GHG Accounting Guide

1. What is GHG accounting?

GHG accounting is the process of identifying, calculating, and reporting greenhouse gas emissions from a company’s activities.

A GHG inventory may include:

fuel use
purchased electricity
company vehicles
production processes
refrigeration systems
business travel
transport
waste
value chain activities

The six greenhouse gases commonly covered are:

CO₂
CH₄
N₂O
HFCs
PFCs
SF₆

These gases are usually converted into CO₂e so different greenhouse gases can be reported in one common unit.

2. Why GHG accounting matters

Managing climate-related risks

Identifying emissions reduction opportunities

Preparing for customer or investor questions

Supporting sustainability reporting

Participating in voluntary or mandatory reporting programs

Tracking progress against climate targets

Improving energy and resource efficiency

A company cannot manage its emissions properly until it understands where they come from.

3. The five GHG accounting principles

Relevance

The inventory should reflect the company’s real emissions profile and support the decision-making needs of internal and external users.

Completeness

The company should account for and report all relevant emission sources and activities within the chosen inventory boundary. If anything is excluded, it should be explained.

Consistency

The company should use consistent methods over time so emissions can be compared meaningfully from year to year.

Transparency

The company should explain assumptions, methods, data sources, limitations, and exclusions in a clear way.

Accuracy

The company should aim to ensure emissions are not systematically overestimated or underestimated.

4. The GHG inventory boundary

Before calculating emissions, a company must define its inventory boundary.

Organizational boundary

Decides which parts of a company are included in the inventory. Important for subsidiaries, joint ventures, leased assets, franchises, or shared ownership structures.

Equity share approach: A company accounts for emissions according to its share of ownership or economic interest.

Control approach: A company accounts for 100 percent of emissions from operations it controls. Control can be financial control or operational control.

Operational boundary

Identifies which emissions are direct and indirect and organizes them into Scope 1, Scope 2, and Scope 3.

5. Scope 1, Scope 2, and Scope 3

Scope 1: Direct emissions

Emissions from sources owned or controlled by the company.

Examples:

fuel burned in company boilers, furnaces, or turbines
fuel used in company-owned vehicles
process emissions from manufacturing or chemical reactions
fugitive emissions from leaks, refrigeration, or air conditioning systems

Scope 2: Purchased energy emissions

Emissions from the generation of purchased electricity, steam, heat, or cooling consumed by the company.

For many companies, purchased electricity is one of the largest emission sources.

Scope 3: Other indirect emissions

Other indirect emissions that occur because of the company’s activities, but from sources not owned or controlled by the company.

Examples:

purchased goods and materials
transportation of purchased materials
employee business travel
employee commuting
waste disposal
use of sold products
transportation of sold products
outsourced activities
leased assets
franchises
upstream fuel and energy-related activities

Scope 3 can be complex, so companies often start with the most relevant or largest categories first.

6. Scope 3 does not always mean full LCA

A Scope 3 assessment does not always need to be a full life cycle assessment of all products and operations. A practical first step is to describe the value chain, identify the most relevant categories, collect available data, and estimate the largest emission areas.

7. Main emission source categories

Stationary combustion

boilers, furnaces, burners, turbines, heaters, incinerators, engines, flares

Mobile combustion

cars, trucks, buses, trains, ships, boats, aircraft, forklifts

Process emissions

cement production, aluminum production, ammonia production, petrochemical processes, waste processing, industrial reactions

Fugitive emissions

refrigerant leaks, air conditioning leakage, equipment leaks, methane leakage, gas transport losses, wastewater treatment emissions

8. How emissions are calculated

Activity data × emission factor = greenhouse gas emissions

Activity data examples

kilowatt-hours of electricity used
liters of diesel consumed
cubic meters of natural gas used
kilometers travelled
tonnes of material produced
tonnes of waste disposed
kilograms of refrigerant leaked

Emission factor examples

kg CO₂e per kWh of electricity
kg CO₂e per liter of diesel
kg CO₂e per cubic meter of natural gas
kg CO₂e per passenger-kilometer
kg CO₂e per tonne of material

Important note

The quality of the result depends strongly on the quality of the input data and the suitability of the emission factor.

