Determining Sources of Emission

Source types are groups that encompass the categories within each scope. Corporations must decide which source
types are applicable to the business.
Almost all businesses generate indirect emissions due to the purchase of electricity.
Scope 1 Scope 2 There are two required methods followed under Scope 2:

Stationary Purchased electricity,

combustion heat, and steam

Fugitive emissions

Mobile combustion Scope 2: purchased electricity and heat for operations and all electricity
purchased to be used in electric vehicles.

Bigger companies may apply both location and market-based

methods as the they may have operations in markets where
energy certificates or supplier-specific information is available.

Corporate Finance Institute®

Determining Sources of Emission
Source types are groups that encompass the categories within each scope. Corporations must decide which source
types are applicable to the business.

Scope 1 Scope 2 Scope 3

Stationary Purchased electricity, Upstream & Purchased goods Business travel Employee commute
& services
combustion heat, and steam downstream
activities
Fugitive emissions
Emissions related to
Mobile combustion
outsourced/contract End-of-life- treatment Investments Franchises
manufacturing, of sold products
leases, or franchises
not included in scope
1 or 2 Upstream & Downstream

Transportation Leased assets

& distribution

Corporate Finance Institute®

Determining Sources of Emission
Source types are groups that encompass the categories within each scope. Corporations must decide which source
types are applicable to the business.
Scope 3 emissions are typically the largest part of a
Scope 1 Scope 2 Scope 3 company’s carbon footprint, but the hardest to
measure and manage.
Stationary Purchased electricity, Upstream &
combustion heat, and steam downstream Companies have historically sought to avoid
activities reporting on scope 3 emissions; however, with
Fugitive emissions
heightened interest in corporate GHG emissions,
Emissions related to
Mobile combustion scope 3 is increasingly becoming a focus for a
outsourced/contract
variety of stakeholders.
manufacturing,
leases, or franchises
not included in scope Science-based Targets
1 or 2
Targets related to reducing emissions to reach the
goals set under the Paris Agreement.

Reporting Scope 3
Higher CDP Score
Activities

Corporate Finance Institute®

Determining Sources of Emission
Source types are groups that encompass the categories within each scope. Corporations must decide which source
types are applicable to the business.
Scope 3 emissions are typically the largest part of a
Scope 1 Scope 2 Scope 3 company’s carbon footprint, but the hardest to
measure and manage.
Stationary Purchased electricity, Upstream &
combustion heat, and steam downstream
activities
Fugitive emissions
Emissions related to
Mobile combustion
outsourced/contract
manufacturing,
Project Gigaton initiative to understand and
leases, or franchises
manage Scope 3 emissions, through
not included in scope
upstream and downstream engagement.
1 or 2

Only a small number of companies have a

comprehensive understanding of their scope 3
emissions.

Corporate Finance Institute®

Determining Sources of Emission
Source types are groups that encompass the categories within each scope. Corporations must decide which source
types are applicable to the business.

Investments
Scope 1 Scope 2 Scope 3

Stationary Purchased electricity, Upstream & Financial services firms calculate GHG
combustion heat, and steam downstream emissions within their investment portfolios,
activities
Fugitive emissions including loan portfolios, under their own
Emissions related to scope 3.
Mobile combustion
outsourced/contract
manufacturing,
leases, or franchises
not included in scope
1 or 2 Publicly disclosed Scope 1 + 2
scope 3 emissions of a emissions of its
financial services firm portfolio companies
Financed Emissions

Corporate Finance Institute®

Determining Activities of Emission
Based on the applicable source type, a company determines the activity data that it needs to collect. This scoping can
help a company recognize what data sources can be leveraged in order to collect information.

GHG Protocol recommends that a company should not neglect any sources and activities in this step.

Look at all the data.

Activity
Company Identify immaterial activities and exclude these from
Data
emissions calculations.

Corporate Finance Institute®

Determining Activities of Emission
Based on the applicable source type, a company determines the activity data that it needs to collect. This scoping can
help a company recognize what data sources can be leveraged in order to collect information.

Look at all the data.

