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A Corporate Accounting and Reporting Standard

REVISED EDITION

The Greenhouse Gas Protocol

— 390

— 370

— 350

— 330

— 310

— 290

— 270 ppm

1000 1500 2000

Year:

WORLD

RESOURCES

INSTITUTE

GHG Protocol Initiative Team

Janet Ranganathan World Resources Institute

Laurent Corbier World Business Council for Sustainable Development

Pankaj Bhatia World Resources Institute

Simon Schmitz World Business Council for Sustainable Development

Peter Gage World Resources Institute

Kjell Oren World Business Council for Sustainable Development

Revision Working Group

Brian Dawson & Matt Spannagle Australian Greenhouse Office

Mike McMahon BP

Pierre Boileau Environment Canada

Rob Frederick Ford Motor Company

Bruno Vanderborght Holcim

Fraser Thomson International Aluminum Institute

Koichi Kitamura Kansai Electric Power Company

Chi Mun Woo & Naseem Pankhida KPMG

Reid Miner National Council for Air and Stream Improvement

Laurent Segalen PricewaterhouseCoopers

Jasper Koch Shell Global Solutions International B.V.

Somnath Bhattacharjee The Energy Research Institute

Cynthia Cummis US Environmental Protection Agency

Clare Breidenich UNFCCC

Rebecca Eaton World Wildlife Fund

Core Advisors

Michael Gillenwater Independent Expert

Melanie Eddis KPMG

Marie Marache PricewaterhouseCoopers

Roberto Acosta UNFCCC

Vincent Camobreco US Environmental Protection Agency

Elizabeth Cook World Resources Institute

103

104

Table of Contents

GUIDANCE

STANDARD

GUIDANCE

STANDARD

GUIDANCE

STANDARD

GUIDANCE

STANDARD

GUIDANCE

STANDARD GUIDANCEGUIDANCE

GUIDANCE

STANDARD

Introduction The Greenhouse Gas Protocol Initiative

Chapter 1 GHG Accounting and Reporting Principles

Chapter 2 Business Goals and Inventory Design

Chapter 3 Setting Organizational Boundaries

Chapter 4 Setting Operational Boundaries

Chapter 5 Tracking Emissions Over Time

Chapter 6 Identifying and Calculating GHG Emissions

Chapter 7 Managing Inventory Quality

Chapter 8 Accounting for GHG Reductions

Chapter 9 Reporting GHG Emissions

Chapter 10 Verification of GHG Emissions

Chapter 11 Setting GHG Targets

Appendix A Accounting for Indirect Emissions from Electricity

Appendix B Accounting for Sequestered Atmospheric Carbon

Appendix C Overview of GHG Programs

Appendix D Industry Sectors and Scopes

Acronyms

Glossary

References

Contributors

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ACorporateAccountingandReportingStandardREVISEDEDITIONTheGreenhouseGasProtocol—390—370—350—330—310—290—270ppm100015002000Year:WORLDRESOURCESINSTITUTEGHGProtocolInitiativeTeamJanetRanganathanWorldResourcesInstituteLaurentCorbierWorldBusinessCouncilforSustainableDevelopmentPankajBhatiaWorldResourcesInstituteSimonSchmitzWorldBusinessCouncilforSustainableDevelopmentPeterGageWorldResourcesInstituteKjellOrenWorldBusinessCouncilforSustainableDevelopmentRevisionWorkingGroupBrianDawson&MattSpannagleAustralianGreenhouseOfficeMikeMcMahonBPPierreBoileauEnvironmentCanadaRobFrederickFordMotorCompanyBrunoVanderborghtHolcimFraserThomsonInternationalAluminumInstituteKoichiKitamuraKansaiElectricPowerCompanyChiMunWoo&NaseemPankhidaKPMGReidMinerNationalCouncilforAirandStreamImprovementLaurentSegalenPricewaterhouseCoopersJasperKochShellGlobalSolutionsInternationalB.V.SomnathBhattacharjeeTheEnergyResearchInstituteCynthiaCummisUSEnvironmentalProtectionAgencyClareBreidenichUNFCCCRebeccaEatonWorldWildlifeFundCoreAdvisorsMichaelGillenwaterIndependentExpertMelanieEddisKPMGMarieMarachePricewaterhouseCoopersRobertoAcostaUNFCCCVincentCamobrecoUSEnvironmentalProtectionAgencyElizabethCookWorldResourcesInstitute2610162434404858626874868890929596103104TableofContentsGUIDANCESTANDARDGUIDANCESTANDARDGUIDANCESTANDARDGUIDANCESTANDARDGUIDANCESTANDARDGUIDANCEGUIDANCEGUIDANCEGUIDANCEGUIDANCEGUIDANCEGUIDANCEGUIDANCESTANDARDIntroductionTheGreenhouseGasProtocolInitiativeChapter1GHGAccountingandReportingPrinciplesChapter2BusinessGoalsandInventoryDesignChapter3SettingOrganizationalBoundariesChapter4SettingOperationalBoundariesChapter5TrackingEmissionsOverTimeChapter6IdentifyingandCalculatingGHGEmissionsChapter7ManagingInventoryQualityChapter8AccountingforGHGReductionsChapter9ReportingGHGEmissionsChapter10VerificationofGHGEmissionsChapter11SettingGHGTargetsAppendixAAccountingforIndirectEmissionsfromElectricityAppendixBAccountingforSequesteredAtmosphericCarbonAppendixCOverviewofGHGProgramsAppendixDIndustrySectorsandScopesAcronymsGlossaryReferencesContributorsheGreenhouseGasProtocolInitiativeisamulti-stakeholderpartnershipofbusinesses,non-governmentalorganizations(NGOs),governments,andothersconvenedbytheWorldResourcesInstitute(WRI),aU.S.-basedenvironmentalNGO,andtheWorldBusinessCouncilforSustainableDevelopment(WBCSD),aGeneva-basedcoalitionof170internationalcompanies.Launchedin1998,theInitiative’smissionistodevelopinternationallyacceptedgreenhousegas(GHG)accountingandreportingstandardsforbusinessandtopromotetheirbroadadoption.TheGHGProtocolInitiativecomprisestwoseparatebutlinkedstandards:•GHGProtocolCorporateAccountingandReportingStandard(thisdocument,whichprovidesastep-by-stepguideforcompaniestouseinquantifyingandreportingtheirGHGemissions)•GHGProtocolProjectQuantificationStandard(forthcoming;aguideforquantifyingreductionsfromGHGmitigationprojects)2TIntroductionThefirsteditionoftheGHGProtocolCorporateAccountingandReportingStandard(GHGProtocolCorporateStandard),publishedinSeptember2001,enjoyedbroadadoptionandacceptancearoundtheglobebybusinesses,NGOs,andgovernments.Manyindustry,NGO,andgovernmentGHGprograms1usedthestandardasabasisfortheiraccountingandreportingsystems.Industrygroups,suchastheInternationalAluminumInstitute,theInternationalCouncilofForestandPaperAssociations,andtheWBCSDCementSustainabilityInitiative,partneredwiththeGHGProtocolInitiativetodevelopcomplementaryindustry-specificcalculationtools.Widespreadadoptionofthestandardcanbeattributedtotheinclu-sionofmanystakeholdersinitsdevelopmentandtothefactthatitisrobust,practical,andbuildsontheexperienceandexpertiseofnumerousexpertsandpractitioners.ThisrevisededitionoftheGHGProtocolCorporateStandardistheculminationofatwo-yearmulti-stakeholderdialogue,designedtobuildonexperiencegainedfromusingthefirstedition.Itincludesadditionalguidance,casestudies,appendices,andanewchapteronsettingaGHGtarget.Forthemostpart,however,thefirsteditionoftheCorporateStandardhasstoodthetestoftime,andthechangesinthisrevisededitionwillnotaffecttheresultsofmostGHGinventories.ThisGHGProtocolCorporateStandardprovidesstandardsandguidanceforcompaniesandothertypesoforganizations2preparingaGHGemissionsinventory.ItcoverstheaccountingandreportingofthesixgreenhousegasescoveredbytheKyotoProtocol—carbondioxide(CO2),methane(CH4),nitrousoxide(N2O),hydrofluorocarbons(HFCs),perfluorocarbons(PFCs),andsulphurhexafluoride(SF6).Thestandardandguidanceweredesignedwiththefollowingobjectivesinmind:•TohelpcompaniesprepareaGHGinventorythatrepresentsatrueandfairaccountoftheiremissions,throughtheuseofstandardizedapproachesandprinciples•TosimplifyandreducethecostsofcompilingaGHGinventory•ToprovidebusinesswithinformationthatcanbeusedtobuildaneffectivestrategytomanageandreduceGHGemissions•ToprovideinformationthatfacilitatesparticipationinvoluntaryandmandatoryGHGprograms•ToincreaseconsistencyandtransparencyinGHGaccountingandreportingamongvariouscompaniesandGHGprograms.Bothbusinessandotherstakeholdersbenefitfromconvergingonacommonstandard.Forbusiness,itreducescostsiftheirGHGinventoryiscapableofmeetingdifferentinternalandexternalinformationrequirements.Forothers,itimprovestheconsistency,transparency,andunderstandabilityofreportedinformation,makingiteasiertotrackandcompareprogressovertime.ThebusinessvalueofaGHGinventoryGlobalwarmingandclimatechangehavecometotheforeasakeysustainabledevelopmentissue.ManygovernmentsaretakingstepstoreduceGHGemissionsthroughnationalpoliciesthatincludetheintroductionofemissionstradingprograms,voluntaryprograms,carbonorenergytaxes,andregulationsandstandardsonenergyefficiencyandemissions.Asaresult,companiesmustbeabletounderstandandmanagetheirGHGrisksiftheyaretoensurelong-termsuccessinacompetitivebusinessenvironment,andtobepreparedforfuturenationalorregionalclimatepolicies.Awell-designedandmaintainedcorporateGHGinventorycanserveseveralbusinessgoals,including:•ManagingGHGrisksandidentifyingreductionopportunities•PublicreportingandparticipationinvoluntaryGHGprograms•Participatinginmandatoryreportingprograms•ParticipatinginGHGmarkets•Recognitionforearlyvoluntaryaction.Whoshouldusethisstandard?Thisstandardiswrittenprimarilyfromtheperspectiveofabusi-nessdevelopingaGHGinventory.However,itappliesequallytoothertypesoforganizationswithoperationsthatgiverisetoGHGemissions,e.g.,NGOs,governmentagencies,anduniversities.3ItshouldnotbeusedtoquantifythereductionsassociatedwithGHGmitigationprojectsforuseasoffsetsorcredits—theforthcomingGHGProtocolProjectQuantificationStandardwillprovidestandardsandguidanceforthispurpose.PolicymakersandarchitectsofGHGprogramscanalsouserele-vantpartsofthisstandardasabasisfortheirownaccountingandreportingrequirements.INTRODUCTION3RelationshiptootherGHGprogramsItisimportanttodistinguishbetweentheGHGProtocolInitiativeandotherGHGprograms.TheGHGProtocolCorporateStandardfocusesonlyontheaccountingandreportingofemissions.ItdoesnotrequireemissionsinformationtobereportedtoWRIorWBCSD.Inaddition,whilethisstandardisdesignedtodevelopaverifiableinventory,itdoesnotprovideastandardforhowtheverificationprocessshouldbeconducted.TheGHGProtocolCorporateStandardhasbeendesignedtobeprogramorpolicyneutral.However,manyexistingGHGprogramsuseitfortheirownaccountingandreportingrequirementsanditiscompatiblewithmostofthem,including:•VoluntaryGHGreductionprograms,e.g.,theWorldWildlifeFund(WWF)ClimateSavers,theU.S.EnvironmentalProtectionAgency(EPA)ClimateLeaders,theClimateNeutralNetwork,andtheBusinessLeadersInitiativeonClimateChange(BLICC)•GHGregistries,e.g.,CaliforniaClimateActionRegistry(CCAR),WorldEconomicForumGlobalGHGRegistry•Nationalandregionalindustryinitiatives,e.g.,NewZealandBusinessCouncilforSustainableDevelopment,TaiwanBusinessCouncilforSustainableDevelopment,Associationdesentreprisespourlaréductiondesgazàeffetdeserre(AERES)•GHGtradingprograms,4e.g.,UKEmissionsTradingScheme(UKETS),ChicagoClimateExchange(CCX),andtheEuropeanUnionGreenhouseGasEmissionsAllowanceTradingScheme(EUETS)•Sector-specificprotocolsdevelopedbyanumberofindustryasso-ciations,e.g.,InternationalAluminumInstitute,InternationalCouncilofForestandPaperAssociations,InternationalIronandSteelInstitute,theWBCSDCementSustainabilityInitiative,andtheInternationalPetroleumIndustryEnvironmentalConservationAssociation(IPIECA).SinceGHGprogramsoftenhavespecificaccountingandreportingrequirements,companiesshouldalwayscheckwithanyrelevantprogramsforanyadditionalrequirementsbeforedevelopingtheirinventory.GHGcalculationtoolsTocomplementthestandardandguidanceprovidedhere,anumberofcross-sectorandsector-specificcalculationtoolsareavailableontheGHGProtocolInitiativewebsite(www.ghgprotocol.org),includingaguideforsmalloffice-basedorganizations(seechapter6forfulllist).Thesetoolsprovidestep-by-stepguidanceandelectronicworksheetstohelpuserscalculateGHGemissionsfromspecificsourcesorindustries.ThetoolsareconsistentwiththoseproposedbytheIntergovernmentalPanelonClimateChange(IPCC)forcompilationofemissionsatthenationallevel(IPCC,1996).Theyhavebeenrefinedtobeuser-friendlyfornon-technicalcompanystaffandtoincreasetheaccuracyofemissionsdataatacompanylevel.Thankstohelpfrommanycompanies,organizations,andindividualexpertsthroughanintensivereviewofthetools,theyarebelievedtorepresentcurrent“bestpractice.”ReportinginaccordancewiththeGHGProtocolCorporateStandardTheGHGProtocolInitiativeencouragestheuseoftheGHGProtocolCorporateStandardbyallcompaniesregardlessoftheirexperienceinpreparingaGHGinventory.Theterm“shall”isusedinthechapterscontainingstandardstoclarifywhatisrequiredtoprepareandreportaGHGinventoryinaccordancewiththeGHGProtocolCorporateStandard.Thisisintendedtoimprovetheconsistencywithwhichthestandardisappliedandtheresultinginformationthatispubliclyreported,withoutdepartingfromtheinitialintentofthefirstedition.Italsohastheadvantageofprovidingaverifiablestandardforcompaniesinterestedintakingthisadditionalstep.OverviewofmainchangestothefirsteditionThisrevisededitioncontainsadditionalguidance,casestudies,andannexes.AnewguidancechapteronsettingGHGtargetshasbeenaddedinresponsetomanyrequestsfromcompaniesthat,havingdevelopedaninventory,wantedtotakethenextstepofsettingatarget.Appendiceshavebeenaddedonaccountingforindirectemissionsfromelectricityandonaccountingforsequesteredatmosphericcarbon.IntroductionINTRODUCTION4Changestospecificchaptersinclude:•CHAPTER1:Minorrewordingofprinciples.•CHAPTER2:Goal-relatedinformationonoperationalbound-arieshasbeenupdatedandconsolidated.•CHAPTER3:Althoughstillencouragedtoaccountforemissionsusingboththeequityandcontrolapproaches,companiesmaynowreportusingoneapproach.Thischangereflectsthefactthatnotallcompaniesneedbothtypesofinfor-mationtoachievetheirbusinessgoals.Newguidancehasbeenprovidedonestablishingcontrol.Theminimumequitythresholdforreportingpurposeshasbeenremovedtoenableemissionstobereportedwhensignificant.•CHAPTER4:Thedefinitionofscope2hasbeenrevisedtoexcludeemissionsfromelectricitypurchasedforresale—thesearenowincludedinscope3.Thispreventstwoormorecompaniesfromdoublecountingthesameemissionsinthesamescope.NewguidancehasbeenaddedonaccountingforGHGemissionsassociatedwithelectricitytransmissionanddistributionlosses.AdditionalguidanceprovidedonScope3categoriesandleasing.•CHAPTER5:Therecommendationofpro-rataadjustmentswasdeletedtoavoidtheneedfortwoadjust-ments.Moreguidancehasbeenaddedonadjustingbaseyearemissionsforchangesincalculationmethodologies.•CHAPTER6:Theguidanceonchoosingemissionfactorshasbeenimproved.•CHAPTER7:Theguidanceonestablishinganinventoryqualitymanagementsystemandontheapplica-tionsandlimitationsofuncertaintyassessmenthasbeenexpanded.•CHAPTER8:GuidancehasbeenaddedonaccountingforandreportingprojectreductionsandoffsetsinordertoclarifytherelationshipbetweentheGHGProtocolCorporateandProjectStandards.•CHAPTER9:Therequiredandoptionalreportingcategorieshavebeenclarified.•CHAPTER10:Guidanceontheconceptsofmaterialityandmaterialdiscrepancyhasbeenexpanded.•CHAPTER11:Newchapteraddedonstepsinsettingatargetandtrackingandreportingprogress.Frequentlyaskedquestions…Belowisalistoffrequentlyaskedquestions,withdirectionstotherelevantchapters.•WhatshouldIconsiderwhensettingouttoaccountforandreportemissions?CHAPTER2•HowdoIdealwithcomplexcompanystructuresandsharedownership?CHAPTER3•Whatisthedifferencebetweendirectandindirectemissionsandwhatistheirrelevance?CHAPTER4•WhichindirectemissionsshouldIreport?CHAPTER4•HowdoIaccountforandreportoutsourcedandleasedoperations?CHAPTER4•WhatisabaseyearandwhydoIneedone?CHAPTER5•Myemissionschangewithacquisitionsanddivestitures.HowdoIaccountforthese?CHAPTER5•HowdoIidentifymycompany’semissionsources?CHAPTER6•Whatkindsoftoolsaretheretohelpmecalculateemissions?CHAPTER6•Whatdatacollectionactivitiesanddatamanagementissuesdomyfacilitieshavetodealwith?CHAPTER6•Whatdeterminesthequalityandcredibilityofmyemissionsinformation?CHAPTER7•HowshouldIaccountforandreportGHGoffsetsthatIsellorpurchase?CHAPTER8•WhatinformationshouldbeincludedinaGHGpublicemissionsreport?CHAPTER9•Whatdatamustbeavailabletoobtainexternalverificationoftheinventorydata?CHAPTER10•WhatisinvolvedinsettinganemissionstargetandhowdoIreportperformanceinrelationtomytarget?CHAPTER11INTRODUCTION5NOTES1GHGprogramisagenerictermusedtorefertoanyvoluntaryormandatoryinternational,national,sub-nationalgovernmentornon-governmentalauthoritythatregisters,certifies,orregulatesGHGemissionsorremovals.2Throughouttherestofthisdocument,theterm“company”or“busi-ness”isusedasshorthandforcompanies,businessesandothertypesoforganizations.3Forexample,WRIusestheGHGProtocolCorporateStandardtopubliclyreportitsownemissionsonanannualbasisandtoparticipateintheChicagoClimateExchange.4TradingprogramsthatoperateattheleveloffacilitiesprimarilyusetheGHGProtocolInitiativecalculationtools.STANDARD6swithfinancialaccountingandreporting,generallyacceptedGHGaccountingprinciplesareintendedtounderpinandguideGHGaccountingandreportingtoensurethatthereportedinformationrepresentsafaithful,true,andfairaccountofacompany’sGHGemissions.A1GHGAccountingandReportingPrinciplesGUIDANCESTANDARDGHGaccountingandreportingshallbebasedonthefollowingprinciples:RELEVANCEEnsuretheGHGinventoryappropriatelyreflectstheGHGemissionsofthecompanyandservesthedecision-makingneedsofusers–bothinternalandexternaltothecompany.COMPLETENESSAccountforandreportonallGHGemissionsourcesandactivitieswithinthechoseninventoryboundary.Discloseandjustifyanyspecificexclusions.CONSISTENCYUseconsistentmethodologiestoallowformeaningfulcomparisonsofemissionsovertime.Transparentlydocumentanychangestothedata,inventoryboundary,methods,oranyotherrelevantfactorsinthetimeseries.TRANSPARENCYAddressallrelevantissuesinafactualandcoherentmanner,basedonaclearaudittrail.Discloseanyrelevantassumptionsandmakeappropriatereferencestotheaccountingandcalculationmethodologiesanddatasourcesused.ACCURACYEnsurethatthequantificationofGHGemissionsissystematicallyneitherovernorunderactualemissions,asfarascanbejudged,andthatuncertaintiesarereducedasfaraspracticable.Achievesufficientaccuracytoenableuserstomakedecisionswithreasonableassuranceastotheintegrityofthereportedinformation.CHAPTER1:GHGAccountingandReportingPrinciples7STANDARDGHGaccountingandreportingpracticesareevolvingandarenewtomanybusinesses;however,theprincipleslistedbelowarederivedinpartfromgenerallyacceptedfinancialaccountingandreportingprinciples.Theyalsoreflecttheoutcomeofacollaborativeprocessinvolvingstakeholdersfromawiderangeoftechnical,environmental,andaccountingdisciplines.GUIDANCECHAPTER18GHGAccountingandReportingPrinciplesheseprinciplesareintendedtounderpinallaspectsofGHGaccountingandreporting.TheirapplicationwillensurethattheGHGinventoryconstitutesatrueandfairrepresentationofthecompany’sGHGemissions.TheirprimaryfunctionistoguidetheimplementationoftheGHGProtocolCorporateStandard,particularlywhentheapplicationofthestandardstospecificissuesorsitua-tionsisambiguous.RelevanceForanorganization’sGHGreporttoberelevantmeansthatitcontainstheinformationthatusers—bothinternalandexternaltothecompany—needfortheirdecisionmaking.Animportantaspectofrelevanceistheselectionofanappropriateinventoryboundarythatreflectsthesubstanceandeconomicrealityofthecompany’sbusinessrelationships,notmerelyitslegalform.Thechoiceoftheinventoryboundaryisdependentonthecharacteristicsofthecompany,theintendedpurposeofinformation,andtheneedsoftheusers.Whenchoosingtheinventoryboundary,anumberoffactorsshouldbeconsidered,suchas:•Organizationalstructures:control(operationalandfinancial),ownership,legalagreements,jointventures,etc.•Operationalboundaries:on-siteandoff-siteactivities,processes,services,andimpacts•Businesscontext:natureofactivities,geographicloca-tions,industrysector(s),purposesofinformation,andusersofinformationMoreinformationondefininganappropriateinventoryboundaryisprovidedinchapters2,3,and4.CompletenessAllrelevantemissionssourceswithinthechoseninventoryboundaryneedtobeaccountedforsothatacomprehensiveandmeaningfulinventoryiscompiled.Inpractice,alackofdataorthecostofgatheringdatamaybealimitingfactor.Sometimesitistemptingtodefineaminimumemissionsaccountingthreshold(oftenreferredtoasamaterialitythreshold)statingthatasourcenotexceedingacertainsizecanbeomittedfromtheinventory.Technically,suchathresholdissimplyapredefinedandacceptednegativebiasinestimates(i.e.,anunderestimate).Althoughitappearsusefulintheory,thepracticalimplementationofsuchathresholdisnotcompatiblewiththecompletenessprincipleoftheGHGProtocolCorporateStandard.Inordertoutilizeamaterialityspecification,theemissionsfromaparticularsourceoractivitywouldhavetobequantifiedtoensuretheywereunderthethreshold.However,onceemissionsarequantified,mostofthebenefitofhavingathresholdislost.Athresholdisoftenusedtodeterminewhetheranerrororomissionisamaterialdiscrepancyornot.Thisisnotthesameasademinimisfordefiningacompleteinventory.Insteadcompaniesneedtomakeagoodfaithefforttoprovideacomplete,accurate,andconsistentaccountingoftheirGHGemissions.Forcaseswhereemissionshavenotbeenestimated,orestimatedataninsufficientlevelofquality,itisimportantthatthisistransparentlydocumentedandjustified.Verifierscandeterminethepotentialimpactandrelevanceoftheexclu-sion,orlackofquality,ontheoverallinventoryreport.Moreinformationoncompletenessisprovidedinchap-ters7and10.ConsistencyUsersofGHGinformationwillwanttotrackandcompareGHGemissionsinformationovertimeinordertoidentifytrendsandtoassesstheperformanceofthereportingcompany.Theconsistentapplicationofaccountingapproaches,inventoryboundary,andcalcula-tionmethodologiesisessentialtoproducingcomparableGHGemissionsdataovertime.TheGHGinformationforalloperationswithinanorganization’sinventoryboundaryneedstobecompiledinamannerthatensuresthattheaggregateinformationisinternallyconsistentandcomparableovertime.Iftherearechangesintheinventoryboundary,methods,dataoranyotherfactorsaffectingemissionestimates,theyneedtobetranspar-entlydocumentedandjustified.Moreinformationonconsistencyisprovidedinchapters5and9.TTransparencyTransparencyrelatestothedegreetowhichinformationontheprocesses,procedures,assumptions,andlimita-tionsoftheGHGinventoryaredisclosedinaclear,factual,neutral,andunderstandablemannerbasedoncleardocumentationandarchives(i.e.,anaudittrail).Informationneedstoberecorded,compiled,andanalyzedinawaythatenablesinternalreviewersandexternalverifierstoattesttoitscredibility.Specificexclusionsorinclusionsneedtobeclearlyidentifiedandjustified,assumptionsdisclosed,andappropriaterefer-encesprovidedforthemethodologiesappliedandthedatasourcesused.Theinformationshouldbesufficienttoenableathirdpartytoderivethesameresultsifprovidedwiththesamesourcedata.A“transparent”reportwillprovideaclearunderstandingoftheissuesinthecontextofthereportingcompanyandameaningfulassessmentofperformance.Anindependentexternalverificationisagoodwayofensuringtransparencyanddeterminingthatanappropriateaudittrailhasbeenestablishedanddocumentationprovided.Moreinformationontransparencyisprovidedinchap-ters9and10.AccuracyDatashouldbesufficientlyprecisetoenableintendeduserstomakedecisionswithreasonableassurancethatthereportedinformationiscredible.GHGmeasure-ments,estimates,orcalculationsshouldbesystemicallyneitherovernorundertheactualemissionsvalue,asfarascanbejudged,andthatuncertaintiesarereducedasfaraspracticable.Thequantificationprocessshouldbeconductedinamannerthatminimizesuncertainty.Reportingonmeasurestakentoensureaccuracyintheaccountingofemissionscanhelppromotecredibilitywhileenhancingtransparency.Moreinformationonaccuracyisprovidedinchapter7.Asaninternational,values-drivenretailerofskin,hair,bodycare,andmake-upproducts,theBodyShopoperatesnearly2,000loca-tions,serving51countriesin29languages.AchievingbothaccuracyandcompletenessintheGHGinventoryprocessforsuchalarge,disaggregatedorganization,isachallenge.Unavailabledataandcostlymeasurementprocessespresentsignificantobstaclestoimprovingemissiondataaccuracy.Forexample,itisdifficulttodisaggregateenergyconsumptioninformationforshopslocatedwithinshoppingcenters.Estimatesfortheseshopsareofteninaccurate,butexcludingsourcesduetoinaccuracycreatesanincompleteinventory.TheBodyShop,withhelpfromtheBusinessLeadersInitiativeonClimateChange(BLICC)program,approachedthisproblemwithatwo-tieredsolution.First,storeswereencouragedtoactivelypursuedirectconsumptiondatathroughdisaggregateddataordirectmonitoring.Second,ifunabletoobtaindirectconsumptiondata,storesweregivenstandardizedguidelinesforestimatingemissionsbasedonfactorssuchassquarefootage,equipmenttype,andusagehours.Thissystemreplacedthepriorfragmentaryapproach,providedgreateraccuracy,andprovidedamorecompleteaccountofemissionsbyincludingfacilitiesthatprevi-ouslywereunabletocalculateemissions.Ifsuchlimitationsinthemeasurementprocessesaremadetransparent,usersoftheinformationwillunderstandthebasisofthedataandthetrade-offthathastakenplace.TheBodyShop:Solvingthetrade-offbetweenaccuracyandcompletenessCHAPTER1GHGAccountingandReportingPrinciples9VolkswagenisaglobalautomanufacturerandthelargestautomakerinEurope.WhileworkingonitsGHGinventory,Volkswagenrealizedthatthestructureofitsemissionsourceshadundergoneconsiderablechangesoverthelastsevenyears.Emissionsfromproductionprocesses,whichwereconsideredtobeirrelevantatacorporatelevelin1996,todayconstitutealmost20percentofaggregatedGHGemissionsattherelevantplantsites.Examplesofgrowingemissionssourcesarenewsitesforenginetestingortheinvestmentintomagnesiumdie-castingequipmentatcertainproductionsites.Thisexampleshowsthatemissionssourceshavetoberegularlyre-assessedtomaintainacompleteinventoryovertime.Volkswagen:MaintainingcompletenessovertimeGUIDANCE10mprovingyourunderstandingofyourcompany’sGHGemissionsbycompilingaGHGinventorymakesgoodbusinesssense.CompaniesfrequentlycitethefollowingfivebusinessgoalsasreasonsforcompilingaGHGinventory:•ManagingGHGrisksandidentifyingreductionopportunities•PublicreportingandparticipationinvoluntaryGHGprograms•Participatinginmandatoryreportingprograms•ParticipatinginGHGmarkets•RecognitionforearlyvoluntaryactionI2BusinessGoalsandInventoryDesignGUIDANCEGUIDANCECompaniesgenerallywanttheirGHGinventorytobecapableofservingmultiplegoals.Itthereforemakessensetodesigntheprocessfromtheoutsettoprovideinformationforavarietyofdifferentusersanduses—bothcurrentandfuture.TheGHGProtocolCorporateStandardhasbeendesignedasacomprehensiveGHGaccountingandreportingframeworktoprovidetheinformationbuildingblockscapableofservingmostbusinessgoals(seeBox1).ThustheinventorydatacollectedaccordingtotheGHGProtocolCorporateStandardcanbeaggregatedanddisaggregatedforvariousorganizationalandoperationalboundariesandfordifferentbusinessgeographicscales(state,country,Annex1countries,non-Annex1countries,facility,businessunit,company,etc.).AppendixCprovidesanoverviewofvariousGHGprograms—manyofwhicharebasedontheGHGProtocolCorporateStandard.Theguidancesectionsofchapters3and4provideadditionalinformationonhowtodesignaninventoryfordifferentgoalsanduses.ManagingGHGrisksandidentifyingreductionopportunitiesCompilingacomprehensiveGHGinventoryimprovesacompany’sunderstandingofitsemissionsprofileandanypotentialGHGliabilityor“exposure.”Acompany’sGHGexposureisincreasinglybecomingamanagementissueinlightofheightenedscrutinybytheinsuranceindustry,shareholders,andtheemergenceofenvironmentalregulations/policiesdesignedtoreduceGHGemissions.InthecontextoffutureGHGregulations,significantGHGemissionsinacompany’svaluechainmayresultinincreasedcosts(upstream)orreducedsales(down-stream),evenifthecompanyitselfisnotdirectlysubjecttoregulations.Thusinvestorsmayviewsignificantindi-rectemissionsupstreamordownstreamofacompany’soperationsaspotentialliabilitiesthatneedtobemanagedandreduced.Alimitedfocusondirectemis-sionsfromacompany’sownoperationsmaymissmajorGHGrisksandopportunities,whileleadingtoamisin-terpretationofthecompany’sactualGHGexposure.Onamorepositivenote,whatgetsmeasuredgetsmanaged.Accountingforemissionscanhelpidentifythemosteffectivereductionopportunities.ThiscandriveincreasedmaterialsandenergyefficiencyaswellasthedevelopmentofnewproductsandservicesthatreducetheGHGimpactsofcustomersorsuppliers.Thisinturncanreduceproductioncostsandhelpdifferen-tiatethecompanyinanincreasinglyenvironmentallyconsciousmarketplace.ConductingarigorousGHGinventoryisalsoaprerequisiteforsettinganinternalorpublicGHGtargetandforsubsequentlymeasuringandreportingprogress.CHAPTER2BusinessGoalsandInventoryDesign11GUIDANCEBOX1.BusinessgoalsservedbyGHGinventoriesManagingGHGrisksandidentifyingreductionopportunities•IdentifyingrisksassociatedwithGHGconstraintsinthefuture•Identifyingcosteffectivereductionopportunities•SettingGHGtargets,measuringandreportingprogressPublicreportingandparticipationinvoluntaryGHGprograms•VoluntarystakeholderreportingofGHGemissionsandprogresstowardsGHGtargets•ReportingtogovernmentandNGOreportingprograms,includingGHGregistries•Eco-labellingandGHGcertificationParticipatinginmandatoryreportingprograms•Participatingingovernmentreportingprogramsatthenational,regional,orlocallevelParticipatinginGHGmarkets•SupportinginternalGHGtradingprograms•Participatinginexternalcapandtradeallowancetradingprograms•Calculatingcarbon/GHGtaxesRecognitionforearlyvoluntaryaction•Providinginformationtosupport“baselineprotection”and/orcreditforearlyactionPublicreportingandparticipationinvoluntaryGHGprogramsAsconcernsoverclimatechangegrow,NGOs,investors,andotherstakeholdersareincreasinglycallingforgreatercorporatedisclosureofGHGinformation.Theyareinterestedintheactionscompaniesaretakingandinhowthecompaniesarepositionedrelativetotheircompetitorsinthefaceofemergingregulations.Inresponse,agrowingnumberofcompaniesarepreparingstakeholderreportscontaininginformationonGHGemissions.Thesemaybestand-alonereportsonGHGemissionsorbroaderenvironmentalorsustainabilityreports.Forexample,companiespreparingsustainabilityreportsusingtheGlobalReportingInitiativeguidelinesshouldincludeinformationonGHGemissionsinaccor-dancewiththeGHGProtocolCorporateStandard(GRI,2002).Publicreportingcanalsostrengthenrelation-shipswithotherstakeholders.Forinstance,companiescanimprovetheirstandingwithcustomersandwiththepublicbybeingrecognizedforparticipatinginvoluntaryGHGprograms.SomecountriesandstateshaveestablishedGHGregistrieswherecompaniescanreportGHGemissionsinapublicdatabase.Registriesmaybeadministeredbygovernments(e.g.,U.S.DepartmentofEnergy1605bVoluntaryReportingProgram),NGOs(e.g.,CaliforniaClimateActionRegistry),orindustrygroups(e.g.,WorldEconomicForumGlobalGHGRegistry).ManyGHGprogramsalsoprovidehelptocompaniessettingvolun-taryGHGtargets.MostvoluntaryGHGprogramspermitorrequirethereportingofdirectemissionsfromoperations(includingallsixGHGs),aswellasindirectGHGemissionsfrompurchasedelectricity.AGHGinventorypreparedinaccordancewiththeGHGProtocolCorporateStandardwillusuallybecompatiblewithmostrequirements(AppendixCprovidesanoverviewofthereportingrequirementsofsomeGHGprograms).However,sincetheaccountingguidelinesofmanyvoluntaryprogramsareperiodicallyupdated,companiesplanningtopartici-pateareadvisedtocontacttheprogramadministratortocheckthecurrentrequirements.GUIDANCEBusinessGoalsandInventoryDesignCHAPTER212Indirectemissionsassociatedwiththeconsumptionofpurchasedelectricityarearequiredelementofanycompany’saccountingandreportingundertheGHGProtocolCorporateStandard.BecausepurchasedelectricityisamajorsourceofGHGemissionsforcompa-nies,itpresentsasignificantreductionopportunity.IBM,amajorinformationtechnologycompanyandamemberoftheWRI’sGreenPowerMarketDevelopmentGroup,hassystematicallyaccountedfortheseindirectemissionsandthusidentifiedthesignificantpotentialtoreducethem.ThecompanyhasimplementedavarietyofstrategiesthatwouldreduceeithertheirdemandforpurchasedenergyortheGHGintensityofthatpurchasedenergy.OnestrategyhasbeentopursuetherenewableenergymarkettoreducetheGHGintensityofitspurchasedelectricity.IBMsucceededinreducingitsGHGemissionsatitsfacilityinAustin,Texas,evenasenergyusestayedrelativelyconstant,throughacontractforrenewableelectricitywiththelocalutilitycompany,AustinEnergy.Startingin2001,thisfive-yearcontractisfor5.25millionkWhsofwind-powerperyear.Thiszeroemissionpowerloweredthefacility’sinventorybymorethan4,100tonnesofCO2comparedtothepreviousyearandrepresentsnearly5%ofthefacility’stotalelectricityconsumption.Company-wide,IBM’s2002totalrenewableenergyprocurementwas66.2millionkWh,whichrepresented1.3%ofitselectricityconsumptionworldwideand31,550tonnesofCO2comparedtothepreviousyear.Worldwide,IBMpurchasedavarietyofsourcesofrenewableenergyincludingwind,biomassandsolar.Byaccountingfortheseindirectemissionsandlookingforassoci-atedreductionopportunities,IBMhassuccessfullyreducedanimportantsourceofitsoverallGHGemissions.IBM:TheroleofrenewableenergyinreducingGHGemissionsParticipatinginmandatoryreportingprogramsSomegovernmentsrequireGHGemitterstoreporttheiremissionsannually.Thesetypicallyfocusondirectemis-sionsfromoperationsatoperatedorcontrolledfacilitiesinspecificgeographicjurisdictions.InEurope,facilitiesfallingundertherequirementsoftheIntegratedPollutionPreventionandControl(IPPC)DirectivemustreportemissionsexceedingaspecifiedthresholdforeachofthesixGHGs.ThereportedemissionsareincludedinaEuropeanPollutantEmissionsRegister(EPER),apubliclyaccessibleinternet-baseddatabasethatpermitscomparisonsofemissionsfromindividualfacilitiesorindustrialsectorsindifferentcountries(EC-DGE,2000).InOntario,OntarioRegulation127requiresthereportingofGHGemissions(OntarioMOE,2001).ParticipatinginGHGmarketsMarket-basedapproachestoreducingGHGemissionsareemerginginsomepartsoftheworld.Inmostplaces,theytaketheformofemissionstradingprograms,althoughthereareanumberofotherapproachesadoptedbycountries,suchasthetaxationapproachusedinNorway.Tradingprogramscanbeimplementedonamandatory(e.g.,theforthcomingEUETS)orvoluntarybasis(e.g.,CCX).Althoughtradingprograms,whichdeterminecompliancebycomparingemissionswithanemissionsreductiontargetorcap,typicallyrequireaccountingonlyfordirectemissions,thereareexceptions.TheUKETS,forexample,requiresdirectentryparticipantstoaccountforGHGemissionsfromthegenerationofpurchasedelectricity(DEFRA,2003).TheCCXallowsitsmemberstheoptionofcountingindirectemissionsasso-ciatedwithelectricitypurchasesasasupplementalreductioncommitment.Othertypesofindirectemissionscanbemoredifficulttoverifyandmaypresentchallengesintermsofavoidingdoublecounting.Tofacilitateindependentverification,emissionstradingCHAPTER2BusinessGoalsandInventoryDesign13GUIDANCEmayrequireparticipatingcompaniestoestablishanaudittrailforGHGinformation(seechapter10).GHGtradingprogramsarelikelytoimposeadditionallayersofaccountingspecificityrelatingtowhichapproachisusedforsettingorganizationalboundaries;whichGHGsandsourcesareaddressed;howbaseyearsareestablished;thetypeofcalculationmethod-ologyused;thechoiceofemissionfactors;andthemonitoringandverificationapproachesemployed.ThebroadparticipationandbestpracticesincorporatedintotheGHGProtocolCorporateStandardarelikelytoinformtheaccountingrequirementsofemergingprograms,andhaveindeeddonesointhepast.RecognitionforearlyvoluntaryactionAcredibleinventorymayhelpensurethatacorpora-tion’searly,voluntaryemissionsreductionsarerecognizedinfutureregulatoryprograms.Toillustrate,supposethatin2000acompanystartedreducingitsGHGemissionsbyshiftingitson-sitepowerhouseboilerfuelfromcoaltolandfillgas.IfamandatoryGHGreductionprogramislaterestablishedin2005anditsets2003asthebaseagainstwhichreductionsaretobemeasured,theprogrammightnotallowtheemissionsreductionsachievedbythegreenpowerprojectpriorto2003tocounttowarditstarget.However,ifacompany’svoluntaryemissionsreductionshavebeenaccountedforandregistered,theyaremorelikelytoberecognizedandtakenintoaccountwhenregulationsrequiringreductionsgointoeffect.Forinstance,thestateofCaliforniahasstatedthatitwilluseitsbesteffortstoensurethatorganizationsthatregistercertifiedemissionresultswiththeCaliforniaClimateActionRegistryreceiveappropriateconsidera-tionunderanyfutureinternational,federal,orstateregulatoryprogramrelatingtoGHGemissions.GUIDANCEBusinessGoalsandInventoryDesignCHAPTER214ForTataSteel,Asia’sfirstandIndia’slargestintegratedprivatesectorsteelcompany,reducingitsGHGemissionsthroughenergyefficiencyisakeyelementofitsprimarybusinessgoal:theacceptabilityofitsproductininternationalmarkets.Eachyear,inpursuitofthisgoal,thecompanylaunchesseveralenergyeffi-ciencyprojectsandintroducesless-GHG-intensiveprocesses.ThecompanyisalsoactivelypursuingGHGtradingmarketsasameansoffurtherimprovingitsGHGperformance.Tosucceedintheseeffortsandbeeligibleforemergingtradingschemes,TataSteelmusthaveanaccurateGHGinventorythatincludesallprocessesandactivities,allowsformeaningfulbenchmarking,measuresimprovements,andpromotescrediblereporting.TataSteelhasdevelopedthecapacitytomeasureitsprogressinreducingGHGemissions.TataSteel’smanagershaveaccesstoon-lineinformationonenergyusage,materialusage,wasteandbyproductgeneration,andothermaterialstreams.UsingthisdataandtheGHGProtocolcalculationtools,TataSteelgeneratestwokeylong-term,strategicperformanceindicators:specificenergyconsumption(Gigacalorie/tonneofcrudesteel)andGHGintensity(tonneofCO2equivalent/tonneofcrudesteel).Theseindicatorsarekeysustainabilitymetricsinthesteelsectorworld-wide,andhelpensuremarketacceptabilityandcompetitiveness.SincethecompanyadoptedtheGHGProtocolCorporateStandard,trackingperformancehasbecomemorestructuredandstream-lined.ThissystemallowsTataSteelquickandeasyaccesstoitsGHGinventoryandhelpsthecompanymaximizeprocessandmaterialflowefficiencies.TataSteel:DevelopmentofinstitutionalcapacityinGHGaccountingandreportingCHAPTER2BusinessGoalsandInventoryDesign15GUIDANCEWhenFordMotorCompany,aglobalautomaker,embarkedonanefforttounderstandandreduceitsGHGimpacts,itwantedtotrackemissionswithenoughaccuracyanddetailtomanagethemeffectively.Aninternalcross-functionalGHGinventoryteamwasformedtoaccomplishthisgoal.Althoughthecompanywasalreadyreportingbasicenergyandcarbondioxidedataatthecorporatelevel,amoredetailedunderstandingoftheseemis-sionswasessentialtosetandmeasureprogressagainstperformancetargetsandevaluatepotentialparticipationinexternaltradingschemes.Forseveralweeks,theteamworkedoncreatingamorecompre-hensiveinventoryforstationarycombustionsources,andquicklyfoundapatternemerging.Alltoooftenteammembersleftmeet-ingswithasmanyquestionsasanswers,andthesamequestionskeptcomingupfromoneweektothenext.Howshouldtheydrawboundaries?Howdotheyaccountforacquisitionsanddivestitures?Whatemissionfactorsshouldbeused?Andperhapsmostimportantly,howcouldtheirmethodologybedeemedcrediblewithstakeholders?Althoughtheteamhadnoshortageofopinions,therealsoseemedtobenoclearlyrightorwronganswers.TheGHGProtocolCorporateStandardhelpedanswermanyofthesequestionsandtheFordMotorCompanynowhasamorerobustGHGinventorythatcanbecontinuallyimprovedtofulfillitsrapidlyemergingGHGmanagementneeds.SinceadoptingtheGHGProtocolCorporateStandard,Fordhasexpandedthecoverageofitspublicreportingtoallofitsbrandsglobally;itnowincludesdirectemissionsfromsourcesitownsorcontrolsandindirectemissionsresultingfromthegenerationofpurchasedelectricity,heat,orsteam.Inaddition,FordisafoundingmemberoftheChicagoClimateExchange,whichusessomeoftheGHGProtocolcalculationtoolsforemissionsreportingpurposes.FordMotorCompany:ExperiencesusingtheGHGProtocolCorporateStandardSTANDARD16usinessoperationsvaryintheirlegalandorganizationalstructures;theyincludewhollyownedoperations,incorporatedandnon-incorporatedjointventures,subsidiaries,andothers.Forthepurposesoffinancialaccounting,theyaretreatedaccordingtoestablishedrulesthatdependonthestructureoftheorganizationandtherelationshipsamongthepartiesinvolved.Insettingorgani-zationalboundaries,acompanyselectsanapproachforconsolidatingGHGemissionsandthenconsistentlyappliestheselectedapproachtodefinethosebusinessesandoperationsthatconstitutethecompanyforthepurposeofaccountingandreportingGHGemissions.B3SettingOrganizationalBoundariesGUIDANCESTANDARDForcorporatereporting,twodistinctapproachescanbeusedtoconsolidateGHGemissions:theequityshareandthecontrolapproaches.CompaniesshallaccountforandreporttheirconsolidatedGHGdataaccordingtoeithertheequityshareorcontrolapproachaspresentedbelow.Ifthereportingcompanywhollyownsallitsoperations,itsorganizationalboundarywillbethesamewhicheverapproachisused.1Forcompanieswithjointoperations,theorganizationalboundaryandtheresultingemissionsmaydifferdependingontheapproachused.Inbothwhollyownedandjointoperations,thechoiceofapproachmaychangehowemissionsarecategorizedwhenoperationalboundariesareset(seechapter4).EquityshareapproachUndertheequityshareapproach,acompanyaccountsforGHGemissionsfromoperationsaccordingtoitsshareofequityintheoperation.Theequitysharereflectseconomicinterest,whichistheextentofrightsacompanyhastotherisksandrewardsflowingfromanoperation.Typically,theshareofeconomicrisksandrewardsinanoperationisalignedwiththecompany’spercentageownershipofthatoperation,andequitysharewillnormallybethesameastheownershippercentage.Wherethisisnotthecase,theeconomicsubstanceoftherelationshipthecompanyhaswiththeoperationalwaysoverridesthelegalownershipformtoensurethatequitysharereflectsthepercentageofeconomicinterest.Theprincipleofeconomicsubstancetakingprecedentoverlegalformisconsistentwithinternationalfinancialreportingstandards.Thestaffpreparingtheinventorymaythereforeneedtoconsultwiththecompany’saccountingorlegalstafftoensurethattheappropriateequitysharepercentageisappliedforeachjointoperation(seeTable1fordefinitionsoffinancialaccountingcategories).ControlapproachUnderthecontrolapproach,acompanyaccountsfor100percentoftheGHGemissionsfromoperationsoverwhichithascontrol.ItdoesnotaccountforGHGemis-sionsfromoperationsinwhichitownsaninterestbuthasnocontrol.Controlcanbedefinedineitherfinancialoroperationalterms.WhenusingthecontrolapproachtoconsolidateGHGemissions,companiesshallchoosebetweeneithertheoperationalcontrolorfinancialcontrolcriteria.Inmostcases,whetheranoperationiscontrolledbythecompanyornotdoesnotvarybasedonwhetherthefinan-cialcontroloroperationalcontrolcriterionisused.Anotableexceptionistheoilandgasindustry,whichoftenhascomplexownership/operatorshipstructures.Thus,thechoiceofcontrolcriterionintheoilandgasindustrycanhavesubstantialconsequencesforacompany’sGHGinventory.Inmakingthischoice,companiesshouldtakeintoaccounthowGHGemissionsaccountingandreportingcanbestbegearedtotherequirementsofemissionsreportingandtradingschemes,howitcanbealignedwithfinancialandenvironmentalreporting,andwhichcriterionbestreflectsthecompany’sactualpowerofcontrol.•FinancialControl.Thecompanyhasfinancialcontrolovertheoperationiftheformerhastheabilitytodirectthefinancialandoperatingpoliciesofthelatterwithaviewtogainingeconomicbenefitsfromitsactivities.2Forexample,financialcontrolusuallyexistsifthecompanyhastherighttothemajorityofbenefitsoftheoperation,howevertheserightsareconveyed.Similarly,acompanyisconsideredtofinanciallycontrolanoperationifitretainsthemajorityrisksandrewardsofownershipoftheoperation’sassets.Underthiscriterion,theeconomicsubstanceoftherelationshipbetweenthecompanyandtheoperationtakesprecedenceoverthelegalownershipstatus,sothatthecompanymayhavefinancialcontrolovertheoperationevenifithaslessthana50percentinterestinthatoperation.Inassessingtheeconomicsubstanceoftherelationship,theimpactofpotentialvotingrights,includingboththoseheldbythecompanyandthoseheldbyotherparties,isalsotakenintoaccount.Thiscriterionisconsistentwithinternationalfinancialaccountingstandards;therefore,acompanyhasfinan-cialcontroloveranoperationforGHGaccountingpurposesiftheoperationisconsideredasagroupcompanyorsubsidiaryforthepurposeoffinancialCHAPTER3SettingOrganizationalBoundaries17STANDARDconsolidation,i.e.,iftheoperationisfullyconsolidatedinfinancialaccounts.Ifthiscriterionischosentodeterminecontrol,emissionsfromjointventureswherepartnershavejointfinancialcontrolareaccountedforbasedontheequityshareapproach(seeTable1fordefinitionsoffinancialaccountingcategories).•OperationalControl.Acompanyhasoperationalcontroloveranoperationiftheformeroroneofitssubsidiaries(seeTable1fordefinitionsoffinancialaccountingcategories)hasthefullauthoritytointroduceandimplementitsoperatingpoliciesattheoperation.Thiscriterionisconsistentwiththecurrentaccountingandreportingpracticeofmanycompa-niesthatreportonemissionsfromfacilities,whichtheyoperate(i.e.,forwhichtheyholdtheoperatinglicense).Itisexpectedthatexceptinveryrarecircumstances,ifthecompanyoroneofitssubsidiariesistheoperatorofafacility,itwillhavethefullauthoritytointroduceandimplementitsoperatingpoliciesandthushasoperationalcontrol.Undertheoperationalcontrolapproach,acompanyaccountsfor100%ofemissionsfromoperationsoverwhichitoroneofitssubsidiarieshasoperationalcontrol.Itshouldbeemphasizedthathavingoperationalcontroldoesnotmeanthatacompanynecessarilyhasauthoritytomakealldecisionsconcerninganoperation.Forexample,bigcapitalinvestmentswilllikelyrequiretheapprovalofallthepartnersthathavejointfinancialcontrol.Operationalcontroldoesmeanthatacompanyhastheauthoritytointroduceandimplementitsoperatingpolicies.MoreinformationontherelevanceandapplicationoftheoperationalcontrolcriterionisprovidedinpetroleumindustryguidelinesforreportingGHGemissions(IPIECA,2003).Sometimesacompanycanhavejointfinancialcontroloveranoperation,butnotoperationalcontrol.Insuchcases,thecompanywouldneedtolookatthecontractualarrangementstodeterminewhetheranyoneofthepart-nershastheauthoritytointroduceandimplementitsoperatingpoliciesattheoperationandthushastheresponsibilitytoreportemissionsunderoperationalcontrol.Iftheoperationitselfwillintroduceandimple-mentitsownoperatingpolicies,thepartnerswithjointfinancialcontrolovertheoperationwillnotreportanyemissionsunderoperationalcontrol.Table2intheguidancesectionofthischapterillustratestheselectionofaconsolidationapproachatthecorpo-ratelevelandtheidentificationofwhichjointoperationswillbeintheorganizationalboundarydependingonthechoiceoftheconsolidationapproach.ConsolidationatmultiplelevelsTheconsolidationofGHGemissionsdatawillonlyresultinconsistentdataifalllevelsoftheorganizationfollowthesameconsolidationpolicy.Inthefirststep,themanagementoftheparentcompanyhastodecideonaconsolidationapproach(i.e.,eithertheequityshareorthefinancialoroperationalcontrolapproach).Onceacorporateconsolidationpolicyhasbeenselected,itshallbeappliedtoalllevelsoftheorganization.State-ownershipTherulesprovidedinthischaptershallalsobeappliedtoaccountforGHGemissionsfromindustryjointoperationsthatinvolvestateownershiporamixofprivate/stateownership.STANDARDCHAPTER318SettingOrganizationalBoundariesBPreportsGHGemissionsonanequitysharebasis,includingthoseoperationswhereBPhasaninterest,butwhereBPisnottheoperator.IndeterminingtheextentoftheequitysharereportingboundaryBPseekstoachieveclosealignmentwithfinancialaccountingprocedures.BP’sequityshareboundaryincludesalloperationsundertakenbyBPanditssubsidiaries,jointventuresandassociatedundertakingsasdeterminedbytheirtreatmentinthefinancialaccounts.Fixedassetinvestments,i.e.,whereBPhaslimitedinfluence,arenotincluded.GHGemissionsfromfacilitiesinwhichBPhasanequityshareareestimatedaccordingtotherequirementsoftheBPGroupReportingGuidelinesforEnvironmentalPerformance(BP2000).InthosefacilitieswhereBPhasanequitysharebutisnottheoperator,GHGemissionsdatamaybeobtaineddirectlyfromtheoperatingcompanyusingamethodologyconsistentwiththeBPGuidelines,oriscalculatedbyBPusingactivitydataprovidedbytheoperator.BPreportsitsequityshareGHGemissionseveryyear.Since2000,independentexternalauditorshaveexpressedtheopinionthatthereportedtotalhasbeenfoundtobefreefrommaterialmisstatementwhenauditedagainsttheBPGuidelines.BP:ReportingonthebasisofequityshareCHAPTER3SettingOrganizationalBoundaries19TABLE1.FinancialaccountingcategoriesACCOUNTINGCATEGORYGroupcompanies/subsidiariesAssociated/affiliatedcompaniesNon-incorporatedjointventures/partnerships/operationswherepartnershavejointfinancialcontrolFixedassetinvestmentsFranchisesFINANCIALACCOUNTINGDEFINITIONTheparentcompanyhastheabilitytodirectthefinancialandoperatingpoliciesofthecompanywithaviewtogainingeconomicbenefitsfromitsactivities.Normally,thiscategoryalsoincludesincorporatedandnon-incorporatedjointventuresandpartnershipsoverwhichtheparentcompanyhasfinancialcontrol.Groupcompanies/subsidiariesarefullyconsolidated,whichimpliesthat100percentofthesubsidiary’sincome,expenses,assets,andliabilitiesaretakenintotheparentcompany’sprofitandlossaccountandbalancesheet,respec-tively.Wheretheparent’sinterestdoesnotequal100percent,theconsolidatedprofitandlossaccountandbalancesheetshowsadeductionfortheprofitsandnetassetsbelongingtominorityowners.Theparentcompanyhassignificantinfluenceovertheoperatingandfinancialpoliciesofthecompany,butdoesnothavefinan-cialcontrol.Normally,thiscategoryalsoincludesincorporatedandnon-incorporatedjointventuresandpartnershipsoverwhichtheparentcompanyhassignificantinfluence,butnotfinancialcontrol.Financialaccountingappliestheequitysharemethodtoassociated/affiliatedcompanies,whichrecognizestheparentcompany’sshareoftheassociate’sprofitsandnetassets.Jointventures/partnerships/operationsareproportionallyconsolidated,i.e.,eachpartneraccountsfortheirpropor-tionateinterestofthejointventure’sincome,expenses,assets,andliabilities.Theparentcompanyhasneithersignificantinfluencenorfinancialcontrol.Thiscategoryalsoincludesincorporatedandnon-incorporatedjointventuresandpartnershipsoverwhichtheparentcompanyhasneithersignificantinfluencenorfinancialcontrol.Financialaccountingappliesthecost/dividendmethodtofixedassetinvestments.Thisimpliesthatonlydividendsreceivedarerecognizedasincomeandtheinvestmentiscarriedatcost.Franchisesareseparatelegalentities.Inmostcases,thefran-chiserwillnothaveequityrightsorcontroloverthefranchise.Therefore,franchisesshouldnotbeincludedinconsolidationofGHGemissionsdata.However,ifthefranchiserdoeshaveequityrightsoroperational/financialcontrol,thenthesamerulesforconsolidationundertheequityorcontrolapproachesapply.ACCOUNTINGFORGHGEMISSIONSACCORDINGTOGHGPROTOCOLCORPORATESTANDARDBASEDONEQUITYSHAREEquityshareofGHGemissionsEquityshareofGHGemissionsEquityshareofGHGemissions0%EquityshareofGHGemissionsBASEDONFINANCIALCONTROL100%ofGHGemissions0%ofGHGemissionsEquityshareofGHGemissions0%100%ofGHGemissionsSTANDARDNOTE:Table1isbasedonacomparisonofUK,US,NetherlandsandInternationalFinancialReportingStandards(KPMG,2000).henplanningtheconsolidationofGHGdata,itisimportanttodistinguishbetweenGHGaccountingandGHGreporting.GHGaccountingconcernstherecognitionandconsolidationofGHGemissionsfromoperationsinwhichaparentcompanyholdsaninterest(eithercontrolorequity)andlinkingthedatatospecificoperations,sites,geographiclocations,businessprocesses,andowners.GHGreporting,ontheotherhand,concernsthepresentationofGHGdatainformatstailoredtotheneedsofvariousreportingusesandusers.MostcompanieshaveseveralgoalsforGHGreporting,e.g.,officialgovernmentreportingrequirements,emissionstradingprograms,orpublicreporting(seechapter2).IndevelopingaGHGaccountingsystem,afundamentalconsiderationistoensurethatthesystemiscapableofmeetingarangeofreportingrequirements.Ensuringthatdataarecollectedandrecordedatasufficientlydisaggregatedlevel,andcapableofbeingconsolidatedinvariousforms,willprovidecompanieswithmaximumflexibilitytomeetarangeofreportingrequirements.DoublecountingWhentwoormorecompaniesholdinterestsinthesamejointoperationandusedifferentconsolidationapproaches(e.g.,CompanyAfollowstheequityshareapproachwhileCompanyBusesthefinancialcontrolapproach),emissionsfromthatjointoperationcouldbedoublecounted.Thismaynotmatterforvoluntarycorporatepublicreportingaslongasthereisadequatedisclosurefromthecompanyonitsconsolidationapproach.However,doublecountingofemissionsneedstobeavoidedintradingschemesandcertainmandatorygovernmentreportingprograms.ReportinggoalsandlevelofconsolidationReportingrequirementsforGHGdataexistatvariouslevels,fromaspecificlocalfacilityleveltoamoreaggregatedcorporatelevel.Examplesofdriversforvariouslevelsofreportinginclude:•OfficialgovernmentreportingprogramsorcertainemissionstradingprogramsmayrequireGHGdatatobereportedatafacilitylevel.Inthesecases,consoli-dationofGHGdataatacorporatelevelisnotrelevant•Governmentreportingandtradingprogramsmayrequirethatdatabeconsolidatedwithincertaingeographicandoperationalboundaries(e.g.,theU.K.EmissionsTradingScheme)•Todemonstratethecompany’saccounttowiderstake-holders,companiesmayengageinvoluntarypublicreporting,consolidatingGHGdataatacorporatelevelinordertoshowtheGHGemissionsoftheirentirebusinessactivities.ContractsthatcoverGHGemissionsToclarifyownership(rights)andresponsibility(obliga-tions)issues,companiesinvolvedinjointoperationsmaydrawupcontractsthatspecifyhowtheownershipofemissionsortheresponsibilityformanagingemissionsandassociatedriskisdistributedbetweentheparties.Wheresucharrangementsexist,companiesmayoption-allyprovideadescriptionofthecontractualarrangementandincludeinformationonallocationofCO2relatedrisksandobligations(seeChapter9).UsingtheequityshareorcontrolapproachDifferentinventoryreportinggoalsmayrequiredifferentdatasets.ThuscompaniesmayneedtoaccountfortheirGHGemissionsusingboththeequityshareandthecontrolapproaches.TheGHGProtocolCorporateStandardmakesnorecommendationastowhethervoluntarypublicGHGemissionsreportingshouldbebasedontheequityshareoranyofthetwocontrolapproaches,butencouragescompaniestoaccountfortheiremissionsapplyingtheequityshareandacontrolapproachsepa-rately.CompaniesneedtodecideontheapproachbestsuitedtotheirbusinessactivitiesandGHGaccountingandreportingrequirements.Examplesofhowthesemaydrivethechoiceofapproachincludethefollowing:•Reflectionofcommercialreality.ItcanbearguedthatacompanythatderivesaneconomicprofitfromacertainactivityshouldtakeownershipforanyGHGemissionsgeneratedbytheactivity.Thisisachievedbyusingtheequityshareapproach,sincethisapproachassignsownershipforGHGemissionsonthebasisofeconomicinterestinabusinessactivity.ThecontrolapproachesdonotalwaysreflectthefullGHGemissionsportfolioofacompany’sbusinessactivities,buthavetheadvantagethatacompanytakesfullownershipofallGHGemissionsthatitcandirectlyinfluenceandreduce.GUIDANCESettingOrganizationalBoundariesCHAPTER320W•Governmentreportingandemissionstradingprograms.Governmentregulatoryprogramswillalwaysneedtomonitorandenforcecompliance.Sincecomplianceresponsibilitygenerallyfallstotheoperator(notequityholdersorthegroupcompanythathasfinancialcontrol),governmentswillusuallyrequirereportingonthebasisofoperationalcontrol,eitherthroughafacilitylevel-basedsystemorinvolvingtheconsolida-tionofdatawithincertaingeographicalboundaries(e.g.theEUETSwillallocateemissionpermitstotheoperatorsofcertaininstallations).•Liabilityandriskmanagement.Whilereportingandcompliancewithregulationswillmostlikelycontinuetobebaseddirectlyonoperationalcontrol,theulti-matefinancialliabilitywilloftenrestwiththegroupcompanythatholdsanequityshareintheoperationorhasfinancialcontroloverit.Hence,forassessingrisk,GHGreportingonthebasisoftheequityshareandfinancialcontrolapproachesprovidesamorecompletepicture.Theequityshareapproachislikelytoresultinthemostcomprehensivecoverageofliabilityandrisks.Inthefuture,companiesmightincurliabilitiesforGHGemissionsproducedbyjointoperationsinwhichtheyhaveaninterest,butoverwhichtheydonothavefinancialcontrol.Forexample,acompanythatisanequityshareholderinanoperationbuthasnofinancialcontroloveritmightfacedemandsbythecompanieswithacontrollingsharetocoveritsrequisiteshareofGHGcompliancecosts.•Alignmentwithfinancialaccounting.FuturefinancialaccountingstandardsmaytreatGHGemissionsasliabilitiesandemissionsallowances/creditsasassets.Toassesstheassetsandliabilitiesacompanycreatesbyitsjointoperations,thesameconsolidationrulesthatareusedinfinancialaccountingshouldbeappliedinGHGaccounting.TheequityshareandfinancialcontrolapproachesresultincloseralignmentbetweenGHGaccountingandfinancialaccounting.•Managementinformationandperformancetracking.Forthepurposeofperformancetracking,thecontrolapproachesseemtobemoreappropriatesincemanagerscanonlybeheldaccountableforactivitiesundertheircontrol.•Costofadministrationanddataaccess.Theequityshareapproachcanresultinhigheradministrativecoststhanthecontrolapproach,sinceitcanbediffi-cultandtimeconsumingtocollectGHGemissionsdatafromjointoperationsnotunderthecontrolofthereportingcompany.Companiesarelikelytohavebetteraccesstooperationaldataandthereforegreaterabilitytoensurethatitmeetsminimumqualitystandardswhenreportingonthebasisofcontrol.•Completenessofreporting.Companiesmightfinditdifficulttodemonstratecompletenessofreportingwhentheoperationalcontrolcriterionisadopted,sincethereareunlikelytobeanymatchingrecordsorlistsoffinancialassetstoverifytheoperationsthatareincludedintheorganizationalboundary.CHAPTER3SettingOrganizationalBoundaries21GUIDANCEIntheoilandgasindustry,ownershipandcontrolstructuresareoftencomplex.Agroupmayownlessthan50percentofaventure’sequitycapitalbuthaveoperationalcontrolovertheventure.Ontheotherhand,insomesituations,agroupmayholdamajorityinterestinaventurewithoutbeingabletoexertopera-tionalcontrol,forexample,whenaminoritypartnerhasavetovoteattheboardlevel.Becauseofthesecomplexownershipandcontrolstructures,RoyalDutch/Shell,aglobalgroupofenergyandpetrochemicalcompanies,haschosentoreportitsGHGemis-sionsonthebasisofoperationalcontrol.Byreporting100percentofGHGemissionsfromallventuresunderitsoperationalcontrol,irrespectiveofitsshareintheventures’equitycapital,RoyalDutch/ShellcanensurethatGHGemissionsreportingisinlinewithitsoperationalpolicyincludingitsHealth,SafetyandEnvironmentalPerformanceMonitoringandReportingGuidelines.Usingtheoperationalcontrolapproach,thegroupgeneratesdatathatisconsistent,reliable,andmeetsitsqualitystandards.RoyalDutch/Shell:ReportingonthebasisofoperationalcontrolGUIDANCESettingOrganizationalBoundariesCHAPTER322FIGURE1.DefiningtheorganizationalboundaryofHollandIndustriesHOLLANDINDUSTRIESHOLLANDSWITZERLANDHOLLANDAMERICAKAHUNACHEMICALSBGB(50%OWNED)IRW(75%OWNED)QUICKFIXNALLOSYNTAL100%100%100%83%100%100%33.3%100%33.3%43%100%100%56%0%0%0%0%0%EquityshareOperationalcontrolFinancialcontrol41.5%0%50%62.25%100%100%ANILLUSTRATION:THEEQUITYSHAREANDCONTROLAPPROACHESHollandIndustriesisachemicalsgroupcomprisinganumberofcompanies/jointventuresactiveintheproductionandmarketingofchemicals.Table2outlinestheorganizationalstructureofHollandIndustriesandshowshowGHGemissionsfromthevariouswhollyownedandjointoperationsareaccountedforunderboththeequityshareandcontrolapproaches.Insettingitsorganizationalboundary,HollandIndustriesfirstdecideswhethertousetheequityorcontrolapproachforconsolidatingGHGdataatthecorporatelevel.Itthendetermineswhichoperationsatthecorporatelevelmeetitsselectedconsolidationapproach.Basedontheselectedconsolidationapproach,theconsolidationprocessisrepeatedforeachloweroperationallevel.Inthisprocess,GHGemissionsarefirstapportionedattheloweroperationallevel(subsidiaries,associate,jointventures,etc.)beforetheyareconsolidatedatthecorporatelevel.Figure1pres-entstheorganizationalboundaryofHollandIndustriesbasedontheequityshareandcontrolapproaches.CHAPTER3SettingOrganizationalBoundaries23GUIDANCEInthisexample,HollandAmerica(notHollandIndustries)holdsa50percentinterestinBGBanda75percentinterestinIRW.IftheactivitiesofHollandIndustriesitselfproduceGHGemissions(e.g.,emissionsassociatedwithelectricityuseattheheadoffice),thentheseemissionsshouldalsobeincludedintheconsolidationat100percent.NOTES1Theterm“operations”isusedhereasagenerictermtodenoteanykindofbusinessactivity,irrespectiveofitsorganizational,gover-nance,orlegalstructures.2Financialaccountingstandardsusethegenericterm“control”forwhatisdenotedas“financialcontrol”inthischapter.TABLE2.HollandIndustries-organizationalstructureandGHGemissionsaccountingWHOLLYOWNEDANDJOINTOPERATIONSOFHOLLANDHollandSwitzerlandHollandAmericaBGBIRWKahunaChemicalsQuickFixNalloSyntalLEGALSTRUCTUREANDPARTNERSIncorporatedcompanyIncorporatedcompanyJointventure,partnershavejointfinancialcontrolotherpartnerReardenSubsidiaryofHollandAmericaNon-incorporatedjointventure;partnershavejointfinancialcontrol;twootherpartners:ICTandBCSFIncorporatedjointventure,otherpartnerMajoxIncorporatedjointventure,otherpartnerNaguaCo.Incorporatedcompany,subsidiaryofErewhonCo.ECONOMICINTERESTHELDBYHOLLANDINDUSTRIES100%83%50%byHollandAmerica75%byHollandAmerica33.3%43%56%1%CONTROLOFOPERATINGPOLICIESHollandIndustriesHollandIndustriesReardenHollandAmericaHollandIndustriesHollandIndustriesNalloErewhonCo.TREATMENTINHOLLANDINDUSTRIES’FINANCIALACCOUNTS(SEETABLE1)WhollyownedsubsidiarySubsidiaryviaHollandAmericaviaHollandAmericaProportionallyconsolidatedjointventureSubsidiary(HollandIndustrieshasfinancialcontrolsinceittreatsQuickFixasasubsidiaryinitsfinancialaccounts)Associatedcompany(HollandIndustriesdoesnothavefinancialcontrolsinceittreatsNalloasanAssociatedcompanyinitsfinancialaccounts)FixedassetinvestmentEMISSIONSACCOUNTEDFORANDREPORTEDBYHOLLANDINDUSTRIESEQUITYSHAREAPPROACH100%83%41.5%(83%x50%)62.25%(83%x75%)33.3%43%56%0%CONTROLAPPROACH100%foroperationalcontrol100%forfinancialcontrol100%foroperationalcontrol100%forfinancialcontrol0%foroperationalcontrol50%forfinancialcontrol(50%x100%)100%foroperationalcontrol100%forfinancialcontrol100%foroperationalcontrol33.3%forfinancialcontrol100%foroperationalcontrol100%forfinancialcontrol0%foroperationalcontrol0%forfinancialcontrol0%foroperationalcontrol0%forfinancialcontrolSTANDARD24fteracompanyhasdetermineditsorganizationalboundariesintermsoftheoperationsthatitownsorcontrols,itthensetsitsoperationalboundaries.Thisinvolvesidentifyingemissionsassociatedwithitsoperations,categorizingthemasdirectandindirectemissions,andchoosingthescopeofaccountingandreportingforindirectemissions.A4SettingOperationalBoundariesGUIDANCESTANDARDForeffectiveandinnovativeGHGmanagement,settingoperationalboundariesthatarecomprehensivewithrespecttodirectandindirectemissionswillhelpacompanybettermanagethefullspectrumofGHGrisksandopportunitiesthatexistalongitsvaluechain.DirectGHGemissionsareemissionsfromsourcesthatareownedorcontrolledbythecompany.1IndirectGHGemissionsareemissionsthatareaconsequenceoftheactivitiesofthecompanybutoccuratsourcesownedorcontrolledbyanothercompany.Whatisclassifiedasdirectandindirectemissionsisdependentontheconsolidationapproach(equityshareorcontrol)selectedforsettingtheorganizationalboundary(seechapter3).Figure2belowshowstherelationshipbetweentheorganizationalandoperationalboundariesofacompany.Introducingtheconceptof“scope”Tohelpdelineatedirectandindirectemissionsources,improvetransparency,andprovideutilityfordifferenttypesoforganizationsanddifferenttypesofclimatepoli-ciesandbusinessgoals,three“scopes”(scope1,scope2,andscope3)aredefinedforGHGaccountingandreportingpurposes.Scopes1and2arecarefullydefinedinthisstandardtoensurethattwoormorecompanieswillnotaccountforemissionsinthesamescope.ThismakesthescopesamenableforuseinGHGprogramswheredoublecountingmatters.Companiesshallseparatelyaccountforandreportonscopes1and2ataminimum.Scope1:DirectGHGemissionsDirectGHGemissionsoccurfromsourcesthatareownedorcontrolledbythecompany,forexample,emissionsfromcombustioninownedorcontrolledboilers,furnaces,vehicles,etc.;emissionsfromchemicalproductioninownedorcontrolledprocessequipment.DirectCO2emissionsfromthecombustionofbiomassshallnotbeincludedinscope1butreportedseparately(seechapter9).GHGemissionsnotcoveredbytheKyotoProtocol,e.g.CFCs,NOx,etc.shallnotbeincludedinscope1butmaybereportedseparately(seechapter9).Scope2:ElectricityindirectGHGemissionsScope2accountsforGHGemissionsfromthegenera-tionofpurchasedelectricity2consumedbythecompany.Purchasedelectricityisdefinedaselectricitythatispurchasedorotherwisebroughtintotheorganizationalboundaryofthecompany.Scope2emissionsphysicallyoccuratthefacilitywhereelectricityisgenerated.Scope3:OtherindirectGHGemissionsScope3isanoptionalreportingcategorythatallowsforthetreatmentofallotherindirectemissions.Scope3emissionsareaconsequenceoftheactivitiesofthecompany,butoccurfromsourcesnotownedorcontrolledbythecompany.Someexamplesofscope3activitiesareextractionandproductionofpurchasedmaterials;transportationofpurchasedfuels;anduseofsoldproductsandservices.CHAPTER4SettingOperationalBoundaries25STANDARDFIGURE2.OrganizationalandoperationalboundariesofacompanyParentCompanyCompanyAShipfleetLeasedbuildingDirectandindirectemissionsCarfleetPowergenerationunitLeasedfactoryOwned/ControlledbuildingOwned/ControlledbuildingCompanyBCompanyCCompanyDORGANIZATIONALBOUNDARIESOPERATIONALBOUNDARIES}}noperationalboundarydefinesthescopeofdirectandindirectemissionsforoperationsthatfallwithinacompany’sestablishedorganizationalboundary.Theoperationalboundary(scope1,scope2,scope3)isdecidedatthecorporatelevelaftersettingtheorganiza-tionalboundary.Theselectedoperationalboundaryisthenuniformlyappliedtoidentifyandcategorizedirectandindirectemissionsateachoperationallevel(seeBox2).Theestablishedorganizationalandoperationalbound-ariestogetherconstituteacompany’sinventoryboundary.AccountingandreportingonscopesCompaniesaccountforandreportemissionsfromscope1and2separately.Companiesmayfurthersubdivideemissionsdatawithinscopeswherethisaidstransparencyorfacilitatescomparabilityovertime.Forexample,theymaysubdividedatabybusinessunit/facility,country,sourcetype(stationarycombustion,process,fugitive,etc.),andactivitytype(productionofelectricity,consumptionofelectricity,generationorpurchasedelectricitythatissoldtoendusers,etc.).InadditiontothesixKyotogases,companiesmayalsoprovideemissionsdataforotherGHGs(e.g.,MontrealProtocolgases)togivecontexttochangesinemissionlevelsofKyotoProtocolgases.SwitchingfromaCFCtoHFC,forexample,willincreaseemissionsofKyotoProtocolgases.InformationonemissionsofGHGsotherthanthesixKyotogasesmaybereportedseparatelyfromthescopesinaGHGpublicreport.Togetherthethreescopesprovideacomprehensiveaccountingframeworkformanagingandreducingdirectandindirectemissions.Figure3providesanoverviewoftherelationshipbetweenthescopesandtheactivitiesthatgeneratedirectandindirectemissionsalongacompany’svaluechain.Acompanycanbenefitfromefficiencygainsthroughoutthevaluechain.Evenwithoutanypolicydrivers,accountingforGHGemissionsalongthevaluechainmayrevealpotentialforgreaterefficiencyandlowercosts(e.g.,theuseofflyashasaclinkersubstituteinthemanufactureofcementthatreducesdownstreamemis-sionsfromprocessingofwasteflyash,andupstream26SettingOperationalBoundariesCHAPTER4GUIDANCEBOX2.OrganizationalandoperationalboundariesOrganizationXisaparentcompanythathasfullownershipandfinancialcontrolofoperationsAandB,butonlya30%non-operatedinterestandnofinancialcontrolinoperationC.SettingOrganizationalBoundary:XwoulddecidewhethertoaccountforGHGemissionsbyequityshareorfinancialcontrol.Ifthechoiceisequityshare,XwouldincludeAandB,aswellas30%ofC’semissions.Iftheapproachchosenisfinancialcontrol,XwouldcountonlyAandB’semissionsasrelevantandsubjecttoconsolidation.Oncethishasbeendecided,theorganizationalboundaryhasbeendefined.SettingOperationalBoundary:Oncetheorganizationalboundaryisset,Xthenneedstodecide,onthebasisofitsbusinessgoals,whethertoaccountonlyforscope1andscope2,orwhethertoincluderelevantscope3categoriesforitsoperations.OperationsA,BandC(iftheequityapproachisselected)accountfortheGHGemissionsinthescopeschosenbyX,i.e.,theyapplythecorporatepolicyindrawinguptheiroperationalboundaries.FIGURE3.OverviewofscopesandemissionsacrossavaluechainSCOPE2INDIRECTCO2SF6N2OCH4PFCsHFCsSCOPE1DIRECTSCOPE3INDIRECTPURCHASEDELECTRICITYFOROWNUSECOMPANYOWNEDVEHICLESFUELCOMBUSTIONPRODUCTUSEOUTSOURCEDACTIVITIESCONTRACTOROWNEDVEHICLESWASTEDISPOSALEMPLOYEEBUSINESSTRAVELPRODUCTIONOFPURCHASEDMATERIALSAAdoptedfromNZBCSD,2002emissionsfromproducingclinker).Evenifsuch“win-win”optionsarenotavailable,indirectemissionsreductionsmaystillbemorecosteffectivetoaccomplishthanscope1reductions.ThusaccountingforindirectemissionscanhelpidentifywheretoallocatelimitedresourcesinawaythatmaximizesGHGreductionandreturnoninvestment.AppendixDlistsGHGsourcesandactivitiesalongthevaluechainbyscopesforvariousindustrysectors.Scope1:DirectGHGemissionsCompaniesreportGHGemissionsfromsourcestheyownorcontrolasscope1.DirectGHGemissionsareprinci-pallytheresultofthefollowingtypesofactivitiesundertakenbythecompany:•Generationofelectricity,heat,orsteam.Theseemis-sionsresultfromcombustionoffuelsinstationarysources,e.g.,boilers,furnaces,turbines•Physicalorchemicalprocessing.3Mostoftheseemis-sionsresultfrommanufactureorprocessingofchemicalsandmaterials,e.g.,cement,aluminum,adipicacid,ammoniamanufacture,andwasteprocessing•Transportationofmaterials,products,waste,andemployees.Theseemissionsresultfromthecombus-tionoffuelsincompanyowned/controlledmobilecombustionsources(e.g.,trucks,trains,ships,airplanes,buses,andcars)•Fugitiveemissions.Theseemissionsresultfrominten-tionalorunintentionalreleases,e.g.,equipmentleaksfromjoints,seals,packing,andgaskets;methaneemissionsfromcoalminesandventing;hydrofluoro-carbon(HFC)emissionsduringtheuseofrefrigerationandairconditioningequipment;andmethaneleakagesfromgastransport.SALEOFOWN-GENERATEDELECTRICITYEmissionsassociatedwiththesaleofown-generatedelectricitytoanothercompanyarenotdeducted/nettedfromscope1.Thistreatmentofsoldelectricityisconsis-tentwithhowothersoldGHGintensiveproductsareaccounted,e.g.,emissionsfromtheproductionofsoldclinkerbyacementcompanyortheproductionofscrapsteelbyanironandsteelcompanyarenotsubtractedfromtheirscope1emissions.Emissionsassociatedwiththesale/transferofown-generatedelectricitymaybereportedinoptionalinformation(seechapter9).Scope2:ElectricityindirectGHGemissionsCompaniesreporttheemissionsfromthegenerationofpurchasedelectricitythatisconsumedinitsownedorcontrolledequipmentoroperationsasscope2.Scope2emissionsareaspecialcategoryofindirectemissions.Formanycompanies,purchasedelectricityrepresentsoneofthelargestsourcesofGHGemissionsandthemostsignifi-cantopportunitytoreducetheseemissions.Accountingforscope2emissionsallowscompaniestoassesstherisksandopportunitiesassociatedwithchangingelectricityandGHGemissionscosts.AnotherimportantreasonforcompaniestotracktheseemissionsisthattheinformationmaybeneededforsomeGHGprograms.Companiescanreducetheiruseofelectricitybyinvestinginenergyefficienttechnologiesandenergyconservation.Additionally,emerginggreenpowermarkets4provideopportunitiesforsomecompaniestoswitchtolessGHGintensivesourcesofelectricity.Companiescanalsoinstallanefficientonsiteco-generationplant,particularlyifitreplacesthepurchaseofmoreGHGintensiveelectricityfromthegridorelectricitysupplier.Reportingofscope2emissionsallowstransparentaccountingofGHGemis-sionsandreductionsassociatedwithsuchopportunities.INDIRECTEMISSIONSASSOCIATEDWITHTRANSMISSIONANDDISTRIBUTIONElectricutilitycompaniesoftenpurchaseelectricityfromindependentpowergeneratorsorthegridandresellittoend-consumersthroughatransmissionanddistribution(T&D)system.5Aportionoftheelectricitypurchasedbyautilitycompanyisconsumed(T&Dloss)duringitstransmissionanddistributiontoend-consumers(seeBox3).Consistentwiththescope2definition,emissionsfromthegenerationofpurchasedelectricitythatisconsumedduringtransmissionanddistributionarereportedinscope2bythecompanythatownsorcontrolstheT&Doperation.EndconsumersofthepurchasedelectricitydonotreportindirectemissionsassociatedwithT&Dlossesinscope2becausetheydonotownorcontroltheT&Doperationwheretheelectricityisconsumed(T&Dloss).CHAPTER4SettingOperationalBoundaries27GUIDANCEBOX3.ElectricitybalancePurchasedelectricityconsumedbytheutilitycompanyduringT&D+PurchasedelectricityconsumedbyendconsumersGENERATEDELECTRICITY=Thisapproachensuresthatthereisnodoublecountingwithinscope2sinceonlytheT&DutilitycompanywillaccountforindirectemissionsassociatedwithT&Dlossesinscope2.Anotheradvantageofthisapproachisthatitaddssimplicitytothereportingofscope2emis-sionsbyallowingtheuseofcommonlyavailableemissionfactorsthatinmostcasesdonotincludeT&Dlosses.Endconsumersmay,however,reporttheirindirectemis-sionsassociatedwithT&Dlossesinscope3underthecategory“generationofelectricityconsumedinaT&Dsystem.”AppendixAprovidesmoreguidanceonaccountingforemissionsassociatedwithT&Dlosses.OTHERELECTRICITY-RELATEDINDIRECTEMISSIONSIndirectemissionsfromactivitiesupstreamofacompany’selectricityprovider(e.g.,exploration,drilling,flaring,transportation)arereportedunderscope3.Emissionsfromthegenerationofelectricitythathasbeenpurchasedforresaletoend-usersarereportedinscope3underthecategory“generationofelectricitythatispurchasedandthenresoldtoendusers.”Emissionsfromthegenerationofpurchasedelectricityforresaletonon-end-users(e.g.,electricitytraders)maybereportedsepa-ratelyfromscope3in“optionalinformation.”ThefollowingtwoexamplesillustratehowGHGemissionsareaccountedforfromthegeneration,sale,andpurchaseofelectricity.Exampleone(Figure4):CompanyAisanindependentpowergeneratorthatownsapowergenerationplant.Thepowerplantproduces100MWhofelectricityandreleases20tonnesofemissionsperyear.CompanyBisanelectricitytraderandhasasupplycontractwithcompanyAtopurchaseallitselectricity.CompanyBre-sellsthepurchasedelectricity(100MWh)tocompanyC,autilitycompanythatowns/controlstheT&Dsystem.CompanyCconsumes5MWhofelectricityinitsT&Dsystemandsellstheremaining95MWhtocompanyD.CompanyDisanenduserwhoconsumesthepurchasedelectricity(95MWh)initsownoperations.CompanyAreportsitsdirectemissionsfrompowergenerationunderscope1.CompanyBreportsemissionsfromthepurchasedelectricitysoldtoanon-end-userasoptionalinformationseparatelyfromscope3.CompanyCreportstheindirectemissionsfromthegenerationofthepartofthepurchasedelectricitythatissoldtotheend-userunderscope3andthepartofthepurchasedelectricitythatitconsumesinitsT&Dsystemunderscope2.End-userDreportstheindirectemissionsassociatedwithitsownconsumptionofpurchasedelectricityunderscope2andcanoptionallyreportemissionsassociatedwithupstreamT&Dlossesinscope3.Figure4showstheaccountingofemissionsassociatedwiththesetransactions.Exampletwo:CompanyDinstallsaco-generationunitandsellssurpluselectricitytoaneighboringcompanyEforitsconsumption.CompanyDreportsalldirectemis-sionsfromtheco-generationunitunderscope1.IndirectemissionsfromthegenerationofelectricityforexporttoEarereportedbyDunderoptionalinformationseparatelyGUIDANCESettingOperationalBoundariesCHAPTER428SeattleCityLight(SCL),Seattle’smunicipalutilitycompany,sellselectricitytoitsend-usecustomersthatiseitherproducedatitsownhydropowerfacilities,purchasedthroughlong-termcontracts,orpurchasedontheshort-termmarket.SCLusedthefirsteditionoftheGHGProtocolCorporateStandardtoestimateitsyear2000andyear2002GHGemissions,andemissionsassociatedwithgenera-tionofnetpurchasedelectricitysoldtoend-userswasanimportantcomponentofthatinventory.SCLtracksandreportstheamountofelectricitysoldtoend-usersonamonthlyandannualbasis.SCLcalculatesnetpurchasesfromthemarket(brokersandotherutilitycompanies)bysubtractingsalestothemarketfrompurchasesfromthemarket,measuredinMWh.Thisallowsacompleteaccountingofallemissionsimpactsfromitsentireoper-ation,includinginteractionswiththemarketandend-users.Onanannualbasis,SCLproducesmoreelectricitythanthereisend-usedemand,buttheproductiondoesnotmatchloadinallmonths.SoSCLaccountsforbothpurchasesfromthemarketandsalesintothemarket.SCLalsoincludesthescope3upstreamemissionsfromnaturalgasproductionanddelivery,operationofSCLfacilities,vehiclefueluse,andairlinetravel.SCLbelievesthatsalestoend-usersareacriticalpartoftheemis-sionsprofileforanelectricutilitycompany.Utilitycompaniesneedtoprovideinformationontheiremissionsprofiletoeducateend-usersandadequatelyrepresenttheimpactoftheirbusiness,theprovidingofelectricity.End-usecustomersneedtorelyontheirutilitycompanytoprovideelectricity,andexceptinsomeinstances(greenpowerprograms),donothaveachoiceinwheretheirelec-tricityispurchased.SCLmeetsacustomerneedbyprovidingemissionsinformationtocustomerswhoaredoingtheirownemis-sionsinventory.SeattleCityLight:Accountingforthepurchaseofelectricitysoldtoendusersfromscope3.CompanyEreportsindirectemissionsassociatedwiththeconsumptionofelectricitypurchasedfromthecompanyD’sco-generationunitunderscope2.Formoreguidance,seeAppendixAonaccountingforindirectemissionsfrompurchasedelectricity.Scope3:OtherindirectGHGemissionsScope3isoptional,butitprovidesanopportunitytobeinnovativeinGHGmanagement.Companiesmaywanttofocusonaccountingforandreportingthoseactivitiesthatarerelevanttotheirbusinessandgoals,andforwhichtheyhavereliableinformation.Sincecompanieshavediscretionoverwhichcategoriestheychoosetoreport,scope3maynotlenditselfwelltocomparisonsacrosscompanies.Thissectionprovidesanindicativelistofscope3categoriesandincludescasestudiesonsomeofthecategories.Someoftheseactivitieswillbeincludedunderscope1ifthepertinentemissionsourcesareownedorcontrolledbythecompany(e.g.,ifthetransportationofproductsisdoneinvehiclesownedorcontrolledbythecompany).Todetermineifanactivityfallswithinscope1orscope3,thecompanyshouldrefertotheselectedconsolidationapproach(equityorcontrol)usedinsettingitsorganizationalboundaries.•Extractionandproductionofpurchasedmaterialsandfuels6•Transport-relatedactivities•Transportationofpurchasedmaterialsorgoods•Transportationofpurchasedfuels•Employeebusinesstravel•Employeescommutingtoandfromwork•Transportationofsoldproducts•Transportationofwaste•Electricity-relatedactivitiesnotincludedinscope2(seeAppendixA)•Extraction,production,andtransportationoffuelsconsumedinthegenerationofelectricity(eitherpurchasedorowngeneratedbythereportingcompany)•Purchaseofelectricitythatissoldtoanenduser(reportedbyutilitycompany)•GenerationofelectricitythatisconsumedinaT&Dsystem(reportedbyend-user)•Leasedassets,franchises,andoutsourcedactivities—emissionsfromsuchcontractualarrangementsareonlyclassifiedasscope3iftheselectedconsolidationapproach(equityorcontrol)doesnotapplytothem.Clarificationontheclassificationofleasedassetsshouldbeobtainedfromthecompanyaccountant(seesectiononleasesbelow).•Useofsoldproductsandservices•Wastedisposal•Disposalofwastegeneratedinoperations•Disposalofwastegeneratedintheproductionofpurchasedmaterialsandfuels•DisposalofsoldproductsattheendoftheirlifeACCOUNTINGFORSCOPE3EMISSIONSAccountingforscope3emissionsneednotinvolveafull-blownGHGlifecycleanalysisofallproductsandoperations.UsuallyitisvaluabletofocusononeortwomajorGHG-generatingactivities.Althoughitisdiffi-culttoprovidegenericguidanceonwhichscope3emissionstoincludeinaninventory,somegeneralstepscanbearticulated:CHAPTER4SettingOperationalBoundaries29GUIDANCE➡➡➡➡➡➡➡➡➡A’sScope1emissions=20temissionfactor=0.2t/MWh100MWh100MWh95MWhemissionfactor=0.2t/MWhemissionfactor=0.2t/MWhB’sOptionalInformation=20tC’sScope3emissions=19tD’sScope3emissions=1tC’sScope2emissions=1tD’sScope2emissions=19tGeneratorAEnd-userDElectricityTraderBUtilityCompanyCFIGURE4.GHGaccountingfromthesaleandpurchaseofelectricity1.Describethevaluechain.Becausetheassessmentofscope3emissionsdoesnotrequireafulllifecycleassessment,itisimportant,forthesakeoftransparency,toprovideageneraldescriptionofthevaluechainandtheassociatedGHGsources.Forthisstep,thescope3categorieslistedcanbeusedasachecklist.Companiesusuallyfacechoicesonhowmanylevelsup-anddown-streamtoincludeinscope3.Considerationofthecompany’sinventoryorbusinessgoalsandrelevanceofthevariousscope3categorieswillguidethesechoices.2.Determinewhichscope3categoriesarerelevant.Onlysometypesofupstreamordownstreamemissionscate-goriesmightberelevanttothecompany.Theymayberelevantforseveralreasons:•Theyarelarge(orbelievedtobelarge)relativetothecompany’sscope1andscope2emissions•Theycontributetothecompany’sGHGriskexposure•Theyaredeemedcriticalbykeystakeholders(e.g.,feedbackfromcustomers,suppliers,investors,orcivilsociety)•Therearepotentialemissionsreductionsthatcouldbeundertakenorinfluencedbythecompany.Thefollowingexamplesmayhelpdecidewhichscope3categoriesarerelevanttothecompany.•Iffossilfuelorelectricityisrequiredtousethecompany’sproducts,productusephaseemissionsmaybearelevantcategorytoreport.Thismaybeespe-ciallyimportantifthecompanycaninfluenceproductdesignattributes(e.g.,energyefficiency)orcustomerbehaviorinwaysthatreduceGHGemissionsduringtheuseoftheproducts.GUIDANCESettingOperationalBoundariesCHAPTER430FIGURE5.AccountingofemissionsfromleasedassetsParentCompanyCompanyAScope1Scope1Scope2Scope3Leasedcarfleet(selectedconsolidationcriterionapplies)Leasedbuilding(selectedconsolidationcriterionapplies)Leasedcarfleet(selectedconsolidationcriteriondoesnotapply)CompanyBORGANIZATIONALBOUNDARIESOPERATIONALBOUNDARIES}}AsamajortransportationandlogisticscompanyinnorthernEurope,DHLExpressNordicserveslargeloadsandspecialtransportneedsaswellasworldwideexpresspackageanddocumentdeliveriesandofferscourier,express,parcel,systemizedandspecialtybusinessservices.ThroughparticipationintheBusinessLeadersInitiativeonClimateChange,thecompanyfoundthat98percentofitsemissionsinSwedenoriginatefromthetransportofgoodsviaoutsourcedpartnertransportationfirms.Eachpartnerisrequired,asanelementofthesubcontractpaymentscheme,toenterdataonvehiclesused,distancetraveled,fuelefficiency,andbackgrounddata.Thisdataisusedtocalculatetotalemissionsviaatailoredcalculationtoolforoutsourcedtransportationwhichgivesadetailedpictureofitsscope3emissions.Linkingdatatospecificcarriersallowsthecompanytoscreenindividualcarriersforenvironmentalperformanceandaffectdecisionsbasedoneachcarrier’semissionsperformance,whichisseenthroughscope3asDHL’sownperformance.Byincludingscope3andpromotingGHGreductionsthroughoutthevaluechain,DHLExpressNordicincreasedtherelevanceofitsemissionsfootprint,expandedopportunitiesforreducingitsimpactsandimproveditsabilitytorecognizecostsavingopportu-nities.Withoutscope3,DHLExpressNordicwouldhavelackedmuchoftheinformationneededtobeabletounderstandandeffec-tivelymanageitsemissions.SCOPEScope1Scope2Scope3TotalEMISSIONS(tCO2)DHLNordicExpress:Thebusinesscaseforaccountingforoutsourcedtransportationservices7,26552327,634334,951CHAPTER4SettingOperationalBoundaries31•Outsourcedactivitiesareoftencandidatesforscope3emissionsassessments.Itmaybeparticularlyimportanttoincludethesewhenapreviouslyoutsourcedactivitycontributedsignificantlytoacompany’sscope1orscope2emissions.•IfGHG-intensivematerialsrepresentasignificantfractionoftheweightorcompositionofaproductusedormanufactured(e.g.,cement,aluminum),companiesmaywanttoexaminewhetherthereareopportunitiestoreducetheirconsumptionoftheproductortosubstitutelessGHG-intensivematerials.•Largemanufacturingcompaniesmayhavesignificantemissionsrelatedtotransportingpurchasedmaterialstocentralizedproductionfacilities.•CommodityandconsumerproductcompaniesmaywanttoaccountforGHGsfromtransportingrawmaterials,products,andwaste.•Servicesectorcompaniesmaywanttoreportonemis-sionsfromemployeebusinesstravel;thisemissionssourceisnotaslikelytobesignificantforotherkindsofcompanies(e.g.,manufacturingcompanies).3.Identifypartnersalongthevaluechain.IdentifyanypartnersthatcontributepotentiallysignificantamountsofGHGsalongthevaluechain(e.g.,customers/users,productdesigners/manufac-turers,energyproviders,etc.).Thisisimportantwhentryingtoidentifysources,obtainrelevantdata,andcalculateemissions.4.Quantifyscope3emissions.Whiledataavailabilityandreliabilitymayinfluencewhichscope3activitiesareincludedintheinventory,itisacceptedthatdataaccuracymaybelower.Itmaybemoreimportanttounderstandtherelativemagnitudeofandpossiblechangestoscope3activities.Emissionestimatesareacceptableaslongasthereistransparencywithregardtotheestimationapproach,andthedatausedfortheanalysisareadequatetosupporttheobjectivesoftheinventory.Verificationofscope3emissionswilloftenbedifficultandmayonlybeconsideredifdataisofreliablequality.Leasedassets,outsourcing,andfranchisesTheselectedconsolidationapproach(equityshareoroneofthecontrolapproaches)isalsoappliedtoaccountforandcategorizedirectandindirectGHGemissionsfromcontractualarrangementssuchasleasedassets,outsourcing,andfranchises.Iftheselectedequityorcontrolapproachdoesnotapply,thenthecompanymayaccountforemissionsfromtheleasedassets,outsourcing,andfranchisesunderscope3.Specificguid-anceonleasedassetsisprovidedbelow:•USINGEQUITYSHAREORFINANCIALCONTROL:Thelesseeonlyaccountsforemissionsfromleasedassetsthataretreatedaswhollyownedassetsinfinancialaccountingandarerecordedassuchonthebalancesheet(i.e.,financeorcapitalleases).IKEA,aninternationalhomefurnitureandfurnishingsretailer,decidedtoincludescope3emissionsfromcustomertravelwhenitbecameclear,throughparticipationintheBusinessLeadersInitiativeonClimateChange(BLICC)program,thattheseemis-sionswerelargerelativeitsscope1andscope2emissions.Furthermore,theseemissionsareparticularlyrelevanttoIKEA’sstorebusinessmodel.Customertraveltoitsstores,oftenfromlongdistances,isdirectlyaffectedbyIKEA’schoiceofstoreloca-tionandthewarehouseshoppingconcept.Customertransportationemissioncalculationswerebasedoncustomersurveysatselectedstores.Customerswereaskedforthedistancetheytraveledtothestore(basedonhomepostalcode),thenumberofcustomersintheircar,thenumberofotherstorestheyintendedtovisitatthatshoppingcenterthatday,andwhethertheyhadaccesstopublictransportationtothestore.ExtrapolatingthisdatatoallIKEAstoresandmultiplyingdistancebyaveragevehicleefficienciesforeachcountry,thecompanycalculatedthat66percentofitsemissionsinventorywasfromscope3customertravel.Basedonthisinformation,IKEAwillhavesignificantinfluenceoverfuturescope3emissionsbyconsideringGHGemissionswhendevelopingpublictransportationoptionsandhomedeliveryservicesforitsexistingandnewstores.IKEA:CustomertransportationtoandfromitsretailstoresGUIDANCEGUIDANCESettingOperationalBoundariesCHAPTER432•USINGOPERATIONALCONTROL:Thelesseeonlyaccountsforemissionsfromleasedassetsthatitoper-ates(i.e.,iftheoperationalcontrolcriterionapplies).Guidanceonwhichleasedassetsareoperatingandwhicharefinanceleasesshouldbeobtainedfromthecompanyaccountant.Ingeneral,inafinancelease,anorganizationassumesallrewardsandrisksfromtheleasedasset,andtheassetistreatedaswhollyownedandisrecordedassuchonthebalancesheet.Allleasedassetsthatdonotmeetthosecriteriaareoper-atingleases.Figure5illustratestheapplicationofconsolidationcriteriatoaccountforemissionsfromleasedassets.DoublecountingConcernisoftenexpressedthataccountingforindirectemissionswillleadtodoublecountingwhentwodifferentcompaniesincludethesameemissionsintheirrespectiveinventories.Whetherornotdoublecountingoccursdependsonhowconsistentlycompanieswithsharedownershiportradingprogramadministratorschoosethesameapproach(equityorcontrol)tosettheorganizationalboundaries.Whetherornotdoublecountingmatters,dependsonhowthereportedinforma-tionisused.Doublecountingneedstobeavoidedwhencompilingnational(country)inventoriesundertheKyotoProtocol,buttheseareusuallycompiledviaatop-downexerciseusingnationaleconomicdata,ratherthanaggregationofbottom-upcompanydata.Complianceregimesaremorelikelytofocusonthe“pointofrelease”ofemis-sions(i.e.,directemissions)and/orindirectemissionsfromuseofelectricity.ForGHGriskmanagementandvoluntaryreporting,doublecountingislessimportant.TheWorldResourcesInstitutehasalong-standingcommitmenttoreduceitsannualGHGemissionstonetzerothroughacombinationofinternalreductioneffortsandexternaloffsetpurchases.WRI’semissionsinventoryincludesscope2indirectemissionsassoci-atedwiththeconsumptionofpurchasedelectricityandscope3indirectemissionsassociatedwithbusinessairtravel,employeecommuting,andpaperuse.WRIhasnoscope1directemissions.CollectingemployeecommutingactivitydatafromWRI’s140staffcanbechallenging.Themethodusedistosurveyemployeesonceeachyearabouttheiraveragecommutinghabits.Inthefirsttwoyearsoftheinitiative,WRIusedanExcelspreadsheetaccessibletoallemployeesonasharedinternalnetwork,butonlyachieveda48percentparticipationrate.Asimplified,web-basedsurveythatdownloadedintoaspreadsheetimprovedparticipationto65percentinthethirdyear.Usingfeedbackonthesurveydesign,WRIfurthersimplifiedandrefinedsurveyquestions,improveduserfriendliness,andreducedthetimeneededtocompletethesurveytolessthanaminute.Employeeparticipationrateroseto88percent.Designingasurveythatwaseasilynavigableandhadclearlyartic-ulatedquestionssignificantlyimprovedthecompletenessandaccuracyoftheemployeecommutingactivitydata.Anaddedbenefitwasthatemployeesfeltacertainamountofprideathavingcontributedtotheinventorydevelopmentprocess.Theexperiencealsoprovidedapositiveinternalcommunicationsopportunity.WRIhasdevelopedaguideconsistentwithGHGProtocolCorporateStandardtohelpoffice-basedorganizationsunderstandhowtotrackandmanagetheiremissions.Working9to5onClimateChange:AnOfficeGuideisaccompaniedbyasuiteofcalculationtools,includingoneforusingasurveymethodtoestimateemployeecommutingemissions.TheGuideandtoolscanbedownloadedfromtheGHGProtocolInitiativewebsite(www.ghgprotocol.org).Transportation-relatedemissionsarethefastestgrowingGHGemissionscategoryintheUnitedStates.Thisincludescommercial,business,andpersonaltravelaswellascommuting.Byaccountingforcommutingemissions,companiesmayfindthatseveralpracticalopportunitiesexistforreducingthem.Forexample,whenWRImovedtonewofficespace,itselectedabuildinglocatedclosetopublictransportation,reducingtheneedforemployeestodrivetowork.Initslease,WRIalsonegotiatedaccesstoalockedbikeroomforthoseemployeeswhocycletowork.Finally,teleworkprogramssignificantlyreducecommutingemissionsbyavoidingordecreasingtheneedtotravel.WorldResourcesInstitute:InnovationsinestimatingemployeecommutingemissionsForparticipatinginGHGmarketsorobtainingGHGcredits,itwouldbeunacceptablefortwoorganizationstoclaimownershipofthesameemissionscommodityanditisthereforenecessarytomakesufficientprovisionstoensurethatthisdoesnotoccurbetweenparticipatingcompanies(seechapter11).SCOPESANDDOUBLECOUNTINGTheGHGProtocolCorporateStandardisdesignedtopreventdoublecountingofemissionsbetweendifferentcompanieswithinscope1and2.Forexample,thescope1emissionsofcompanyA(generatorofelectricity)canbecountedasthescope2emissionsofcompanyB(end-userofelectricity)butcompanyA’sscope1emissionscannotbecountedasscope1emis-sionsbycompanyC(apartnerorganizationofcompanyA)aslongascompanyAandcompanyCconsistentlyapplythesamecontrolorequityshareapproachwhenconsolidatingemissions.Similarly,thedefinitionofscope2doesnotallowdoublecountingofemissionswithinscope2,i.e.,twodifferentcompaniescannotbothcountscope2emissionsfromthepurchaseofthesameelectricity.Avoidingthistypeofdoublecountingwithinscope2emissionsmakesitausefulaccountingcategoryforGHGtradingprogramsthatregulateendusersofelectricity.WhenusedinexternalinitiativessuchasGHGtrading,therobustnessofthescope1and2definitionscombinedwiththeconsistentapplicationofeitherthecontrolorequityshareapproachfordefiningorganizationalbound-ariesallowsonlyonecompanytoexerciseownershipofscope1orscope2emissions.CHAPTER4SettingOperationalBoundaries33ABB,anenergyandautomationtechnologycompanybasedinSwitzerland,producesavarietyofappliancesandequipment,suchascircuitbreakersandelectricaldrives,forindustrialappli-cations.ABBhasastatedgoaltoissueEnvironmentalProductDeclarations(EPDs)forallitscoreproductsbasedonlifecycleassessment.Asapartofitscommittment,ABBreportsbothmanufacturingandproductusephaseGHGemissionsforavarietyofitsproductsusingastandardizedcalculationmethodandsetofassumptions.Forexample,productusephasecalcula-tionsforABB’s4kWDriveITLowVoltageACdrivearebasedona15-yearexpectedlifetimeandanaverageof5,000annualoper-atinghours.ThisactivitydataismultipliedbytheaverageelectricityemissionfactorforOECDcountriestoproducetotallifetimeproductuseemissions.Comparedwithmanufacturingemissions,productusephaseemissionsaccountforabout99percentoftotallifecycleemis-sionsforthistypeofdrive.ThemagnitudeoftheseemissionsandABB’scontrolofthedesignandperformanceofthisequipmentclearlygivethecompanysignificantleverageonitscustomers’emissionsbyimprovingproductefficiencyorhelpingcustomersdesignbetteroverallsystemsinwhichABB’sproductsareinvolved.Byclearlydefiningandquantifyingsignificantvaluechainemissions,ABBhasgainedinsightintoandinfluenceoveritsemissionsfootprint.ABB:CalculatingproductusephaseemissionsassociatedwithelectricalappliancesNOTES1Theterms“direct”and“indirect”asusedinthisdocumentshouldnotbeconfusedwiththeiruseinnationalGHGinventorieswhere‘direct’referstothesixKyotogasesand‘indirect’referstotheprecursorsNOx,NMVOC,andCO.2Theterm“electricity”isusedinthischapterasshorthandforelec-tricity,steam,andheating/cooling.3Forsomeintegratedmanufacturingprocesses,suchasammoniamanu-facture,itmaynotbepossibletodistinguishbetweenGHGemissionsfromtheprocessandthosefromtheproductionofelectricity,heat,orsteam.4GreenpowerincludesrenewableenergysourcesandspecificcleanenergytechnologiesthatreduceGHGemissionsrelativetoothersourcesofenergythatsupplytheelectricgrid,e.g.,solarphotovoltaicpanels,geothermalenergy,landfillgas,andwindturbines.5AT&DsystemincludesT&DlinesandotherT&Dequipment(e.g.,transformers).6“Purchasedmaterialsandfuels”isdefinedasmaterialorfuelthatispurchasedorotherwisebroughtintotheorganizationalboundaryofthecompany.GUIDANCE34ompaniesoftenundergosignificantstructuralchangessuchasacquisitions,divestments,andmergers.Thesechangeswillalteracompany’shistoricalemissionprofile,makingmeaningfulcomparisonsovertimedifficult.Inordertomaintainconsistencyovertime,orinotherwords,tokeepcomparing“likewithlike”,historicemissiondatawillhavetoberecalculated.CTrackingEmissionsOverTimeGUIDANCESTANDARD5STANDARDCompaniesmayneedtotrackemissionsovertimeinresponsetoavarietyofbusinessgoals,including:•Publicreporting•EstablishingGHGtargets•Managingrisksandopportunities•AddressingtheneedsofinvestorsandotherstakeholdersAmeaningfulandconsistentcomparisonofemissionsovertimerequiresthatcompaniessetaperformancedatumwithwhichtocomparecurrentemissions.Thisperformancedatumisreferredtoasthebaseyear1emissions.Forconsistenttrackingofemissionsovertime,thebaseyearemissionsmayneedtoberecalcu-latedascompaniesundergosignificantstructuralchangessuchasacquisitions,divestments,andmergers.Thefirststepintrackingemissions,however,istheselec-tionofabaseyear.ChoosingabaseyearCompaniesshallchooseandreportabaseyearforwhichverifiableemissionsdataareavailableandspecifytheirreasonsforchoosingthatparticularyear.Mostcompaniesselectasingleyearastheirbaseyear.However,itisalsopossibletochooseanaverageofannualemissionsoverseveralconsecutiveyears.Forexample,theU.K.ETSspecifiesanaverageof1998–2000emissionsasthereferencepointfortrackingreductions.Amulti-yearaveragemayhelpsmoothoutunusualfluctuationsinGHGemissionsthatwouldmakeasingleyear’sdataunrepresentativeofthecompany’stypicalemissionsprofile.TheinventorybaseyearcanalsobeusedasabasisforsettingandtrackingprogresstowardsaGHGtargetinwhichcaseitisreferredtoasatargetbaseyear(seechapter11).RecalculatingbaseyearemissionsCompaniesshalldevelopabaseyearemissionsrecalcu-lationpolicy,andclearlyarticulatethebasisandcontextforanyrecalculations.Ifapplicable,thepolicyshallstateany“significancethreshold”appliedfordecidingonhistoricemissionsrecalculation.“Significancethreshold”isaqualitativeand/orquantitativecriterionusedtodefineanysignificantchangetothedata,inven-toryboundary,methods,oranyotherrelevantfactors.Itistheresponsibilityofthecompanytodeterminethe“significancethreshold”thattriggersbaseyearemissionsrecalculationandtodiscloseit.Itistheresponsibilityoftheverifiertoconfirmthecompany’sadherencetoitsthresholdpolicy.Thefollowingcasesshalltriggerrecalculationofbaseyearemissions:•Structuralchangesinthereportingorganizationthathaveasignificantimpactonthecompany’sbaseyearemissions.Astructuralchangeinvolvesthetransferofownershiporcontrolofemissions-generatingactiv-itiesoroperationsfromonecompanytoanother.Whileasinglestructuralchangemightnothaveasignificantimpactonthebaseyearemissions,thecumulativeeffectofanumberofminorstructuralchangescanresultinasignificantimpact.Structuralchangesinclude:•Mergers,acquisitions,anddivestments•Outsourcingandinsourcingofemittingactivities•Changesincalculationmethodologyorimprovementsintheaccuracyofemissionfactorsoractivitydatathatresultinasignificantimpactonthebaseyearemissionsdata•Discoveryofsignificanterrors,oranumberofcumu-lativeerrors,thatarecollectivelysignificant.Insummary,baseyearemissionsshallberetroactivelyrecalculatedtoreflectchangesinthecompanythatwouldotherwisecompromisetheconsistencyandrele-vanceofthereportedGHGemissionsinformation.Onceacompanyhasdetermineditspolicyonhowitwillrecal-culatebaseyearemissions,itshallapplythispolicyinaconsistentmanner.Forexample,itshallrecalculateforbothGHGemissionsincreasesanddecreases.CHAPTER5TrackingEmissionsOverTime35STANDARDelectionandrecalculationofabaseyearshouldrelatetothebusinessgoalsandtheparticularcontextofthecompany:•Forthepurposeofreportingprogresstowardsvolun-tarypublicGHGtargets,companiesmayfollowthestandardsandguidanceinthischapter•AcompanysubjecttoanexternalGHGprogrammayfaceexternalrulesgoverningthechoiceandrecalcu-lationofbaseyearemissions•Forinternalmanagementgoals,thecompanymayfollowtherulesandguidelinesrecommendedinthisdocument,oritmaydevelopitsownapproach,whichshouldbefollowedconsistently.ChoosingabaseyearCompaniesshouldchooseasabaseyeartheearliestrele-vantpointintimeforwhichtheyhavereliabledata.Someorganizationshaveadopted1990asabaseyearinordertobeconsistentwiththeKyotoProtocol.However,obtainingreliableandverifiabledataforhistoricalbaseyearssuchas1990canbeverychallenging.Ifacompanycontinuestogrowthroughacquisitions,itmayadoptapolicythatshiftsor“rolls”thebaseyearforwardbyanumberofyearsatregularintervals.Chapter11containsadescriptionofsucha“rollingbaseyear,”includingacomparisonwiththefixedbaseyearapproachdescribedinthischapter.Afixedbaseyearhastheadvantageofallowingemissionsdatatobecomparedonalike-with-likebasisoveralongertimeperiodthanarollingbaseyearapproach.Mostemis-sionstradingandregistryprogramsrequireafixedbaseyearpolicytobeimplemented.GUIDANCETrackingEmissionsOverTime36FIGURE6.BaseyearemissionsrecalculationforanacquisitionBaseYearIncreaseinProductionGammaAcquiresC123CompanyGammaconsistsoftwobusinessunits(AandB).Initsbaseyear(yearone),eachbusinessunitemits25tonnesCO2.Inyeartwo,thecompanyundergoes“organicgrowth,”leadingtoanincreaseinemissionsto30tonnesCO2perbusinessunit,i.e.,60tonnesCO2intotal.Thebaseyearemissionsarenotrecalculatedinthiscase.Atthebeginningofyearthree,thecompanyacquiresproductionfacilityCfromanothercompany.TheannualemissionsoffacilityCinyearonewere15tonnesCO2,and20tonnesCO2inyearstwoandthree.ThetotalemissionofcompanyGammainyearthree,includingfacilityC,aretherefore80tonnesCO2.Tomaintainconsistencyovertime,thecompanyrecalculatesitsbaseyearemissionstotakeintoaccounttheacquisitionoffacilityC.Thebaseyearemissionsincreaseby15tonnesCO2—thequantityofemissionsproducedbyfacilityCinGamma’sbaseyear.Therecalculatedbaseyearemissionsare65tonnesCO2.Gammaalso(optionally)reports80tonnesCO2astherecalculatedemissionsforyeartwo.