Setting the Emissions Boundary – Value Chain Support

What is an Emissions Boundary?

An emissions boundary is like a clear border that shows which greenhouse gas emissions a company will measure and report. It's important to set this border so everyone knows what parts of the company’s activities are included in the emissions count and which parts are left out. This helps to enable consistent and comparable measurement and reporting over time.

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What do you need to answer Q4 in the request? You’ll need to describe which approach was used to determine the organisational boundary when preparing your company’s GHG Inventory Report i.e. Operational Control Approach or Equity Share Approach? And list the business operations and emission sources that have been included or excluded. Our Accounting Support Help Desk can walk you through this, just reach out here or get your accountant, sustainability or finance team involved.

What do the Standards Say?

There are two 'boundaries' to consider under the GHG Protocol:

Types of Boundaries:

Organisational Boundary

Operational Boundary

Figure 2 below, from page 25 of the Corporate Standard demonstrates the split:

Setting the Organisational Boundary

There’s a few approaches to determine the organisational boundary and what should be included. We’ve listed the standard’s approaches and examples to demonstrate:

Equity Share Approach

Each company is responsible for greenhouse gas (GHG) emissions based on their ownership percentage in another company.

Example: If Company A has a 75% controlling stake in Company X and Company B has a 25% minority stake in Company X, then:

Company A will report 75% of the GHG emissions from Company X.

Company B will report 25% of the GHG emissions from Company X.

Financial Control Approach

Definition: The company that has financial control over another company is responsible for 100% of the greenhouse gas (GHG) emissions from that company.

Example: If Company A has financial control over Company B (meaning Company A can direct Company B’s operating policies and benefit from its operations), then:

Company A will report 100% of the GHG emissions from Company B.

Operational Control Approach

Definition: The company that has operational control over another company is responsible for 100% of the greenhouse gas (GHG) emissions from that company.

Example: If Company A has operational control over Company B (meaning Company A can implement and manage Company B’s operating policies), then:

Company A will report 100% of the GHG emissions from Company B.

To learn more visit Chapter 3 of Introduction to Carbon Accounting course in the Sumday Academy.

Setting the Operational Boundary

Operational boundaries helps a company decide which operations or business activities should be accounted for.

It defines direct and indirect emissions within the company’s organisational boundary.

Is decided at the corporate level based on business goals e.g. by the Parent / Group

Decides whether to account for Scope 1 or Scope 2 emissions only, or, whether to include relevant scope 3 emissions categories for its operations.

By setting operational boundaries, companies can:

Identify where their emissions are coming from.

Measure how much they are emitting.

Manage their emissions better, both in their own operations and throughout their supply chain.

The defined operational boundary is then uniformly applied to identify and categorise direct and indirect emissions at each operational level.

Learn More

Course Modules 🎓

Check out the Sumday Academy courses for learning modules on Scope 1 emissions:

🌱 Introduction to Carbon Accounting Course: Chapter 3

Standards Guidance 📑

Read GHG Protocol’s Corporate Accounting and Reporting Standard: Chapter 3 and 4