy ECCM
Alke Schmidt European Bank for Reconstruction Ralph Taylor Greenleaf Composting Company
and Development
Glenna Ford GreenWare Environmental Systems
Peter Vis European Commission
Nickolai Denisov GRID-Arendal / Hindalco Industries
Chris Evers European Commission
Y.K. Saxena Gujarat Ambuja Cement
Yun Yang ExxonMobil Research
& Engineering Company Mihir Moitra Hindalco Industries Ltd.
Urs Brodmann Factor Consulting and Management Claude Culem Holcim
M.A. J. Jeyaseelan Federation of Indian Chambers Adrienne Williams Holcim
of Commerce & Industry
Mo Loya Honeywell Allied Signal
Anu Karessuo Finnish Forest Industries Federation
Edan Dionne IBM Corporation
Tod Delaney First Environment
Ravi Kuchibhotla IBM Corporation
Brian Glazebrook First Environment
Thomas A. Cortina ICCP
James D. Heeren First Environment
Paul E. Bailey ICF Consulting
James T. Wintergreen First Environment
Anne Choate ICF Consulting
Kevin Brady Five Winds International
Craig Ebert ICF Consulting
Duncan Noble Five Winds International
Marcia M. Gowen ICF Consulting
Steven Young Five Winds International
Kamala R. Jayaraman ICF Consulting
Larry Merritt Ford Motor Company
Richard Lee ICF Consulting
Chad McIntosh Ford Motor Company
Diana Paper ICF Consulting
John Sullivan Ford Motor Company
Frances Sussman ICF Consulting
Debbie Zemke Ford Motor Company
Molly Tirpak ICF Consulting
Dan Blomster Fortum Power and Heat
Thomas Bergmark IKEA International A / S
Arto Heikkinen Fortum Power and Heat
Eva May Lawson IKEA International A / S
Jussi Nykanen Fortum Power and Heat
Mona Nilsson IKEA International A / S
Steven Hellem Global Environment
Management Initiative Othmar Schwank INFRAS
Judith M. Mullins General Motors Corporation Roel Hammerschlag Institute for Lifecycle Energy Analysis
Terry Pritchett General Motors Corporation Shannon Cox Interface Inc.
Richard Schneider General Motors Corporation Buddy Hay Interface Inc.
Robert Stephens General Motors Corporation Alyssa Tippens Interface Inc.
Kristin Zimmerman General Motors Corporation Melissa Vernon Interface Inc.
Mark Starik George Washington University Willy Bjerke International Aluminum Institute
Michael Rumberg Gerling Group of Insurances Jerry Marks International Aluminum Institute
Jeffrey C. Frost GHG Spaces Robert Dornau International Emissions

