The GHG Protocol and its importance on climate reporting

The GHG Protocol is a name thrown around occasionally when the topic of carbon emissions is being discussed. It is essentially an accounting standard for greenhouse gas emissions. The GHG Protocol is an accounting tool used to track how much greenhouse gases are being produced.

It helps businesses measure and report their carbon footprint by providing guidelines and tools. As the world’s most used greenhouse gas accounting standard, the GHG Protocol is an important part of climate-related agreements like the TCFD and the Paris Agreement.

The first GHG Protocol standard was released in 2001, with prior footwork starting from the late 90s. The effort was and still is driven by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). They are getting advice from environmental experts and representatives from different industries to make sure the standards are good for everyone.

As with many other reporting standards, the GHG Protocol emerged out of the need for a standardized accounting framework focused on the complex science of greenhouse gas reporting. Without standardization, the use of different terms, methodologies, and approaches can significantly alter the meaning and outcome of measurement and reporting, making comparability impossible between countries and corporations reporting their footprints.

Understanding the GHG Protocol and its standards

The GHG Protocol consists of several standards. The GHG Protocol Corporate Accounting and Reporting Standard sets guidelines for corporates on how to measure and report all seven of the greenhouse gases covered by the Kyoto Protocol. The Kyoto Protocol is an international agreement on reducing potent greenhouse gases responsible for global warming.

The seven greenhouse gases are:

• Carbon dioxide
• Nitrous oxide
• Methane
• Hydrofluorocarbons
• Perfluorocarbons
• Sulphur hexafluoride
• Nitrogen trifluoride

By targeting these seven greenhouse gases, the GHG Protocol is holding organizations accountable for their contributions to climate change.

At least 92% of Fortune 500 companies that responded to CDP’s annual questionnaire use the GHG Protocol to develop their GHG inventory and present an accurate account of their emissions, which they can then use to develop reduction strategies¹. Scope 1 and 2 are covered by this standard.

Although the GHG Protocol Corporate Accounting and Reporting Standard was developed for corporates, other organizations including non-profits, academia, and governments can use it for the same purpose.

Scope 3 reporting falls under a separate standard – the Corporate Value Chain (Scope 3) Standard. Tracking Scope 3 emissions is a complex undertaking as it involves the entire value chain. This standard facilitates understanding of how to measure emissions in the supply chain and identify areas for emissions reduction.

The GHG Protocol for Project Accounting is the standard for climate mitigation projects such as those in the carbon markets. This standard is specifically relevant to GHG project architects and third-party verifiers. Entities seeking to offset their emissions via GHG projects can use this standard.

As part of this standard, two guidelines have been further developed for Land Use, Land Use-Change, and Forestry (LULUCF) related projects and Grid-Connected Electricity Projects. These are significant areas for carbon offsetting and use their own terminologies.

At the product level, the Product Life Cycle Accounting and Reporting Standard provides guidance on understanding a product’s emissions throughout its life cycle, from raw materials, production, and transportation to storage, use, and disposal. This can be the first step toward circularity within the value chain.

For city administrators, the GHG Protocol for Cities helps to determine emissions sources at the city level and to develop effective reduction strategies and goals, as well as monitoring programs. This standard enables cities to get a clear picture of their GHG inventory in support of national climate goals. It also contains a section for community-scale inventories, suitable for use by local and municipal governments. The GHG Protocol Mitigation Goal Standard focuses on goal-setting and progress monitoring for cities or nations that are designing mitigation plans.

Policymakers can use the GHG Protocol Policy and Action Standard to measure the effect that related policies could have on emissions. This is especially useful in policy design for national climate action plans.

In addition to the above standards, sectoral guidance has also been published, as emissions measurement and reductions can vary greatly for different industries. Tools to develop and maintain inventories are available for certain developing countries, sectors, and countries or cities, including a generally applicable cross-sector tool and a Scope 3 evaluator for springboarding their Scope 3 emissions inventory.

‍Why is the GHG Protocol important for companies?

Climate reporting is the rule and the norm in today’s regulatory and investor climate. The conventions of climate-related disclosures including their definitions, terminologies, scope, and methodologies are underpinned by the framework of the GHG Protocol. The industry is set to experience greater demand for Scope 3 reporting as attention turns to supply chains that account for the majority of emissions.

For companies, the GHG Protocol Corporate Accounting and Reporting Standard, Corporate Value Chain (Scope 3) Standard, GHG Protocol for Project Accounting, and Product Life Cycle Accounting and Reporting Standard are relevant. These guidelines help companies baseline, benchmark, and cut emissions. Following internationally-agreed standards for GHG accounting is necessary to develop Paris-aligned, science-based net-zero and climate mitigation plans. Without this approach, formulating reduction goals is like plucking numbers out of thin air – in other words, simply declaring a goal without the required analysis is unfounded and cannot be meaningfully compared.

The GHG Protocol benefits investors by providing a standardized framework through which an investment or a portfolio’s climate resilience can be assessed. Investors can make better-informed choices, compare GHG inventories, and understand a company’s contributions to climate change. This kind of information can potentially qualify an investment according to the definitions of the EU taxonomy and other such green investment categories.

The GHG Protocol is the standard for greenhouse gas accounting and is already widely in use by most countries and corporations. Companies seeking to take stock of their GHG inventory should use it to form the basis of their climate strategy.

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How we help you

• We explain the ins and outs of the GHG Protocol and help you understand what data you need to collect in order to comply with the standard.
• We simplify the collection of data that is necessary to calculate your greenhouse gas emissions by offering one central platform and integrations with ERP, HRM, CRM, EMS, etc.
• We facilitate data collection from your suppliers and ensure that relevant information such as data needed to calculate Scope 3 emissions from your supply chain arrives in a complete and accurate manner. Furthermore, we will handle the burden of information exchange with your suppliers.
• We help you complete the information requests from regulators and guarantee the protection of business-critical information, for example about your supplier network.

¹ Greenhouse Gas Protocol: Companies and Organizations

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