➡25253030302020201530251520202530303030FiguresreportedinrespectiveyearsGAMMAEMISSIONSRecalculatedFiguresFacilityCUnitBUnitA123CHAPTER5SFacilityCemissionsSignificancethresholdsforrecalculationsWhetherbaseyearemissionsarerecalculateddependsonthesignificanceofthechanges.Thedeterminationofasignificantchangemayrequiretakingintoaccountthecumulativeeffectonbaseyearemissionsofanumberofsmallacquisitionsordivestments.TheGHGProtocolCorporateStandardmakesnospecificrecommenda-tionsastowhatconstitutes“significant.”However,someGHGprogramsdospecifynumericalsignificancethresholds,e.g.,theCaliforniaClimateActionRegistry,wherethechangethresholdis10percentofthebaseyearemissions,determinedonacumulativebasisfromthetimethebaseyearisestablished.BaseyearemissionsrecalculationforstructuralchangesStructuralchangestriggerrecalculationbecausetheymerelytransferemissionsfromonecompanytoanotherwithoutanychangeofemissionsreleasedtotheatmos-phere,forexample,anacquisitionordivestmentonlytransfersexistingGHGemissionsfromonecompany’sinventorytoanother.Figures6and7illustratetheeffectofstructuralchangesandtheapplicationofthisstandardonrecalcu-lationofbaseyearemissions.TimingofrecalculationsforstructuralchangesWhensignificantstructuralchangesoccurduringthemiddleoftheyear,thebaseyearemissionsshouldberecalculatedfortheentireyear,ratherthanonlyfortheremainderofthereportingperiodafterthestructuralchangeoccurred.Thisavoidshavingtorecalculatebaseyearemissionsagaininthesucceedingyear.Similarly,currentyearemissionsshouldberecalculatedfortheentireyeartomaintainconsistencywiththebaseyearrecalculation.Ifitisnotpossibletomakearecalcula-tionintheyearofthestructuralchange(e.g.,duetoCHAPTER5TrackingEmissionsOverTime37GUIDANCEFIGURE7.BaseyearemissionsrecalculationforadivestmentBaseYearIncreaseinProductionBetaDivestsC123➡25252530303030303030252530303030FiguresreportedinrespectiveyearsRecalculatedfiguresUnitCUnitBUnitA123CompanyBetaconsistsofthreebusinessunits(A,B,andC).Eachbusinessunitemits25tonnesCO2andthetotalemissionsforthecompanyare75tonnesCO2inthebaseyear(yearone).Inyeartwo,theoutputofthecompanygrows,leadingtoanincreaseinemissionsto30tonnesCO2perbusinessunit,i.e.,90tonnesCO2intotal.Atthebeginningofyearthree,BetadivestsbusinessunitCanditsannualemissionsarenow60tonnes,representinganapparentreductionof15tonnesrelativetothebaseyearemissions.However,tomaintainconsistencyovertime,thecompanyrecalculatesitsbaseyearemissionstotakeintoaccountthedivestmentofbusinessunitC.Thebaseyearemissionsareloweredby25tonnesCO2—thequantityofemissionsproducedbythebusinessunitCinthebaseyear.Therecalcu-latedbaseyearemissionsare50tonnesCO2,andtheemissionsofcompanyBetaareseentohaverisenby10tonnesCO2overthethreeyears.Beta(optionally)reports60tonnesCO2astherecalculatedemissionsforyeartwo.BETAEMISSIONSlackofdataforanacquiredcompany),therecalculationmaybecarriedoutinthefollowingyear.2RecalculationsforchangesincalculationmethodologyorimprovementsindataaccuracyAcompanymightreportthesamesourcesofGHGemis-sionsasinpreviousyears,butmeasureorcalculatethemdifferently.Forexample,acompanymighthaveusedanationalelectricpowergenerationemissionsfactortoestimatescope2emissionsinyearoneofreporting.Inlateryears,itmayobtainmoreaccurateutility-specificemissionfactors(forthecurrentaswellaspastyears)thatbetterreflecttheGHGemissionsassociatedwiththeelectricitythatithaspurchased.Ifthedifferencesinemissionsresultingfromsuchachangearesignificant,historicdataisrecalculatedapplyingthenewdataand/ormethodology.Sometimesthemoreaccuratedatainputmaynotreason-ablybeappliedtoallpastyearsornewdatapointsmaynotbeavailableforpastyears.Thecompanymaythenhavetobackcastthesedatapoints,orthechangeindatasourcemaysimplybeacknowledgedwithoutrecalcula-tion.Thisacknowledgementshouldbemadeinthereporteachyearinordertoenhancetransparency;otherwise,newusersofthereportinthetwoorthreeyearsafterthechangemaymakeincorrectassumptionsabouttheperformanceofthecompany.Anychangesinemissionfactororactivitydatathatreflectrealchangesinemissions(i.e.,changesinfueltypeortechnology)donottriggerarecalculation.OptionalreportingforrecalculationsOptionalinformationthatcompaniesmayreportonrecalculationsincludes:•TherecalculatedGHGemissionsdataforallyearsbetweenthebaseyearandthereportingyear•Allactualemissionsasreportedinrespectiveyearsinthepast,i.e.,thefiguresthathavenotbeenrecalcu-lated.Reportingtheoriginalfiguresinadditiontotherecalculatedfigurescontributestotransparencysinceitillustratestheevolutionofthecompany’sstructureovertime.NobaseyearemissionsrecalculationsforfacilitiesthatdidnotexistinthebaseyearBaseyearemissionsarenotrecalculatedifthecompanymakesanacquisitionof(orinsources)operationsthatdidnotexistinitsbaseyear.Theremayonlybearecal-culationofhistoricdatabacktotheyearinwhichtheacquiredcompanycameintoexistence.Thesameappliestocaseswherethecompanymakesadivestmentof(oroutsources)operationsthatdidnotexistinthebaseyear.Figure8illustratesasituationwherenorecalculationofbaseyearemissionsisrequired,sincetheacquiredfacilitycameintoexistenceafterthebaseyearwasset.Norecalculationfor“outsourcing/insourcing”ifreportedunderscope2and/orscope3Structuralchangesdueto“outsourcing”or“insourcing”donottriggerbaseyearemissionsrecalculationifthecompanyisreportingitsindirectemissionsfromrelevantoutsourcedorinsourcedactivities.Forexample,outsourcingproductionofelectricity,heat,orsteamdoesnottriggerbaseyearemissionsrecalculation,sincetheGHGProtocolCorporateStandardrequiresscope2reporting.However,outsourcing/insourcingthatshiftssignificantemissionsbetweenscope1andscope3whenscope3isnotreporteddoestriggerabaseyearemis-sionsrecalculation(e.g.,whenacompanyoutsourcesthetransportationofproducts).Incaseacompanydecidestotrackemissionsovertimeseparatelyfordifferentscopes,andhasseparatebaseyearsforeachscope,baseyearemissionsrecalculationforoutsourcingorinsourcingismade.GUIDANCETrackingEmissionsOverTimeCHAPTER538TheGHGProtocolCorporateStandardrequiressettingabaseyearforcomparingemissionsovertime.Tobeabletocompareovertime,thebaseyearemissionsmustberecalculatedifanystructuralchangesoccurinthecompany.InadealcompletedJanuary2002,theENDESAGroup,apowergenerationcompanybasedinSpain,soldits87.5percentholdinginViesgo,apartofitsSpanishpowergenera-tionbusiness,toENEL,anItalianpowercompany.Toaccountforthisstructuralchange,historicalemissionsfromthesixpowerplantsincludedinthesalewerenolongeraccountedforintheEndesaGHGinventoryandthereforeremovedfromitsbaseyearemissions.ThisrecalculationprovidesENDESAwithacompleteandcomparablepictureofitshistoricalemissions.ENDESA:RecalculationofbaseyearemissionsbecauseofstructuralchangesNorecalculationfororganicgrowthordeclineBaseyearemissionsandanyhistoricdataarenotrecalculatedfororganicgrowthordecline.Organicgrowth/declinereferstoincreasesordecreasesinproductionoutput,changesinproductmix,andclosuresandopeningsofoperatingunitsthatareownedorcontrolledbythecompany.Therationaleforthisisthatorganicgrowthordeclineresultsinachangeofemissionstotheatmosphereandthereforeneedstobecountedasanincreaseordecreaseinthecompany’semissionsprofileovertime.CHAPTER5TrackingEmissionsOverTime39FIGURE8.AcquisitionofafacilitythatcameintoexistenceafterthebaseyearwassetBaseYearIncreaseinProductionTetaAcquiresC123➡25202530303015302525301530302030FiguresreportedinrespectiveyearsRecalculatedfiguresFacilityCUnitBUnitA123CompanyTetaconsistsoftwobusinessunits(AandB).Initsbaseyear(yearone),thecompanyemits50tonnesCO2.Inyeartwo,thecompanyundergoesorganicgrowth,leadingtoanincreaseinemissionsto30tonnesCO2perbusinessunit,i.e.,60tonnesCO2intotal.Thebaseyearemissionsarenotrecalculatedinthiscase.Atthebeginningofyearthree,TetaacquiresaproductionfacilityCfromanothercompany.FacilityCcameintoexistenceinyeartwo,itsemissionsbeing15tonnesCO2inyeartwoand20tonnesCO2inyearthree.ThetotalemissionsofcompanyTetainyearthree,includingfacilityC,aretherefore80tonnesCO2.Inthisacquisitioncase,thebaseyearemissionsofcompanyTetadonotchangebecausetheacquiredfacilityCdidnotexistinyearonewhenthebaseyearofTetawasset.ThebaseyearemissionsofTetathereforeremainat50tonnesCO2.Teta(optionally)reports75tonnesastherecalculatedfigureforyeartwoemissions.TETAEMISSIONSGUIDANCENOTES1Terminologyonthistopiccanbeconfusing.Baseyearemissionsshouldbedifferentiatedfromtheterm“baseline,”whichismostlyusedinthecontextofproject-basedaccounting.Thetermbaseyearfocusesonacomparisonofemissionsovertime,whileabaselineisahypotheticalscenarioforwhatGHGemissionswouldhavebeenintheabsenceofaGHGreductionprojectoractivity.2Formoreinformationonthetimingofbaseyearemissionsrecalcula-tions,seetheguidancedocument“Baseyearrecalculationmethodologiesforstructuralchanges”ontheGHGProtocolwebsite(www.ghgprotocol.org).20GUIDANCE40ncetheinventoryboundaryhasbeenestablished,companiesgenerallycalculateGHGemissionsusingthefollowingsteps:1.IdentifyGHGemissionssources2.SelectaGHGemissionscalculationapproach3.Collectactivitydataandchooseemissionfactors4.Applycalculationtools5.Roll-upGHGemissionsdatatocorporatelevel.ThischapterdescribesthesestepsandthecalculationtoolsdevelopedbytheGHGProtocol.ThecalculationtoolsareavailableontheGHGProtocolInitiativewebsiteatwww.ghgprotocol.org.OIdentifyingandCalculatingGHGEmissionsGUIDANCE6Tocreateanaccurateaccountoftheiremissions,companieshavefounditusefultodivideoverallemis-sionsintospecificcategories.Thisallowsacompanytousespecificallydevelopedmethodologiestoaccu-ratelycalculatetheemissionsfromeachsectorandsourcecategory.IdentifyGHGemissionssourcesThefirstofthefivestepsinidentifyingandcalculatingacompany’semissionsasoutlinedinFigure9istocategorizetheGHGsourceswithinthatcompany’sboundaries.GHGemissionstypicallyoccurfromthefollowingsourcecategories:•Stationarycombustion:combustionoffuelsinstationaryequipmentsuchasboilers,furnaces,burners,turbines,heaters,incinerators,engines,flares,etc.•Mobilecombustion:combustionoffuelsintrans-portationdevicessuchasautomobiles,trucks,buses,trains,airplanes,boats,ships,barges,vessels,etc.•Processemissions:emissionsfromphysicalorchem-icalprocessessuchasCO2fromthecalcinationstepincementmanufacturing,CO2fromcatalyticcrackinginpetrochemicalprocessing,PFCemissionsfromaluminumsmelting,etc.•Fugitiveemissions:intentionalandunintentionalreleasessuchasequipmentleaksfromjoints,seals,packing,gaskets,aswellasfugitiveemissionsfromcoalpiles,wastewatertreatment,pits,coolingtowers,gasprocessingfacilities,etc.Everybusinesshasprocesses,products,orservicesthatgeneratedirectand/orindirectemissionsfromoneormoreoftheabovebroadsourcecategories.TheGHGProtocolcalculationtoolsareorganizedbasedonthesecategories.AppendixDprovidesanoverviewofdirectandindirectGHGemissionsourcesorganizedbyscopesandindustrysectorsthatmaybeusedasaninitialguidetoidentifymajorGHGemissionsources.IDENTIFYSCOPE1EMISSIONSAsafirststep,acompanyshouldundertakeanexer-cisetoidentifyitsdirectemissionsourcesineachofthefoursourcecategorieslistedabove.Processemis-sionsareusuallyonlyrelevanttocertainindustrysectorslikeoilandgas,aluminum,cement,etc.Manufacturingcompaniesthatgenerateprocessemis-sionsandownorcontrolapowerproductionfacilitywilllikelyhavedirectemissionsfromallthemainsourcecategories.Office-basedorganizationsmaynothaveanydirectGHGemissionsexceptincaseswheretheyownoroperateavehicle,combustiondevice,orrefrigerationandair-conditioningequipment.Oftencompaniesaresurprisedtorealizethatsignificantemissionscomefromsourcesthatarenotinitiallyobvious(seeUnitedTechnologiescasestudy).IDENTIFYSCOPE2EMISSIONSThenextstepistoidentifyindirectemissionsourcesfromtheconsumptionofpurchasedelectricity,heat,orsteam.Almostallbusinessesgenerateindirectemissionsduetothepurchaseofelectricityforuseintheirprocessesorservices.IDENTIFYSCOPE3EMISSIONSThisoptionalstepinvolvesidentificationofotherindirectemissionsfromacompany’supstreamanddownstreamactivitiesaswellasemissionsassociatedwithoutsourced/contractmanufacturing,leases,orfranchisesnotincludedinscope1orscope2.Theinclusionofscope3emissionsallowsbusinessestoexpandtheirinventoryboundaryalongtheirvaluechainandtoidentifyallrelevantGHGemissions.ThisprovidesabroadoverviewofvariousbusinesslinkagesandpossibleopportunitiesforsignificantGHGemissionreductionsthatmayexistupstreamordownstreamofacompany’simmediateoperations(seechapter4foranoverviewofactivitiesthatcangenerateGHGemissionsalongacompany’svaluechain).CHAPTER6IdentifyingandCalculatingGHGEmissions41GUIDANCEFIGURE9.StepsinidentifyingandcalculatingGHGemissionsIdentifySourcesSelectCalculationApproachCollectDataandChooseEmissionFactorsApplyCalculationToolsRoll-upDatatoCorporateLevelSelectacalculationapproachDirectmeasurementofGHGemissionsbymonitoringconcentrationandflowrateisnotcommon.Moreoften,emissionsmaybecalculatedbasedonamassbalanceorstoichiometricbasisspecifictoafacilityorprocess.However,themostcommonapproachforcalculatingGHGemissionsisthroughtheapplicationofdocumentedemissionfactors.ThesefactorsarecalculatedratiosrelatingGHGemissionstoaproxymeasureofactivityatanemissionssource.TheIPCCguidelines(IPCC,1996)refertoahierarchyofcalculationapproachesandtech-niquesrangingfromtheapplicationofgenericemissionfactorstodirectmonitoring.Inmanycases,particularlywhendirectmonitoringiseitherunavailableorprohibitivelyexpensive,accurateemissiondatacanbecalculatedfromfuelusedata.Evensmallusersusuallyknowboththeamountoffuelconsumedandhaveaccesstodataonthecarboncontentofthefuelthroughdefaultcarboncontentcoefficientsorthroughmoreaccurateperiodicfuelsampling.Companiesshouldusethemostaccuratecalculationapproachavailabletothemandthatisappropriatefortheirreportingcontext.CollectactivitydataandchooseemissionfactorsFormostsmalltomedium-sizedcompaniesandformanylargercompanies,scope1GHGemissionswillbecalcu-latedbasedonthepurchasedquantitiesofcommercialfuels(suchasnaturalgasandheatingoil)usingpublishedemissionfactors.Scope2GHGemissionswillprimarilybecalculatedfrommeteredelectricityconsumptionandsupplier-specific,localgrid,orotherpublishedemissionfactors.Scope3GHGemissionswillprimarilybecalculatedfromactivitydatasuchasfueluseorpassengermilesandpublishedorthird-partyemissionfactors.Inmostcases,ifsource-orfacility-specificemissionfactorsareavailable,theyarepreferabletomoregenericorgeneralemissionfactors.Industrialcompaniesmaybefacedwithawiderrangeofapproachesandmethodologies.Theyshouldseekguidancefromthesector-specificguidelinesontheGHGProtocolwebsite(ifavailable)orfromtheirindustryassociations(e.g.,InternationalAluminumInstitute,InternationalIronandSteelInstitute,AmericanPetroleumInstitute,WBCSDSustainableCementInitiative,InternationalPetroleumIndustryEnvironmentalConservationAssociation).ApplycalculationtoolsThissectionprovidesanoverviewoftheGHGcalcula-tiontoolsandguidanceavailableontheGHGProtocolInitiativewebsite(www.ghgprotocol.org).Useofthesetoolsisencouragedastheyhavebeenpeerreviewedbyexpertsandindustryleaders,areregularlyupdated,andarebelievedtobethebestavailable.Thetools,however,areoptional.CompaniesmaysubstitutetheirownGHGcalculationmethods,providedtheyaremoreaccuratethanorareatleastconsistentwiththeGHGProtocolCorporateStandardsapproaches.Therearetwomaincategoriesofcalculationtools:•Cross-sectortoolsthatcanbeappliedtodifferentsectors.Theseincludestationarycombustion,mobilecombustion,HFCuseinrefrigerationandaircondi-tioning,andmeasurementandestimationuncertainty.•Sector-specifictoolsthataredesignedtocalculateemissionsinspecificsectorssuchasaluminum,ironandsteel,cement,oilandgas,pulpandpaper,office-basedorganizations.GUIDANCEIdentifyingandCalculatingGHGEmissionsCHAPTER642In1996,UnitedTechnologiesCorporation(UTC),aglobalaero-spaceandbuildingsystemstechnologycorporation,appointedateamtosetboundariesforthecompany’snewNaturalResourceConservation,EnergyandWaterUseReportingProgram.Theteamfocusedonwhatsourcesofenergyshouldbeincludedintheprogram'sannualreportofenergyconsumption.Theteamdecidedjetfuelneededtobereportedintheannualreport;jetfuelwasusedbyanumberofUTCdivisionsforengineandflighthard-waretestingandfortestfiring.Althoughtheamountofjetfuelusedinanygivenyearwassubjecttowidevariationduetochangingtestschedules,thetotalamountconsumedinanaverageyearwasbelievedtobelargeandpotentiallysmallenoughtobespecificallyexcluded.However,jetfuelconsumptionreportsprovedthatinitialbeliefincorrect.Jetfuelhasaccountedforbetween9and13percentofthecorporation'stotalannualuseofenergysincetheprogramcommenced.HadUTCnotincludedtheuseofjetfuelinannualdatacollectionefforts,asignificantemissionssourcewouldhavebeenoverlooked.UnitedTechnologiesCorporation:MorethanmeetstheeyeMostcompanieswillneedtousemorethanonecalcu-lationtooltocoveralltheirGHGemissionsources.Forexample,tocalculateGHGemissionsfromanaluminumproductionfacility,thecompanywouldusethecalculationtoolsforaluminumproduction,stationarycombustion(foranyconsumptionofpurchasedelectricity,generationofenergyon-site,etc),mobilecombustion(fortransportationofmaterialsandproductsbytrain,vehiclesemployedon-site,employeebusinesstravel,etc),andHFCuse(forrefrigeration,etc).SeeTable3forthefulllistoftools.STRUCTUREOFGHGPROTOCOLCALCULATIONTOOLSEachofthecross-sectorandsector-specificcalculationtoolsonthewebsiteshareacommonformatandincludestep-by-stepguidanceonmeasuringandcalcu-latingemissionsdata.Eachtoolconsistsofaguidancesectionandautomatedworksheetswithexplanationsonhowtousethem.Theguidanceforeachcalculationtoolincludesthefollowingsections:•Overview:providesanoverviewofthepurposeandcontentofthetool,thecalculationmethodusedinthetool,andaprocessdescription•Choosingactivitydataandemissionfactors:providessector-specificgoodpracticeguidanceandreferencesfordefaultemissionfactors•Calculationmethods:describesdifferentcalculationmethodsdependingontheavailabilityofsite-specificactivitydataandemissionfactors•Qualitycontrol:providesgoodpracticeguidance•Internalreportinganddocumentation:providesguidanceoninternaldocumentationtosupportemissionscalculations.CHAPTER6IdentifyingandCalculatingGHGEmissions43GUIDANCEChevronTexaco,aglobalenergycompany,hasdevelopedandimple-mentedenergyutilizationandGHGestimationandreportingsoftwareconsistentwiththeGHGProtocolCorporateStandard.Thissoftwareisavailablefreeofchargeandmakesiteasier,moreaccu-rate,andlesscostlytoinstituteacorporate-wideGHGaccountingandreportingsystemintheoilandgassector.CalledtheSANGEA™EnergyandGreenhouseGasEmissionsEstimatingSystem,itiscurrentlyinuseatallChevronTexacofacilitiesworldwide,comprisingmorethan70reportingentities.Thesystemisanauditable,Excel-and-Visual-Basic-basedtoolforestimatingGHGemissionsandenergyutilization.Itstreamlinescorpo-rate-leveldataconsolidationbyallowingtheinventorycoordinatorateachfacilitytoconfigureaspreadsheet,entermonthlydata,andsendquarterlyreportstoacentralizeddatabase.Inpractice,theSANGEA™systememploysavarietyofstrategiestoensureconsistentcalculationmethodsandeasecompany-widestandardization:•Spreadsheetconfigurationandmaterialinputinformationforspecificfacilitiescanbecarriedoverfromyeartoyear.Inventoryspecialistscaneasilymodifyconfigurationsasafacilitychanges(duetonewconstruction,retirementofunits,etc.).•Updatesareefficient.Methodologiesforestimatingemissions,emissionfactors,andcalculationequationsarestoredcentrallyinthesoftware,easingupdateswhenmethodologiesordefaultfactorschange.Updatestothiscentralreferenceareautomati-callyappliedtotheexistingconfigurationandinputdata.UpdateswillmirrorthetimingandcontentofupdatestotheAmericanPetroleumInstituteCompendiumofGHGemissionesti-matingmethodologies.•Thesystemisauditable.Thesoftwarerequiresdetailedaudittrailinformationondatainputsandsystemusers.Thereisdocu-mentedaccountabilityofwhomadeanychangetothesystem.•Usingonesystemsavesmoney.Significantcostsavingsareachievedbyusingthesamesysteminallfacilities,ascomparedtoconventional,disparatesystems.ChevronTexaco’sone-offinvestmentindevelopingtheSANGEA™systemhasalreadyshownresults:AroughcostestimateforChevronTexaco'sRichmond,California,refineryindicatessavingsofmorethan70percentoverafive-yearperiodcomparedwiththeconventionalapproachesbasedonlocallydevelopedreportingsystems.SANGEA™isexpectedtoreducethelongtermexpensesofmaintainingalegacysystemandhiringindependentconsultants.EmployingacombinationoftheGHGProtocolCorporateStandardsandSANGEA™calculationsoftwaretoreplaceadiverseandconfusingsetofaccountingandreportingtemplatesyieldssignificantefficiencyandaccuracygains,andallowsthecompanytomoreaccuratelymanageGHGemissionsandinstitutespecificemissionsimprovements.ChevronTexaco:TheSANGEATMaccountingandreportingsystemGUIDANCEIdentifyingandCalculatingGHGEmissionsCHAPTER644StationaryCombustionMobileCombustionHFCfromAirConditioningandRefrigerationUseMeasurementandEstimationUncertaintyforGHGEmissionsAluminumandothernon-FerrousMetalsProductionIronandSteelNitricAcidManufactureAmmoniaManufactureAdipicAcidManufactureCementLimeHFC-23fromHCFC-22ProductionPulpandPaperSemi-ConductorWaferProductionGuideforSmallOffice-BasedOrganizations•CalculatesdirectandindirectCO2emissionsfromfuelcombustioninstationaryequipment•ProvidestwooptionsforallocatingGHGemissionsfromaco-generationfacility•Providesdefaultfuelandnationalaverageelectricityemissionfactors•CalculatesdirectandindirectCO2emissionsfromfuelcombustioninmobilesources•Providescalculationsandemissionfactorsforroad,air,water,andrailtransport•CalculatesdirectHFCemissionsduringmanufacture,useanddisposalofrefrigerationandair-conditioningequipmentincommercialapplications•Providesthreecalculationmethodologies:asales-basedapproach,alifecyclestagebasedapproach,andanemissionfactorbasedapproach•Introducesthefundamentalsofuncertaintyanalysisandquantification•CalculatesstatisticalparameteruncertaintiesduetorandomerrorsrelatedtocalculationofGHGemissions•AutomatestheaggregationstepsinvolvedindevelopingabasicuncertaintyassessmentforGHGinventorydata•CalculatesdirectGHGemissionsfromaluminumproduction(CO2fromanodeoxidation,PFCemis-sionsfromthe“anodeeffect,”andSF6usedinnon-ferrousmetalsproductionasacovergas)•CalculatesdirectGHGemissions(CO2)fromoxidationofthereducingagent,fromthecalcinationofthefluxusedinsteelproduction,andfromtheremovalofcarbonfromtheironoreandscrapsteelused•CalculatesdirectGHGemissions(N2O)fromtheproductionofnitricacid•CalculatesdirectGHGemissions(CO2)fromammoniaproduction.Thisisfortheremovalofcarbonfromthefeedstockstreamonly;combustionemissionsarecalculatedwiththestationarycombustionmodule•CalculatesdirectGHGemissions(N2O)fromadipicacidproduction•CalculatesdirectCO2emissionsfromthecalcinationprocessincementmanufacturing(WBCSDtoolalsocalculatescombustionemissions)•Providestwocalculationmethodologies:thecement-basedapproachandtheclinker-basedapproach•CalculatesdirectGHGemissionsfromlimemanufacturing(CO2fromthecalcinationprocess)•CalculatesdirectHFC-23emissionsfromproductionofHCFC-22•CalculatesdirectCO2,CH4,andN2Oemissionsfromproductionofpulpandpaper.ThisincludescalculationofdirectandindirectCO2emissionsfromcombustionoffossilfuels,bio-fuels,andwasteproductsinstationaryequipment•CalculatesPFCemissionfromtheproductionofsemi-conductorwafers•CalculatesdirectCO2emissionsfromfueluse,indirectCO2emissionsfromelectricityconsumption,andotherindirectCO2emissionsfrombusinesstravelandcommutingTABLE3.OverviewofGHGcalculationtoolsavailableontheGHGProtocolwebsiteCROSS-SECTORTOOLSCALCULATIONTOOLSMAINFEATURES.SECTOR-SPECIFICTOOLSIntheautomatedworksheetsection,itisonlynecessarytoinsertactivitydataintotheworksheetsandtoselectanappropriateemissionfactororfactors.Defaultemis-sionfactorsareprovidedforthesectorscovered,butitisalsopossibletoinsertcustomizedemissionfactorsthataremorerepresentativeofthereportingcompany’soper-ations.TheemissionsofeachGHG(CO2,CH4,N2O,etc.)arecalculatedseparatelyandthenconvertedtoCO2equivalentsonthebasisoftheirglobalwarmingpotential.Sometools,suchastheironandsteelsectortoolandtheHFCcross-sectortool,takeatieredapproach,offeringachoicebetweenasimpleandamoreadvancedcalculationmethodology.Themoreadvancedmethodsareexpectedtoproducemoreaccurateemissionsestimatesbutusuallyrequirecollectionofmoredetaileddataandamorethoroughunderstandingofacompany’stechnologies.Roll-upGHGemissionsdatatocorporatelevelToreportacorporation’stotalGHGemissions,compa-nieswillusuallyneedtogatherandsummarizedatafrommultiplefacilities,possiblyindifferentcountriesandbusinessdivisions.Itisimportanttoplanthisprocesscarefullytominimizethereportingburden,reducetheriskoferrorsthatmightoccurwhilecompilingdata,andensurethatallfacilitiesarecollectinginformationonanapproved,consistentbasis.Ideally,corporationswillintegrateGHGreportingwiththeirexistingreportingtoolsandprocesses,andtakeadvantageofanyrelevantdataalreadycollectedandreportedbyfacilitiestodivisionorcorporateoffices,regulatorsorotherstakeholders.Thetoolsandprocesseschosentoreportdatawilldependupontheinformationandcommunicationinfra-structurealreadyinplace(i.e.,howeasyisittoincludenewdatacategoriesincorporatedatabases).Itwillalsodependupontheamountofdetailthatcorporatehead-quarterswishestobereportedfromfacilities.Datacollectionandmanagementtoolscouldinclude:•Securedatabasesavailableoverthecompanyintranetorinternet,fordirectdataentrybyfacilities•Spreadsheettemplatesfilledoutande-mailedtoacorpo-rateordivisionoffice,wheredataisprocessedfurther•Paperreportingformsfaxedtoacorporateordivisionofficewheredataisre-enteredinacorporatedata-base.However,thismethodmayincreasethelikelihoodoferrorsiftherearenotsufficientchecksinplacetoensuretheaccuratetransferofthedata.Forinternalreportinguptothecorporatelevel,itisrecommendedthatstandardizedreportingformatsbeusedtoensurethatdatareceivedfromdifferentbusinessunitsandfacilitiesiscomparable,andthatinternalreportingrulesareobserved(seeBPcasestudy).Standardizedformatscansignificantlyreducetheriskoferrors.CHAPTER6IdentifyingandCalculatingGHGEmissions45GUIDANCEBP,aglobalenergycompany,hasbeencollectingGHGdatafromthedifferentpartsofitsoperationssince1997andhasconsoli-dateditsinternalreportingprocessesintoonecentraldatabasesystem.Theresponsibilityforreportingenvironmentalemissionslieswithabout320individualBPfacilitiesandbusinessdepart-ments,whicharetermed“reportingunits.”AllreportingunitshavetocompleteastandardExcelpro-formaspreadsheeteveryquarter,statingactualemissionsfortheprecedingthreemonthsandupdatestoforecastsforthecurrentyearandthenexttwoyears.Inaddition,reportingunitsareaskedtoaccountforallsignificantvariances,includingsustainablereductions.ThereportingunitsallusethesameBPGHGReportingGuidelines“Protocol”(BP,2000)forquantifyingtheiremissionsofcarbondioxideandmethane.Allpro-formaspreadsheetsaree-mailedautomaticallybythecentraldatabasetothereportingunits,andthecompletede-mailreturnsareuploadedintothedatabasebyacorporateteam,whocheckthequalityoftheincomingdata.Thedataarethencompiled,bytheendofthemonthfollowingeachquarterend,toprovidethetotalemissioninventoryandforecastsforanalysisagainstBP’sGHGtarget.Finally,theinventoryisreviewedbyateamofinde-pendentexternalauditorstoprovideassuranceonthequalityandaccuracyofthedata.BP:AstandardizedsystemforinternalreportingofGHGsApproachesforrollingupGHGemissionsdatatocorporatelevelTherearetwobasicapproachesforgatheringdataonGHGemissionsfromacorporation’sfacilities(Figure10):•Centralized:individualfacilitiesreportactivity/fuelusedata(suchasquantityoffuelused)tothecorpo-ratelevel,whereGHGemissionsarecalculated.•Decentralized:individualfacilitiescollectactivity/fuelusedata,directlycalculatetheirGHGemissionsusingapprovedmethods,andreportthisdatatothecorporatelevel.Thedifferencebetweenthesetwoapproachesisinwheretheemissionscalculationsoccur(i.e.,whereactivitydataismultipliedbytheappropriateemissionfactors)andinwhattypeofqualitymanagementproceduresmustbeputinplaceateachlevelofthecorporation.Facility-levelstaffisgenerallyresponsibleforinitialdatacollectionunderbothapproaches.Underbothapproaches,staffatcorporateandlowerlevelsofconsolidationshouldtakecaretoidentifyandexcludeanyscope2or3emissionsthatarealsoaccountedforasscope1emissionsbyotherfacilities,businessunits,orcompaniesincludedintheemissionsinventoryconsolidation.CENTRALIZEDAPPROACH:INDIVIDUALFACILITIESREPORTACTIVITY/FUELUSEDATAThisapproachmaybeparticularlysuitableforoffice-basedorganizations.Requestingthatfacilitiesreporttheiractivity/fuelusedatamaybethepreferredoptionif:•Thestaffatthecorporateordivisionlevelcancalcu-lateemissionsdatainastraightforwardmanneronthebasisofactivity/fuelusedata;and•Emissionscalculationsarestandardacrossanumberoffacilities.DECENTRALIZEDAPPROACH:INDIVIDUALFACILITIESCALCULATEGHGEMISSIONSDATAAskingfacilitiestocalculateGHGemissionsthemselveswillhelptoincreasetheirawarenessandunderstandingoftheissue.However,itmayalsoleadtoresistance,increasedtrainingneeds,anincreaseincalculationerrors,andagreaterneedforauditingofcalculations.RequestingthatfacilitiescalculateGHGemissionsthemselvesmaybethepreferredoptionif:•GHGemissioncalculationsrequiredetailedknowledgeofthekindofequipmentbeingusedatfacilities;•GHGemissioncalculationmethodsvaryacrossanumberoffacilities;•Processemissions(incontrasttoemissionsfromburningfossilfuels)makeupanimportantshareoftotalGHGemissions;•Resourcesareavailabletotrainfacilitystafftoconductthesecalculationsandtoauditthem;•Auser-friendlytoolisavailabletosimplifythecalcu-lationandreportingtaskforfacility-levelstaff;or•LocalregulationsrequirereportingofGHGemissionsatafacilitylevel.Thechoiceofcollectionapproachdependsontheneedsandcharacteristicsofthereportingcompany.Forexample,UnitedTechnologiesCorporationusesthecentralizedapproach,leavingthechoiceofemissionfactorsandcalculationstocorporatestaff,whileBPusesthedecentralizedapproachandfollowsupwithauditstoensurecalculationsarecorrect,documented,andfollowapprovedmethods.Tomaximizeaccuracyandminimizereportingburdens,somecompaniesuseacombinationofthetwoapproaches.Complexfacilitieswithprocessemissionscalculatetheiremissionsatthefacilitylevel,whilefacilitieswithuniformemissionsfromstandardsourcesonlyreportfueluse,electricityconsumption,andtravelactivity.ThecorporatedatabaseorreportingtoolthencalculatestotalGHGemissionsforeachofthesestandardactivities.Thetwoapproachesarenotmutuallyexclusiveandshouldproducethesameresult.Thuscompaniesdesiringaconsistencycheckonfacility-levelcalcula-tionscanfollowbothapproachesandcomparetheresults.EvenwhenfacilitiescalculatetheirownGHGemissions,corporatestaffmaystillwishtogatheractivity/fuelusedatatodouble-checkcalculationsandexploreopportunitiesforemissionsreductions.TheseGUIDANCECHAPTER646IdentifyingandCalculatingGHGEmissionsActivitydataActivitydataxemissionfactor=GHGemissionsSitesreportGHGemissionsSitesreportactivitydata(GHGemissionscalculatedatcorporatelevel:activitydataxemissionsfactor=GHGemissions)DECENTRALIZEDCENTRALIZED➡➡SITELEVELCORPORATELEVELFIGURE10.ApproachestogatheringdataCHAPTER6IdentifyingandCalculatingGHGEmissions47GUIDANCEdatashouldbeavailableandtransparenttostaffatallcorporatelevels.Corporatestaffshouldalsoverifythatfacility-reporteddataarebasedonwelldefined,consis-tent,andapprovedinventoryboundaries,reportingperiods,calculationmethodologies,etc.CommonguidanceonreportingtocorporatelevelReportsfromfacilityleveltocorporateordivisionofficesshouldincludeallrelevantinformationasspeci-fiedinchapter9.Somereportingcategoriesarecommontoboththecentralizedanddecentralizedapproachesandshouldbereportedbyfacilitiestotheircorporateoffices.Theseinclude:•Abriefdescriptionoftheemissionsources•Alistandjustificationofspecificexclusionorinclu-sionofsources•Comparativeinformationfrompreviousyears•Thereportingperiodcovered•Anytrendsevidentinthedata•Progresstowardsanybusinesstargets•Adiscussionofuncertaintiesinactivity/fueluseoremissionsdatareported,theirlikelycause,andrecom-mendationsforhowdatacanbeimproved•Adescriptionofeventsandchangesthathaveanimpactonreporteddata(acquisitions,divestitures,closures,technologyupgrades,changesofreportingboundariesorcalculationmethodologiesapplied,etc.).REPORTINGFORTHECENTRALIZEDAPPROACHInadditiontotheactivity/fuelusedataandaforemen-tionedcommoncategoriesofreportingdata,facilitiesfollowingthecentralizedapproachbyreportingactivity/fuelusedatatothecorporatelevelshouldalsoreportthefollowing:•Activitydataforfreightandpassengertransportactivities(e.g.,freighttransportintonne-kilometers)•Activitydataforprocessemissions(e.g.,tonnesoffertilizerproduced,tonnesofwasteinlandfills)•Clearrecordsofanycalculationsundertakentoderiveactivity/fuelusedata•Localemissionfactorsnecessarytotranslatefueluseand/orelectricityconsumptionintoCO2emissions.REPORTINGFORTHEDECENTRALIZEDAPPROACHInadditiontotheGHGemissionsdataandaforemen-tionedcommoncategoriesofreportingdata,individualfacilitiesfollowingthedecentralizedapproachbyreportingcalculatedGHGemissionstothecorporatelevelshouldalsoreportthefollowing:•AdescriptionofGHGcalculationmethodologiesandanychangesmadetothosemethodologiesrelativetopreviousreportingperiods•Ratioindicators(seechapter9)•Detailsonanydatareferencesusedforthecalculations,inparticularinformationonemissionfactorsused.Clearrecordsofcalculationsundertakentoderiveemissionsdatashouldbekeptforanyfutureinternalorexternalverification.ompanieshavedifferentreasonsformanagingthequalityoftheirGHGemissionsinventory,rangingfromidentifyingopportunitiesforimprovementtostakeholderdemandtopreparationforregulation.TheGHGProtocolCorporateStandardrecognizesthatthesereasonsareafunctionofacompany’sgoalsanditsexpectationsforthefuture.Acompany’sgoalsforandvisionoftheevolutionoftheGHGemissionsissueshouldguidethedesignofitscorporateinventory,theimplementationofaqualitymanagementsystem,andthetreatmentofuncertaintywithinitsinventory.GUIDANCE48C7ManagingInventoryQualityGUIDANCEAcorporateGHGinventoryprogramincludesallinstitu-tional,managerial,andtechnicalarrangementsmadeforthecollectionofdata,preparationoftheinventory,andimplementationofstepstomanagethequalityoftheinventory.1Theguidanceinthischapterisintendedtohelpcompaniesdevelopandimplementaqualitymanagementsystemfortheirinventory.Givenanuncertainfuture,highqualityinformationwillhavegreatervalueandmoreuses,whilelowqualityinformationmayhavelittleornovalueoruseandmayevenincurpenalties.Forexample,acompanymaycurrentlybefocusingonavoluntaryGHGprogrambutalsowantitsinventorydatatomeettheanticipatedrequirementsofafuturewhenemissionsmayhavemonetaryvalue.AqualitymanagementsystemisessentialtoensuringthataninventorycontinuestomeettheprinciplesoftheGHGProtocolCorporateStandardandanticipatestherequirementsoffutureGHGemissionsprograms.Evenifacompanyisnotanticipatingafutureregulatorymechanism,internalandexternalstakeholderswilldemandhighqualityinventoryinformation.Therefore,theimplementationofsometypeofqualitymanagementsystemisimportant.However,theGHGProtocolCorporateStandardrecognizesthatcompaniesdonothaveunlim-itedresources,and,unlikefinancialaccounting,corporateGHGinventoriesinvolvealevelofscientificandengineeringcomplexity.Therefore,companiesshoulddeveloptheirinventoryprogramandqualitymanage-mentsystemasacumulativeeffortinkeepingwiththeirresources,thebroaderevolutionofpolicy,andtheirowncorporatevision.Aqualitymanagementsystemprovidesasystematicprocessforpreventingandcorrectingerrors,andidentifiesareaswhereinvestmentswilllikelyleadtothegreatestimprovementinoverallinventoryquality.However,theprimaryobjectiveofqualitymanagementisensuringthecredibilityofacompany’sGHGinven-toryinformation.Thefirststeptowardsachievingthisobjectiveisdefininginventoryquality.DefininginventoryqualityTheGHGProtocolCorporateStandardoutlinesfiveaccountingprinciplesthatsetanimplicitstandardforthefaithfulrepresentationofacompany’sGHGemissionthroughitstechnical,accounting,andreportingefforts(seechapter1).Puttingtheseprinciplesintopracticewillresultinacredibleandunbiasedtreatmentandpres-entationofissuesanddata.Foracompanytofollowtheseprinciples,qualitymanagementneedstobeanintegralpartofitscorporateinventoryprogram.Thegoalofaqualitymanagementsystemistoensurethattheseprinciplesareputintopractice.CHAPTER7ManagingInventoryQuality49GUIDANCEKPMG,aglobalservicescompany,foundthatakeyfactorinthederivationofreliable,verifiableGHGdataistheintegrationofGHGdatamanagementandreportingmechanismswithcompa-nies’coreoperationalmanagementandassuranceprocesses.Thisisbecause:•ItismoreefficienttowidenthescopeofexistingembeddedmanagementandassuranceprocessesthantodevelopaseparatefunctionresponsibleforgeneratingandreportingGHGinformation.