Trading Association
T. Imai Global Environment and Energy Group
Contributors
Andrei Marcu International Emissions Jeff Fiedler Natural Resources Defense Council
Trading Association
Brad Upton NCASI
Akira Tanabe International Finance Corporation
Timothy J. Roskelley NESCAUM
George Thomas International Finance Corporation
Matthew W. Addison Nexant
Danny L. Adams International Paper Company
Atulya Dhungana Nexant
Julie C. Brautigam International Paper Company
David H. King Niagara Mohawk Power Corporation
Carl Gagliardi International Paper Company
Martin A. Smith Niagara Mohawk Power Corporation
Thomas C. Jorling International Paper Company
Jim Goddard Nike Inc.
Mark E. Bateman Investor Responsibility Research Center
Leta Winston Nike Inc.
S.K. Bezbaroa ITC Ltd.
Amit Meridor NILIT
H.D. Kulkami ITC Ltd.
Karina Aas Norsk Hydro
Michael Nesbit JAN Consultants
Jos van Danne Norsk Hydro
Chris Hunter Johnson & Johnson International
Hans Goosens Norsk Hydro
Harry Kaufman Johnson & Johnson International
Jon Rytter Hasle Norsk Hydro
Daniel Usas Johnson & Johnson Worldwide
Engineering Services Tore K. Jenssen Norsk Hydro
Shintaro Yokokawa Kansai Electric Power Co. Halvor Kvande Norsk Hydro
Iain Alexander KPMG Bernt Malme Norsk Hydro
Giulia Galluccio KPMG Lillian Skogen Norsk Hydro
Lisa Gibson KPMG Jostein Soreide Norsk Hydro
Jed Jones KPMG Lasse Nord Norsk Hydro
Sophie Punte KPMG Thor Lobben Norske Skogindustrier ASA
Michele Sanders KPMG Morton A. Barlaz North Carolina State University
Chris Boyd Lafarge Corporation Geir Husdal Novatech
David W. Carroll Lafarge Corporation Gard Pedersen Novatech
Ed Vine Lawrence Berkeley National Laboratory Ron Oei Nuon N.V.
Richard Kahle Lincoln Electric Service Jan Corfee-Morlot OECD
Michael E. Canes Logistics Management Institute Stephane Willems OECD
Erik Brejla The Louis Berger Group Anda Kalvins Ontario Power Generation
Michael J. Bradley M.J. Bradley & Associates Mikako Kokitsu Osaka Gas Co.
Brian Jones M.J. Bradley & Associates Greg San Martin Pacific Gas and Electric Company
Craig McBernie McBernie QERL Ken Humphreys Pacific Northwest National Laboratory
Tracy Dyson Meridian Energy Limited Michael Betz PE Europe GmbH
Tim Mealey Meridian Institute Kathy Scales Petro-Canada
Maria Wellisch MWA Consultants Judith Greenwald Pew Center
Margriet Kuijper NAM Naomi Pena Pew Center
Sukumar Devotta National Chemical Laboratory Daniel L. Chartier PG&E Generating
Neil B. Cohn Natsource Zhang Fan Philips & Yaming Co. Ltd.
Garth Edward Natsource Xue Gongren Philips & Yaming Co. Ltd.
Robert Youngman Natsource Orestes R. Anastasia Planning and Development

Collaborative International
Dale S. Bryk Natural Resources Defense Council
108 LIST OF CONTRIBUTORS
CONTRIBUTORS 109
Robert Hall Platts Research and Consulting Gareth Phillips SGS

Neil Kolwey Platts Research and Consulting Antoine de SGS
La Rochefordière
David B. Sussman Poubelle Associates
Murray G. Jones Shell Canada
Bill Kyte Powergen
Sean Kollee Shell Canada
Surojit Bose PricewaterhouseCoopers
Rick Weidel Shell Canada
Melissa Carrington PricewaterhouseCoopers
Pipope Siripatananon Siam Cement
Rachel Cummins PricewaterhouseCoopers
J.P. Semwal Simplex Mills Co. Ltd.
Len Eddy PricewaterhouseCoopers
Ros Taplin SMEC Environment
Dennis Jennings PricewaterhouseCoopers
Robert K. Ham Solid & Hazardous
Terje Kronen PricewaterhouseCoopers Waste Engineering
Craig McBurnie PricewaterhouseCoopers Jeremy K. O’Brien Solid Waste Association
Olivier Muller PricewaterhouseCoopers of North America
Dorje Mundle PricewaterhouseCoopers Hidemi Tomita Sony Corporation
Thierry Raes PricewaterhouseCoopers Gwen Parker Stanford University
Alain Schilli PricewaterhouseCoopers Georges Auguste STMicroelectronics
Hans Warmenhoven PricewaterhouseCoopers Ivonne Bertoncini STMicroelectronics
Pedro Maldonado PRIEN Giuliano Boccalletti STMicroelectronics
Alfredo Munoz PRIEN Eugenio Ferro STMicroelectronics
Mark S. Brownstein PSEG Philippe Levavasseur STMicroelectronics
James Hough PSEG Geoffrey Johns Suncor Energy
Samuel Wolfe PSEG Manuele de Gennaro Swiss Federal Institute of Technology,

