Greenhouse Gas (GHG) Protocol

As organizations are increasingly under pressure from customers and investors to reduce their carbon footprint, many are seeking to measure and reduce their emissions. One of the most widely recognized frameworks for this type of accounting is the GHG Protocol Corporate Reporting and Accounting Standard. 

It was developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) to provide guidance for businesses and other organizations to measure and manage their greenhouse gas emissions.

What is Greenhouse Gas Protocol?

The GHG Protocol is a widely-used framework for carbon accounting and reporting greenhouse gas emissions. It focuses on emissions which can be directly attributed to an organization's operations or activities (scopes 1) or indirectly through purchased energy (scope 2) and third parties (scope 3).

The GHG Protocol itself is not a regulation, but it is used as a reference in many regulations and standards related to greenhouse gas emissions. For example, the GHG Protocol is referenced in the International organization for Standardisation (ISO) 14064 standard for greenhouse gas accounting and verification, as well as in various national and regional reporting programs.

What are scope 1, 2 and 3 emissions?

Scope 1, 2 and 3 emissions refer to different categories of greenhouse gas - often referred to as ‘GHG’) emissions that are covered by the GHG Protocol. Together they give businesses an idea of how they’re contributing to their carbon footprint based on direct and indirect resources. 

Scope 1 emissions

Scope 1 emissions  are GHG emissions that come directly from a company's own activities, such as fuel combustion and industrial processes. These are the most easily tracked and managed of all emissions, as they originate directly from an organization’s operations or activities, and are therefore easier to attribute.

Scope 2 emissions

Scope 2 emissions  refer to indirect GHG emissions that result from the generation of purchased electricity, heat or steam. These emissions are produced by sources that are owned or controlled by another entity, but are consumed by the reporting entity.

Scope 3 emissions

Scope 3 emissions are also indirect and are a category of GHG emissions that occur beyond the operational boundaries of an organization - for example,  in the supply chain. These emissions are associated with the activities of suppliers, customers and other stakeholders. scope 3 includes upstream emissions caused by suppliers or downstream emissions resulting from customer use of a product or service.

What are avoided emissions?

Avoided emissions - sometimes referred to as scope 4 - are the net GHG emissions that a company's products have prevented from being emitted compared to a baseline scenario. For example, a company which produces solar panels can claim avoided emissions as its product saves carbon on a life-cycle basis compared to other forms of non-renewable energy production. Avoided emissions go beyond a company's value chain accounting and should therefore be reported separately from its carbon inventory (i.e. Scope 1, 2 and 3). . 

Protocols and standards included in GHG

The GHG protocol is comprehensive, and extends beyond just guidance on scope 1, 2 and 3 emissions. It has several standards and protocols within it that are used for very specific purposes depending on the needs and targets of the organization adhering to them. Some of the included protocols and standards are: 

The different protocols and standards under the GHG umbrella are designed to be flexible and scalable, so that they can be used by organizations of all sizes and in all sectors.

Who uses the GHG protocol?

The GHG Protocol is used by a wide range of organizations and individuals around the world to measure, manage, and report GHG emissions. Some examples of groups and organizations that use the GHG Protocol:

• Companies -  Many companies use the protocol to measure and manage their own GHG emissions, as well as the emissions associated with their supply chains. The protocol is used by companies in a wide range of industries, including energy, transportation, manufacturing, and consumer goods.
• Governments - Governments around the world use it to track and report their GHG emissions, as well as to develop policies and regulations related to climate change. The protocol is used at the national, state, and local levels.
• NGOs - Non-governmental organizations (NGOs) use the GHG Protocol to measure and report the emissions associated with their own operations, as well as to promote transparency and accountability in the private sector.
• Investors - Investors and financial institutions use the protocol to evaluate the environmental risks and opportunities associated with different companies and industries, as well as to assess the carbon footprint of their investment portfolios - known as financed emissions. 
• Standards organizations - The GHG Protocol - and its Corporate Standard - is used as a basis for developing and implementing other greenhouse gas accounting standards and frameworks, such as ISO 14064 and the Carbon Trust Standard.

Why the GHG protocol matters

Organizations must consider both direct and indirect GHG emission sources when developing strategies to reduce their carbon footprint. By understanding scope 1, 2 and 3 emissions under the Greenhouse Gas Protocol framework, businesses can identify areas where they can have significant impact on their organization’s carbon emissions output and make strategies to mitigate them.

What are the benefits of adhering to the protocol?

Increasingly, businesses across the globe are under pressure to better their practices, with many regulations being introduced in various countries. However, that’s not the only reason that organizations should be adhering to the GHG Protocol. In fact, the implementation of an emissions reduction strategy in business provides numerous benefits. 