Activity
Company Identify immaterial activities and exclude these from
Data
emissions calculations.

GHG Protocol provides options for identifying sources of activity data and advises organizations to seek
guidance from the sector-specific guidelines their website or from industry associations.

Corporate Finance Institute®

Determining Activities of Emission
The classification of direct and indirect emissions depends on the consolidation approach (equity share or
control) selected for setting the organizational boundary.
Consider all the facilities for data collection based on the
organizational boundary, such as:

Office buildings

Manufacturing plants

Laboratories
Sources/Activities
Company of Emissions
Other buildings

that are owned and/or operated in different regions,

incorporated, and unincorporated areas that are operated
by the parent company or other companies legally
associated to it.
Corporate Finance Institute®
 Determining Activities of Emission Food Retailers & Distributors Industry

Zeta Corp. Company A Company B Company C Company D Company E

Incorporated Company Subsidiary Incorporated JV JV of a Subsidiary Incorporated JV Incorporated Company

Zeta’s:
Equity 100% 80% 50% 83% (depends on E) 40% 83%
Operational Control 100% 100% 100% 0% 0% 0%
Financial Control 100% 80% 0% E and Zeta have joint 100% 83%
financial control
The classification of direct and indirect emissions depends on the consolidation approach (equity share or
control) selected for setting the organizational boundary.

Scope 1 Scope 2

Stationary Fugitive Mobile Electricity purchased for consumption in all facilities, offices and
Combustion Emissions Combustion stores that fall under the organization boundary of the company.

On-site diesel Refrigeration Food distribution &

generators system data logistics
Corporate Finance Institute®
Determining Organizational & Operational Boundaries Exercise
This exercise covers setting organizational and operational boundaries including the source types and activities. You are
required to answer the questions as we understand this concept through an example.
Zeta Corp. Company A Company B Company C Company D
Incorporated Company Subsidiary Incorporated JV JV of a Subsidiary Incorporated JV

Zeta’s:
Equity 100% 100% 100% 100% 40%
Operational Control 100% 100% 100% 100% 0%
Financial Control 100% 100% 100% 100% 0%

Which control route would Zeta take if it were to include all emissions from A, B & C as well as 40% of D?

Equity Share Control Approach

Corporate Finance Institute®

Determining Organizational & Operational Boundaries Exercise
Zeta Corp. Company A Company B Company C Company D
Incorporated Company Subsidiary Incorporated JV JV of a Subsidiary Incorporated JV

Zeta’s:
Equity 100% 100% 100% 100% 40%
Operational Control 100% 100% 100% 100% 0%
Financial Control 100% 100% 100% 100% 0%

Zeta

Organizational
Boundary
Company A Company B Company C Company D Based on the chart
what activity
emissions under
Ship Power Owned/controlled Car Leased Owned/controlled

Operational
operational

Boundary
fleet generation unit building fleet factory building
boundary would
Zeta not consider?
Leased building Direct & Indirect Emissions

Corporate Finance Institute®

Determining Organizational & Operational Boundaries Exercise
Zeta Corp. Company A Company B Company C Company D
Incorporated Company Subsidiary Incorporated JV JV of a Subsidiary Incorporated JV

Zeta’s:
Equity 100% 100% 100% 100% 40%
Operational Control 100% 100% 100% 100% 0%
Financial Control 100% 100% 100% 100% 0%

Zeta If zeta decides to use the

Organizational
Boundary
control approach then it
would not consider the
Company A Company B Company C Company D
emissions from D vs. the
equity share approach it
Ship Power Owned/controlled Car Leased Owned/controlled would be accounting for

Operational
Boundary
fleet generation unit building fleet factory building 40% of the emissions
from buildings owned &
Leased building Direct & Indirect Emissions factories leased by D.