•AsGHGinformationbecomesincreasinglymonetized,itwillattractthesameattentionasotherkeyperformanceindicatorsofbusinesses.Therefore,managementwillneedtoensureadequateproceduresareinplacetoreportreliabledata.Theseprocedurescanmosteffectivelybeimplementedbyfunctionswithintheorganizationthatoverseecorporategovernance,internalaudit,IT,andcompanyreporting.AnotherfactorthatisoftennotgivensufficientemphasisistrainingofpersonnelandcommunicationofGHGobjectives.Datagenerationandreportingsystemsareonlyasreliableasthepeoplewhooperatethem.Manywell-designedsystemsfailbecausetheprecisereportingneedsofthecompanyarenotadequatelyexplainedtothepeoplewhohavetointerpretareportingstandardandcalculationtools.Giventhecomplexityofaccountingboundariesandanelementofsubjectivitythatmustaccompanysourceinclusionandequityshare,inconsistentinter-pretationofreportingrequirementsisarealrisk.Itisalsoimportantthatthoseresponsibleforsupplyinginputdataareawareofitsuse.Theonlywaytominimizethisriskisthroughclearcommunication,adequatetrainingandknowledgesharing.KPMG:ThevalueofintegratingGHGmanagementwithexistingsystemsAninventoryprogramframeworkApracticalframeworkisneededtohelpcompaniesconceptualizeanddesignaqualitymanagementsystemandtohelpplanforfutureimprovements.Thisframe-workfocusesonthefollowinginstitutional,managerial,andtechnicalcomponentsofaninventory(Figure11):METHODS:Thesearethetechnicalaspectsofinventorypreparation.Companiesshouldselectordevelopmethod-ologiesforestimatingemissionsthataccuratelyrepresentthecharacteristicsoftheirsourcecategories.TheGHGProtocolprovidesmanydefaultmethodsandcalculationtoolstohelpwiththiseffort.Thedesignofaninventoryprogramandqualitymanagementsystemshouldprovidefortheselection,application,andupdatingofinventorymethodologiesasnewresearchbecomesavailable,changesaremadetobusinessoperations,ortheimpor-tanceofinventoryreportingiselevated.DATA:Thisisthebasicinformationonactivitylevels,emissionfactors,processes,andoperations.Althoughmethodologiesneedtobeappropriatelyrigorousanddetailed,dataqualityismoreimportant.Nomethod-ologycancompensateforpoorqualityinputdata.Thedesignofacorporateinventoryprogramshouldfacilitatethecollectionofhighqualityinventorydataandthemaintenanceandimprovementofcollectionprocedures.INVENTORYPROCESSESANDSYSTEMS:Thesearetheinstitutional,managerial,andtechnicalproceduresforpreparingGHGinventories.Theyincludetheteamandprocesseschargedwiththegoalofproducingahighqualityinventory.TostreamlineGHGinventoryqualitymanagement,theseprocessesandsystemsmaybeinte-grated,whereappropriate,withothercorporateprocessesrelatedtoquality.DOCUMENTATION:Thisistherecordofmethods,data,processes,systems,assumptions,andestimatesusedtoprepareaninventory.Itincludeseverythingemployeesneedtoprepareandimproveacompany’sinventory.SinceestimatingGHGemissionsisinherentlytechnical(involvingengineeringandscience),highquality,trans-parentdocumentationisparticularlyimportanttocredibility.Ifinformationisnotcredible,orfailstobeeffectivelycommunicatedtoeitherinternalorexternalstakeholders,itwillnothavevalue.Companiesshouldseektoensurethequalityofthesecomponentsateveryleveloftheirinventorydesign.ImplementinganinventoryqualitymanagementsystemAqualitymanagementsystemforacompany’sinventoryprogramshouldaddressallfouroftheinventorycompo-nentsdescribedabove.Toimplementthesystem,acompanyshouldtakethefollowingsteps:1.Establishaninventoryqualityteam.Thisteamshouldberesponsibleforimplementingaqualitymanage-mentsystem,andcontinuallyimprovinginventoryquality.Theteamormanagershouldcoordinateinteractionsbetweenrelevantbusinessunits,facilitiesandexternalentitiessuchasgovernmentagencyprograms,researchinstitutions,verifiers,orconsultingfirms.GUIDANCEManagingInventoryQuality50FIGURE11:Inventoryqualitymanagementsystem7.Report,Document,andArchive2.DevelopQualityManagementPlan6.InstitutionalizeFormalFeedbackLoops3.PerformGenericQualityChecks5.ReviewFinalInventoryEstimatesandReports4.PerformSource-SpecificQualityChecks➡➡➡➡➡➡➡DATAMETHODSSYSTEMSDOCUMENTATION1.EstablishInventoryQualityTeamINVENTORYQUALITYMANAGEMENTSYSTEMFEEDBACKCHAPTER72.Developaqualitymanagementplan.Thisplandescribesthestepsacompanyistakingtoimplementitsqualitymanagementsystem,whichshouldbeincorporatedintothedesignofitsinventoryprogramfromthebeginning,althoughfurtherrigorandcoverageofcertainproceduresmaybephasedinovermultipleyears.Theplanshouldincludeproce-duresforallorganizationallevelsandinventorydevelopmentprocesses—frominitialdatacollectiontofinalreportingofaccounts.Forefficiencyandcomprehensiveness,companiesshouldintegrate(andextendasappropriate)existingqualitysystemstocoverGHGmanagementandreporting,suchasanyISOprocedures.Toensureaccuracy,thebulkoftheplanshouldfocusonpracticalmeasuresforimple-mentingthequalitymanagementsystem,asdescribedinstepsthreeandfour.3.Performgenericqualitychecks.Theseapplytodataandprocessesacrosstheentireinventory,focusingonappropriatelyrigorousqualitychecksondatahandling,documentation,andemissioncalculationactivities(e.g.,ensuringthatcorrectunitconversionsareused).Guidanceonqualitycheckingproceduresisprovidedinthesectiononimplementationbelow(seetable4).CHAPTER7ManagingInventoryQuality51GUIDANCETABLE4.GenericqualitymanagementmeasuresDATAGATHERING,INPUT,ANDHANDLINGACTIVITIES•Checkasampleofinputdatafortranscriptionerrors•Identifyspreadsheetmodificationsthatcouldprovideadditionalcontrolsorchecksonquality•Ensurethatadequateversioncontrolproceduresforelectronicfileshavebeenimplemented•OthersDATADOCUMENTATION•Confirmthatbibliographicaldatareferencesareincludedinspreadsheetsforallprimarydata•Checkthatcopiesofcitedreferenceshavebeenarchived•Checkthatassumptionsandcriteriaforselectionofboundaries,baseyears,methods,activitydata,emissionfactors,andotherparametersaredocumented•Checkthatchangesindataormethodologyaredocumented•OthersCALCULATINGEMISSIONSANDCHECKINGCALCULATIONS•Checkwhetheremissionunits,parameters,andconversionfactorsareappropriatelylabeled•Checkifunitsareproperlylabeledandcorrectlycarriedthroughfrombeginningtoendofcalculations•Checkthatconversionfactorsarecorrect•Checkthedataprocessingsteps(e.g.,equations)inthespreadsheets•Checkthatspreadsheetinputdataandcalculateddataareclearlydifferentiated•Checkarepresentativesampleofcalculations,byhandorelectronically•Checksomecalculationswithabbreviatedcalculations(i.e.,backoftheenvelopecalculations)•Checktheaggregationofdataacrosssourcecategories,businessunits,etc.•Checkconsistencyoftimeseriesinputsandcalculations•Others4.Performsource-category-specificqualitychecks.Thisincludesmorerigorousinvestigationsintotheappro-priateapplicationofboundaries,recalculationprocedures,andadherencetoaccountingandreportingprinciplesforspecificsourcecategories,aswellasthequalityofthedatainputused(e.g.,whetherelectricitybillsormeterreadingsarethebestsourceofconsumptiondata)andaqualitativedescrip-tionofthemajorcausesofuncertaintyinthedata.Theinformationfromtheseinvestigationscanalsobeusedtosupportaquantitativeassessmentofuncer-tainty.Guidanceontheseinvestigationsisprovidedinthesectiononimplementationbelow.5.Reviewfinalinventoryestimatesandreports.Aftertheinventoryiscompleted,aninternaltechnicalreviewshouldfocusonitsengineering,scientific,andothertechnicalaspects.Subsequently,aninternalmanagerialreviewshouldfocusonsecuringofficialcorporateapprovalofandsupportfortheinventory.Athirdtypeofreviewinvolvingexpertsexternaltothecompany’sinventoryprogramisaddressedinchapter10.6.Institutionalizeformalfeedbackloops.Theresultsofthereviewsinstepfive,aswellastheresultsofeveryothercomponentofacompany’squalitymanagementsystem,shouldbefedbackviaformalfeedbackproce-durestothepersonorteamidentifiedinstepone.Errorsshouldbecorrectedandimprovementsimple-mentedbasedonthisfeedback.7.Establishreporting,documentation,andarchivingprocedures.Thesystemshouldcontainrecordkeepingproceduresthatspecifywhatinformationwillbedocu-mentedforinternalpurposes,howthatinformationshouldbearchived,andwhatinformationistobereportedforexternalstakeholders.Likeinternalandexternalreviews,theserecordkeepingproceduresincludeformalfeedbackmechanisms.Acompany’squalitymanagementsystemandoverallinventoryprogramshouldbetreatedasevolving,inkeepingwithacompany’sreasonsforpreparinganinventory.Theplanshouldaddressthecompany’sstrategyforamulti-yearimplementation(i.e.,recognizethatinventoriesarealong-termeffort),includingstepstoensurethatallqualitycontrolfindingsfrompreviousyearsareadequatelyaddressed.PracticalmeasuresforimplementationAlthoughprinciplesandbroadprogramdesignguidelinesareimportant,anyguidanceonqualitymanagementwouldbeincompletewithoutadiscussionofpracticalinventoryqualitymeasures.Acompanyshouldimple-mentthesemeasuresatmultiplelevelswithinthecompany,fromthepointofprimarydatacollectiontothefinalcorporateinventoryapprovalprocess.Itisimportanttoimplementthesemeasuresatpointsintheinventoryprogramwhereerrorsaremostlylikelytooccur,suchastheinitialdatacollectionphaseandduringcalculationanddataaggregation.Whilecorporatelevelinventoryqualitymayinitiallybeemphasized,itisimportanttoensurequalitymeasuresareimplementedatalllevelsofdisaggre-gation(e.g.,facility,process,geographical,accordingtoaparticularscope,etc)tobebetterpreparedforGHGmarketsorregulatoryrulesinthefuture.Companiesalsoneedtoensurethequalityoftheirhistor-icalemissionestimatesandtrenddata.Theycanachievethisbyemployinginventoryqualitymeasurestomini-mizebiasesthatcanarisefromchangesinthecharacteristicsofthedataormethodsusedtocalculatehistoricalemissionestimates,andbyfollowingthestan-dardsandguidanceofchapter5.Thethirdstepofaqualitymanagementsystem,asdescribedabove,istoimplementgenericqualitycheckingmeasures.Thesemeasuresapplytoallsourcecategoriesandalllevelsofinventorypreparation.Table4providesasamplelistofsuchmeasures.Thefourthstepofaqualitymanagementsystemissourcecategory-specificdataqualityinvestigations.Theinformationgatheredfromtheseinvestigationscanalsobeusedforthequantitativeandqualitativeassessmentofdatauncertainty(seesectiononuncertainty).Addressedbelowarethetypesofsource-specificqualitymeasuresthatcanbeemployedforemissionfactors,activitydata,andemissionestimates.GUIDANCEManagingInventoryQualityCHAPTER752EMISSIONFACTORSANDOTHERPARAMETERSForaparticularsourcecategory,emissionscalculationswillgenerallyrelyonemissionfactorsandotherparame-ters(e.g.,utilizationfactors,oxidationrates,methaneconversionfactors).2Thesefactorsandparametersmaybepublishedordefaultfactors,basedoncompany-specificdata,site-specificdata,ordirectemissionorothermeasurements.Forfuelconsumption,publishedemissionfactorsbasedonfuelenergycontentaregener-allymoreaccuratethanthosebasedonmassorvolume,exceptwhenmassorvolumebasedfactorshavebeenmeasuredatthecompany-orsite-specificlevel.Qualityinvestigationsneedtoassesstherepresentativenessandapplicabilityofemissionfactorsandotherparameterstothespecificcharacteristicsofacompany.Differencesbetweenmeasuredanddefaultvaluesneedtobequalita-tivelyexplainedandjustifiedbaseduponthecompany’soperationalcharacteristics.ACTIVITYDATAThecollectionofhighqualityactivitydatawilloftenbethemostsignificantlimitationforcorporateGHGinven-tories.Therefore,establishingrobustdatacollectionproceduresneedstobeapriorityinthedesignofanycompany’sinventoryprogram.Thefollowingareusefulmeasuresforensuringthequalityofactivitydata:•Developdatacollectionproceduresthatallowthesamedatatobeefficientlycollectedinfutureyears.•Convertfuelconsumptiondatatoenergyunitsbeforeapplyingcarboncontentemissionfactors,whichmaybebettercorrelatedtoafuel’senergycontentthanitsmass.•Comparecurrentyeardatawithhistoricaltrends.Ifdatadonotexhibitrelativelyconsistentchangesfromyeartoyearthenthecausesforthesepatternsshouldbeinvestigated(e.g.,changesofover10percentfromyeartoyearmaywarrantfurtherinvestigation).•Compareactivitydatafrommultiplereferencesources(e.g.,governmentsurveydataordatacompiledbytradeassociations)withcorporatedatawhenpossible.Suchcheckscanensurethatconsistentdataisbeingreportedtoallparties.Datacanalsobecomparedamongfacilitieswithinacompany.•InvestigateactivitydatathatisgeneratedforpurposesotherthanpreparingaGHGinventory.Indoingso,companieswillneedtochecktheapplicabilityofthisdatatoinventorypurposes,includingcompleteness,consistencywiththesourcecategorydefinition,andconsistencywiththeemissionfactorsused.Forexample,datafromdifferentfacilitiesmaybeexam-inedforinconsistentmeasurementtechniques,operatingconditions,ortechnologies.Qualitycontrolmeasures(e.g.,ISO)mayhavealreadybeenconductedduringthedata’soriginalpreparation.Thesemeasurescanbeintegratedwiththecompany’sinventoryqualitymanagementsystem.•Checkthatbaseyearrecalculationprocedureshavebeenfollowedconsistentlyandcorrectly(seechapter5).•Checkthatoperationalandorganizationalboundarydecisionshavebeenappliedcorrectlyandconsistentlytothecollectionofactivitydata(seechapters3and4).CHAPTER7ManagingInventoryQuality53GUIDANCEInterface,Inc.,istheworld’slargestmanufacturerofcarpettilesandupholsteryfabricsforcommercialinteriors.Thecompanyhasestablishedanenvironmentaldatasystemthatmirrorsitscorpo-ratefinancialdatareporting.TheInterfaceEcoMetricssystemisdesignedtoprovideactivityandmaterialflowdatafrombusinessunitsinanumberofcountries(theUnitedStates,Canada,Australia,theUnitedKingdom,ThailandandthroughoutEurope)andprovidesmetricsformeasuringprogressonenvironmentalissuessuchasGHGemissions.Usingcompany-wideaccountingguidelinesandstandards,energyandmaterialinputdataarereportedtoacentraldatabaseeachquarterandmadeavailabletosustainabilitypersonnel.ThesedataarethefoundationofInterface’sannualinventoryandenabledatacomparisonovertimeinthepursuitofimprovedquality.BasingemissionsdatasystemsonfinancialreportinghelpsInterfaceimproveitsdataquality.Justasfinancialdataneedtobedocumentedanddefensible,Interface’semissionsdataareheldtostandardsthatpromoteanincreasinglytransparent,accurate,andhigh-qualityinventory.IntegratingitsfinancialandemissionsdatasystemshasmadeInterface’sGHGaccountingandreportingmoreusefulasitstrivestobea“completelysustainablecompany”by2020.Interface:Integrationofemissionsandbusinessdatasystems•Investigatewhetherbiasesorothercharacteristicsthatcouldaffectdataqualityhavebeenpreviouslyidenti-fied(e.g.,bycommunicatingwithexpertsataparticularfacilityorelsewhere).Forexample,abiascouldbetheunintentionalexclusionofoperationsatsmallerfacilitiesordatathatdonotcorrespondexactlywiththecompany’sorganizationalboundaries.•Extendqualitymanagementmeasurestocoveranyadditionaldata(sales,production,etc.)usedtoesti-mateemissionintensitiesorotherratios.EMISSIONESTIMATESEstimatedemissionsforasourcecategorycanbecomparedwithhistoricaldataorotherestimatestoensuretheyfallwithinareasonablerange.Potentiallyunreasonableestimatesprovidecauseforcheckingemissionfactorsoractivitydataanddeterminingwhetherchangesinmethodology,marketforces,orothereventsaresufficientreasonsforthechange.Insituationswhereactualemissionmonitoringoccurs(e.g.,powerplantCO2emissions),thedatafrommoni-torscanbecomparedwithcalculatedemissionsusingactivitydataandemissionfactors.Ifanyoftheaboveemissionfactor,activitydata,emis-sionestimate,orotherparameterchecksindicateaproblem,moredetailedinvestigationsintotheaccuracyofthedataorappropriatenessofthemethodsmayberequired.Thesemoredetailedinvestigationscanalsobeutilizedtobetterassessthequalityofdata.Onepotentialmeasureofdataqualityisaquantitativeandqualitativeassessmentoftheiruncertainty.InventoryqualityandinventoryuncertaintyPreparingaGHGinventoryisinherentlybothanaccountingandascientificexercise.Mostapplicationsforcompany-levelemissionsandremovalestimatesrequirethatthesedatabereportedinaformatsimilartofinancialaccountingdata.Infinancialaccounting,itisstandardpracticetoreportindividualpointestimates(i.e.,singlevalueversusarangeofpossiblevalues).Incontrast,thestandardpracticeformostscientificstudiesofGHGandotheremissionsistoreportquantitativedatawithestimatederrorbounds(i.e.,uncertainty).Justlikefinancialfiguresinaprofitandlossorbankaccountstatement,pointestimatesinacorporateemissioninven-toryhaveobvioususes.However,howwouldorshouldtheadditionofsomequantitativemeasureofuncertaintytoanemissioninventorybeused?Inanidealsituation,inwhichacompanyhadperfectquantitativeinformationontheuncertaintyofitsemis-sionestimatesatalllevels,theprimaryuseofthisinformationwouldalmostcertainlybecomparative.Suchcomparisonsmightbemadeacrosscompanies,acrossbusinessunits,acrosssourcecategories,orthroughtime.Inthissituation,inventoryestimatescouldevenberatedordiscountedbasedontheirqualitybeforetheywereused,withuncertaintybeingtheobjec-tivequantitativemetricforquality.Unfortunately,suchobjectiveuncertaintyestimatesrarelyexist.TYPESOFUNCERTAINTIESUncertaintiesassociatedwithGHGinventoriescanbebroadlycategorizedintoscientificuncertaintyandestimationuncertainty.Scientificuncertaintyariseswhenthescienceoftheactualemissionand/orremovalprocessisnotcompletelyunderstood.Forexample,manydirectandindirectfactorsassociatedwithglobalwarmingpotential(GWP)valuesthatareusedtocombineemissionestimatesforvariousGHGsinvolvesignificantscientificuncertainty.Analyzingandquanti-fyingsuchscientificuncertaintyisextremelyproblematicandislikelytobebeyondthecapacityofmostcompanyinventoryprograms.GUIDANCEManagingInventoryQualityCHAPTER754TheexperienceoftheU.K.automotivemanufacturerVauxhalMotorsillustratestheimportanceofattentiontodetailinsettingupGHGinformationcollectionsystems.ThecompanywishedtocalculateGHGemissionsfromstaffairtravel.However,whendeterminingtheimpactofflighttravel,itisimportanttomakesurethattheroundtripdistanceisusedwhencalculatingemissions.Fortunately,Vauxhall’sreviewofitsassumptionsandcalculationmethodologiesrevealedthisfactandavoidedreportingemissionsthatwere50percentlowerthantheactualvalue.VauxhallMotors:TheimportanceofaccuracychecksEstimationuncertaintyarisesanytimeGHGemissionsarequantified.Thereforeallemissionsorremovalesti-matesareassociatedwithestimationuncertainty.Estimationuncertaintycanbefurtherclassifiedintotwotypes:modeluncertaintyandparameteruncertainty.3Modeluncertaintyreferstotheuncertaintyassociatedwiththemathematicalequations(i.e.,models)usedtocharacterizetherelationshipsbetweenvariousparame-tersandemissionprocesses.Forexample,modeluncertaintymayariseeitherduetotheuseofanincor-rectmathematicalmodelorinappropriateinputintothemodel.Aswithscientificuncertainty,estimatingmodeluncertaintyislikelytobebeyondmostcompany’sinventoryefforts;however,somecompaniesmaywishtoutilizetheiruniquescientificandengi-neeringexpertisetoevaluatetheuncertaintyintheiremissionestimationmodels.Parameteruncertaintyreferstotheuncertaintyassoci-atedwithquantifyingtheparametersusedasinputs(e.g.,activitydataandemissionfactors)intoestima-tionmodels.Parameteruncertaintiescanbeevaluatedthroughstatisticalanalysis,measurementequipmentprecisiondeterminations,andexpertjudgment.Quantifyingparameteruncertaintiesandthenesti-matingsourcecategoryuncertaintiesbasedontheseparameteruncertaintieswillbetheprimaryfocusofcompaniesthatchoosetoinvestigatetheuncertaintyintheiremissioninventories.LIMITATIONSOFUNCERTAINTYESTIMATESGiventhatonlyparameteruncertaintiesarewithinthefeasiblescopeofmostcompanies,uncertaintyestimatesforcorporateGHGinventorieswill,ofnecessity,beimperfect.Completeandrobustsampledatawillnotalwaysbeavailabletoassessthestatisticaluncertainty4ineveryparameter.Formostparameters(e.g.,litersofgasolinepurchasedortonnesoflimestoneconsumed),onlyasingledatapointmaybeavailable.Insomecases,companiescanutilizeinstrumentprecisionorcalibrationinformationtoinformtheirassessmentofstatisticaluncertainty.However,toquantifysomeofthesystematicuncertainties5associatedwithparametersandtosupplementstatisticaluncertaintyestimates,companieswillusuallyhavetorelyonexpertjudgment.6Theproblemwithexpertjudgment,though,isthatitisdifficulttoobtaininacomparable(i.e.,unbiased)andconsistentmanneracrossparameters,sourcecategories,orcompanies.CHAPTER7ManagingInventoryQuality55GUIDANCEForthesereasons,almostallcomprehensiveestimatesofuncertaintyforGHGinventorieswillbenotonlyimper-fectbutalsohaveasubjectivecomponentand,despitethemostthoroughefforts,arethemselvesconsideredhighlyuncertain.Inmostcases,uncertaintyestimatescannotbeinterpretedasanobjectivemeasureofquality.Norcantheybeusedtocomparethequalityofemissionestimatesbetweensourcecategoriesorcompanies.Exceptionstothisincludethefollowingcasesinwhichitisassumedthateitherstatisticalorinstrumentprecisiondataareavailabletoobjectivelyestimateeachpara-meter’sstatisticaluncertainty(i.e.,expertjudgmentisnotneeded):•Whentwooperationallysimilarfacilitiesuseidenticalemissionestimationmethodologies,thedifferencesinscientificormodeluncertaintiescan,forthemostpart,beignored.Thenquantifiedestimatesofstatis-ticaluncertaintycanbetreatedasbeingcomparablebetweenfacilities.Thistypeofcomparabilityiswhatisaimedforinsometradingprogramsthatprescribespecificmonitoring,estimation,andmeasurementrequirements.However,eveninthissituation,thedegreeofcomparabilitydependsontheflexibilitythatparticipantsaregivenforestimatingemissions,thehomogeneityacrossfacilities,aswellasthelevelofenforcementandreviewofthemethodologiesused.•Similarly,whenasinglefacilityusesthesameestima-tionmethodologyeachyear,thesystematicparameteruncertainties—inadditiontoscientificandmodeluncertainties—inasource’semissionestimatesfortwoyearsare,forthemostpart,identical.7Becausethesystematicparameteruncertaintiesthencancelout,theuncertaintyinanemissiontrend(e.g.,thedifferencebetweentheestimatesfortwoyears)isgenerallylessthantheuncertaintyintotalemissionsforasingleyear.Insuchasituation,quantifieduncer-taintyestimatescanbetreatedasbeingcomparableovertimeandusedtotrackrelativechangesinthequalityofafacility’semissionestimatesforthatsourcecategory.Suchestimatesofuncertaintyinemissiontrendscanalsobeusedasaguidetosettingafacility’semissionsreductiontarget.Trenduncer-taintyestimatesarelikelytobelessusefulforsettingbroader(e.g.,company-wide)targets(seechapter11)becauseofthegeneralproblemswithcomparabilitybetweenuncertaintyestimatesacrossgases,sources,andfacilities.Giventheselimitations,theroleofqualitativeandquan-titativeuncertaintyassessmentsindevelopingGHGinventoriesinclude:•Promotingabroaderlearningandqualityfeedbackprocess.•Supportingeffortstoqualitativelyunderstandanddocumentthecausesofuncertaintyandhelpidentifywaysofimprovinginventoryquality.Forexample,collectingtheinformationneededtodeterminethestatisticalpropertiesofactivitydataandemissionfactorsforcesonetoaskhardquestionsandtocare-fullyandsystematicallyinvestigatedataquality.•Establishinglinesofcommunicationandfeedbackwithdatasupplierstoidentifyspecificopportunitiestoimprovequalityofthedataandmethodsused.•Providingvaluableinformationtoreviewers,verifiers,andmanagersforsettingprioritiesforinvestmentsintoimprovingdatasourcesandmethodologies.TheGHGProtocolCorporateStandardhasdevelopedasupplementaryguidancedocumentonuncertaintyassess-ments(“GuidanceonuncertaintyassessmentinGHGinventoriesandcalculatingstatisticalparameteruncer-tainty”)alongwithanuncertaintycalculationtool,bothofwhichareavailableontheGHGProtocolwebsite.Theguidancedocumentdescribeshowtousethecalculationtoolinaggregatinguncertainties.Italsodiscussesinmoredepthdifferenttypesofuncertainties,thelimita-tionsofquantitativeuncertaintyassessment,andhowuncertaintyestimatesshouldbeproperlyinterpreted.Additionalguidanceandinformationonassessinguncertainty—includingoptionalapproachestodevel-opingquantitativeuncertaintyestimatesandelicitingjudgmentsfromexperts—canalsobefoundinEPA'sEmissionsInventoryImprovementProgram,VolumeVI:QualityAssurance/QualityControl(1999)andinchapter6oftheIPCC’sGoodPracticeGuidance(2000a).GUIDANCEManagingInventoryQualityCHAPTER756CHAPTER7ManagingInventoryQuality57GUIDANCENOTES1Althoughtheterm“emissionsinventory”isusedthroughoutthischapter,theguidanceequallyappliestoestimatesofremovalsduetosinkcate-gories(e.g.,forestcarbonsequestration).2Someemissionestimatesmaybederivedusingmassorenergybalances,engineeringcalculations,orcomputersimulationmodels.Inadditiontoinvestigatingtheinputdatatothesemodels,companiesshouldalsoconsiderwhethertheinternalassumptions(includingassumedparametersinthemodel)areappropriatetothenatureofthecompany’soperations.3Emissionsestimatedfromdirectemissionsmonitoringwillgenerallyonlyinvolveparameteruncertainty(e.g.,equipmentmeasurementerror).4Statisticaluncertaintyresultsfromnaturalvariations(e.g.,randomhumanerrorsinthemeasurementprocessandfluctuationsinmeasure-mentequipment).Statisticaluncertaintycanbedetectedthroughrepeatedexperimentsorsamplingofdata.5Systematicparameteruncertaintyoccursifdataaresystematicallybiased.Inotherwords,theaverageofthemeasuredorestimatedvalueisalwayslessorgreaterthanthetruevalue.Biasesarise,forexample,becauseemissionfactorsareconstructedfromnon-representativesamples,allrelevantsourceactivitiesorcategorieshavenotbeenidenti-fied,orincorrectorincompleteestimationmethodsorfaultymeasurementequipmenthavebeenused.Becausethetruevalueisunknown,suchsystematicbiasescannotbedetectedthroughrepeatedexperimentsand,therefore,cannotbequantifiedthroughstatisticalanalysis.However,itispossibletoidentifybiasesand,sometimes,toquantifythemthroughdataqualityinvestigationsandexpertjudgments.6Theroleofexpertjudgmentcanbetwofold:First,itcanprovidethedatanecessarytoestimatetheparameter.Second,itcanhelp(incombinationwithdataqualityinvestigations)identify,explain,andquantifybothstatisticalandsystematicuncertainties.7Itshouldberecognized,however,thatbiasesmaynotbeconstantfromyeartoyearbutinsteadmayexhibitapatternovertime(e.g.,maybegrowingorfalling).Forexample,acompanythatcontinuestodisinvestincollectinghighqualitydatamaycreateasituationinwhichthebiasesinitsdatagetworseeachyear.Thesetypesofdataqualityissuesareextremelyproblematicbecauseoftheeffecttheycanhaveoncalculatedemissiontrends.Insuchcases,systematicparameteruncertaintiescannotbeignored.GUIDANCE58svoluntaryreporting,externalGHGprograms,andemissiontradingsystemsevolve,itisbecomingmoreandmoreessentialforcompa-niestounderstandtheimplicationsofaccountingforGHGemissionschangesovertimeontheonehand,and,ontheotherhand,accountingforoffsetsorcreditsthatresultfromGHGreductionprojects.Thischapterelaboratesonthedifferentissuesassociatedwiththeterm“GHGreductions.”A8AccountingforGHGReductionsGUIDANCETheGHGProtocolCorporateStandardfocusesonaccountingandreportingforGHGemissionsatthecompanyororganizationallevel.Reductionsincorpo-rateemissionsarecalculatedbycomparingchangesinthecompany’sactualemissionsinventoryovertimerelativetoabaseyear.FocusingonoverallcorporateororganizationallevelemissionshastheadvantageofhelpingcompaniesmanagetheiraggregateGHGrisksandopportunitiesmoreeffectively.Italsohelpsfocusresourcesonactivitiesthatresultinthemostcost-effectiveGHGreductions.Incontrasttocorporateaccounting,theforthcomingGHGProtocolProjectQuantificationStandardfocusesonthequantificationofGHGreductionsfromGHGmiti-gationprojectsthatwillbeusedasoffsets.OffsetsarediscreteGHGreductionsusedtocompensatefor(i.e.,offset)GHGemissionselsewhere,forexampletomeetavoluntaryormandatoryGHGtargetorcap.Offsetsarecalculatedrelativetoabaselinethatrepresentsahypotheticalscenarioforwhatemissionswouldhavebeenintheabsenceoftheproject.CorporateGHGreductionsatfacilityorcountrylevelFromtheperspectiveoftheearth'satmosphere,itdoesnotmatterwhereGHGemissionsorreductionsoccur.Fromtheperspectiveofnationalandinternationalpolicymakersaddressingglobalwarming,thelocationwhereGHGreductionsareachievedisrelevant,sincepoliciesusuallyfocusonachievingreductionswithinspecificcountriesorregions,asspelledout,forexample,intheKyotoProtocol.Thuscompanieswithglobaloperationswillhavetorespondtoanarrayofstate,national,orregionalregulationsandrequirementsthataddressGHGsfromoperationsorfacilitieswithinaspecificgeographicarea.TheGHGProtocolCorporateStandardcalculatesGHGemissionsusingabottom-upapproach.Thisinvolvescalculatingemissionsatthelevelofanindividualsourceorfacilityandthenrollingthisuptothecorporatelevel.Thusacompany’soverallemissionsmaydecrease,evenifincreasesoccuratspecificsources,facilities,oropera-tionsandvice-versa.Thisbottom-upapproachenablescompaniestoreportGHGemissionsinformationatdifferentscales,e.g.,byindividualsourcesorfacilities,orbyacollectionoffacilitieswithinagivencountry.Companiescanmeetanarrayofgovernmentrequire-mentsorvoluntarycommitmentsbycomparingactualemissionsovertimefortherelevantscale.Onacorpo-rate-widescale,thisinformationcanalsobeusedwhensettingandreportingprogresstowardsacorporate-wideGHGtarget(seechapter11).InordertotrackandexplainchangesinGHGemissionsovertime,companiesmayfinditusefultoprovideinformationonthenatureofthesechanges.Forexample,BPaskseachofitsreportingunitstoprovidesuchinformationinanaccountingmovementformatusingthefollowingcategories(BP2000):•Acquisitionsanddivestments•Closure•Realreductions(e.g.,efficiencyimprovements,materialorfuelsubstitution)•Changeinproductionlevel•Changesinestimationmethodology•OtherThistypeofinformationcanbesummarizedatthecorporateleveltoprovideanoverviewofthecompany’sperformanceovertime.ReductionsinindirectemissionsReductionsinindirectemissions(changesinscope2or3emissionsovertime)maynotalwayscapturetheactualemissionsreductionaccurately.Thisisbecausethereisnotalwaysadirectcause-effectrelationshipbetweentheactivityofthereportingcompanyandtheresultingGHGemissions.Forexample,areductioninairtravelwouldreduceacompany’sscope3emissions.Thisreductionisusuallyquantifiedbasedonanaverageemissionfactoroffueluseperpassenger.However,howthisreductionactuallytranslatesintoachangeinGHGemissionstotheatmospherewoulddependonanumberoffactors,includingwhetheranotherpersontakesthe“emptyseat”orwhetherthisunusedseatcontributestoreducedairtrafficoverthelongerterm.Similarly,reductionsinscope2emissionscalculatedwithanaveragegridemissionsfactormayover-orunderestimatetheactualreductiondependingonthenatureofthegrid.Generally,aslongastheaccountingofindirectemissionsovertimerecognizesactivitiesthatinaggregatechangeglobalemissions,anysuchconcernsoveraccuracyshouldnotinhibitcompaniesfromreportingtheirindi-rectemissions.Incaseswhereaccuracyismoreimportant,itmaybeappropriatetoundertakeamoreCHAPTER8AccountingforGHGReductions59GUIDANCEdetailedassessmentoftheactualreductionusingaprojectquantificationmethodology.Projectbasedreductionsandoffsets/creditsProjectreductionsthataretobeusedasoffsetsshouldbequantifiedusingaprojectquantificationmethod,suchastheforthcomingGHGProtocolProjectQuantificationStandard,thataddressesthefollowingaccountingissues:•SELECTIONOFABASELINESCENARIOANDEMISSION.Thebaselinescenariorepresentswhatwouldhavehappenedintheabsenceoftheproject.Baselineemissionsarethehypotheticalemissionsassociatedwiththisscenario.Theselectionofabaselinescenarioalwaysinvolvesuncertaintybecauseitrepresentsahypotheticalscenarioforwhatwouldhavehappenedwithouttheproject.Theprojectreductioniscalculatedasthedifferencebetweenthebaselineandprojectemissions.Thisdiffersfromthewaycorporateororganizationalreductionsaremeasuredinthisdocument,i.e.,inrelationtoanactualhistoricalbaseyear.•DEMONSTRATIONOFADDITIONALITY.Thisrelatestowhethertheprojecthasresultedinemissionreductionsorremovalsinadditiontowhatwouldhavehappenedintheabsenceoftheproject.Iftheprojectreductionisusedasanoffset,thequantificationprocedureshouldaddressadditionalityanddemonstratethattheprojectitselfisnotthebaselineandthatprojectemissionsarelessthanbaselineemissions.Additionalityensurestheintegrityofthefixedcaportargetforwhichtheoffsetisused.Eachreductionunitfromaprojectusedasanoffsetallowstheorganizationorfacilitywithacaportargetoneadditionalunitofemissions.Iftheprojectweregoingtohappenanyway(i.e.,isnon-additional),globalemissionswillbehigherbythenumberofreduc-tionunitsissuedtotheproject.•IDENTIFICATIONANDQUANTIFICATIONOFRELEVANTSECONDARYEFFECTS.TheseareGHGemissionschangesresultingfromtheprojectnotcapturedbytheprimaryeffect(s).1Secondaryeffectsaretypicallythesmall,unintendedGHGconsequencesofaprojectandincludeleakage(changesintheavailabilityorquan-tityofaproductorservicethatresultsinchangesinGHGemissionselsewhere)aswellaschangesinGHGemissionsup-anddownstreamoftheproject.Ifrele-vant,secondaryeffectsshouldbeincorporatedintothecalculationoftheprojectreduction.•CONSIDERATIONOFREVERSIBILITY.Someprojectsachievereductionsinatmosphericcarbondioxidelevelsbycapturing,removingand/orstoringcarbonorGHGsinbiologicalornon-biologicalsinks(e.g.,forestry,landusemanagement,undergroundreser-voirs).Thesereductionsmaybetemporaryinthattheremovedcarbondioxidemaybereturnedtotheatmosphereatsomepointinthefuturethroughintentionalactivitiesoraccidentaloccurrences—suchasharvestingofforestlandorforestfires,etc.2Theriskofreversibilityshouldbeassessed,togetherwithanymitigationorcompensationmeasuresincludedintheprojectdesign.