Regulatory compliance

 Adhering to the GHG Protocol can help organizations comply with greenhouse gas reporting requirements under various regulations, which will vary depending on mandates or guidance in the countries or regions that the organization is based in.

Preparation for future regulation

Businesses can prepare for future regulations and policies related to climate change, such as carbon pricing or emissions trading schemes. 

Improved credibility

By using a widely recognized and accepted framework for greenhouse gas accounting, organizations can improve the credibility of their emissions data and reporting.

Enhanced transparency

 Because the GHG Protocol is standardized, this can enhance transparency and enable investors and stakeholders to easily witness an organization's commitment to carbon management.

Better risk management

Organizations can better understand and manage the risks associated with climate change, such as regulatory compliance, reputational damage, and physical impacts. They can then create strategies to mitigate those risks to help future-proof their decisions.

Competitive advantage

Organizations that take action to reduce their greenhouse gas emissions can differentiate themselves in the market and attract environmentally-conscious consumers, investors, and stakeholders.

Improved relationships with stakeholders

 By demonstrating a commitment to addressing climate change and reducing emissions, organizations can build stronger relationships with stakeholders, including customers, investors, and regulators.

Future-proofing your business

By identifying and reducing greenhouse gas emissions, companies can be prepared for further regulations or mandates that are likely to be introduced in the coming years. With the rules around carbon reporting becoming ever more stringent, understanding and creating a strategy for carbon reduction can help your business be on the front foot.

Is GHG reporting mandatory?

Whether or not GHG reporting is mandatory will depend on the county you’re in. In many countries or regions it is voluntary but heavily encouraged - whereas some local governments do mandate that organizations should report on their greenhouse gas emissions. For example: 

• In the US, some states mandate carbon reporting while others don’t. For example, California's Mandatory Reporting of Greenhouse Gas Emissions (MRR) program, which requires organizations that emit over 10,000 of CO2 to report their GHG emissions.
• In Canada, the government has implemented the Greenhouse Gas Reporting Program (GHGRP), which requires large emitters (those emitting above 10,000 tonnes of carbon dioxide)  to report their emissions annually.
• In the UK, large businesses (that have either a turnover of £36 million or more, a balance sheet of £18 million or more, or 250 employees or more) are required to report on their GHG emissions under Streamlined Energy and Carbon Reporting (SECR).
• In the EU, large companies (that meet two or more of following criteria: 1. >250 employee, 2. >€40M turnover or 3. >€20M total assets) are subject to the Corporate Sustainability Reporting Directive (CSRD).

While it isn’t always mandated, it’s likely that increasingly stringent measures will be introduced over time. This means the advantages of gaining an understanding of your business’ carbon output before this happens are huge. It also means that organizations that are prepared ahead of time will be more prepared for investor pressure when the regulations around carbon reporting do become tighter.  

FAQs about GHG protocol

Who created the GHG protocol?

The Greenhouse Gas Protocol (GHG Protocol) was created by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).  It is regularly updated with best practices based on new research findings, technological advancements or policy alterations.. 

With its international reach and industry-leading credentials, the GHG Protocol’s framework has become an essential tool for organizations.

How to account for land use change with GHG protocol?

Agricultural activities result in an ongoing flux of carbon between various pools (soils, biomass, atmosphere, etc.). At present, the GHGP recommends reporting these fluxes as biogenic CO2 emissions (and potentially removals) separately, outside of scopes 1, 2 or 3. The exception to this is biomass and soil carbon losses from land use change (LUC), which should be reported within scopes, as it is deemed a permanent change. Due to the nature of the flux, in particular soil carbon losses, these emissions are amortized over a period of 20 years after the land use change has occurred.

For Scope 3 LUC, the emissions are commonly accounted for the embodied carbon of agricultural products.

What is the Paris agreement in relation to GHGP?

The Paris Climate Agreement is an international treaty signed in 2015 under the United Nations Framework Convention on Climate Change (UNFCCC) to address global climate change. One of the main goals of the agreement is to limit global warming to well below 2 degrees Celsius above pre-industrial levels, and to pursue efforts to limit the temperature increase to 1.5 degrees Celsius.

Greenhouse gas (GHG) emissions are a key focus of the Paris Climate Agreement. Each signatory country is required to submit a nationally determined contribution (NDC) that outlines its goals and targets for reducing GHG emissions. These contributions are expected to be updated every five years to reflect the progress made towards the temperature goals of the agreement.

The Science-based-targets initiative validates companies climate reduction targets against temperature goals set out by the Paris agreement. In order for a target to be valid and ambitious, the carbon inventory has to follow the GHGP.