A Corporate Accounting and Reporting Standard

Training Curriculum

A Corporate Accounting and Reporting Standard

 Introduction
Lesson Modules

Principles
2. GHG Accounting and Reporting Principles

Organizational
Boundaries
3. Setting Organizational Boundaries

Operational
Boundaries
4. Setting Operational Boundaries

5. Tracking Emissions Over Time

over time
Tracking
6. Identifying and Calculating Emissions

Calculating
Emissions
7. Reporting GHG Emissions

Reporting
8. Review

Review
A Corporate Accounting and Reporting Standard
Operational Boundaries
Lesson 4

A Corporate Accounting and Reporting Standard

 Introduction
Learning Objectives

Principles
In this lesson, you will learn:

Organizational
Boundaries
• Which sources of emissions to include in an inventory

Operational
Boundaries
• The difference between direct and indirect emissions

over time
Tracking
• How to classify emissions under Scopes 1, 2, and 3

Calculating
Emissions
• How to prevent double-counting emissions

Reporting
• How to classify emissions from leased assets

Review
A Corporate Accounting and Reporting Standard
 Introduction
“Boundaries” in a GHG inventory

Principles
• Boundaries: Imaginary lines encompassing the emissions to include
in a company’s GHG inventory

Organizational
Boundaries
1. Organizational boundaries
• Determine which company operations to include

Operational
Boundaries
2. Operational boundaries
• Determine which emissions sources to include

over time
Tracking
• Determine how to categorize emissions
Scope 3 Scope 1 Scope 1 Scope 2

Calculating
GHGs GHGs

Emissions
GHGs GHGs

Reporting
Review
A Corporate Accounting and Reporting Standard
 Organizational Operational Tracking Calculating
Introduction Principles Reporting Review
Boundaries Boundaries over time Emissions
Organizational and Operational

A Corporate Accounting and Reporting Standard

Boundaries
 Introduction
Why are Operational Boundaries Important?

Principles
Organizational
Boundaries
• To determine which sources of emissions to include

Operational
Boundaries
• To classify sources to avoid double-counting

over time
Tracking
• To provide more useful information to stakeholders

Calculating
Emissions
• To help manage GHG risks and opportunities along the
value chain

Reporting
Review
A Corporate Accounting and Reporting Standard
 Introduction
Setting Operational Boundaries

Principles
Organizational
Boundaries
• Identify emissions associated with operations

Operational
Boundaries
• Classify emissions as direct or indirect

over time
Tracking
Calculating
Emissions
• Categorize the “scope” of emissions

Reporting
Review
A Corporate Accounting and Reporting Standard
 Introduction
Direct and Indirect Emissions

Principles
• Direct: emissions from sources owned or controlled by the reporting
company

Organizational
Boundaries
• Indirect: emissions that are a consequence of the activities of the

Operational
Boundaries
reporting company but occur at sources owned or controlled by
another company

over time
Tracking
Indirect Emissions Direct Emissions Indirect Emissions

Calculating
Emissions
Reporting
Maintenance service Your factory Power plant
(owned by another company) (owned by utility company)

Review
A Corporate Accounting and Reporting Standard
 Organizational Operational Tracking Calculating
Introduction Principles Reporting Review
Boundaries Boundaries over time Emissions
Scope 3
Scope 2
Scope 1

Indirect
Direct
Classifying Emissions: Scopes

A Corporate Accounting and Reporting Standard

Emissions
 Introduction
Scope 1 Emissions

Principles
• Direct GHG emissions from sources a company owns or controls
• Examples:

Organizational
Boundaries
– Generation of electricity, heat, or steam
– Physical or chemical processing
– Transportation of materials, products, waste, and employees

Operational
Boundaries
– Fugitive emissions
• Inclusion in GHG inventory: required
Scope 1

over time
Tracking
Indirect Emissions Direct Emissions Indirect Emissions

Calculating
Emissions
Reporting
Maintenance service Your factory Power plant
(owned by another company) (owned by utility company)

Review
A Corporate Accounting and Reporting Standard
 Introduction
Scope 2 Emissions

Principles
• Indirect emissions from purchased electricity, steam,

Organizational
heating and cooling

Boundaries
– For office-based businesses Scope 2 usually most significant
– Can be reduced through energy efficiency and conservation