9. Practical calculation flow

1
Identify emission sources
2
Choose the organizational boundary
3
Choose the operational boundary
4
Collect activity data
5
Select emission factors
6
Calculate emissions
7
Convert gases to CO₂e
8
Review data quality
9
Report Scope 1 and Scope 2 separately
10
Add relevant Scope 3 categories where possible
11
Track results over time

10. Data companies should collect first

Energy and fuel

electricity bills
natural gas use
heating oil use
diesel use
petrol use
LPG or other fuels
steam, heat, or cooling purchases

Transport

company vehicle fuel
mileage records
logistics data
freight transport data
business travel records
employee commuting information, if relevant

Operations and production

production quantities
material consumption
process data
waste quantities
water and wastewater data, if connected to emissions
equipment lists

Refrigerants

type of refrigerant
amount purchased
amount refilled
leakage records
maintenance records
air conditioning and refrigeration equipment information

Value chain data

purchased goods and services
supplier activity data
outsourced transport
waste treatment routes
use of sold products, if relevant
end-of-life information, if relevant

11. Choosing emission factors

Emission factors should match the activity data as closely as possible.

electricity data should use a suitable electricity emission factor
fuel data should use a suitable fuel-specific emission factor
transport data should use a suitable vehicle, fuel, distance, or freight factor
refrigerant data should use the correct global warming potential for the refrigerant type

Stronger choices include supplier-specific electricity factors where reliable, country or grid-specific electricity factors, fuel-specific emission factors, sector-specific calculation tools, and facility-specific or process-specific factors where available.

If assumptions are used, they should be documented clearly.

12. Base year and tracking over time

A base year is the reference year used to compare emissions over time. A base year should be selected where reliable and verifiable emissions data are available.

Recalculation may be needed for acquisitions, divestments, mergers, outsourcing or insourcing of major emitting activities, major changes in calculation methods, or discovery of significant errors.

The goal is to compare like with like over time.

13. Data quality and internal checks

Are all relevant sources included?
Are units correct?
Are conversion factors correct?
Do electricity and fuel data match bills or meters?
Are emission factors suitable?
Are calculations documented?
Are assumptions explained?
Are changes from previous years reasonable?
Are exclusions justified?
Are files and sources archived?

14. Centralized and decentralized data collection

Centralized approach

Facilities or departments send activity data to a central team. The central team calculates emissions.

Decentralized approach

Facilities or departments calculate their own emissions and send results to a central team.

Many companies use a mixed approach. Simple sites provide activity data. Complex sites calculate emissions using approved methods. The central team reviews, checks, and consolidates the data.

15. What a GHG report usually includes

company description
reporting period
organizational boundary
consolidation approach
operational boundary
Scope 1 emissions
Scope 2 emissions
relevant Scope 3 emissions, if included
emissions by greenhouse gas where available
total emissions in CO₂e
base year
calculation methods
emission factors used
data sources
specific exclusions
explanation of major changes
progress over time, where available

Scope 1 and Scope 2 should be reported separately. Scope 3 should clearly state which categories are included.

16. Verification and assurance

Verification is an independent review of reported GHG information. It checks whether the inventory is complete, accurate, transparent, and aligned with the chosen accounting approach.

Even without external verification, companies should keep an internal audit trail.

data sources
methods
emission factors
assumptions
calculations
exclusions
approvals
changes from previous years

17. GHG reductions and offsets

Companies should distinguish between reducing their own inventory emissions and using offsets.

A public GHG report should show gross emissions separately from any offsets, credits, or trades.

18. Setting GHG targets

Once a company has a reliable inventory, it can set emissions targets.

A good target should define:

base year
target year
emissions boundary
which scopes are included
whether the target is absolute or intensity-based
level of reduction expected
how progress will be measured
how structural changes will be handled

Examples:

Reduce Scope 1 and Scope 2 emissions by 30 percent by 2030.
Reduce emissions intensity per tonne of product.
Increase renewable electricity use.
Reduce business travel emissions.
Improve energy efficiency across facilities.

19. Common mistakes in GHG accounting

Watch for these common issues

starting without a clear boundary
mixing Scope 1, Scope 2, and Scope 3 together
using activity data without checking units
using emission factors that do not match the data
forgetting refrigerant leakage
ignoring company vehicles
excluding major sources without explanation
not documenting assumptions
changing methods without explaining the change
reporting reductions without a clear base year
mixing gross emissions with offsets
trying to calculate all Scope 3 categories before identifying the most relevant ones

20. Simple GHG accounting checklist

Have we defined our organizational boundary?
Have we chosen equity share, financial control, or operational control?
Have we identified Scope 1 emission sources?
Have we collected electricity and purchased energy data for Scope 2?
Have we identified relevant Scope 3 categories?
Have we collected activity data from reliable sources?
Have we selected suitable emission factors?
Have we documented assumptions and exclusions?
Have we chosen a base year?
Have we checked calculation quality?
Have we kept an audit trail?
Have we reported Scope 1 and Scope 2 separately?
Have we explained any major year-to-year changes?

21. Important note

This guide is for general information only. It does not provide verification, certification, audit, legal, or official greenhouse gas reporting advice. Companies should confirm applicable reporting requirements with qualified sustainability, accounting, audit, legal, or verification professionals.