•AVOIDANCEOFDOUBLECOUNTING.Toavoiddoublecounting,thereductionsgivingrisetotheoffsetmustoccuratsourcesorsinksnotincludedinthetargetorcapforwhichtheoffsetisused.Also,ifthereductionsoccuratsourcesorsinksownedorcontrolledbysomeoneotherthanthepartiestotheproject(i.e.,theyareindirect),theownershipofthereductionshouldbeclarifiedtoavoiddoublecounting.Offsetsmaybeconvertedintocreditswhenusedtomeetanexternallyimposedtarget.CreditsareconvertibleandtransferableinstrumentsusuallybestowedbyanexternalGHGprogram.Theyaretypicallygeneratedfromanactivitysuchasanemissionsreductionprojectandthenusedtomeetatargetinanotherwiseclosedsystem,suchasagroupoffacilitieswithanabsoluteemissionscapplacedacrossthem.Althoughacreditisusuallybasedontheunderlyingreductioncalculation,theconversionofanoffsetintoacreditisusuallysubjecttostrictrules,whichmaydifferfromprogramtoprogram.Forexample,aCertifiedEmissionReduction(CER)isacreditissuedbytheKyotoProtocolCleanDevelopmentMechanism.Onceissued,thiscreditcanbetradedandultimatelyusedtomeetKyotoProtocoltargets.Experiencefromthe“pre-compliance”marketinGHGcreditshighlightstheimportanceofdelineatingprojectreductionsthataretobeusedasoffsetswithacrediblequantificationmethodcapableofprovidingverifiabledata.ReportingprojectbasedreductionsItisimportantforcompaniestoreporttheirphysicalinventoryemissionsfortheirchoseninventorybound-ariesseparatelyandindependentlyofanyGHGtradestheyundertake.GHGtrades3shouldbereportedinitspublicGHGreportunderoptionalinformation—eitherinrelationtoatarget(seechapter11)orcorporateGUIDANCEAccountingforGHGReductionsCHAPTER860inventory(seechapter9).Appropriateinformationaddressingthecredibilityofpurchasedorsoldoffsetsorcreditsshouldbeincluded.WhencompaniesimplementinternalprojectsthatreduceGHGsfromtheiroperations,theresultingreductionsareusuallycapturedintheirinventory’sboundaries.Thesereductionsneednotbereportedseparatelyunlesstheyaresold,tradedexternally,orotherwiseusedasanoffsetorcredit.However,somecompaniesmaybeabletomakechangestotheirownoperationsthatresultinGHGemissionschangesatsourcesnotincludedintheirowninventoryboundary,ornotcapturedbycomparingemissionschangesovertime.Forexample:•Substitutingfossilfuelwithwaste-derivedfuelthatmightotherwisebeusedaslandfillorincineratedwithoutenergyrecovery.Suchsubstitutionmayhavenodirecteffecton(ormayevenincrease)acompany’sownGHGemissions.However,itcouldresultinemissionsreductionselsewherebyanotherorganization,e.g.,throughavoidinglandfillgasandfossilfueluse.•Installinganon-sitepowergenerationplant(e.g.,acombinedheatandpower,orCHP,plant)thatprovidessurpluselectricitytoothercompaniesmayincreaseacompany’sdirectemissions,whiledisplacingtheconsumptionofgridelectricitybythecompaniessupplied.Anyresultingemissionsreduc-tionsattheplantswherethiselectricitywouldhaveotherwisebeenproducedwillnotbecapturedintheinventoryofthecompanyinstallingtheon-siteplant.•Substitutingpurchasedgridelectricitywithanon-sitepowergenerationplant(e.g.,CHP)mayincreaseacompany’sdirectGHGemissions,whilereducingtheGHGemissionsassociatedwiththegenerationofgridelectricity.DependingontheGHGintensityandthesupplystructureoftheelectricitygrid,thisreductionmaybeover-orunderestimatedwhenmerelycomparingscope2emissionsovertime,ifthelatterarequantifiedusinganaveragegridemissionfactor.Thesereductionsmaybeseparatelyquantified,forexampleusingtheGHGProtocolProjectQuantificationStandard,andreportedinacompany’spublicGHGreportunderoptionalinformationinthesamewayasGHGtradesdescribedabove.CHAPTER8AccountingforGHGReductions61GUIDANCEAlcoa,aglobalmanufacturerofaluminum,isimplementingavarietyofstrategiestoreduceitsGHGemissions.Oneapproachhasbeentopurchaserenewableenergycertificates,orRECs,tooffsetsomeofthecompany’sGHGemissions.RECs,whichrepre-senttheenvironmentalbenefitsofrenewableenergyunbundledfromtheactualflowofelectrons,areaninnovativemethodofprovidingrenewableenergytoindividualcustomers.RECsrepre-senttheunbundledenvironmentalbenefits,suchasavoidedCO2emissions,generatedbyproducingelectricityfromrenewableratherthanfossilsources.RECscanbesoldbundledwiththeelectricity(asgreenpower)orseparatelytocustomersinterestedinsupportingrenewableenergy.AlcoafoundthatRECsofferavarietyofadvantages,includingdirectaccesstothebenefitsofrenewableenergyforfacilitiesthatmayhavelimitedrenewableenergyprocurementoptions.InOctober2003,AlcoabeganpurchasingRECsequivalentto100%oftheelectricityusedannuallyatfourcorporateofficesinTennessee,Pennsylvania,andNewYork.TheRECsAlcoaispurchasingeffec-tivelymeanthatthefourcorporatecentersarenowoperatingonelectricitygeneratedbyprojectsthatproduceelectricityfromland-fillgas,avoidingtheemissionofmorethan6.3millionkilograms(13.9millionpounds)ofcarbondioxideannually.AlcoachoseRECsinpartbecausethesupplierwasabletoprovideRECstoallfourfacilitiesthroughonecontract.Thisflexibilityloweredtheadministrativecostofpurchasingrenewableenergyformultiplefacilitiesthatareservedbydifferentutilities.FormoreinformationonRECs,seetheGreenPowerMarketDevelopmentGroup’sCorporateGuidetoGreenPowerMarkets:Installment#5(WRI,2003).Alcoa:TakingadvantageofrenewableenergycertificatesNOTES1PrimaryeffectsarethespecificGHGreducingelementsoractivities(reducingGHGemissions,carbonstorage,orenhancingGHGremovals)thattheprojectisintendedtoachieve.2ThisproblemwiththetemporarynatureofGHGreductionsissometimesreferredtoasthe“permanence”issue.3Theterm“GHGtrades”referstoallpurchasesorsalesofallowances,offsets,andcredits.62credibleGHGemissionsreportpresentsrelevantinformationthatiscomplete,consistent,accurateandtransparent.WhileittakestimetodeveloparigorousandcompletecorporateinventoryofGHGemissions,knowledgewillimprovewithexperienceincalculatingandreportingdata.ItisthereforerecommendedthatapublicGHGreport:•Bebasedonthebestdataavailableatthetimeofpublication,whilebeingtransparentaboutitslimitations•Communicateanymaterialdiscrepanciesidentifiedinpreviousyears•Includethecompany’sgrossemissionsforitschoseninventoryboundaryseparatefromandindependentofanyGHGtradesitmightengagein.AReportingGHGEmissionsGUIDANCESTANDARDSTANDARD9Reportedinformationshallbe“relevant,complete,consistent,transparentandaccurate.”TheGHGProtocolCorporateStandardrequiresreportingaminimumofscope1andscope2emissions.RequiredinformationApublicGHGemissionsreportthatisinaccordancewiththeGHGProtocolCorporateStandardshallincludethefollowinginformation:DESCRIPTIONOFTHECOMPANYANDINVENTORYBOUNDARY•Anoutlineoftheorganizationalboundarieschosen,includingthechosenconsolidationapproach.•Anoutlineoftheoperationalboundarieschosen,andifscope3isincluded,alistspecifyingwhichtypesofactivitiesarecovered.•Thereportingperiodcovered.INFORMATIONONEMISSIONS•Totalscope1and2emissionsindependentofanyGHGtradessuchassales,purchases,transfers,orbankingofallowances.•Emissionsdataseparatelyforeachscope.•EmissionsdataforallsixGHGsseparately(CO2,CH4,N2O,HFCs,PFCs,SF6)inmetrictonnesandintonnesofCO2equivalent.•Yearchosenasbaseyear,andanemissionsprofileovertimethatisconsistentwithandclarifiesthechosenpolicyformakingbaseyearemissionsrecalculations.•Appropriatecontextforanysignificantemissionschangesthattriggerbaseyearemissionsrecalculation(acquisitions/divestitures,outsourcing/insourcing,changesinreportingboundariesorcalculationmethodologies,etc.).•EmissionsdatafordirectCO2emissionsfrombiologi-callysequesteredcarbon(e.g.,CO2fromburningbiomass/biofuels),reportedseparatelyfromthescopes.•Methodologiesusedtocalculateormeasureemissions,providingareferenceorlinktoanycalculationtoolsused.•Anyspecificexclusionsofsources,facilities,and/oroperations.OptionalinformationApublicGHGemissionsreportshouldinclude,whenapplicable,thefollowingadditionalinformation:INFORMATIONONEMISSIONSANDPERFORMANCE•Emissionsdatafromrelevantscope3emissionsactivi-tiesforwhichreliabledatacanbeobtained.•Emissionsdatafurthersubdivided,wherethisaidstransparency,bybusinessunits/facilities,country,sourcetypes(stationarycombustion,process,fugitive,etc.),andactivitytypes(productionofelectricity,transportation,generationofpurchasedelectricitythatissoldtoendusers,etc.).•Emissionsattributabletoowngenerationofelec-tricity,heat,orsteamthatissoldortransferredtoanotherorganization(seechapter4).•Emissionsattributabletothegenerationofelectricity,heatorsteamthatispurchasedforre-saletonon-endusers(seechapter4).•Adescriptionofperformancemeasuredagainstinternalandexternalbenchmarks.•EmissionsfromGHGsnotcoveredbytheKyotoProtocol(e.g.,CFCs,NOx,),reportedseparatelyfromscopes.•Relevantratioperformanceindicators(e.g.emissionsperkilowatt-hourgenerated,tonneofmaterialproduction,orsales).•AnoutlineofanyGHGmanagement/reductionprogramsorstrategies.•InformationonanycontractualprovisionsaddressingGHG-relatedrisksandobligations.•Anoutlineofanyexternalassuranceprovidedandacopyofanyverificationstatement,ifapplicable,ofthereportedemissionsdata.CHAPTER9ReportingGHGEmissions63STANDARD•Informationonthecausesofemissionschangesthatdidnottriggerabaseyearemissionsrecalculation(e.g.,processchanges,efficiencyimprovements,plantclosures).•GHGemissionsdataforallyearsbetweenthebaseyearandthereportingyear(includingdetailsofandreasonsforrecalculations,ifappropriate)•Informationonthequalityoftheinventory(e.g.,infor-mationonthecausesandmagnitudeofuncertaintiesinemissionestimates)andanoutlineofpoliciesinplacetoimproveinventoryquality.(seechapter7).•InformationonanyGHGsequestration.•Alistoffacilitiesincludedintheinventory.•Acontactperson.INFORMATIONONOFFSETS•Informationonoffsetsthathavebeenpurchasedordevelopedoutsidetheinventoryboundary,subdividedbyGHGstorage/removalsandemissionsreductionprojects.Specifyiftheoffsetsareverified/certified(seechapter8)and/orapprovedbyanexternalGHGprogram(e.g.,theCleanDevelopmentMechanism,JointImplementation).•Informationonreductionsatsourcesinsidetheinven-toryboundarythathavebeensold/transferredasoffsetstoathirdparty.Specifyifthereductionhasbeenverified/certifiedand/orapprovedbyanexternalGHGprogram(seechapter8).STANDARDReportingGHGEmissionsCHAPTER964yfollowingtheGHGProtocolCorporateStandardreportingrequirements,usersadoptacompre-hensivestandardwiththenecessarydetailandtransparencyforcrediblepublicreporting.Theappropriatelevelofreportingofoptionalinformationcategoriescanbedeterminedbytheobjectivesandintendedaudienceforthereport.FornationalorvoluntaryGHGprograms,orforinternalmanagementpurposes,reportingrequirementsmayvary(AppendixCsummarizestherequirementsofvariousGHGprograms).Forpublicreporting,itisimportanttodifferentiatebetweenasummaryofapublicreportthatis,forexample,publishedontheInternetorinSustainability/CorporateSocialResponsibilityreporting(e.g.,GlobalReportingInitiative)andafullpublicreportthatcontainsallthenecessarydataasspecifiedbythereportingstandardspelledoutinthisvolume.Noteverycirculatedreportmustcontainallinformationasspecifiedbythisstandard,butalinkorreferenceneedstobemadetoapubliclyavailablefullreportwhereallinformationisavailable.Forsomecompanies,providingemissionsdataforspecificGHGsorfacilities/businessunits,orreportingratioindicators,maycompromisebusinessconfiden-tiality.Ifthisisthecase,thedataneednotbepubliclyreported,butcanbemadeavailabletothoseauditingtheGHGemissionsdata,assumingconfidentialityissecured.Companiesshouldstrivetocreateareportthatisastransparent,accurate,consistentandcompleteaspossible.Structurally,thismaybeachievedbyadoptingthereportingcategoriesofthestandard(e.g.,requireddescriptionofthecompanyandinventoryboundary,requiredinformationoncorporateemissions,optionalinformationonemissionsandperformance,andoptionalinformationonoffsets)asabasisofthereport.Qualitatively,includingadiscussionofthereportingcompany’sstrategyandgoalsforGHGaccounting,anyparticularchallengesortradeoffsfaced,thecontextofdecisionsonboundariesandotheraccountingparameters,andananalysisofemissionstrendsmayhelpprovideacompletepictureofthecompany’sinventoryefforts.DoubleCountingCompaniesshouldtakecaretoidentifyandexcludefromreportinganyscope2orscope3emissionsthatarealsoreportedasscope1emissionsbyotherfacilities,businessunits,orcompaniesincludedintheemissionsinventoryconsolidation(seechapter6).UseofratioindicatorsTwoprincipalaspectsofGHGperformanceareofinteresttomanagementandstakeholders.OneconcernstheoverallGHGimpactofacompany—thatistheabsolutequantityofGHGemissionsreleasedtotheatmosphere.Theotherconcernsthecompany’sGHGemissionsnormalizedbysomebusinessmetricthatresultsinaratioindicator.TheGHGProtocolCorporateStandardrequiresreportingofabsoluteemissions;reportingofratioindicatorsisoptional.Ratioindicatorsprovideinformationonperformancerelativetoabusinesstypeandcanfacilitatecompar-isonsbetweensimilarproductsandprocessesovertime.CompaniesmaychoosetoreportGHGratioindicatorsinorderto:•Evaluateperformanceovertime(e.g.,relatefiguresfromdifferentyears,identifytrendsinthedata,andshowperformanceinrelationtotargetsandbaseyears(seechapter11).•Establisharelationshipbetweendatafromdifferentcategories.Forexample,acompanymaywanttoestablisharelationshipbetweenthevaluethatanactionprovides(e.g.,priceofatonneofproduct)anditsimpactonsocietyorontheenvironment(e.g.,emissionsfromproductmanufacturing).•Improvecomparabilitybetweendifferentsizesofbusi-nessandoperationsbynormalizingfigures(e.g.,byassessingtheimpactofdifferentsizedbusinessesonthesamescale).Itisimportanttorecognizethattheinherentdiversityofbusinessesandthecircumstancesofindividualcompaniescanresultinmisleadingindicators.Apparentlyminordifferencesinprocess,product,orlocationcanbesignificantintermsofenvironmentaleffect.Therefore,itisnecessarytoknowthebusinesscontextinordertobeabletodesignandinterpretratioindicatorscorrectly.CHAPTER9ReportingGHGEmissions65GUIDANCEBCompaniesmaydevelopratiosthatmakemostsensefortheirbusinessandarerelevanttotheirdecision-makingneeds.Theymayselectratiosforexternalreportingthatimprovetheunderstandingandclarifytheinterpretationoftheirperformancefortheirstakeholders.Itisimportanttoprovidesomeperspec-tiveonissuessuchasscaleandlimitationsofindicatorsinawaythatusersunderstandthenatureoftheinformationprovided.Companiesshouldconsiderwhatratioindicatorsbestcapturethebene-fitsandimpactsoftheirbusiness,i.e.,itsoperations,itsproducts,anditseffectsonthemarketplaceandontheentireeconomy.Someexamplesofdifferentratioindicatorsareprovidedhere.PRODUCTIVITY/EFFICIENCYRATIOS.Productivity/efficiencyratiosexpressthevalueorachievementofabusinessdividedbyitsGHGimpact.Increasingefficiencyratiosreflectapositiveperform-anceimprovement.Examplesofproductivity/efficiencyratiosincluderesourceproductivity(e.g.,salesperGHG)andprocesseco-efficiency(e.g.,productionvolumeperamountofGHG).GUIDANCEReportingGHGEmissionsCHAPTER966MidAmericanEnergyHoldingsCompany,anenergycompanybasedinIowa,wantedamethodtotrackapowerplant’sGHGintensity,whilealsobeingabletorollindividualplantresultsintoacorporate“generationportfolio”GHGintensityindicator.MidAmericanalsowantedtobeabletotakeintoaccounttheGHGbenefitsfromplannedrenewablegeneration,aswellasmeasuretheimpactsofotherchangestoitsgenerationportfolioovertime(e.g.,unitretirementsornewconstruction).ThecompanyadoptedaGHGintensityindicatorthatspecificallymeasurespoundsofdirectemissionsovertotalmegawatthoursgenerated(lbs/MWh).Tomeasureitsdirectemissions,thecompanyleveragesdatacurrentlygatheredtosatisfyexistingregulatoryrequirementsand,wheregapsmightexist,usesfuelcalculations.Forcoal-firedunits,thatmeansmainlyusingcontinuousemissionsmonitoring(CEM)dataandtheU.S.EnvironmentalProtectionAgency’semissionfactorsfornaturalgas-andfueloil-firedunits.UsingtheGHGProtocolCorporateStandard,thecompanycompletesanannualemissioninventoryforeachofitsfossil-firedplants,gatheringtogethera)fuelvolumeandheatinputdata,b)megawattproductiondata,c)CEMsdata,andd)fuelcalculationsusingappropriateemissionfactors.Forexample,in2001,usingCEMdataandfuelcalculations,thecompany’sIowautilitybusinessemittedroughly23milliontonnesofCO2,whilegeneratingapproximately21millionmegawatthours.Its2001GHGintensityindicatorcalculatestoapproximately2,177lbs/MWhofCO2,reflectingtheIowautilitycompany’srelianceontraditionalcoal-firedgeneration.By2008,theIowautilitycompanywillhaveconstructedanew790MWcoal-fueledplant,a540MWcombined-cyclenaturalgasplant,anda310MWwind-turbinefarmandaddedthemtoitsgenerationportfolio.Theutilitycompany’soverallCO2emissionswillincrease,butsowillitsmegawattproduction.Thecombinedemissionsfromthenewcoal-andgas-firedplantswillbeaddedtotheGHGintensityindicator’snumerator,whilethemegawattproductiondatafromallthreefacilitieswillbeaddedtotheindi-cator’sdenominator.Moreimportantly,andtheratioindicatorillustratesthis,overtimeMidAmerican’sGHGintensitywilldeclineasmoreefficientgenerationisbroughtonlineandolderpowerplantsareusedlessorretiredaltogether.MidAmerican:SettingratioindicatorsforautilitycompanyINTENSITYRATIOS.IntensityratiosexpressGHGimpactperunitofphysicalactivityorunitofeconomicoutput.Aphysicalintensityratioissuitablewhenaggre-gatingorcomparingacrossbusinessesthathavesimilarproducts.Aneconomicintensityratioissuitablewhenaggregatingorcomparingacrossbusinessesthatproducedifferentproducts.Adecliningintensityratioreflectsapositiveperformanceimprovement.Manycompanieshistoricallytrackedenvironmentalperform-ancewithintensityratios.Intensityratiosareoftencalled“normalized”environmentalimpactdata.Examplesofintensityratiosincludeproductemissionintensity(e.g.,tonnesofCO2emissionsperelectricitygenerated);serviceintensity(e.g.,GHGemissionsperfunctionorperservice);andsalesintensity(e.g.,emis-sionspersales).PERCENTAGES.Apercentageindicatorisaratiobetweentwosimilarissues(withthesamephysicalunitinthenumeratorandthedenominator).ExamplesofpercentagesthatcanbemeaningfulinperformancereportsincludecurrentGHGemissionsexpressedasapercentageofbaseyearGHGemissions.ForfurtherguidanceonratioindicatorsrefertoCCAR,2003;GRI,2002;VerfaillieandBidwell,2000.CHAPTER9ReportingGHGEmissions67GUIDANCEGUIDANCE68erificationisanobjectiveassessmentoftheaccuracyandcompletenessofreportedGHGinformationandtheconformityofthisinformationtopre-establishedGHGaccountingandreportingprinciples.AlthoughthepracticeofverifyingcorporateGHGinventoriesisstillevolvingtheemergenceofwidelyacceptedstandards,suchastheGHGProtocolCorporateStandardandtheforth-comingGHGProtocolProjectQuantificationStandard,shouldhelpGHGverificationbecomemoreuniform,credible,andwidelyaccepted.V10VerificationofGHGEmissionsGUIDANCEThischapterprovidesanoverviewofthekeyelementsofaGHGverificationprocess.ItisrelevanttocompanieswhoaredevelopingGHGinventoriesandhaveplannedfor,orareconsidering,obtaininganindependentverifi-cationoftheirresultsandsystems.Furthermore,astheprocessofdevelopingaverifiableinventoryislargelythesameasthatforobtainingreliableanddefensibledata,thischapterisalsorelevanttoallcompaniesregardlessofanyintentiontocommissionaGHGverification.Verificationinvolvesanassessmentoftherisksofmate-rialdiscrepanciesinreporteddata.Discrepanciesrelatetodifferencesbetweenreporteddataanddatageneratedfromtheproperapplicationoftherelevantstandardsandmethodologies.Inpractice,verificationinvolvestheprioritizationofeffortbytheverifiertowardsthedataandassociatedsystemsthathavethegreatestimpactonoveralldataquality.RelevanceofGHGprinciplesTheprimaryaimofverificationistoprovideconfidencetousersthatthereportedinformationandassociatedstatementsrepresentafaithful,true,andfairaccountofacompany’sGHGemissions.Ensuringtransparencyandverifiabilityoftheinventorydataiscrucialforverifica-tion.Themoretransparent,wellcontrolledandwelldocumentedacompany’semissionsdataandsystemsare,themoreefficientitwillbetoverify.Asoutlinedinchapter1,thereareanumberofGHGaccountingandreportingprinciplesthatneedtobeadheredtowhencompilingaGHGinventory.Adherencetotheseprinci-plesandthepresenceofatransparent,well-documentedsystem(sometimesreferredtoasanaudittrail)isthebasisofasuccessfulverification.GoalsBeforecommissioninganindependentverification,acompanyshouldclearlydefineitsgoalsanddecidewhethertheyarebestmetbyanexternalverification.Commonreasonsforundertakingaverificationinclude:•IncreasedcredibilityofpubliclyreportedemissionsinformationandprogresstowardsGHGtargets,leadingtoenhancedstakeholdertrust•Increasedseniormanagementconfidenceinreportedinformationonwhichtobaseinvestmentandtarget-settingdecisions•Improvementofinternalaccountingandreportingpractices(e.g.,calculation,recordingandinternalreportingsystems,andtheapplicationofGHGaccountingandreportingprinciples),andfacilitatinglearningandknowledgetransferwithinthecompany•PreparationformandatoryverificationrequirementsofGHGprograms.InternalassuranceWhileverificationisoftenundertakenbyanindependent,externalthirdparty,thismaynotalwaysbethecase.ManycompaniesinterestedinimprovingtheirGHGinventoriesmaysubjecttheirinformationtointernalverificationbypersonnelwhoareindependentoftheGHGaccountingandreportingprocess.Bothinternalandexternalverificationshouldfollowsimilarproceduresandprocesses.Forexternalstakeholders,externalthirdpartverificationislikelytosignificantlyincreasethecredibilityoftheGHGinventory.However,independentinternalverificationscanalsoprovidevaluableassuranceoverthereliabilityofinformation.Internalverificationcanbeaworthwhilelearningexpe-rienceforacompanypriortocommissioninganexternalverificationbyathirdparty.Itcanalsoprovideexternalverifierswithusefulinformationtobegintheirwork.TheconceptofmaterialityTheconceptof“materiality”isessentialtounderstandingtheprocessofverification.Chapter1providesausefulinterpretationoftherelationshipbetweentheprincipleofcompletenessandtheconceptofmateriality.Informationisconsideredtobematerialif,byitsinclusionorexclu-sion,itcanbeseentoinfluenceanydecisionsoractionstakenbyusersofit.Amaterialdiscrepancyisanerror(forexample,fromanoversight,omissionormiscalcula-tion)thatresultsinareportedquantityorstatementbeingsignificantlydifferenttothetruevalueormeaning.Inordertoexpressanopinionondataorinformation,averifierwouldneedtoformaviewonthematerialityofallidentifiederrorsoruncertainties.Whiletheconceptofmaterialityinvolvesavaluejudg-ment,thepointatwhichadiscrepancybecomesmaterial(materialitythreshold)isusuallypre-defined.Asaruleofthumb,anerrorisconsideredtobemateriallymisleadingCHAPTER10VerificationofGHGEmissions69GUIDANCEGUIDANCEVerificationofGHGEmissions70ifitsvalueexceeds5%ofthetotalinventoryforthepartoftheorganizationbeingverified.Theverifierneedstoassessanerrororomissioninthefullcontextwithinwhichinformationispresented.Forexample,ifa2%errorpreventsacompanyfromachievingitscorporatetargetthenthiswouldmostlikelybeconsideredmaterial.Understandinghowverifiersapplyamaterialitythresholdwillenablecompaniestomorereadilyestablishwhethertheomissionsofanindi-vidualsourceoractivityfromtheirinventoryislikelytoraisequestionsofmateriality.MaterialitythresholdsmayalsobeoutlinedintherequirementsofaspecificGHGprogramordeterminedbyanationalverificationstandard,dependingonwhoisrequiringtheverificationandforwhatreasons.Amaterialitythresholdprovidesguidancetoverifiersonwhatmaybeanimmaterialdiscrepancysothattheycanconcentratetheirworkonareasthataremorelikelytoleadtomateriallymisleadingerrors.Amaterialitythresholdisnotthesameasdeminimisemissions,orapermissiblequantityofemissionsthatacompanycanleaveoutofitsinventory.AssessingtheriskofmaterialdiscrepancyVerifiersneedtoassesstheriskofmaterialdiscrepancyofeachcomponentoftheGHGinformationcollectionandreportingprocess.Thisassessmentisusedtoplananddirecttheverificationprocess.Inassessingthisrisk,theywillconsideranumberoffactors,including:•ThestructureoftheorganizationandtheapproachusedtoassignresponsibilityformonitoringandreportingGHGemissions•TheapproachandcommitmentofmanagementtoGHGmonitoringandreporting•Developmentandimplementationofpoliciesandprocessesformonitoringandreporting(includingdocumentedmethodsexplaininghowdataisgeneratedandevaluated)•Processesusedtocheckandreviewcalculationmethodologies•Complexityandnatureofoperations•Complexityofthecomputerinformationsystemusedtoprocesstheinformation•Thestateofcalibrationandmaintenanceofmetersused,andthetypesofmetersused•Reliabilityandavailabilityofinputdata•Assumptionsandestimationsapplied•Aggregationofdatafromdifferentsources•Otherassuranceprocessestowhichthesystemsanddataaresubjected(e.g.,internalaudit,externalreviewsandcertifications).EstablishingtheverificationparametersThescopeofanindependentverificationandthelevelofassuranceitprovideswillbeinfluencedbythecompany'sgoalsand/oranyspecificjurisdictionalrequirements.ItispossibletoverifytheentireGHGinventoryorspecificpartsofit.Discretepartsmaybespecifiedintermsofgeographiclocation,businessunits,facilities,andtypeofemissions.Theverificationprocessmayalsoexaminemoregeneralmanagerialissues,suchasqualitymanage-mentprocedures,managerialawareness,availabilityofresources,clearlydefinedresponsibilities,segregationofduties,andinternalreviewprocedures.Thecompanyandverifiershouldreachanagreementup-frontonthescope,levelandobjectiveoftheverification.Thisagreement(oftenreferredtoasthescopeofwork)willaddressissuessuchaswhichinformationistobeincludedintheverification(e.g.,headofficeconsolidationonlyorinformationfromallsites),thelevelofscrutinytowhichselecteddatawillbesubjected(e.g.,desktoprevieworon-sitereview),andtheintendeduseoftheresultsoftheverification).Thematerialitythresholdisanotheritemtobeconsideredinthescopeofwork.Itwillbeofkeyconsid-erationforboththeverifierandthecompany,andislinkedtotheobjectivesoftheverification.Thescopeofworkisinfluencedbywhattheverifieractu-allyfindsoncetheverificationcommencesand,asaresult,thescopeofworkmustremainsufficientlyflexibletoenabletheverifiertoadequatelycompletetheverification.Aclearlydefinedscopeofworkisnotonlyimportanttothecompanyandverifier,butalsoforexternalstakeholderstobeabletomakeinformedandappro-priatedecisions.Verifierswillensurethatspecificexclusionshavenotbeenmadesolelytoimprovethecompany’sperformance.Toenhancetransparencyandcredibilitycompaniesshouldmakethescopeofworkpubliclyavailable.CHAPTER10SitevisitsDependingonthelevelofassurancerequiredfromverification,verifiersmayneedtovisitanumberofsitestoenablethemtoobtainsufficient,appropriateevidenceoverthecompleteness,accuracyandreliabilityofreportedinformation.Thesitesvisitedshouldberepre-sentativeoftheorganizationasawhole.Theselectionofsitestobevisitedwillbebasedonconsiderationofanumberoffactors,including:•NatureoftheoperationsandGHGsourcesateachsite•Complexityoftheemissionsdatacollectionandcalculationprocess•PercentagecontributiontototalGHGemissionsfromeachsite•Theriskthatthedatafromsiteswillbemateriallymisstated•Competenciesandtrainingofkeypersonnel•Resultsofpreviousreviews,verifications,anduncertaintyanalyses.TimingoftheverificationTheengagementofaverifiercanoccuratvariouspointsduringtheGHGpreparationandreportingprocess.Somecompaniesmayestablishasemi-permanentinternalverificationteamtoensurethatGHGdatastan-dardsarebeingmetandimprovedonanon-goingbasis.Verificationthatoccursduringareportingperiodallowsforanyreportingdeficienciesordataissuestobeaddressedbeforethefinalreportisprepared.Thismaybeparticularlyusefulforcompaniespreparinghighprofilepublicreports.However,someGHGprogramsmayrequire,oftenonarandomselectionbasis,aninde-pendentverificationoftheGHGinventoryfollowingthesubmissionofareport(e.g.,WorldEconomicForumGlobalGHGRegistry,GreenhouseChallengeprograminAustralia,EUETS).Inbothcasestheverificationcannotbeclosedoutuntilthefinaldatafortheperiodhasbeensubmitted.CHAPTER10VerificationofGHGEmissions71GUIDANCEPricewaterhouseCoopers(PwC),aglobalservicescompany,hasbeenconductingGHGemissionsverificationsforthepast10yearsinvarioussectors,includingenergy,chemicals,metals,semicon-ductors,andpulpandpaper.PwC’sverificationprocessinvolvestwokeysteps:1.AnevaluationofwhethertheGHGaccountingandreportingmethodology(e.g.,GHGProtocolCorporateStandard)hasbeencorrectlyimplemented2.Identificationofanymaterialdiscrepancies.TheGHGProtocolCorporateStandardhasbeencrucialinhelpingPwCtodesignaneffectiveGHGverificationmethodology.Sincethepublicationofthefirstedition,PwChaswitnessedrapidimprove-mentsinthequalityandverifiabilityofGHGdatareported.Inparticularthequantificationonnon-CO2GHGsandcombustionemissionshasdramaticallyimproved.CementsectoremissionsverificationhasbeenmadeeasierbythereleaseoftheWBCSDcementsectortool.GHGemissionsfrompurchasedelectricityarealsoeasytoverifysincemostcompanieshavereliabledataonMWhconsumedandemissionfactorsarepubliclyavailable.However,experiencehasshownthatformostcompanies,GHGdatafor1990istoounreliabletoprovideaverifiablebaseyearforthepurposesoftrackingemissionsovertimeorsettingaGHGtarget.ChallengesalsoremaininauditingGHGemissionsembeddedinwastefuels,co-generation,passengertravel,andshipping.Overthepast3yearsPwChasnoticedagradualevolutionofGHGverificationpracticesfrom“customized”and“voluntary”to“standardized”and“mandatory.”TheCaliforniaClimateActionRegistry,WorldEconomicForumGlobalGHGRegistryandtheforthcomingEUETS(covering12,000industrialsitesinEurope)requiresomeformofemissionsverification.IntheEUETSGHGverifierswilllikelyhavetobeaccreditedbyanationalbody.GHGverifieraccreditationprocesseshavealreadybeenestablishedintheUKforitsdomestictradingscheme,andinCaliforniaforregis-teringemissionsintheCCAR.PricewaterhouseCoopers:GHGinventoryverification—lessonsfromthefieldSelectingaverifierSomefactorstoconsiderwhenselectingaverifierincludetheir:•previousexperienceandcompetenceinundertakingGHGverifications•understandingofGHGissuesincludingcalculationmethodologies•understandingofthecompany’soperationsandindustry•objectivity,credibility,andindependence.Itisimportanttorecognizethattheknowledgeandqual-ificationsoftheindividual(s)conductingtheverificationcanbemoreimportantthanthoseoftheorganization(s)theycomefrom.Companiesshouldselectorganizationsbasedontheknowledgeandqualificationsoftheiractualverifiersandensurethattheleadverifierassignedtothemisappropriatelyexperienced.EffectiveverificationofGHGinventoriesoftenrequiresamixofspecializedskills,notonlyatatechnicallevel(e.g.,engineeringexperience,industryspecialists)butalsoatabusinesslevel(e.g.,verificationandindustryspecialists).PreparingforaGHGverificationTheinternalprocessesdescribedinchapter7arelikelytobesimilartothosefollowedbyanindependentveri-fier.Therefore,thematerialsthattheverifiersneedaresimilar.Informationrequiredbyanexternalverifierislikelytoincludethefollowing:•Informationaboutthecompany'smainactivitiesandGHGemissions(typesofGHGproduced,descriptionofactivitythatcausesGHGemissions)•Informationaboutthecompany/groups/organiza-tion(listofsubsidiariesandtheirgeographiclocation,ownershipstructure,financialentitieswithintheorganization)•Detailsofanychangestothecompany’sorganiza-tionalboundariesorprocessesduringtheperiod,includingjustificationfortheeffectsofthesechangesonemissionsdata•Detailsofjointventureagreements,outsourcingandcontractoragreements,productionsharingagree-ments,emissionsrightsandotherlegalorcontractualdocumentsthatdeterminetheorganizationalandoperationalboundaries•Documentedproceduresforidentifyingsourcesofemissionswithintheorganizationalandoperationalboundaries•Informationonotherassuranceprocessestowhichthesystemsanddataaresubjected(e.g.internalaudit,externalreviewsandcertifications)•DatausedforcalculatingGHGemissions.Thismight,forexample,include:•Energyconsumptiondata(invoices,deliverynotes,weigh-bridgetickets,meterreadings:electricity,gaspipes,steam,andhotwater,etc.)•Productiondata(tonnesofmaterialproduced,kWhofelectricityproduced,etc.)•Rawmaterialconsumptiondataformassbalancecalculations(invoices,deliverynotes,weighbridgetickets,etc.)•Emissionfactors(laboratoryanalysisetc.).•DescriptionofhowGHGemissionsdatahavebeencalculated:•Emissionfactorsandotherparametersusedandtheirjustification•Assumptionsonwhichestimationsarebased•Informationonthemeasurementaccuracyofmetersandweigh-bridges(e.g.,calibrationrecords),andothermeasurementtechniques•Equityshareallocationsandtheiralignmentwithfinancialreporting•Documentationonwhat,ifany,GHGsourcesoractivitiesareexcludeddueto,forexample,tech-nicalorcostreasons.•Informationgatheringprocess:•Descriptionoftheproceduresandsystemsusedtocollect,documentandprocessGHGemissionsdataatthefacilityandcorporatelevel•Descriptionofqualitycontrolproceduresapplied(internalaudits,comparisonwithlastyear’sdata,recalculationbysecondperson,etc.).GUIDANCEVerificationofGHGEmissionsCHAPTER1072•Otherinformation:•Selectedconsolidationapproachasdefinedinchapter3•listof(andaccessto)personsresponsibleforcollectingGHGemissionsdataateachsiteandatthecorporatelevel(name,title,e-mail,andtele-phonenumbers)•informationonuncertainties,qualitativeandifavailable,quantitative.AppropriatedocumentationneedstobeavailabletosupporttheGHGinventorybeingsubjectedtoexternalverification.Statementsmadebymanagementforwhichthereisnoavailablesupportingdocumentationcannotbeverified.Whereareportingcompanyhasnotyetimple-mentedsystemsforroutinelyaccountingandrecordingGHGemissionsdata,anexternalverificationwillbedifficultandmayresultintheverifierbeingunabletoissueanopinion.Underthesecircumstances,theveri-fiersmaymakerecommendationsonhowcurrentdatacollectionandcollationprocessshouldbeimprovedsothatanopinioncanbeobtainedinfutureyears.Companiesareresponsibleforensuringtheexistence,qualityandretentionofdocumentationsoastocreateanaudittrailofhowtheinventorywascompiled.IfacompanyissuesaspecificbaseyearagainstwhichitassessesitsGHGperformance,itshouldretainallrelevanthistoricalrecordstosupportthebaseyeardata.TheseissuesshouldbeborninmindwhendesigningandimplementingGHGdataprocessesandprocedures.UsingtheverificationfindingsBeforetheverifierswillverifythataninventoryhasmettherelevantqualitystandard,theymayrequirethecompanytoadjustanymaterialerrorsthattheyidenti-fiedduringthecourseoftheverification.Iftheverifiersandthecompanycannotcometoanagreementregardingadjustments,thentheverifiermaynotbeabletoprovidethecompanywithanunqualifiedopinion.Allmaterialerrors(individuallyorinaggregate)needtobeamendedpriortothefinalverificationsignoff.Aswellasissuinganopiniononwhetherthereportedinformationisfreefrommaterialdiscrepancy,theveri-fiersmay,dependingontheagreedscopeofwork,alsoissueaverificationreportcontaininganumberofrecom-mendationsforfutureimprovements.Theprocessofverificationshouldbeviewedasavaluableinputtotheprocessofcontinualimprovement.Whetherverificationisundertakenforthepurposesofinternalreview,publicreportingortocertifycompliancewithaparticularGHGprogram,itwilllikelycontainusefulinformationandguidanceonhowtoimproveandenhanceacompany’sGHGaccountingandreportingsystem.Similartotheprocessofselectingaverifier,thoseselectedtoberesponsibleforassessingandimple-mentingresponsestotheverificationfindingsshouldalsohavetheappropriateskillsandunderstandingofGHGaccountingandreportingissues.CHAPTER10VerificationofGHGEmissions73GUIDANCEGUIDANCE74ettingtargetsisaroutinebusinesspracticethathelpsensurethatanissueiskeptonseniormanagement’s“radarscreen”andfactoredintorelevantdecisionsaboutwhatproductsandservicestoprovideandwhatmaterialsandtechnologiestouse.Often,acorporateGHGemissionreductiontargetisthelogicalfollow-uptodevelopingaGHGinventory.S11SettingaGHGTargetGUIDANCEThischapterprovidesguidanceontheprocessofsettingandreportingonacorporateGHGtarget.Althoughthechapterfocusesonemissions,manyoftheconsid-erationsequallyapplytoGHGsequestration(seeAppendixB).Itisnotthepurposeofthischaptertoprescribewhatacompany’stargetshouldbe,ratherthefocusisonthestepsinvolved,thechoicestobemade,andtheimplicationsofthosechoices.WhySetaGHGTarget?Anyrobustbusinessstrategyrequiressettingtargetsforrevenues,sales,andothercorebusinessindicators,aswellastrackingperformanceagainstthosetargets.Likewise,effectiveGHGmanagementinvolvessettingaGHGtarget.AscompaniesdevelopstrategiestoreducetheGHGemissionsoftheirproductsandoperations,corporate-wideGHGtargetsareoftenkeyelementsoftheseefforts,evenifsomepartsofthecompanyareorwillbesubjecttomandatoryGHGlimits.CommondriversforsettingaGHGtargetinclude:•MINIMIZINGANDMANAGINGGHGRISKSWhiledevelopingaGHGinventoryisanimportantsteptowardsidentifyingGHGrisksandopportunities,aGHGtargetisaplanningtoolthatcanactuallydriveGHGreductions.AGHGtargetwillhelpraiseinternalawarenessabouttherisksandopportunitiespresentedbyclimatechangeandensuretheissueisonthebusi-nessagenda.Thiscanservetominimizeandmoreeffectivelymanagethebusinessrisksassociatedwithclimatechange.