Operational
Boundaries
• Inclusion in GHG inventory: required Scope 2

over time
Tracking
Indirect Emissions Direct Emissions Indirect Emissions

Calculating
Emissions
Reporting
Maintenance service Your factory Power plant
(owned by another company) (owned by utility company)

Review
A Corporate Accounting and Reporting Standard
 Introduction
Types of differentiated electricity products

Principles
• Supplier-specific emission rates

Organizational
Boundaries
• Energy attribute certificates (GOs, RECs)
• Direct contracts such as power purchase agreements (PPAs), where

Operational
Boundaries
other instruments or energy attribute certificates do not exist
• Residual mix (e.g., the emissions rate left after the three other
contractual information items are removed from the system)

over time
Tracking
Calculating
Emissions
Reporting
Review
A Corporate Accounting and Reporting Standard
 Introduction
NEW: required conformance with Scope 2 Guidance

Principles
New Guidance prompted by changes in electricity markets worldwide:

Organizational
Boundaries
• Deregulation
• Increase in consumer choice
• New purchasing options and instruments (e.g. certificates)

Operational
Boundaries
• More government requirements for sourcing renewable energy
• Growth of the renewable electricity markets

over time
Tracking
Accounting for purchased electricity should meet 5 GHG Protocol

Calculating
Emissions
principles:
• Accuracy, Completeness, Consistency, Transparency and Relevance

Reporting
Review
A Corporate Accounting and Reporting Standard
 Organizational Operational Tracking Calculating
Introduction Principles Reporting Review
Boundaries Boundaries over time Emissions
Markets with no choice in electricity supply

A Corporate Accounting and Reporting Standard

 Organizational Operational Tracking Calculating
Introduction Principles Reporting Review
Boundaries Boundaries over time Emissions
Markets with consumer choice

A Corporate Accounting and Reporting Standard

 Organizational Operational Tracking Calculating
Introduction Principles Reporting Review
Boundaries Boundaries over time Emissions
Markets with consumer choice

A Corporate Accounting and Reporting Standard

 Organizational Operational Tracking Calculating
Introduction Principles Reporting Review
Boundaries Boundaries over time Emissions
Markets with consumer choice

A Corporate Accounting and Reporting Standard

 Organizational Operational Tracking Calculating
Introduction Principles Reporting Review
Boundaries Boundaries over time Emissions
Markets with consumer choice

A Corporate Accounting and Reporting Standard

 Introduction
The two scope 2 calculation methods

Principles
Location-based Market-based

Organizational
Boundaries
What is it? Reflects the average Reflects emissions form
emissions intensity of electricity that

Operational
Boundaries
grids on which energy companies have
consumption occurs purposefully chosen (via
bundled or unbundled

over time
Tracking
certificates)
To which All electricity grids Markets providing

Calculating
Emissions
markets does consumer choice of
it apply? differentiated electricity
products or supplier-

Reporting
specific data

Review
A Corporate Accounting and Reporting Standard
 Introduction
Pros and cons of the two Scope 2 calculation methods

Principles
Pros Cons

Organizational
Boundaries
Location- • Reflects actual • No incentive to reflect
based generation & distribution purchases or influence

Operational
Boundaries
method supply
• Only means of reducing
scope 2 emissions is via

over time
Tracking
consumption
• Less relevant for making
purchasing decisions

Calculating
Emissions
Market- • Better reflects risks & • Voluntary purchasing may
based opportunities associated not impact market (but see
method with supplier portfolios quality criteria)

Reporting
• More relevant for making
purchasing decisions

Review
A Corporate Accounting and Reporting Standard
 Introduction
When should the different methods be used?

Principles
• For companies with operations only in markets that do not provide
product or supplier-specific data or other contractual instruments:

Organizational
Boundaries
– Only one scope 2 figure shall be accounted and reported, based on the
location-based method.

Operational
Boundaries
• For companies with any operations in markets providing product or
supplier-specific data in the form of contractual instruments
(Currently this includes: EU Economic Area, the US, Australia, most Latin

over time
Tracking
American countries, Japan, India among others)
– Two scope 2 figures shall be accounted and reported, one for the

Calculating
Emissions
market-based method and one for the location-based method.