ETH Zurich
Vinayak Khanolkar Pudumjee Pulp & Paper Mills Ltd.
Markus Ohndorf Swiss Federal Institute of Technology,
Federica Ranghieri Ranghieri & Associates ETH Zurich
Jennifer Lee Resources for the Future Matthias Gysler Swiss Federal Office for Energy
Kaj Embren Respect Europe Christopher T. Swiss Reinsurance Co.
Walker
Mei Li Han Respect Europe
Gregory A. Norris Sylvatica
David W. Cross The RETEC Group
GS Basu Tata Iron & Steel Company Ltd.
Alan Steinbeck Rio Tinto
RP Sharma Tata Iron & Steel Company Ltd.
Katie Smith RMC Group
Robert Graff Tellus Institute
Rick Heede Rocky Mountain Institute
Sivan Kartha Tellus Institute
Chris Lotspeich Rocky Mountain Institute
Michael Lazarus Tellus Institute
Anita M. Burke Royal Dutch / Shell
Allen L. White Tellus Institute
David Hone Royal Dutch / Shell
Will Gibson Tetra Tech Em Incorporated
Thomas Ruddy Ruddy Consultants
Satish Malik Tetra Tech Em Incorporated
Julie Doherty Science Applications Intl. Corp.
Fred Zobrist Tetra Tech Em Incorporated
Richard Y. Richards Science Applications Intl. Corp.
Sonal Agrawal Tetra Tech India
Corinne Grande Seattle City Light
Ranjana Ganguly Tetra Tech India
Doug Howell Seattle City Light
Ashwani Zutshi Tetra Tech India
Edwin Aalders SGS
Mark D. Crowdis Think Energy
Irma Lubrecht SGS
Contributors
Tinus Pulles TNO MEP Dina Kruger U.S. Environmental Protection Agency
Yasushi Hieda Tokyo Electric Power Co. Ltd Skip Laitner U.S. Environmental Protection Agency
Midori Sasaki Tokyo Electric Power Co. Ltd. Joseph Mangino U.S. Environmental Protection Agency
Tsuji Yoshiyuki Tokyo Electric Power Co. Ltd. Pam Herman Milmoe U.S. Environmental Protection Agency
Hiroshi Hashimoto Tokyo Gas Co. Ltd. Beth Murray U.S. Environmental Protection Agency
Takahiro Nagata Tokyo Gas Co. Ltd Deborah Ottinger U.S. Environmental Protection Agency
Kentaro Suzawa Tokyo Gas Co. Ltd. Paul Stolpman U.S. Environmental Protection Agency
Satoshi Yoshida Tokyo Gas Co. Ltd. Susan Thorneloe U.S. Environmental Protection Agency
Ralph Torrie Torrie Smith Associates Chloe Weil U.S. Environmental Protection Agency
Manuela Ojan Toyota Motor Company Phil J. Wirdzek U.S. Environmental Protection Agency
Eugene Smithart Trane Company Tom Wirth U.S. Environmental Protection Agency
Laura Kosloff Trexler & Associates Michael Savonis U.S. Federal Highway Administration
Mark Trexler Trexler & Associates M. Michael Miller U.S. Geological Survey
Walter Greer Trinity Consultants Hendrik G. van Oss U.S. Geological Survey
Jochen Mundinger University of Cambridge Valentin V. Tepordei U.S. Geological Survey
Hannu Nilsen UPM-Kymmene Corporation Marguerite Downey U.S. Postal Service
Nao Ikemoto U.S. Asia Environmental Partnership Hussein Abaza UNEP
Stephen Calopedis U.S. Department of Energy Lambert Kuijpers UNEP
Gregory H. Kats U.S. Department of Energy Gary Nakarado UNEP
Dick Richards U.S. Department of Energy Mark Radka UNEP
Arthur Rosenfeld U.S. Department of Energy Stelios Pesmajoglou UNFCCC
Arthur Rypinski U.S. Department of Energy Alden Meyer Union of Concerned Scientists
Monisha Shah U.S. Department of Energy Judith Bayer United Technologies Corporation
Tatiana Strajnic U.S. Department of Energy Fred Keller United Technologies Corporation
Kenneth Andrasko U.S. Environmental Protection Agency Paul Patlis United Technologies Corporation
Jan Canterbury U.S. Environmental Protection Agency Ellen J. Quinn United Technologies Corporation
Ed Coe U.S. Environmental Protection Agency Bill Walters United Technologies Corporation
Lisa H. Chang U.S. Environmental Protection Agency Gary Bull University of British Colombia
Andrea Denny U.S. Environmental Protection Agency Zoe Harkin University of British Columbia
Bob Doyle U.S. Environmental Protection Agency Gerard Alleng University of Delaware
Henry Ferland U.S. Environmental Protection Agency Jacob Park University of Maryland
Dave Godwin U.S. Environmental Protection Agency Terri Shires URS Corporation
Katherine Grover U.S. Environmental Protection Agency Angela Crooks USAID
John Hall U.S. Environmental Protection Agency Virginia Gorsevski USAID
Lisa Hanle U.S. Environmental Protection Agency Carrie Stokes USAID
Reid Harvey U.S. Environmental Protection Agency Sandeep Tandon USAID
Kathleen Hogan U.S. Environmental Protection Agency A.K. Ghose Vam Organosys Ltd.
Roy Huntley U.S. Environmental Protection Agency Cyril Coillot Vivendi Environment
Bill N. Irving U.S. Environmental Protection Agency Eric Lesueur Vivendi Environment
110
CONTRIBUTORS 111
Michael Dillman Volkswagen Anand Rao World Resources Institute