•ACHIEVINGCOSTSAVINGSANDSTIMULATINGINNOVATIONImplementingaGHGtargetcanresultincostsavingsbydrivingimprovementsinprocessinnovationandresourceefficiency.TargetsthatapplytoproductscandriveR&D,whichinturncreatesproductsandserv-icesthatcanincreasemarketshareandreduceemissionsassociatedwiththeuseofproducts.•PREPARINGFORFUTUREREGULATIONSInternalaccountabilityandincentivemechanismsthatareestablishedtosupportatarget’simplementationcanalsoequipcompaniestorespondmoreeffectivelytofutureGHGregulations.Forexample,somecompa-nieshavefoundthatexperimentingwithinternalGHGtradingprogramshasallowedthemtobetterunder-standthepossibleimpactsoffuturetradingprogramsonthecompany.CHAPTER11SettingaGHGTarget75GUIDANCE➡FIGURE12.StepsinsettingaGHGtarget➡➡➡➡➡➡·➡1.Obtainseniormanagementcommitment2.DecideonthetargettypeSetanabsoluteorintensitytarget?3.DecideonthetargetboundaryWhichGHGstoinclude?Whichdirectandindirectemissions?Whichgeographicaloperations?Treatbusinesstypesseparately?4.ChoosethetargetbaseyearUseafixedorrollingapproach?Useasingleormulti-yearapproach?5.DefinethetargetcompletiondateSetalong-orshort-termtarget?6.DefinethelengthofthetargetcommitmentperiodSetaone-yearormulti-yearcommitmentperiod?7.Decideontheuseofoffsetsorcredits8.EstablishatargetdoublecountingpolicyHowtodealwithdoublecountingofreductionsacrosscompanies?HowdoesGHGtradingaffecttargetperformance?9.DecideonthetargetlevelWhatisbusiness-as-usual?Howfartogobeyondthat?Howdoalltheabovestepsinfluencethedecision?10.TrackandreportprogressMakeregularperformancechecksReportinformationinrelationtothetarget•DEMONSTRATINGLEADERSHIPANDCORPORATERESPONSIBILITYWiththeemergenceofGHGregulationsinmanypartsoftheworld,aswellasgrowingconcernabouttheeffectsofclimatechange,acommitmentsuchassettingapubliccorporateGHGtargetdemonstratesleadershipandcorporateresponsibility.Thiscanimproveacompany’sstandingwithcustomers,employees,investors,businesspartners,andthepublic,andenhancebrandreputation.•PARTICIPATINGINVOLUNTARYPROGRAMSAgrowingnumberofvoluntaryGHGprogramsareemergingtoencourageandassistcompaniesinsetting,implementing,andtrackingprogresstowardGHGtargets.Participationinvoluntaryprogramscanresultinpublicrecognition,mayfacilitaterecog-nitionofearlyactionbyfutureregulations,andenhanceacompany’sGHGaccountingandreportingcapacityandunderstanding.StepsinSettingaTargetSettingaGHGtargetinvolvesmakingchoicesamongvariousstrategiesfordefiningandachievingaGHGreduction.Thebusinessgoals,anyrelevantpolicycontext,andstakeholderdiscussionsshouldinformthesechoices.Thefollowingsectionsoutlinethetenstepsinvolved.Althoughpresentedsequentially,inpracticetargetsettinginvolvescyclingbackandforthbetweenthesteps.ItisassumedthatthecompanyhasdevelopedaGHGinventorybeforeimplementingthesesteps.Figure12summarizesthesteps.1.ObtainseniormanagementcommitmentAswithanycorporatewidetarget,seniormanagementbuy-inandcommitmentparticularlyattheboard/CEOlevelisaprerequisiteforasuccessfulGHGreductionprogram.Implementingareductiontargetislikelytonecessitatechangesinbehavioranddecision-makingthroughouttheorganization.Italsorequiresestab-lishinganinternalaccountabilityandincentivesystemandprovidingadequateresourcestoachievethetarget.Thiswillbedifficult,ifnotimpossible,withoutseniormanagementcommitment.GUIDANCESettingaGHGTargetCHAPTER1176BOX4.ComparingabsoluteandintensitytargetsABSOLUTETARGETSreduceabsoluteemissionsovertime(Example:reduceCO2by25percentbelow1994levelsby2010)Advantages•DesignedtoachieveareductioninaspecifiedquantityofGHGsemittedtotheatmosphere•EnvironmentallyrobustasitentailsacommitmenttoreduceGHGsbyaspecifiedamount•TransparentlyaddressespotentialstakeholderconcernsabouttheneedtomanageabsoluteemissionsDisadvantages•Targetbaseyearrecalculationsforsignificantstructuralchangestotheorganizationaddcomplexitytotrackingprogressovertime•DoesnotallowcomparisonsofGHGintensity/efficiency•RecognizesacompanyforreducingGHGsbydecreasingproduc-tionoroutput(organicdecline,seechapter5)•MaybedifficulttoachieveifthecompanygrowsunexpectedlyandgrowthislinkedtoGHGemissionsINTENSITYTARGETSreducetheratioofemissionsrelativetoabusinessmetricovertime(Example:reduceCO2by12percentpertonneofclinkerbetween2000and2008)Advantages•ReflectsGHGperformanceimprovementsindependentoforganicgrowthordecline•Targetbaseyearrecalculationsforstructuralchangesareusuallynotrequired(seestep4)•MayincreasethecomparabilityofGHGperformanceamongcompaniesDisadvantages•NoguaranteethatGHGemissionstotheatmospherewillbereduced—absoluteemissionsmayriseevenifintensitygoesdownandoutputincreases•Companieswithdiverseoperationsmayfinditdifficulttodefineasinglecommonbusinessmetric•Ifamonetaryvariableisusedforthebusinessmetric,suchasdollarofrevenueorsales,itmustberecalculatedforchangesinproductpricesandproductmix,aswellasinflation,addingcomplexitytothetrackingprocessTYPEOFTARGETReduceabsoluteemissionsMP:notnormallyconstrainedReduceGHGintensityImproveBPE(efficiency)ImprovePE(efficiency)LEVELOFDECISION-MAKING(INGENERALANDONTARGET)CorporateAlllevelsdependingonscale(e.g.newventure,newplant,operational)BusinessinconsultationwithcorporateBusinessBusinessFacility,supportedbyShellGlobalSolutionsEnergiseTMCHAPTER11SettingaGHGTarget77GUIDANCETheRoyalDutch/ShellGroup,aglobalenergycorporation,discoveredwhenimplementingitsvoluntaryGHGreductiontargetthatoneofthebiggestchallengeswastocascadethetargetdowntotheactionsofallemployeeswhoinfluencetargetperformance.Itwasconcludedthatsuccessfulimplementationrequireddifferenttargetsatdifferentlevelsofthecompany.ThisisbecauseeachofthecomponentsthatunderlieabsoluteGHGemissionsisinfluencedbydecision-makingatvariousmanagementlevels(fromthecorporateleveldowntoindi-vidualbusinessesandfacilities).AbsoluteGHGemissionsataplant(tonnesofCO2-e.)=Function(MPxBPExPE)MPQuantityofproductmanufacturedbyafacility.Thisisfundamentaltotheneedtogrowandisthereforecontrolledatcorporatelevel.GHGemissionsaretypicallynotmanagedbylimitingthiscomponent.BPEBestprocessenergyusepertonne.Theoptimal(ortheoretical)energyconsumed(translatestoemissions)byaparticulardesignofplant.Thetypeofplantbuiltisabusiness-leveldecision.Significantcapitaldecisionsmaybeinvolvedinbuildinganewplantincorporatingnewtechnology.Forexistingplants,BPEisimprovedbysignificantdesignchangeandretrofitting.Thiscouldalsoinvolvelargecapitalexpenditure.PEPlantefficiencyindex.AnindexthatindicateshowtheplantisactuallyperformingrelativetoBPE.PEisaresultofday-to-daydecisionstakenbyplantoperatorsandtechnicians.ItisimprovedalsobytheShellGlobalSolutionsEnergiseTMprogramme,whichtypicallyrequireslowcapitalexpendituretoimplement.RoyalDutch/Shellfoundthatwhilethismodelisprobablyanoversimplificationwhenitcomestoexplorationandproductionfacilities,itissuitableformanufacturingfacilities(e.g.,refineriesandchemicalplants).Itillustratesthatanabsolutetargetcouldonlybesetatthecorporatelevel,whilelowerlevelsrequireintensityorefficiencytargets.RoyalDutch/Shell:ThetargetcascadeACTIONSTHATREDUCEEMISSIONSSeebelow--------SeebelowBuildingnewplantswithnewtechnologyRetrofittingandchangingdesignofplantsIncreaseplantoperatingefficiency2.DecideonthetargettypeTherearetwobroadtypesofGHGtargets:absoluteandintensity-based.AnabsolutetargetisusuallyexpressedintermsofareductionovertimeinaspecifiedquantityofGHGemissionstotheatmosphere,theunittypicallybeingtonnesofCO2-e.AnintensitytargetisusuallyexpressedasareductionintheratioofGHGemissionsrelativetoanotherbusinessmetric.1Thecomparativemetricshouldbecarefullyselected.Itcanbetheoutputofthecompany(e.g.tonneCO2-epertonneproduct,perkWh,pertonnemileage)orsomeothermetricsuchassales,revenuesorofficespace.Tofacilitatetransparency,companiesusinganintensitytargetshouldalsoreporttheabsoluteemissionsfromsourcescoveredbythetarget.Box4summarizestheadvantagesanddisadvantagesofeachtypeoftarget.Somecompanieshavebothanabsoluteandanintensitytarget.Box5providesexam-plesofcorporateGHGtargets.TheRoyalDutch/Shellcasestudyillustrateshowacorporatewideabsolutetargetcanbeimplementedbyformulatingacombina-tionofintensitytargetsatlowerlevelsofdecision-makingwithinthecompany.3.DecideonthetargetboundaryThetargetboundarydefineswhichGHGs,geographicoper-ations,sources,andactivitiesarecoveredbythetarget.Thetargetandinventoryboundarycanbeidentical,orthetargetmayaddressaspecifiedsubsetofthesourcesincludedinthecompanyinventory.ThequalityoftheGHGinventoryshouldbeakeyfactorinformingthischoice.Thequestionstobeaddressedinthisstepincludethefollowing:•WHICHGHGS?TargetsusuallyincludeoneormoreofthesixmajorGHGscoveredbytheKyotoProtocol.Forcompanieswithsignificantnon-CO2GHGsourcesitusuallymakessensetoincludethesetoincreasetherangeofreductionopportunities.However,practicalmonitoringlimitationsmayapplytosmallersources.•WHICHGEOGRAPHICALOPERATIONS?OnlycountryorregionaloperationswithreliableGHGinventorydatashouldbeincludedinthetarget.Forcompanieswithglobaloperations,itmakessensetolimitthetarget’sgeographicalscopeuntilarobustandreli-ableinventoryhasbeendevelopedforalloperations.CompaniesthatparticipateinGHGprogramsinvolvingtrading2willneedtodecidewhetherornottoincludetheemissionssourcescoveredinthetradingprogramintheircorporatetarget.Ifcommonsourcesareincluded,i.e.,ifthereisoverlapinsourcescoveredbetweenthecorporatetargetandthetradingprogram,companiesshouldconsiderhowtheywilladdressanydoublecountingresultingfromthetradingofGHGreductionsinthetradingprogram(seestep8).•WHICHDIRECTANDINDIRECTEMISSIONSOURCES?IncludingindirectGHGemissionsinatargetwillfacilitatemorecost-effectivereductionsbyincreasingthereductionopportunitiesavailable.However,indirectemissionsaregenerallyhardertomeasureaccuratelyandverifythandirectemissionsalthoughsomecategories,suchasscope2emissionsfrompurchasedelectricity,maybeamenabletoaccuratemeasurementandverification.Includingindirectemissionscanraiseissueswithregardtoownershipanddoublecountingofreductions,asindirectemis-sionsarebydefinitionsomeoneelse’sdirectemissions(seestep8).•SEPARATETARGETSFORDIFFERENTTYPESOFBUSINESSES?ForcompanieswithdiverseoperationsitmaymakemoresensetodefineseparateGHGtargetsfordifferentcorebusinesses,especiallywhenusinganintensitytarget,wherethemostmeaningfulbusinessmetricfordefiningthetargetvariesacrossbusinessunits(e.g.,GHGspertonneofcementproducedorbarrelofoilrefined).GUIDANCESettingaGHGTargetCHAPTER1178BOX5.SelectedcorporateGHGtargetsABSOLUTETARGETS•ABBReduceGHGsby1percenteachyearfrom1998through2005•AlcoaReduceGHGsby25percentfrom1990levelsby2010,and50percentfrom1990levelsoversameperiod,ifinertanodetech-nologysucceeds•BPHoldnetGHGsstableat1990levelsthrough2012•DupontReduceGHGsby65percentfrom1990levelsby2010•EntergyStabilizeCO2fromU.S.generatingfacilitiesat2000levelsthrough2005•FordReduceCO2by4percentover2003-2006timeframebaseduponaverage1998-2001baselineaspartofChicagoClimateExchange•IntelReducePFCsby10percentfrom1995levelsby2010•Johnson&JohnsonReduceGHGsby7percentfrom1990levelsby2010,withinterimgoalof4percentbelow1990levelsby2005•PolaroidReduceCO2emissions20percentbelowits1994emissionsbyyear-end2005;25percentby2010•RoyalDutch/ShellManageGHGemissionssothattheyarestill5percentormorebelowthe1990baselineby2010,evenwhilegrowingthebusiness•TransaltaReduceGHGsto1990levelsby2000.AchievezeronetGHGsfromCanadianoperationsby2024INTENSITYTARGETS•HolcimLtd.Reducebytheyear2010theGroupaveragespecific3netCO2emissionsby20percentfromthereferenceyear1990•KansaiElectricPowerCompanyReduceCO2emissionsperkWhsoldinfiscal2010toapprox.0.34kg-CO2/kWh•MillerBrewingCompanyReduceGHGsby18percentperbarrelofproductionfrom2001to2006•NationalRenewableEnergyLaboratoryReduceGHGsby10percentpersquarefootfrom2000to2005COMBINEDABSOLUTE&INTENSITYTARGETS•SCJohnsonGHGemissionsintensityreductionof23percentby2005,whichrepresentsanabsoluteoractualGHGreductionof8percent•LafargeReduceabsolutegrossCO2emissionsinAnnexIcountries10percentbelow1990levelsbytheyear2010.ReduceworldwideaveragespecificnetCO2emissions20percentbelow1990levelsbytheyear201034.ChoosethetargetbaseyearForatargettobecredible,ithastobetransparenthowtargetemissionsaredefinedinrelationtopastemissions.Twogeneralapproachesareavailable:afixedtargetbaseyearorarollingtargetbaseyear.•USINGAFIXEDTARGETBASEYEAR.MostGHGtargetsaredefinedasapercentagereductioninemis-sionsbelowafixedtargetbaseyear(e.g.,reduceCO2emissions25percentbelow1994levelsby2010).Chapter5describeshowcompaniesshouldtrackemis-sionsintheirinventoryovertimeinreferencetoafixedbaseyear.Althoughitispossibletousedifferentyearsfortheinventorybaseyearandthetargetbaseyear,tostreamlinetheinventoryandtargetreportingprocess,itusuallymakessensetousethesameyearforboth.Aswiththeinventorybaseyear,itisimpor-tanttoensurethattheemissionsdataforthetargetbaseyeararereliableandverifiable.Itispossibletouseamulti-yearaveragetargetbaseyear.Thesameconsiderationsasdescribedformulti-yearaveragebaseyearsinchapter5apply.Chapter5providesstandardsonwhenandhowtorecalculatebaseyearemissionsinordertoensurelike-with-likecomparisonsovertimewhenstructuralchanges(e.g.,acquisitions/divestitures)orchangesinmeasurementandcalculationmethodologiesaltertheemissionsprofileovertime.Inmostcases,thiswillalsobeanappropriateapproachforrecalculatingdataforafixedtargetbaseyear.•USINGAROLLINGTARGETBASEYEAR.Companiesmayconsiderusingarollingtargetbaseyearifobtainingandmaintainingreliableandverifiabledataforafixedtargetbaseyearislikelytobechallenging(forexample,duetofrequentacquisitions).Witharollingtargetbaseyear,thebaseyearrollsforwardatregulartimeintervals,usuallyoneyear,sothatemis-sionsarealwayscomparedagainstthepreviousyear.4However,emissionreductionscanstillbecollectivelyCHAPTER11SettingaGHGTarget79GUIDANCETABLE5.ComparingtargetswithrollingandfixedbaseyearsHowmightthetargetbestated?Whatisthetargetbaseyear?Howfarbackislike-with-likecomparisonpossible?Whatisthebasisforcomparingemissionsbetweenthetargetbaseyearandcompletionyear?(seealsoFigure14)Howfarbackarerecalculationsmade?Howreliablearethetargetbaseyearemissions?Whenarerecalculationsmade?FIXEDTARGETBASEYEARAtargetmighttaketheform“wewillemitX%lessinyearBthaninyearA”AfixedreferenceyearinthepastThetimeseriesofabsoluteemissionswillcomparelikewithlikeThecomparisonovertimeisbasedonwhatisowned/controlledbythecompanyinthetargetcompletionyear.EmissionsarerecalculatedforallyearsbacktothefixedtargetbaseyearIfacompanywithatargetacquiresacompanythatdidnothavereliableGHGdatainthetargetbaseyear;back-castingofemissionsbecomesnecessary,reducingthereliabilityofthebaseyearROLLINGTARGETBASEYEARAtargetmighttaketheformof“overthenextXyearswewillreduceemissionseveryyearbyY%comparedtothepreviousyear”5ThepreviousyearIftherehavebeensignificantstructuralchangesthetimeseriesofabsoluteemissionswillnotcomparelikewithlikeovermorethantwoyearsatatimeThecomparisonovertimeisbasedonwhatwasowned/controlledbythecompanyintheyearstheinformationwasreported6Emissionsarerecalculatedonlyfortheyearpriortothestructuralchange,orex-postfortheyearofthestructuralchangewhichthenbecomesthebaseyear.Datafromanacquiredcompany’sGHGemissionsareonlynecessaryfortheyearbeforetheacquisi-tion(orevenonlyfromtheacquisitiononwards),reducingoreliminatingtheneedforback-castingThecircumstanceswhichtriggerrecalculationsforstructuralchangesetc.(seechapter5)arethesameunderbothapproachesstatedoverseveralyears.Anexamplewouldbe“from2001through2012,emissionswillbereducedbyonepercenteveryyear,comparedtothepreviousyear.”Whenstructuralormethodologicalchangesoccur,recalculationsonlyneedtobemadetothepreviousyear.7Asaresult,like-with-likecomparisonsofemissionsinthe“targetstartingyear”(2001intheexample)and“targetcompletionyear”(2012)cannotbemadebecauseemissionsarenotrecalcu-latedforallyearsbacktothetargetstartingyear.Thedefinitionofwhattriggersabase-yearemissionsrecalculationisthesameasunderthefixedbaseyearapproach.Thedifferenceliesinhowfarbackemissionsarerecalculated.Table5comparestargetsusingtherollingandfixedbaseyearapproacheswhileFigure14illustratesoneofthekeydifferences.RECALCULATIONSUNDERINTENSITYTARGETSWhilethestandardinchapter5appliestoabsoluteinventoryemissionsofcompaniesusingintensitytargets,recalculationsforstructuralchangesforthepurposesofthetargetarenotusuallyneededunlessthestructuralchangeresultsinasignificantchangeintheGHGintensity.However,ifrecalculationsforstructuralchangesaremadeforthepurposesofthetarget,theyshouldbemadeforboththeabsoluteemissionsandthebusinessmetric.Ifthetargetbusinessmetricbecomesirrelevantthroughastructuralchange,areformulationofthetargetmightbeneeded(e.g.,whenacompanyrefocusesonadifferentindustrybuthadusedanindustry-specificbusinessmetricbefore).5.DefinethetargetcompletiondateThetargetcompletiondatedetermineswhetherthetargetisrelativelyshort-orlong-term.Long-termtargets(e.g.,withacompletionyeartenyearsfromthetimethetargetisset)facilitatelong-termplanningforlargecapitalinvestmentswithGHGbenefits.However,theymightencouragelaterphase-outsoflessefficientequipment.Generally,long-termtargetsdependonuncertainfuturedevelopments,whichcanhaveopportu-nitiesaswellasrisks,whichisillustratedinFigure13.Afive-yeartargetperiodmaybemorepracticalfororganizationswithshorterplanningcycles.6.DefinethelengthofthecommitmentperiodThetargetcommitmentperiodistheperiodoftimeduringwhichemissionsperformanceisactuallymeasuredagainstthetarget.Itendswiththetargetcompletiondate.Manycompaniesusesingle-yearcommitmentperiods,whereastheKyotoProtocol,forexample,speci-fiesamulti-year“firstcommitmentperiod”offiveyears(2008–2012).Thelengthofthetargetcommitmentperiodisanimportantfactorindeterminingacompany’slevelofcommitment.Generally,thelongerthetargetcommitmentperiod,thelongertheperiodduringwhichemissionsperformancecountstowardsthetarget.•EXAMPLEOFASINGLEYEARCOMMITMENTPERIOD.CompanyBetahasatargetofreducingemissionsby10percentcomparedtoitstargetbaseyear2000,bythecommitmentyear2010.ForBetatomeetitstarget,itissufficientforitsemissionstobe,intheyear2010,nomorethan90percentofyear2000emissions.•EXAMPLEOFAMULTI-YEARCOMMITMENTPERIOD.CompanyGammahasatargetofreducingemissionsby10percent,comparedtoitstargetbaseyear2000,bythecommitmentperiod2008–2012.ForGammatomeetitstarget,itssumtotalemissionsfrom2008–2012mustnotexceed90percentofyear2000emissionstimesfive(numberofyearsintheGUIDANCESettingaGHGTargetCHAPTER1180FIGURE13.DefiningthetargetcompletiondateShort-termLong-termUncertaintyrangeEMISSIONSTIMETIMEEMISSIONSCHAPTER11SettingaGHGTarget81GUIDANCEFIGURE14.ComparingastabilizationtargetunderthefixedandrollingtargetbaseyearapproachCompanyBCompanyAAaquiresBatthestartofyear3123➡CompanyANOCHANGENOCHANGEINCREASECompanyAFixedbaseyearRollingbaseyear1231223➡➡Astabilizationtargetisonethataimstokeepemissionsconstantovertime.Inthisexample,companyAacquirescompanyB,whichhasexperiencedorganicGHGgrowthsincethetargetbaseyear(or“starting”year).Undertherollingapproach,emissionsgrowthintheacquiredcompany(B)fromyear1toyear2doesnotappearasanemissionsincreaseinrelationtothetargetoftheacquiringcompany(A).ThuscompanyAwouldmeetitsstabilizationtargetwhenusingtherollingapproachbutnotwhenusingthefixedapproach.Inparalleltotheexampleinchapter5,pastGHGgrowthordeclineindivestedfacilities(GHGchangesbeforethedivestment)wouldaffectthetargetperformanceundertherollingapproach,whileitwouldnotbecountedunderthefixedapproach.commitmentperiod).Inotherwords,itsaverageemissionsoverthosefiveyearsmustnotexceed90percentofyear2000emissions.Targetcommitmentperiodslongerthanoneyearcanbeusedtomitigatetheriskofunpredictableeventsinoneparticularyearinfluencingperformanceagainstthetarget.Figure15showsthatthelengthofthetargetcommitmentperioddetermineshowmanyemis-sionsareactuallyrelevantfortargetperformance.Foratargetusingarollingbaseyear,thecommitmentperiodappliesthroughout:emissionperformanceiscontinuouslybeingmeasuredagainstthetargeteveryyearfromwhenthetargetissetuntilthetargetcompletiondate.7.DecideontheuseofGHGoffsetsorcredits8AGHGtargetcanbemetentirelyfrominternalreduc-tionsatsourcesincludedinthetargetboundaryorthroughadditionallyusingoffsetsthataregeneratedfromGHGreductionprojectsthatreduceemissionsatsources(orenhancesinks)externaltothetargetboundary.9TheuseofoffsetsmaybeappropriatewhenFIGURE15.Shortvs.longcommitmentperiods1year5yearsEMISSIONSTIMETIMEEMISSIONSEMISSIONSthecostofinternalreductionsishigh,opportunitiesforreductionslimited,orthecompanyisunabletomeetitstargetbecauseofunexpectedcircumstances.Whenreportingonthetarget,itshouldbespecifiedwhetheroffsetsareusedandhowmuchofthetargetreductionwasachievedusingthem.CREDIBILITYOFOFFSETSANDTRANSPARENCYTherearecurrentlynogenerallyacceptedmethodologiesforquantifyingGHGoffsets.TheuncertaintiesthatsurroundGHGprojectaccountingmakeitdifficulttoestablishthatanoffsetisequivalentinmagnitudetotheinternalemissionsitisoffsetting.10Thisiswhycompa-niesshouldalwaysreporttheirowninternalemissionsinseparateaccountsfromoffsetsusedtomeetthetarget,ratherthanprovidinganetfigure(seestep10).Itisalsoimportanttocarefullyassessthecredibilityofoffsetsusedtomeetatargetandtospecifytheoriginandnatureoftheoffsetswhenreporting.Informationneededincludes:•thetypeofproject•geographicandorganizationalorigin•howoffsetshavebeenquantified•whethertheyhavebeenrecognizedbyexternalprograms(CDM,JI,etc.)Oneimportantwaytoensurethecredibilityofoffsetsistodemonstratethatthequantificationmethodologyadequatelyaddressesallofthekeyprojectaccountingchallengesinchapter8.Takingthesechallengesintoaccount,theforthcomingGHGProtocolProjectQuantificationStandardaimstoimprovetheconsistency,credibility,andrigorofprojectaccounting.Additionally,itisimportanttocheckthatoffsetshavenotalsobeencountedtowardsanotherorganization’sGHGtarget.Thismightinvolveacontractbetweenthebuyerandsellerthattransfersownershipoftheoffset.Step8providesmoreinformationonaccountingforGHGtradesinrelationtoacorporatetarget,includingestablishingapolicyondoublecounting.OFFSETSANDINTENSITYTARGETSWhenusingoffsetsunderintensitytargets,alltheaboveconsiderationsapply.Inordertodeterminecompliancewiththetarget,theoffsetscanbesubtractedfromthefigureusedforabsoluteemissions(thenumerator);theresultingdifferenceisthendividedbythecorrespondingmetric.Itisimportant,however,thatabsoluteemissionsarestillreportedseparatelybothfromoffsetsandthebusinessmetric(seestep9below).8.EstablishatargetdoublecountingpolicyThisstepaddressesdoublecountingofGHGreductionsandoffsets,aswellasallowancesissuedbyexternaltradingprograms.Itappliesonlytocompaniesthatengageintrading(saleorpurchase)ofGHGoffsetsorwhosecorporatetargetboundariesinterfacewithothercompanies’targetsorexternalprograms.Giventhatthereiscurrentlynoconsensusonhowsuchdoublecountingissuesshouldbeaddressed,companiesshoulddeveloptheirown“TargetDoubleCountingPolicy.”Thisshouldspecifyhowreductionsandtradesrelatedtoothertargetsandprogramswillbereconciledwiththeircorporatetarget,andaccordinglywhichtypesofdoublecountingsituationsareregardedasrelevant.Listedherearesomeexamplesofdoublecountingthatmightneedtobeaddressedinthepolicy.•DOUBLECOUNTINGOFOFFSETS.ThiscanoccurwhenaGHGoffsetiscountedtowardsthetargetbyboththesellingandpurchasingorganizations.Forexample,companyAundertakesaninternalreductionprojectthatreducesGHGsatsourcesincludedinitsowntarget.CompanyAthensellsthisprojectreductiontocompanyBtouseasanoffsettowardsitstarget,whilestillcountingittowarditsowntarget.Inthiscase,reductionsarecountedbytwodifferentorganizationsagainsttargetsthatcoverdifferentemissionssources.Tradingprogramsaddressthisbyusingregistriesthatallocateaserialnumbertoalltradedoffsetsorcreditsandensuringtheserialnumbersareretiredoncetheyareused.Intheabsenceofregistriesthiscouldbeaddressedbyacontractbetweensellerandbuyer.•DOUBLECOUNTINGDUETOTARGETOVERLAP.11Thiscanoccurwhensourcesincludedunderacompany’scorporatetargetarealsosubjecttolimitsbyanexternalprogramoranothercompany’starget.Twoexamples:•CompanyAhasacorporatetargetthatincludesGHGsourcesthatarealsoregulatedunderatradingprogram.Inthiscase,reductionsatthecommonsourcesareusedbycompanyAtomeetbothitscorporatetargetandthetradingprogramtarget.GUIDANCESettingaGHGTargetCHAPTER1182•CompanyBhasacorporatetargettoreduceitsdirectemissionsfromthegenerationofelectricity.12CompanyCwhopurchaseselectricitydirectlyfromcompanyBalsohasacorporatetargetthatincludesindirectemissionsfromthepurchaseofelectricity(scope2).CompanyCundertakesenergyefficiencymeasurestoreduceitsindirectemissionsfromtheuseoftheelectricity.Thesewillusuallyshowupasreductionsinbothcompanies’targets.13ThesetwoexamplesillustratethatdoublecountingisinherentwhentheGHGsourceswherethereductionsoccurareincludedinmorethanonetargetofthesameordifferentorganizations.Withoutlimitingthescopeoftargetsitmaybedifficulttoavoidthistypeofdoublecountinganditprobablydoesnotmatterifthedoublecountingisrestrictedtotheorganizationssharingthesamesourcesintheirtargets(i.e.,whenthetwotargetsoverlap).•DOUBLECOUNTINGOFALLOWANCESTRADEDINEXTERNALPROGRAMS.Thisoccurswhenacorporatetargetoverlapswithanexternaltradingprogramandallowancesthatcoverthecommonsourcesaresoldinthetradingprogramforusebyanotherorganizationandreconciledwiththeregulatorytarget,butnotreconciledwiththecorporatetarget.Thisexamplediffersfromthepreviousexampleinthatdoublecountingoccursacrosstwotargetsthatarenotover-lapping(i.e.,theydonotcoverthesamesources).Thistypeofdoublecountingcouldbeavoidedifthecompanysellingtheallowancesreconcilesthetradewithitscorporatetarget(seeHolcimcasestudy).Whateverthecompanydecidestodointhissituation,inordertomaintaincredibility,itshouldaddressbuyingandsellingofallowancesintradingprogramsinaconsistentway.Forexample,ifitdecidesnottoreconcileallowancesthatitsellsinatradingprogramwithitscorporatetarget,itshouldalsonotcountanyallowancesofthesametypethatitpurchasestomeetitscorporatetarget.Ideallyacompanyshouldtrytoavoiddoublecountinginitscorporatetargetifthisunderminestheenvironmentalintegrityofthetarget.Also,anypreventeddoublecountingbetweentwoorganizationsprovidesanaddi-tionalincentiveforoneofthesecompaniestofurtherreduceemissions.However,inpracticetheavoidanceofdoublecountingcanbequitechallenging,particularlyforcompaniessubjecttomultipleexternalprogramsandwhenindirectGHGemissionsareincludedinthetarget.Companiesshouldthereforebetransparentabouttheirdoublecountingpolicyandstateanyreasonsforchoosingnottoaddresssomedoublecountingsituations.TheHolcimcasestudydescribeshowonecompanyhaschosentotrackperformancetowardsitstargetandaddressdoublecountingissues.9.DecideonthetargetlevelThedecisiononsettingthetargetlevelshouldbeinformedbyalltheprevioussteps.Otherconsiderationstotakeintoaccountinclude:•UnderstandingthekeydriversaffectingGHGemis-sionsbyexaminingtherelationshipbetweenGHGemissionsandotherbusinessmetrics,suchasproduc-tion,squarefootageofmanufacturingspace,numberofemployees,sales,revenue,etc.•DevelopingdifferentreductionstrategiesbasedonthemajorreductionopportunitiesavailableandexaminingtheireffectsontotalGHGemissions.Investigatehowemissionsprojectionschangewithdifferentmitigationstrategies.•LookingatthefutureofthecompanyasitrelatestoGHGemissions.•Factoringinrelevantgrowthfactorssuchasproductionplans,revenueorsalestargets,andReturnonInvestment(ROI)ofothercriteriathatdriveinvestmentstrategy.CHAPTER11SettingaGHGTarget83GUIDANCEGUIDANCESettingaGHGTargetCHAPTER1184Holcim:UsingaGHGbalancesheettotrackperformancetowardsthetargetHolcim,aglobalcementproducer,tracksitsperformanceinrelationtoitsvoluntarycorporatetargetusingaGHGbalancesheet.Thisbalancesheetshows,foreachcommitmentperiodandforeachcountrybusiness,ononesidetheactualGHGemissionsandontheothersidetheGHG“assets”and“instruments.”TheseassetsandinstrumentsconsistofthevoluntaryGHGtargetitself(the“voluntarycap”;inotherwords,theallowancesthatHolcimprovidesforitself),aregu-latorytarget(“cap”)ifapplicable,plustheCDMcreditspurchased(added)orsold(subtracted),andanyregulatoryemissionstradingallowancespurchased(added)orsold(subtracted).ThusifanycountrybusinesssellsCDMcredits(generatedatsourcesinsidethevoluntarytargetboundary),itisensuredthatonlythebuyingorganizationcountsthecredit(seefirstexampleofdoublecountinginstep8).Attheendofthecommitmentperiod,everycountrybusinessmustdemonstrateaneutralorpositivebalancetowardsHolcim’starget.Thosecompanieswhosevoluntarycapoverlapswitharegulatorycap(e.g.,inEurope)mustalsodemonstrateaneutralorpositivebalancetowardstheregulatorycap.GHGreductionsinEuropearethusreportedtowardsbothtargets(seesecondexampleofdoublecountinginstep8).Bothsidesofthecountrybusinessbalancesheetsareconsoli-datedtogrouplevel.Creditsandallowancestradedwithinthegroupsimplycanceloutintheassetcolumnoftheconsoli-datedcorporatelevelGHGbalancesheet.Anycreditsorallowancestradedexternallyarereconciledwithboththevoluntaryandregulatorycapsatthebottomlineoftheassetcolumnofthebalancesheet.Thisensuresthatanysoldallowanceisonlycountedbythebuyingorganization(whenHolcim’stargetandthatofthebuyingorganizationdonotoverlap).ApurchasedallowanceorcreditiscountedtowardsboththevoluntaryandregulatorytargetsoftheEuropeanbusi-ness(thesetwotargetsoverlap).GHGASSETS&INSTRUMENTSVoluntarycap(directemissions)Regulatorycap(directemissions)Reg.allowancespurchased(+)orsold(-)CDMcreditspurchased(+)orsold(-)Sumofvoluntarycap,reg.allowances&creditsSumofregulatorycap,reg.allowances&creditsVoluntarycapCDMcreditspurchased(+)orsold(-)Sumofvoluntarycap&creditsSumofvoluntarycap,reg.allowances&creditsGHGEMISSIONSEmissions,direct,indirect+biomassSumofdirectemissionsSumofdirectemissions,accordingtoEUETSEmissions,direct,indirect+biomassSumofdirectemissionsSumofdirectemissionsHolcimGroupHolcim(countryAinEurope)Holcim(countryXinLatinAmerica)GHGbalancesheet(AllvaluesintonnesCO2-e/year)•Consideringwhetherthereareanyexistingenvironmentalorenergyplans,capitalinvestments,product/servicechanges,ortargetsthatwillaffectGHGemissions.Arethereplansalreadyinplaceforfuelswitching,onsitepowergeneration,and/orrenewableenergyinvestmentsthataffectthefutureGHGtrajectory?•BenchmarkingGHGemissionswithsimilarorganizations.Generally,organizationsthathavenotpreviouslyinvestedinenergyandotherGHGreductionsshouldbecapableofmeetingmoreaggres-sivereductionlevelsbecausetheywouldhavemorecost-effectivereductionopportunities.10.TrackandreportprogressOncethetargethasbeenset,itisnecessarytotrackperformanceagainstitinordertocheckcompliance,andalso—inordertomaintaincredibility—toreportemissionsandanyexternalreductionsinaconsistent,completeandtransparentmanner.•CARRYOUTREGULARPERFORMANCECHECKS.Inordertotrackperformanceagainstatarget,itisimportanttolinkthetargettotheannualGHGinventoryprocessandmakeregularchecksofemissionsinrelationtothetarget.Somecompaniesuseinterimtargetsforthispurpose(atargetusingarollingtargetbaseyearautomaticallyincludesinterimtargetseveryyear).