Reporting
Review
A Corporate Accounting and Reporting Standard
 Introduction
Scope 3 Emissions

Principles
• All other indirect emissions
• Examples:

Organizational
Boundaries
– Transport in vehicles not owned/controlled by the company
– Energy consumed during customer use of company products
• Inclusion in GHG inventory: optional under Corporate Standard

Operational
Boundaries
– Although may be required by some programs
– Required by GHG Protocol Scope 3 Standard

Scope 3

over time
Tracking
Indirect Emissions Direct Emissions Indirect Emissions

Calculating
Emissions
Reporting
Maintenance service Your factory Power plant
(owned by another company) (owned by utility company)

Review
A Corporate Accounting and Reporting Standard
 Scopes 1, 2 and 3

Introduction
Principles
Organizational
Boundaries
Operational
Boundaries
over time
Tracking
Calculating
Emissions
Reporting
Account for and report emissions from each scope separately

Review
A Corporate Accounting and Reporting Standard
 Introduction
Biomass

Principles
Organizational
Emissions from the combustion of biomass

Boundaries
(wood, ethanol, other biofuels, etc.)

Operational
Boundaries
– CO2 emissions:
• Report separately from Scopes

over time
Tracking
• Because CO2 is sequestered during growing

Calculating
Emissions
– N2O and CH4
• Report as normal within Scopes
• Because N2O and CH4 not sequestered during growing

Reporting
Review
A Corporate Accounting and Reporting Standard
 Introduction
Determining Scope

Principles
• Determined by ownership or control of emission source

Organizational
Boundaries
• NOT determined by type of emission source

Operational
Boundaries
The same emissions
from energy generation

over time
Tracking
counted as counted as
Scope 1 GHGs Scope 2

Calculating
Emissions
by the power by an
plant producing office using
the energy the energy

Reporting
Review
A Corporate Accounting and Reporting Standard
 Organizational Operational Tracking Calculating
Introduction Principles Reporting Review
Boundaries Boundaries over time Emissions
Scopes Across the Value Chain

A Corporate Accounting and Reporting Standard

 Introduction
How will each action affect each scope?

Principles
ACTION SCOPE 1 SCOPE 2 SCOPE 3

Organizational
Boundaries
Install new thermal power plant
on-site so you don’t need to buy
power from the grid anymore

Operational
Boundaries
Purchase new vehicle fleet instead
of outsourcing transportation
services

over time
Tracking
Install new on-site solar power
generation plant to replace grid

Calculating
Emissions
electricity

Install energy efficient lighting at

Reporting
company facilities

Review
A Corporate Accounting and Reporting Standard
 Introduction
Scope 3: Further Guidance

Principles
• To account for Scope 3 emissions:

Organizational
Boundaries
1. Describe the value chain
2. Determine which categories are relevant
3. Identify partners along value chain

Operational
Boundaries
4. Quantify emissions

over time
Tracking
• Remember: Scope depends on who owns/controls emissions
source

Calculating
Emissions
• Consult GHG Protocol Corporate Value Chain (Scope 3)

Reporting
Accounting and Reporting Standard

Review
A Corporate Accounting and Reporting Standard
 Introduction
Special Issue: Electricity Emissions

Principles
Organizational
Boundaries
Consult Corporate Standard when accounting for emissions

Operational
Boundaries
• from the sale of own-generated electricity

over time
Tracking
• from transmission and distribution of electricity

Calculating
Emissions
• from electricity purchased for resale to end-users and
non-end-users

Reporting
Review
A Corporate Accounting and Reporting Standard
 Introduction
Leased Assets, Outsourcing and Franchising

Principles
• Remember consolidation approaches:

Organizational
Boundaries
1. Equity Share
2. Control
a) Financial Control

Operational
Boundaries
b) Operational Control

• Apply selected consolidation approach to leased assets,

outsourced activities or franchises

over time
Tracking
– If included in organizational boundary, classify as

Calculating
Emissions
Scope 1 or Scope 2

– If not included in boundary, classify as

Reporting
Scope 3

Review
A Corporate Accounting and Reporting Standard
 Introduction
Types of Leased Assets

Principles
Organizational
Boundaries
• Finance or capital lease:
– Enables lessee to operate an asset

Operational
Boundaries
– Lessee assumes all risks and rewards of owning asset
– Asset considered wholly owned by lessee in financial accounting

over time
Tracking
• Operating lease:

Calculating
Emissions
– Enables lessee to operate an asset
– Lessee assumes NO risks or rewards of owning asset
– Any lease that is not capital or finance is an operating lease

Reporting
Review
A Corporate Accounting and Reporting Standard
 Introduction
Emissions from Leased Assets

Principles
LESSEE’S / TENANT’S PERSPECTIVE
Capital lease Operating lease

Organizational
Boundaries
Operational Control Approach Lessee has control/ownership (S1 or 2)

Operational
Boundaries
Financial Control or Equity Lessee has control/ownership Lessee does NOT have control/ownership
Share Approach (S1 or 2) S3

over time
Tracking
LESSOR’S / LANDLORD’S PERSPECTIVE

Calculating
Emissions
Capital lease Operating lease

Operational Control Approach Lessor does NOT have control/ownership

Reporting
Financial Control or Equity
Lessor does NOT have control/ownership Lessor has control/ownership
Share Approach

Review
A Corporate Accounting and Reporting Standard
 Introduction
Double Counting

Principles
Organizational
Boundaries
• Occurs when different companies claim ownership of
same emissions or reductions

Operational
Boundaries
• Scopes allow companies to account for emissions along
value chain while preventing double-counting

over time
Tracking
Calculating
• The same emissions will never be reported twice under

Emissions
the same scope (except Scope 3)

Reporting
Review
A Corporate Accounting and Reporting Standard
 Introduction
Summary

Principles
• Operational boundaries determine which emissions are included and how

Organizational
Boundaries
they are classified

SCOPE TYPE OF EMISSIONS REPORTING

Operational
Boundaries
Scope 1 direct mandatory
Scope 2 purchase energy mandatory

over time
Tracking
Scope 3 all other indirect optional

Calculating
Emissions
• Apply selected consolidation approach to leased assets, outsourced activities
or franchises

Reporting
• Scopes prevent emissions from being double-counted

Review
A Corporate Accounting and Reporting Standard
 Introduction
Further Reading

Principles
The Greenhouse Gas Protocol: A Corporate Accounting &
Reporting Standard

Organizational
Boundaries
• Chapter 4: Setting Operational Boundaries;
• Appendix F: Categorizing GHG Emissions Associated with
Leased Assets
(http://www.ghgprotocol.org/downloads/calcs/Appendix_F_Leased_Assets.pdf)

Operational
Boundaries
• Appendix A: Accounting for Indirect Emissions from
Purchased Electricity
• Appendix D: Industry Sectors and Scopes

over time
Tracking
The Greenhouse Gas Protocol: Scope 2 Guidance

Hot Climate, Cool Commerce: A Service Sector Guide to

Calculating
Emissions
Greenhouse Gas Management
Part I, Step 2: Establishing Boundaries

ISO 14064-1

Reporting
Section 4.2: Operational Boundaries

Review
A Corporate Accounting and Reporting Standard
 Organizational Operational Tracking Calculating
Introduction Principles Reporting Review
Boundaries Boundaries over time Emissions
A Corporate Accounting and Reporting Standard
Additional slides
 Introduction
Types of contractual instruments

Principles
The market-based Scope 2 approach is applicable to a wide range of

Organizational
Boundaries
contractual instruments, not just those specifically linked with green
power or even renewable energy. They include:

Operational
Boundaries
• Energy attribute certificates (GOs, RECs)
• Direct contracts such as power purchase agreements (PPAs), where
other instruments or energy attribute certificates do not exist

over time
Tracking
• Supplier-specific emission rates
• Residual mix (e.g., the emissions rate left after the three other

Calculating
Emissions
contractual information items are removed from the system)

Reporting
Review
A Corporate Accounting and Reporting Standard
 Introduction
Pros and cons of the two Scope 2 calculation methods

Principles
Pros Cons

Organizational
Boundaries
Location- • Reflects actual • No incentive to reflect
based generation & distribution purchases or influence

Operational
Boundaries
method supply
• Only means of reducing
scope 2 emissions is via

over time
Tracking
consumption
• Less relevant for making
purchasing decisions

Calculating
Emissions
Market- • Better reflects risks & • Voluntary purchasing may
based opportunities associated not impact market (but see
method with supplier portfolios quality criteria)

Reporting
• More relevant for making
purchasing decisions

Review
A Corporate Accounting and Reporting Standard