Stephan Herbst Volkswagen Lee Schipper World Resources Institute
Herbert Forster Votorantim Jason Snyder World Resources Institute
Claude Grinfeder Votorantim Jennifer Morgan World Wildlife Fund
Mahua Acharya World Business Council
for Sustainable Development WRI and WBCSD would also like to thank the following individuals
Christine Elleboode World Business Council and organizations for their generous financial support: Energy
for Sustainable Development Foundation, Spencer T. and Ann W. Olin Foundation, John D. and
Margaret Flaherty World Business Council Catherine T. MacArthur Foundation, Charles Stewart Mott
Foundation, the US Agency for International Development, the US
Al Fry World Business Council
for Sustainable Development Environmental Protection Agency, Arthur Lee, Anglo American,
Susanne Haefeli World Business Council Baxter International, BP, Det Norske Veritas, DuPont, Ford, General
Motors, Lafarge, International Paper, Norsk Hydro, Ontario Power
Kija Kummer World Business Council
for Sustainable Development Generation, Petro-Canada, PowerGen, S.C.Johnson, SGS, Shell,
Heidi Sundin World Business Council Statoil, STMicroelectronics, Sulzer, Suncor, Swiss Re, Texaco, The
for Sustainable Development Dow Chemical Company, Tokyo Electric Power Company, Toyota,
Donna Danihel We Energies TransAlta and Volkswagen.
Gary Risner Weyerhauser
Thomas F. Catania Whirlpool Corporation
Eric Olafson Williams Company
Johannes Heister World Bank
Ajay Mathur World Bank
Richard Samans World Economic Forum
Andrew Aulisi World Resources Institute
Kevin Baumert World Resources Institute
Carey Bylin World Resources Institute
Florence Daviet World Resources Institute
Manmita Dutta World Resources Institute
Suzie Greenhalgh World Resources Institute
Craig Hanson World Resources Institute
Fran Irwin World Resources Institute
David Jhirad World Resources Institute
Nancy Kete World Resources Institute
Bill LaRocque World Resources Institute
Jim MacKenzie World Resources Institute
Emily Matthews World Resources Institute
Sridevi Nanjundaram World Resources Institute
Jim Perkaus World Resources Institute
Jonathan Pershing World Resources Institute
Samantha World Resources Institute
Putt del Pino
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Ordering publications
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Fax: (44 1438) 748 844
wbcsd @ earthprint.com
Publications are available at:

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Disclaimer
This document, designed to promote best practice GHG
accounting and reporting, has been developed through a
unique multi-stakeholder consultative process involving
representatives of reporters and report-users from around
the world. While WBCSD and WRI encourage use of the
GHG Protocol Corporate Standard by all corporations
and organizations, the preparation and publication of
reports based fully or partially on the GHG Protocol is the
full responsibility of those producing them. Neither the
WBCSD and WRI, nor other individuals who contributed
to this standard assume responsibility for any conse-
quences or damages resulting directly or indirectly from
its use in the preparation of reports or the use of reports
based on the GHG Protocol Corporate Standard.
Copyright © World Resources Institute and World Business Council