Corporate Finance Institute®

Data Collection: Quantifying GHG Emissions
Once the activity types and the sources of emissions are established, the sources of the activity data need to be
determined for collection. Key considerations:
Centralized sources within the
organization

Direct measurement of GHG

emissions: direct monitoring may not be
possible or may be expensive. In many
cases, emission data must be be
Information Data Format Information
calculated based on a mass balance or
Owners Sources
stoichiometric basis specific to a facility
or a process

Decentralized sources (e.g. individual

facilities)

Corporate Finance Institute®

Data Collection: Quantifying GHG Emissions

Centralized sources within the

organization

Direct measurement of GHG

emissions: direct monitoring may not be Information may need
possible or may be expensive. In many to be collected from
cases, emission data must be be various stakeholders,
Information Data Collection
calculated based on a mass balance or and in different
Sources Timeline
stoichiometric basis specific to a facility formats.
or a process

Decentralized sources (e.g. individual

facilities)

Corporate Finance Institute®

Data Collection: Quantifying GHG Emissions
Quality checks are necessary as data is collected. As per GHG Protocol, some data collection & management tools
that can help with these checks include:

Secure databases available via Spreadsheets sent to a corporate Paper reporting forms sent to a
company intranet or division office, where data is corporate or division office where
processed further data is re-entered in a database

It’s recommended that standardized reporting formats be used for internal reporting up to the corporate
level to ensure that data received from different business units is comparable.

Corporate Finance Institute®

Data Collection: Quantifying GHG Emissions
Quality checks are necessary as data is collected. As per GHG Protocol, some data collection & management tools
that can help with these checks include:

Finally, data is checked to ensure alignment with the 5 principles of GHG reporting as per GHG
Protocol.

Internal verification and an overall quality check is conducted by a quality management team.

Corporate Finance Institute®

Data Collection: Quantifying GHG Emissions

Source Type Activity Data Type Location ID [Possible] Activity Data Source

Screening Method: Preliminary method to estimate emissions

Sales-Based Method: Activity data based on purchase records and

Refrigerant Cold storage Location
Fugitive service records
information warehouse 12332
Lifecycle Stage Method: Activity data based on total inventory of
refrigerants
Fuel Consumption: Number of gallons, barrels, etc.

Combination Location Distance Traveled: Number of miles, kilometers

Mobile Transportation
trucks 864 Vehicle Characteristics: Vehicle type and model year
Fuel Characteristics: Type of fuel and heating value
Total electricity purchased and consumed during the reporting period
in energy units, MWh or kWh. Can be derived from utility bills or meter
reading
Energy Purchased Electricity
Building 2 Location Based: Need overall emission factors
Consumption electricity consumed
Market Based: Information on energy attribute certificates or RECs,
contracts for electricity, such as power purchase agreements (PPAs)
Corporate Finance Institute® and supplier/utility emission rates
Calculating Annual Emissions
Once all the activity data is collected and checked for quality, the copes can be calculated. The calculations can be
conducted at the:

Facility Level Company Level

The most common approach for calculating GHG emissions is using a documented emission factor (EF), which
is a coefficient which allows management to convert activity data into GHG emissions.

Corporate Finance Institute®

Calculating Annual Emissions

The most common approach for calculating GHG emissions is using a documented emission factor (EF), which
is a coefficient which allows management to convert activity data into GHG emissions.

Emission Factor is the average emission rate

of a given source, relative to units of activity.

Emission factors are geography-dependent, and a custom emission factor can also be used by a company
if its emission rates aren’t in step with industry benchmarks.

Corporate Finance Institute®

Calculating Annual Emissions

Scope 1 Scope 2

For location-based calculations, companies use a

EF of Total method to quantify Scope 2 GHG emissions based
Activity
Activity Emissions on average energy generation emission factors for
Type
Type (CO2e) defined locations, including local, subnational, or
national boundaries.
Fuel for mobile For market-based calculations, companies are
EF of specific Total GHG
& stationary
oil used Emissions required to use supplier-specific emission factors.
combustion

GHG intensity is the emission rate relative to the

Fuel for EF of specific Total GHG
intensity of a specific activity, or an industrial
transportation oil used Emissions
production process; for example, grams of GHG
released per megajoule of energy produced, or the
Fuel for EF of specific Total GHG ratio of GHG emissions produced to GDP.
refrigeration oil used Emissions
Corporate Finance Institute®