The GHG Protocol

What is the GHG Protocol?

There are growing expectations for companies to contribute to the fight against climate change by reducing greenhouse gas emissions from their operations and value chains. However, in order to set targets and develop effective plans to cut emissions, we need to properly account for the level of emissions and where they are coming from. How this data is to be collected and reported is often little understood.

This article sheds light on the most commonly referenced source of emissions reporting guidance and standards, the Greenhouse Gas (GHG) Protocol¹, an international multi-stakeholder partnership, which first published its Corporate Accounting and Reporting Standard in 2001. The Corporate Standard covers “requirements and guidance for companies and other organizations preparing a corporate-level GHG emissions inventory.”

Over time, additional guidance has been provided on the accounting of GHG emissions in the public sector and value chain (scope 3) emissions. The Corporate Standard has become the most commonly cited methodology for GHG accounting by Canadian firms reporting to CDP.²

Source: Author. Data used to generate the graphic is from CDP 2021 Climate Change Data.
Notes: The graph shows the number of times a standard/protocol/methodology is listed by Canadian companies answering the CDP questionnaire. One company may list more than one standard/protocol/methodology.

Who created the GHG Protocol?

The GHG Protocol was created³ by the World Resources Institute (WRI), a global nonprofit organization with headquarters in Washington D.C. that “works on practical solutions that improve people's lives and ensure nature can thrive,”⁴ and the World Business Council for Sustainable Development (WBCSD), a global, “CEO-led community of over 200 of the world's leading sustainable businesses,” with headquarters in Geneva, Switzerland.⁵

The Corporate Standard is a 116-page document which covers the accounting and reporting of the six greenhouse gases covered by the Kyoto Protocol.⁶ It has also been revised and supplemented with reports that provide alternative approaches to scope 2 emissions accounting (emissions from the purchase of electricity, steam, heating or cooling), further guidance on scope 3 (emissions from a company’s value chain including customers and suppliers), and more explicit requirements regarding GHG emission calculations.

The Corporate Standard specifies that it is written primarily from the perspective of a business developing a GHG inventory. However, it also specifies that it applies equally to other types of organizations with operations that produce GHG emissions (e.g., NGOs, universities and government agencies).

The majority of the Corporate Standard is presented as guidance. Although some subsections are labelled as a standard, no chapter as a whole is labelled as such. For example, some chapters that include both standards and guidance are: GHG Accounting and Reporting Principles; Tracking Emissions Over Time; and Reporting GHG Emissions. Some chapters that include just guidance are: Identifying and Calculating GHG Emissions; Accounting for GHG Reductions; and Verification of GHG Emissions. The emphasis on guidance makes it difficult for regulators to implement.

Developments and the Future of GHG Accounting

Both the U.S. Securities and Exchange Commission (SEC) and the Canadian Securities Administrators (CSA) have proposed regulation that references the GHG Protocol for GHG accounting methods. And the draft standard on climate-related disclosures by the new International Sustainability Standards Board (ISSB) – a body built to deliver a comprehensive global baseline of sustainability-related disclosure standards for the capital markets – proposes the use of the GHG Protocol as well. ⁷

Given the potentially significant influence of the GHG Protocol due to these and other initiatives, developing more prescriptive and clear standards will be important for the industry and analysts that track and finance reporting firms, as it would lead to better overall measurement, progress tracking, and comparison of performance on reducing emissions.

• ¹ For more a more detailed review please refer to the joint ISF, CPA Canada publication, A Closer Look at the GHG Protocol: Observations and Implications for Standards Setters and Regulators, September 2022.
• ² CDP, formerly the Carbon Disclosure Project, is the de facto leader in voluntary CO2 reporting.
• ³ Source: The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (Revised Edition).
• ⁴ Source: WRI.ORG
• ⁵ Source: WBCSD.ORG
• ⁶ Source: UNFCC.INT
• ⁷ Source: Exposure Draft IFRS Sustainability Disclosure Standard, March 2022.