for Sustainable Development, March 2004
ISBN 1-56973-568-9
Printed in USA
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112
About WBCSD About WRI
The World Business Council for Sustainable Development (WBCSD) World Resources Institute is an independent nonprofit organization
is a coalition of 170 international companies united by a shared with a staff of more than 100 scientists, economists, policy
commitment to sustainable development via the three pillars of experts, business analysts, statistical analysts, mapmakers, and
economic growth, ecological balance and social progress. Our communicators working to protect the Earth and improve people’s
members are drawn from more than 35 countries and 20 major lives. The GHG Protocol Initiative is managed by WRI’s Sustainable
industrial sectors. We also benefit from a global network of Enterprise Program which for more than a decade, has harnessed
48 national and regional business councils and partner organi- the power of business to create profitable solutions to environment
zations involving some 1,000 business leaders globally. and development challenges. WRI is the only organization that
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The Greenhouse Gas Protocol

Year: 1000 1500 2000

A Corporate Accounting and Reporting Standard

Revision Working Group

Introduction The Greenhouse Gas Protocol Initiative 2

Chapter 1 GHG Accounting and Reporting Principles S T A N D A R D G U I D A N C E 6

Chapter 2 Business Goals and Inventory Design G U I D A N C E 10

Chapter 3 Setting Organizational Boundaries S T A N D A R D G U I D A N C E 16

Chapter 4 Setting Operational Boundaries S T A N D A R D G U I D A N C E 24

Chapter 5 Tracking Emissions Over Time S T A N D A R D G U I D A N C E 34

Chapter 6 Identifying and Calculating GHG Emissions G U I D A N C E 40

Chapter 7 Managing Inventory Quality G U I D A N C E 48

Chapter 8 Accounting for GHG Reductions G U I D A N C E 58

Chapter 9 Reporting GHG Emissions S T A N D A R D G U I D A N C E 62

Chapter 10 Verification of GHG Emissions G U I D A N C E 68

Chapter 11 Setting GHG Targets G U I D A N C E 74

Appendix A Accounting for Indirect Emissions from Electricity 86

Appendix B Accounting for Sequestered Atmospheric Carbon 88

Appendix C Overview of GHG Programs 90

Appendix D Industry Sectors and Scopes 92

T he Greenhouse Gas Protocol Initiative is a multi-stakeholder partnership of

businesses, non-governmental organizations (NGOs), governments, and others

convened by the World Resources Institute (WRI), a U.S.-based environmental

Geneva-based coalition of 170 international companies. Launched in 1998, the

Initiative’s mission is to develop internationally accepted greenhouse gas (GHG)

• GHG Protocol Project Quantification Standard (forthcoming; a guide for quantifying

reductions from GHG mitigation projects)

• To simplify and reduce the costs of compiling a GHG inventory

• To provide business with information that can be used to build

• To provide information that facilitates participation in voluntary

• To increase consistency and transparency in GHG accounting

Both business and other stakeholders benefit from converging

Relationship to other GHG programs GHG calculation tools

• GHG registries, e.g., California Climate Action Registry (CCAR),

Changes to specific chapters include: Frequently asked questions…

• C H A P T E R 8 : Guidance has been added on accounting for NOTES

A s with financial accounting and reporting, generally accepted GHG

accounting principles are intended to underpin and guide GHG

accounting and reporting to ensure that the reported information represents a

faithful, true, and fair account of a company’s GHG emissions.

GHG accounting and reporting shall be based on the following principles:

A threshold is often used to determine whether an error

For an organization’s GHG report to be relevant means

effort to provide a complete, accurate, and consistent

reflects the substance and economic reality of the

determine the potential impact and relevance of the exclu-

• Organizational structures: control (operational

emissions based on factors such as square footage, equipment

complete account of emissions by including facilities that previ-

the measurement processes are made transparent, users of the

I mproving your understanding of your company’s GHG emissions by compiling

following five business goals as reasons for compiling a GHG inventory:

• Managing GHG risks and identifying reduction opportunities

• Public reporting and participation in voluntary GHG programs

• Participating in mandatory reporting programs

• Participating in GHG markets

• Recognition for early voluntary action

and reporting progress.

credit for early action