•REPORTINFORMATIONINRELATIONTOTHETARGET.Companiesshouldincludethefollowinginformationwhensettingandreportingprogressinrelationtoatarget:1.Descriptionofthetarget•Provideanoutlineofthetargetboundarieschosen•Specifytargettype,targetbaseyear,targetcompletiondate,andlengthofcommitmentperiod•Specifywhetheroffsetscanbeusedtomeetthetarget;ifyes,specifythetypeandamount•Describethetargetdoublecountingpolicy•Specifytargetlevel.2.Informationonemissionsandperformanceinrela-tiontothetarget•ReportemissionsfromsourcesinsidethetargetboundaryseparatelyfromanyGHGtrades•Ifusinganintensitytarget,reportabsoluteemis-sionsfromwithinthetargetboundaryseparately,bothfromanyGHGtradesandthebusinessmetric•ReportGHGtradesthatarerelevanttocompliancewiththetarget(includinghowmanyoffsetswereusedtomeetthetarget)•Reportanyinternalprojectreductionssoldortransferredtoanotherorganizationforuseasanoffset•Reportoverallperformanceinrelationtothetarget.CHAPTER11SettingaGHGTarget85GUIDANCE1SomecompaniesmayformulateGHGefficiencytargetsbyformulatingthisratiotheotherwayaround.2ExamplesincludetheU.K.ETS,theCCX,andtheEUETS.3Holcim’sandLafarge’stargethavebeenformulatedusingthetermi-nologyoftheWBCSDCementCO2Protocol(WBCSD,2001),whichuses“specific”todenoteemissionspertonneofcementproduced.4Itispossibletouseanintervalotherthanoneyear.However,thelongertheintervalatwhichthebaseyearrollsforward,themorethisapproachbecomeslikeafixedtargetbaseyear.Thisdiscussionisbasedonarollingtargetbaseyearthatmovesforwardatannualintervals.5Notethatsimplyaddingtheyearlyemissionschangesundertherollingbaseyearyieldsadifferentresultfromthecomparisonovertimemadewithafixedbaseyear,evenwithoutstructuralchanges.Inabsoluteterms,anX%reductioneveryyearover5years(comparedtothepreviousyear)isnotthesameasan(Xtimes5)reductioninyear5comparedtoyear1.6Dependingonwhichrecalculationmethodologyisusedwhenapplyingtherollingbaseyear,thecomparisonovertimecanincludeemissionsthatoccurredwhenthecompanydidnotownorcontroltheemissionsources.However,theinclusionofthistypeofinformationismini-mized.Seealsotheguidancedocument“Baseyearrecalculationmethodologiesforstructuralchanges”ontheGHGProtocolwebsite(www.ghgprotocol.org).7Forfurtherdetailsondifferentrecalculationmethodologies,seetheguidancedocument“Baseyearrecalculationmethodologiesforstruc-turalchanges”ontheGHGProtocolwebsite(www.ghgprotocol.org).8Asnotedinchapter8,offsetscanbeconvertedtocredits.Creditsarethusunderstoodtobeasubsetofoffsets.Thischapterusesthetermoffsetsasagenericterm.9Forthepurposesofthischapter,theterms“internal”and“external”refertowhetherthereductionsoccuratsourcesinside(internal)oroutside(external)thetargetboundary.10Thisequivalenceissometimesreferredtoas“fungibility.”However,“fungibility”canalsorefertoequivalenceintermsofthevalueinmeetingatarget(twofungibleoffsetshavethesamevalueinmeetingatarget,i.e.,theycanbothbeappliedtothesametarget).11Overlapherereferstoasituationwhentwoormoretargetsincludethesamesourcesintheirtargetboundaries.12Similarly,companyAinthisexamplecouldbesubjecttoamandatorycaponitsdirectemissionsunderatradingprogramandengageintradingallowancescoveringthecommonsourcesitshareswithcompanyB.Inthiscase,theexampleinthesection“Doublecountingofallowancestradedinexternalprograms”ismorerelevant.13TheenergyefficiencymeasuresimplementedbycompanyCmaynotalwaysresultinanactualreductionofcompanyB’semissions.Seechapter8forfurtherdetailsonreductionsinindirectemissions.NOTEShisappendixprovidesguidanceonhowtoaccountforandreportindirectemissionsassociatedwiththepurchaseofelectricity.FigureA–1providesanoverviewofthetransactionsassociatedwithpurchasedelectricityandthecorrespondingemissions.PurchasedelectricityforownconsumptionEmissionsassociatedwiththegenerationofpurchasedelectricitythatisconsumedbythereportingcompanyarereportedinscope2.Scope2onlyaccountsfortheportionofthedirectemissionsfromgeneratingelec-tricitythatisactuallyconsumedbythecompany.Acompanythatpurchaseselectricityandtransportsitinatransmissionanddistribution(T&D)systemthatitownsorcontrolsreportstheemissionsassociatedwithT&Dlossesunderscope2.However,ifthereportingcompanyownsorcontrolstheT&Dsystembutgenerates(ratherthanpurchases)theelectricitytransmittedthroughitswires,theemissionsassociatedwithT&Dlossesarenotreportedunderscope2,astheywouldalreadybeaccountedforunderscope1.Thisisthecasewhengeneration,transmission,anddistributionsystemsareverticallyintegratedandownedorcontrolledbythesamecompany.Purchasedelectricityforresaletoend-usersEmissionsfromthegenerationofpurchasedelectricityforresaletoend-users,forexamplepurchasesbyautilitycompany,maybereportedunderscope3inthecategory“generationofpurchasedelectricitythatissoldtoend-users.”Thisreportingcategoryisparticu-larlyrelevantforutilitycompaniesthatpurchasewholesaleelectricitysuppliedbyindependentpowerproducersforresaletotheircustomers.Sinceutilitycompaniesandelectricitysuppliersoftenexercisechoiceoverwheretheypurchaseelectricity,thisprovidesthemwithanimportantGHGreductionopportunity(seeSeattleCityLightcasestudyinchapter4).Sincescope3isoptional,companiesthatareunabletotracktheirelectricitysalesintermsofendusersandnon-enduserscanchoosenottoreporttheseemissionsinscope3.Instead,theycanreportthetotalemissionsassociatedwithpurchasedelectricitythatissoldtobothend-andnon-end-usersunderoptionalinformationinthecategory“generationofpurchasedelectricity,heat,orsteamforre-saletonon-endusers.”PurchasedelectricityforresaletointermediariesEmissionsassociatedwiththegenerationofpurchasedelectricitythatisresoldtoanintermediary(e.g.,tradingtransactions)maybereportedunderoptionalinformationunderthecategory“Generationofpurchasedelectricity,heat,orsteamforre-saletonon-endusers.”Examplesoftradingtransactionsincludebrokerage/tradingroomtransactionsinvolvingpurchasedelectricityoranyothertransactioninwhichelectricityispurchaseddirectlyfromonesourceorthespotmarketandthenresoldtoanintermediary(e.g.,anon-enduser).Theseemissionsarereportedunderoptionalinformationseparatelyfromscope3becausetherecouldbeanumberoftradingtransactionsbeforetheelectricityfinallyreachestheend-user.Thismaycauseduplicativereportingofindirectemissionsfromaseriesofelectricitytradingtransactionsforthesameelectricity.86OwnconsumptionResaletoend-usersResaletointermediariesScope2IndirectemissionsfromownconsumptionofpurchasedelectricityScope3IndirectemissionsfrompurchasedelectricitysoldtoendusersOptionalInformationEmissionsfrompurchasedelectricitysoldtononendusersFIGUREA–1.AccountingfortheindirectGHGemissionsassociatedwithpurchasedelectricity➡PurchasedElectricityTAPPENDIXAccountingforIndirectEmissionsfromPurchasedElectricityAAPPENDIXA87GHGemissionsupstreamofthegenerationofelectricityEmissionsassociatedwiththeextractionandproductionoffuelsconsumedinthegenerationofpurchasedelectricitymaybereportedinscope3underthecate-gory“extraction,production,andtransportationoffuelsconsumedinthegenerationofelectricity.”Theseemissionsoccurupstreamofthegenerationofelectricity.Examplesincludeemissionsfromminingofcoal,refiningofgasoline,extractionofnaturalgas,andproductionofhydrogen(ifusedasafuel).ChoosingelectricityemissionfactorsToquantifyscope2emissions,theGHGProtocolCorporateStandardrecommendsthatcompaniesobtainsource/supplierspecificemissionfactorsfortheelec-tricitypurchased.Ifthesearenotavailable,regionalorgridemissionfactorsshouldbeused.Formoreinformationonchoosingemissionfactors,seetherelevantGHGProtocolcalculationtoolsavailableontheGHGProtocolwebsite(www.ghgprotocol.org).GHGemissionsassociatedwiththeconsumptionofelectricityinT&DEmissionsfromthegenerationofelectricitythatisconsumedinaT&Dsystemmaybereportedinscope3underthecategory“generationofelectricitythatisconsumedinaT&Dsystem”byend-users.PublishedelectricitygridemissionfactorsdonotusuallyincludeT&Dlosses.Tocalculatetheseemissions,itmaybenecessarytoapplysupplierorlocationspecificT&Dlossfactors.Companiesthatpurchaseelectricityandtrans-portitintheirownT&DsystemswouldreporttheportionofelectricityconsumedinT&Dunderscope2.AccountingforindirectemissionsassociatedwithT&DlossesTherearetwotypesofelectricityemissionfactors:Emissionfactoratgeneration(EFG)andEmissionsfactoratconsumption(EFC).EFGiscalculatedfromCO2emissionsfromgenerationofelectricitydividedbyamountofelectricitygenerated.EFCiscalculatedfromCO2emissionsfromgenerationdividedbyamountofelectricityconsumed.EFCandEFGarerelatedasshownbelow.Astheseequationsindicate,EFCmultipliedbytheamountofconsumedelectricityyieldsthesumofemissionsattrib-utabletoelectricityconsumedduringenduseandtransmissionanddistribution.Incontrast,EFGmultipliedbytheamountofconsumedelectricityyieldsemissionsattributabletoelectricityconsumedduringenduseonly.Consistentwiththescope2definition(seechapter4),theGHGProtocolCorporateStandardrequirestheuseofEFGtocalculatescope2emissions.TheuseofEFGensuresinternalconsistencyinthetreatmentofelectricityrelatedupstreamemissionscategoriesandavoidsdoublecountinginscope2.Additionally,thereareseveralotheradvantagesinusingEFG:1)Itissimplertocalculateandwidelyavailableinpublishedregional,national,andinternationalsources.2)Itisbasedonacommonlyusedapproachtocalculateemissionsintensity,i.e.,emissionsperunitofproduc-tionoutput.3)Itensurestransparencyinreportingofindirectemis-sionsfromT&Dlosses.TheformulatoaccountforemissionsassociatedwithT&Dlossesisthefollowing:InsomecountriessuchasJapan,localregulationsmayrequireutilitycompaniestoprovidebothEFGandEFCtoitsconsumers,andconsumersmayberequiredtouseEFCtocalculateindirectemissionsfromtheconsumptionofpurchasedelectricity.Inthiscase,acompanystillneedstouseEFGtoreportitsscope2emissionsforaGHGreportpreparedinaccordancewithGHGProtocolCorporateStandard.APPENDIXAEFCxELECTRICITYCONSUMED=EFGx(ELECTRICITYCONSUMED+T&DLOSSES)T&DLOSSESELECTRICITYCONSUMEDEFG=EFC=TOTALCO2EMISSIONSFROMGENERATIONELECTRICITYGENERATEDTOTALCO2EMISSIONSFROMGENERATIONELECTRICITYCONSUMED()INDIRECTEMISSIONSFROMCONSUMPTIONOFELECTRICITYDURINGT&DEFGxELECTRICITYCONSUMEDDURINGT&D=EFC=EFGx1+keypurposeoftheGHGProtocolCorporateStandardistoprovidecompanieswithguidanceonhowtodevelopinventoriesthatprovideanaccurateandcompletepictureoftheirGHGemissionsbothfromtheirdirectoperationsaswellasthosealongthevaluechain.1Forsometypesofcompanies,thisisnotpossiblewithoutaddressingthecompany’simpactsonsequesteredatmosphericcarbon.2SequesteredatmosphericcarbonDuringphotosynthesis,plantsremovecarbon(asCO2)fromtheatmosphereandstoreitinplanttissue.Untilthiscarboniscycledbackintotheatmosphere,itresidesinoneofanumberof“carbonpools.”Thesepoolsinclude(a)abovegroundbiomass(e.g.,vegeta-tion)inforests,farmland,andotherterrestrialenvironments,(b)belowgroundbiomass(e.g.,roots),and(c)biomass-basedproducts(e.g.,woodproducts)bothwhileinuseandwhenstoredinalandfill.Carboncanremaininsomeofthesepoolsforlongperiodsoftime,sometimesforcenturies.Anincreaseinthestockofsequesteredcarbonstoredinthesepoolsrepresentsanetremovalofcarbonfromtheatmos-phere;adecreaseinthestockrepresentsanetadditionofcarbontotheatmosphere.WhyincludeimpactsonsequesteredcarbonincorporateGHGinventories?ItisgenerallyrecognizedthatchangesinstocksofsequesteredcarbonandtheassociatedexchangesofcarbonwiththeatmosphereareimportanttonationallevelGHGemissionsinventories,andconsequently,theseimpactsonsequesteredcarbonarecommonlyaddressedinnationalinventories(UNFCCC,2000).Similarly,forcompaniesinbiomass-basedindustries,suchastheforestproductsindustry,someofthemostsignificantaspectsofacompany’soverallimpactonatmosphericCO2levelswilloccurasaresultofimpactsonsequesteredcarbonintheirdirectoperationsaswellasalongtheirvaluechain.SomeforestproductcompanieshavebeguntoaddressthisaspectoftheirGHGfootprintwithintheircorporateGHGinventories(GeorgiaPacific,2002).Moreover,WBCSD’sSustainableForestProductsIndustryWorkingGroup—whichrepresentsasignificantclusterofinte-gratedforestrycompaniesoperatinginternationally—isdevelopingaprojectthatwillfurtherinvestigatecarbonmeasurement,accounting,reporting,andownershipissuesassociatedwiththeforestproductsvaluechain.Informationonacompany’simpactsonsequesteredatmosphericcarboncanbeusedforstrategicplanning,foreducatingstakeholders,andforidentifyingopportunitiesforimprovingthecompany’sGHGprofile.Opportunitiesmayalsoexisttocreatevaluefromreductionscreatedalongthevaluechainbycompaniesactingaloneorinpartnershipwithrawmaterialprovidersorcustomers.AccountingforsequesteredcarboninthecontextoftheGHGProtocolCorporateStandardConsensusmethodshaveyettobedevelopedundertheGHGProtocolCorporateStandardforaccountingofsequesteredatmosphericcarbonasitmovesthroughthevaluechainofbiomass-basedindustries.Nonetheless,someissuesthatwouldneedtobeaddressedwhenaddressingimpactsonsequesteredcarbonincorporateinventoriescanbeexaminedinthecontextofexistingguidanceprovidedbytheGHGProtocolCorporateStandardashighlightedbelow.SETTINGORGANIZATIONALBOUNDARIESTheGHGProtocolCorporateStandardoutlinestwoapproachesforconsolidatingGHGdata—theequityshareapproachandthecontrolapproach.Insomecases,itmaybepossibletoapplytheseapproachesdirectlytoemissions/removalsassociatedwithsequesteredatmos-phericcarbon.Amongtheissuesthatmayneedtobeexaminedistheownershipofsequesteredcarbonunderthedifferenttypesofcontractualarrangementsinvolvinglandandwoodownership,harvestingrights,andcontroloflandmanagementandharvestingdeci-sions.Thetransferofownershipascarbonmovesthroughthevaluechainmayalsoneedtobeaddressed.Insomecases,aspartofariskmanagementprogramforinstance,companiesmaybeinterestedinperformingvaluechainassessmentsofsequesteredcarbonwithoutregardtoownershiporcontroljustastheymightdoforscope2and3emissions.SETTINGOPERATIONALBOUNDARIESAswithGHGemissionsaccounting,settingoperationalboundariesforsequesteredcarboninventorieswouldhelpcompaniestransparentlyreporttheirimpactsonsequesteredcarbonalongtheirvaluechain.Companiesmay,forexample,provideadescriptionofthevaluechaincapturingimpactsthatarematerialtotheresultsoftheanalysis.Thisshouldincludewhichpoolsare88AccountingforSequesteredAtmosphericCarbonAPPENDIXBAincludedintheanalysis,whicharenot,andtherationalefortheselections.Untilconsensusmethodsaredevelopedforcharacterizingimpactsonsequesteredatmosphericcarbonalongthevaluechain,thisinformationcanbeincludedinthe“optionalinformation”sectionofaGHGinventorycompiledusingtheGHGProtocolCorporateStandard.TRACKINGREMOVALSOVERTIMEAsissometimesthecasewithaccountingforGHGemis-sions,baseyeardataforimpactsonsequesteredcarbonmayneedtobeaveragedovermultipleyearstoaccom-modatetheyear-to-yearvariabilityexpectedofthesesystems.Thetemporalscaleusedinsequesteredcarbonaccountingwilloftenbecloselytiedtothespatialscaleoverwhichtheaccountingisdone.Thequestionofhowtorecalculatebaseyearstoaccountforlandacquisitionanddivestment,landusechanges,andotheractivitiesalsoneedstobeaddressed.IDENTIFYINGANDCALCULATINGGHGREMOVALSTheGHGProtocolCorporateStandarddoesnotincludeconsensusmethodsforsequesteredcarbonquantifica-tion.Companiesshould,therefore,explainthemethodsused.Insomeinstances,quantificationmethodsusedinnationalinventoriescanbeadaptedforcorporate-levelquantificationofsequesteredcarbon.IPCC(1997;2000b)providesusefulinformationonhowtodothis.In2004,IPCCisexpectedtoissueGoodPracticeGuidanceforLandUse,LandUseChangeandForestry,withinformationonmethodsforquan-tificationofsequesteredcarboninforestsandforestproducts.Companiesmayalsofinditusefultoconsultthemethodsusedtopreparenationalinventoriesforthosecountrieswheresignificantpartsoftheircompany’svaluechainreside.Inaddition,althoughcorporateinventoryaccountingdiffersfromproject-basedaccounting(asdiscussedbelow),itmaybepossibletousesomeofthecalculationandmonitoringmethodsderivedfromprojectlevelaccountingofsequestrationprojects.ACCOUNTINGFORREMOVALENHANCEMENTSAcorporateinventorycanbeusedtoaccountforyearlyremovalswithinthecorporateinventoryboundary.Incontrast,theforthcomingGHGProtocolProjectQuantificationStandardisdesignedtocalculateprojectreductionsthatwillbeusedasoffsets,relativetoahypo-theticalbaselinescenarioforwhatwouldhavehappenedwithouttheproject.Intheforestrysector,projectstaketheformofremovalenhancements.Chapter8inthisdocumentaddressessomeoftheissuesthatmustbeaddressedwhenaccountingforoffsetsfromGHGreductionprojects.Muchofthisguidanceisalsoapplicabletoremovalenhancementprojects.Oneexampleistheissueofreversibilityofremovals—alsobrieflydescribedinchapter8.REPORTINGGHGREMOVALSUntilconsensusmethodsaredevelopedforcharacter-izingimpactsonsequesteredatmosphericcarbonalongthevaluechain,thisinformationcanbeincludedinthe“optionalinformation”sectionoftheinventory(Seechapter9).Informationonsequesteredcarboninthecompany’sinventoryboundaryshouldbekeptseparatefromproject-basedreductionsatsourcesthatarenotintheinventoryboundary.Whereremovalenhancementprojectstakeplacewithinacompany’sinventoryboundarytheywouldnormallyshowupasanincreaseincarbonremovalsovertime,butcanalsobereportedinoptionalinformation.However,theyshouldalsobeiden-tifiedseparatelytoensurethattheyarenotdoublecounted.Thisisespeciallyimportantwhentheyaresoldasoffsetsorcreditstoathirdparty.Ascompaniesdevelopexperienceusingvariousmethodsforcharacterizingimpactsonsequesteredcarbon,moreinformationwillbecomeavailableonthelevelofaccuracytoexpectfromthesemethods.Intheearlystagesofdevelopingthisexperience,however,companiesmayfinditdifficulttoassesstheuncer-taintyassociatedwiththeestimatesandthereforemayneedtogivespecialcaretohowtheestimatesarerepresentedtostakeholders.89APPENDIXBNOTES1InthisAppendix,“valuechain”meansaseriesofoperationsandentities,startingwiththeforestandextendingthroughend-of-lifemanagement,that(a)supplyoraddvaluetorawmaterialsandinter-mediateproductstoproducefinalproductsforthemarketplaceand(b)areinvolvedintheuseandend-of-lifemanagementoftheseproducts.2InthisAppendixtheterm“sequesteredatmosphericcarbon”refersexclusivelytosequestrationbybiologicalsinks.FOCUS(Organization,project,facility)Organization(Projectspossiblein2004)OrganizationOrganizationOrganizationFacilityFacilityOrganizationandprojectOrganizationGASESCOVEREDOrganizationsreportCO2forfirstthreeyearsofparticipa-tion,allsixGHGsthereafter.SixCO2SixSixSixKyotogasesaswellasotherpollutantsSixSixORGANIZATIONALPROJECTBOUNDARIESEquityshareorcontrolforCaliforniaorUSoperationsEquityshareorcontrolforUSoperationsataminimumEquityshareorcontrolforworldwideoperationsEquityshareorcontrolforworldwideoperationsFacilitiesinselectedsectorsFacilitiesthatfallunderEUIPPCdirectiveEquityshareEquityshareorcontrolforworldwideoperationsAPPENDIX90COverviewofGHGProgramsOverviewofGHGProgramsNAMEOFPROGRAMCaliforniaClimateActionRegistrywww.climateregisty.orgUSEPAClimateLeaderswww.epa.gov/climateleadersWWFClimateSaverswww.worldwildlife.org/climatesaversWorldEconomicForumGlobalGHGRegisterwww.weforum.orgEUGHGEmissionsAllowanceTradingSchemewww.europa.eu.int/comm/environment/EuropeanPollutantEmissionRegistrywww.europa.eu.int/comm/environ-ment/ippc/eper/index.htmChicagoClimateExchangewww.chicagoclimateexchange.comRespectEuropeBLICCwww.respecteurope.com/rt2/blicc/TYPEOFPROGRAMVoluntaryregistryVoluntaryreductionprogramVoluntaryregistryVoluntaryregistryMandatoryallowancetradingschemeMandatoryregistryforlargeindustrialfacilitiesVoluntaryallowancetradingschemeVoluntaryreductionprogramOPERATIONALBOUNDARIESScope1and2required,scope3tobedecidedScope1and2required,scope3optionalScope1and2required,scope3optionalScope1and2required,scope3optionalScope1Scope1requiredDirectcombustionandprocessemis-sionsourcesandindirectemissionsoptional.Scope1and2required,scope3stronglyencouragedNATURE/PURPOSEOFPROGRAMBaselineprotection,publicreporting,possiblefuturetargetsPublicrecognition,assistancesettingtargetsandachievingreductionsAchievetargets,publicrecognition,expertassistanceBaselineprotection,publicreporting,targetsencouragedbutoptionalAchieveannualcapsthroughtradableallowancemarket,initialperiodfrom2005to2007PermitindividualindustrialfacilitiesAchieveannualtargetsthroughtrad-ableallowancemarketAchievetargets,publicrecognition,expertassistanceBASEYEARSpecifictoeachorganization,recalculationconsistentwithGHGProtocolCorporateStandardrequiredYearthatorganizationjoinsprogram,recalculationconsistentwithGHGProtocolCorporateStandardrequiredChosenyearsince1990,specifictoeachorganization,recalcula-tionconsistentwithGHGProtocolCorporateStandardrequiredChosenyearsince1990,specifictoeachorganization,recalcula-tionconsistentwithGHGProtocolCorporateStandardrequiredDeterminedbymembercountryforallowanceallocationNotapplicableAverageof1998through2001Specifictoeachorganization,recalculationconsistentwithGHGProtocolCorporateStandardrequiredTARGETEncouragedbutoptionalRequired,specifictoeachorganizationRequired,specifictoeachorganizationEncouragedbutoptionalAnnualcompliancewithallocatedandtradedallowances,EUcommittedto8%overallreductionbelow1990Notapplicable1%belowitsbaselinein2003,2%belowbaselinein2004,3%belowbase-linein2005and4%belowbaselinein2006Mandatory,specifictoeachorganizationVERIFICATIONRequiredthroughcerti-fiedthirdpartyverifierOptional,providesguidanceandchecklistofcomponentsthatshouldbeincludedifundertakenThirdpartyverifierThirdpartyverifierorspotchecksbyWEFThirdpartyverifierLocalpermittingauthorityThirdpartyverifierThirdpartyverifierAPPENDIXC9192IndustrySectorsandScopesAPPENDIXDSCOPE1EMISSIONSOURCES•Stationarycombustion(boilersandturbinesusedintheproductionofelectricity,heatorsteam,fuelpumps,fuelcells,flaring)•Mobilecombustion(trucks,bargesandtrainsfortransportationoffuels)•Fugitiveemissions(CH4leakagefromtransmissionandstoragefacilities,HFCemissionsfromLPGstoragefacilities,SF6emissionsfromtransmissionanddistri-butionequipment)•Stationarycombustion(processheaters,engines,turbines,flares,incinerators,oxidizers,productionofelectricity,heatandsteam)•Processemissions(processvents,equipmentvents,maintenance/turnaroundactivities,non-routineactivities)•Mobilecombustion(transportationofrawmaterials/products/waste;companyownedvehicles)•Fugitiveemissions(leaksfrompressurizedequipment,wastewatertreatment,surfaceimpoundments)•Stationarycombustion(methaneflaringanduse,useofexplosives,minefires)•Mobilecombustion(miningequipment,transportationofcoal)•Fugitiveemissions(CH4emissionsfromcoalminesandcoalpiles)•Stationarycombustion(bauxitetoaluminumprocessing,cokebaking,lime,sodaashandfueluse,on-siteCHP)•Processemissions(carbonanodeoxidation,electrol-ysis,PFC)•Mobilecombustion(pre-andpost-smeltingtrans-portation,orehaulers)•Fugitiveemissions(fuellineCH4,HFCandPFC,SF6covergas)•Stationarycombustion(coke,coalandcarbonatefluxes,boilers,flares)•Processemissions(crudeironoxidation,consumptionofreducingagent,carboncontentofcrudeiron/ferroalloys)•Mobilecombustion(on-sitetransportation)•Fugitiveemission(CH4,N2O)•Stationarycombustion(boilers,flaring,reductivefurnaces,flamereactors,steamreformers)•Processemissions(oxidation/reductionofsubstrates,impurityremoval,N2Obyproducts,catalyticcracking,myriadotheremissionsindividualtoeachprocess)•Mobilecombustion(transportationofrawmaterials/products/waste)•Fugitiveemissions(HFCuse,storagetankleakage)SCOPE2EMISSIONSOURCES•Stationarycombustion(consumptionofpurchasedelectricity,heatorsteam)•Stationarycombustion(consumptionofpurchasedelectricity,heatorsteam)•Stationarycombustion(consumptionofpurchasedelectricity,heatorsteam)•Stationarycombustion(consumptionofpurchasedelectricity,heatorsteam)•Stationarycombustion(consumptionofpurchasedelectricity,heatorsteam)•Stationarycombustion(consumptionofpurchasedelectricity,heatorsteam)SCOPE3EMISSIONSOURCES1•Stationarycombustion(miningandextractionoffuels,energyforrefiningorprocessingfuels)•Processemissions(productionoffuels,SF6emissions2)•Mobilecombustion(transportationoffuels/waste,employeebusinesstravel,employeecommuting)•Fugitiveemissions(CH4andCO2fromwastelandfills,pipelines,SF6emissions)•Stationarycombustion(productuseasfuelorcombus-tionfortheproductionofpurchasedmaterials)•Mobilecombustion(transportationofrawmaterials/products/waste,employeebusinesstravel,employeecommuting,productuseasfuel)•Processemissions(productuseasfeedstockoremis-sionsfromtheproductionofpurchasedmaterials)•Fugitiveemissions(CH4andCO2fromwastelandfillsorfromtheproductionofpurchasedmaterials)•Stationarycombustion(productuseasfuel)•Mobilecombustion(transportationofcoal/waste,employeebusinesstravel,employeecommuting)•Processemissions(gasification)•Stationarycombustion(rawmaterialprocessingandcokeproductionbysecondpartysuppliers,manufactureofproductionlinemachinery)•Mobilecombustion(transportationservices,businesstravel,employeecommuting)•Processemissions(duringproductionofpurchasedmaterials)•Fugitiveemissions(miningandlandfillCH4andCO2,outsourcedprocessemissions)•Stationarycombustion(miningequipment,productionofpurchasedmaterials)•Processemissions(productionofferroalloys)•Mobilecombustion(transportationofrawmaterials/products/wasteandintermediateproducts)•Fugitiveemissions(CH4andCO2fromwastelandfills)•Stationarycombustion(productionofpurchasedmate-rials,wastecombustion)•Processemissions(productionofpurchasedmaterials)•Mobilecombustion(transportationofrawmaterials/products/waste,employeebusinesstravel,employeecommuting)•Fugitiveemissions(CH4andCO2fromwastelandfillsandpipelines)SECTORENERGYEnergyGenerationOilandGas3CoalMiningMETALSAluminum4IronandSteel5CHEMICALSNitricacid,Ammonia,Adipicacid,Urea,andPetrochemicalsAPPENDIXD93SCOPE1EMISSIONSOURCES•Processemissions(calcinationoflimestone)•Stationarycombustion(clinkerkiln,dryingofrawmaterials,productionofelectricity)•Mobilecombustion(quarryoperations,on-sitetransportation)•Stationarycombustion(incinerators,boilers,flaring)•Processemissions(sewagetreatment,nitrogenloading)•Fugitiveemissions(CH4andCO2emissionsfromwasteandanimalproductdecomposition)•Mobilecombustion(transportationofwaste/products)•Stationarycombustion(productionofsteamandelec-tricity,fossilfuel-derivedemissionsfromcalcinationofcalciumcarbonateinlimekilns,dryingproductswithinfrareddriersfiredwithfossilfuels)•Mobilecombustion(transportationofrawmaterials,prod-ucts,andwastes,operationofharvestingequipment)•Fugitiveemissions(CH4andCO2fromwaste)•Stationarycombustion(productionofelectricity,heatorsteam)•Processemissions(HFCventing)•Mobilecombustion(transportationofrawmaterials/products/waste)•Fugitiveemissions(HFCuse)•Processemissions(C2F6,CH4,CHF3,SF6,NF3,C3F8,C4F8,N2Ousedinwaferfabrication,CF4createdfromC2F6andC3F8processing)•Stationarycombustion(oxidationofvolatileorganicwaste,productionofelectricity,heatorsteam)•Fugitiveemissions(processgasstorageleaks,containerremainders/heelleakage)•Mobilecombustion(transportationofrawmaterials/products/waste)•Stationarycombustion(productionofelectricity,heatorsteam)•Mobilecombustion(transportationofrawmaterials/waste)•Fugitiveemissions(mainlyHFCemissionsduringuseofrefrigerationandair-conditioningequipment)SCOPE2EMISSIONSOURCES•Stationarycombustion(consumptionofpurchasedelectricity,heatorsteam)•Stationarycombustion(consumptionofpurchasedelectricity,heatorsteam)•Stationarycombustion(consumptionofpurchasedelectricity,heatorsteam)•Stationarycombustion(consumptionofpurchasedelectricity,heatorsteam)•Stationarycombustion(consumptionofpurchasedelectricity,heatorsteam)•Stationarycombustion(consumptionofpurchasedelectricity,heatorsteam)SCOPE3EMISSIONSOURCES•Stationarycombustion(productionofpurchasedmate-rials,wastecombustion)•Processemissions(productionofpurchasedclinkerandlime)•Mobilecombustion(transportationofrawmaterials/products/waste,employeebusinesstravel,employeecommuting)•Fugitiveemissions(miningandlandfillCH4andCO2,outsourcedprocessemissions)•Stationarycombustion(recycledwasteusedasafuel)•Processemissions(recycledwasteusedasafeedstock)•Mobilecombustion(transportationofwaste/products,employeebusinesstravel,employeecommuting)•Stationarycombustion(productionofpurchasedmate-rials,wastecombustion)•Processemissions(productionofpurchasedmaterials)•Mobilecombustion(transportationofrawmaterials/products/waste,employeebusinesstravel,employeecommuting)•Fugitiveemissions(landfillCH4andCO2emissions)HFC,PFC,SF6&HCFC22production•Stationarycombustion(productionofpurchasedmaterials)•Processemissions(productionofpurchasedmaterials)•Mobilecombustion(transportationofrawmaterials/prod-ucts/waste,employeebusinesstravel,employeecommuting)•Fugitiveemissions(fugitiveleaksinproductuse,CH4andCO2fromwastelandfills)•Stationarycombustion(productionofimportedmate-rials,wastecombustion,upstreamT&Dlossesofpurchasedelectricity)•Processemissions(productionofpurchasedmaterials,outsourceddisposalofreturnedprocessgasesandcontainerremainder/heel)•Mobilecombustion(transportationofrawmaterials/prod-ucts/waste,employeebusinesstravel,employeecommuting)•Fugitiveemissions(landfillCH4andCO2emissions,down-streamprocessgascontainerremainder/heelleakage)OtherSectors•Stationarycombustion(productionofpurchasedmaterials)•Processemissions(productionofpurchasedmaterials)•Mobilecombustion(transportationofrawmaterials/products/waste,employeebusinesstravel,employeecommuting)SECTORMINERALSCementandLime6WASTE7Landfills,Wastecombustion,WaterservicesPULP&PAPERPulpandPaper8HCFC22productionSemiconductorproductionServicesector/Officebasedorganizations10HFC,PFC,SF6&HCFC22PRODUCTION9SEMICONDUCTORPRODUCTIONOTHERSECTORS10AppendixD941Scope3activitiesofoutsourcing,contractmanufacturing,andfran-chisesarenotaddressedinthistablebecausetheinclusionofspecificGHGsourceswilldependonthenatureoftheoutsourcing.2GuidelinesonunintentionalSF6processemissionsaretobedeveloped.3TheAmericanPetroleumInstitute’sCompendiumofGreenhouseGasEmissionsMethodologiesfortheOilandGasIndustry(2004)providesguidelinesandcalculationmethodologyforcalculatingGHGemissionsfromtheoilandgassector.4TheInternationalAluminumInstitute’sAluminumSectorGreenhouseGasProtocol(2003),incooperationwithWRIandWBCSD,providesguidelinesandtoolsforcalculatingGHGemissionsfromthealuminumsector.5TheInternationalIronandSteelInstitute'sIronandSteelsectorguide-lines,incooperationwithWRIandWBCSD,areunderdevelopment.6TheWBCSDWorkingGroupCement:TowardaSustainableCementIndustryhasdevelopedTheCementCO2Protocol:CO2EmissionsMonitoringandReportingProtocolfortheCementIndustry(2002),whichincludesguidelinesandtoolstocalculateGHGemissionsfromthecementsector.7Guidelinesforwastesectoraretobedeveloped.8TheClimateChangeWorkingGroupoftheInternationalCouncilofForestandPaperAssociationshasdevelopedCalculationToolsforEstimatingGreenhouseGasEmissionsfromPulpandPaperMills(2002),whichincludesguidelinesandtoolstocalculateGHGemissionsfromthepulpandpapersector.9GuidelinesforPFCandSF6productionaretobedeveloped.10Businessesin“othersectors”canestimateGHGemissionsusingcross-sectoralestimationtools—stationarycombustion,mobile(transportation)combustion,HFCuse,measurementandestimationuncertainty,andwaste.11WRIhasdevelopedWorking9to5onClimateChange:AnOfficeGuide(2002)andwww.Safeclimate.net,whichincludeguidelinesandcalculationtoolsforcalculatingGHGemissionsfromoffice-basedorganizations.NOTES95AcronymsCDMCleanDevelopmentMechanismCEMContinuousEmissionMonitoringCH4MethaneCERCertifiedEmissionReductionCCARCaliforniaClimateActionRegistryCCXChicagoClimateExchangeCO2CarbonDioxideCO2-eCarbonDioxideEquivalentEPEREuropeanPollutantEmissionRegisterEUETSEuropeanUnionEmissionsAllowanceTradingSchemeGHGGreenhouseGasGAAPGenerallyAcceptedAccountingPrinciplesHFCsHydrofluorocarbonsIPCCIntergovernmentalPanelonClimateChangeIPIECAInternationalPetroleumIndustryEnvironmentalConservationAssociationISOInternationalStandardsOrganizationJIJointImplementationN4ONitrousOxideNGONon-GovernmentalOrganizationPFCsPerfluorocarbonsSF6SulfurHexafluorideT&DTransmissionandDistributionUKETSUnitedKingdomEmissionTradingSchemeWBCSDWorldBusinessCouncilforSustainableDevelopmentWRIWorldResourcesInstituteAbsolutetargetAtargetdefinedbyreductioninabsoluteemissionsovertimee.g.,reducesCO2emissionsby25%below1994levelsby2010.(Chapter11)AdditionalityAcriterionforassessingwhetheraprojecthasresultedinGHGemissionreductionsorremovalsinadditiontowhatwouldhaveoccurredinitsabsence.Thisisanimportantcriterionwhenthegoaloftheprojectistooffsetemissionselsewhere.(Chapter8)AllowanceAcommoditygivingitsholdertherighttoemitacertainquantityofGHG.(Chapter11)Annex1countriesDefinedintheInternationalClimateChangeConventionasthosecountriestakingonemissionsreductionobligations:Australia;Austria;Belgium;Belarus;Bulgaria;Canada;Croatia;CzechRepublic;Denmark;Estonia;Finland;France;Germany;Greece;Hungary;Iceland;Ireland;Italy;Japan;Latvia;Liechtenstein;Lithuania;Luxembourg;Monaco;Netherlands;NewZealand;Norway;Poland;Portugal;Romania;RussianFederation;Slovakia;Slovenia;Spain;Sweden;Switzerland;Ukraine;UnitedKingdom;USA.Associated/affiliatedcompanyTheparentcompanyhassignificantinfluenceovertheoperatingandfinancialpoliciesoftheassociated/affiliatedcompany,butnotfinancialcontrol.(Chapter3)AuditTrailWellorganizedandtransparenthistoricalrecordsdocumentinghowaninventorywascompiled.BaselineAhypotheticalscenarioforwhatGHGemissions,removalsorstoragewouldhavebeenintheabsenceoftheGHGprojectorprojectactivity.(Chapter8)BaseyearAhistoricdatum(aspecificyearoranaverageovermultipleyears)againstwhichacompany’semissionsaretrackedovertime.(Chapter5)BaseyearemissionsGHGemissionsinthebaseyear.(Chapter5)BaseyearemissionsrecalculationRecalculationofemissionsinthebaseyeartoreflectachangeinthestructureofthecompany,ortoreflectachangeintheaccountingmethodologyused.Thisensuresdataconsistencyovertime,i.e.,comparisonsoflikewithlikeovertime.(Chapter5,11)BiofuelsFuelmadefromplantmaterial,e.g.wood,strawandethanolfromplantmatter(Chapter4,9,AppendixB)BoundariesGHGaccountingandreportingboundariescanhaveseveraldimensions,i.e.organizational,opera-tional,geographic,businessunit,andtargetboundaries.Theinventoryboundarydetermineswhichemissionsareaccountedandreportedbythecompany.(Chapter3,4,11)CapandtradesystemAsystemthatsetsanoverallemissionslimit,allocatesemissionsallowancestoparticipants,andallowsthemtotradeallowancesandemissioncreditswitheachother.(Chapter2,8,11)CapitalLeaseAleasewhichtransferssubstantiallyalltherisksandrewardsofownershiptothelesseeandisaccountedforasanassetonthebalancesheetofthelessee.AlsoknownasaFinancialorFinanceLease.LeasesotherthanCapital/Financial/FinanceleasesareOperatingleases.Consultanaccountantforfurtherdetailasdefinitionsofleasetypesdifferbetweenvariousacceptedfinancialstandards.(Chapter4)CarbonsequestrationTheuptakeofCO2andstorageofcarboninbiologicalsinks.CleanDevelopmentMechanismAmechanismestablishedbyArticle12oftheKyotoProtocolforproject-basedemissionreduction(CDM)activitiesindevelopingcountries.TheCDMisdesignedtomeettwomainobjectives:toaddressthesustainabilityneedsofthehostcountryandtoincreasetheopportunitiesavailabletoAnnex1PartiestomeettheirGHGreductioncommitments.TheCDMallowsforthecreation,acquisitionandtransferofCERsfromclimatechangemitigationprojectsundertakeninnon-Annex1countries.Glossary96CertifiedEmissionReductionsAunitofemissionreductiongeneratedbyaCDMproject.CERsaretradablecommoditiesthatcanbe(CERs)usedbyAnnex1countriestomeettheircommitmentsundertheKyotoProtocol.Co-generationunit/CombinedAfacilityproducingbothelectricityandsteam/heatusingthesamefuelsupply.(Chapter3)heatandpower(CHP)ConsolidationCombinationofGHGemissionsdatafromseparateoperationsthatformpartofonecompanyorgroupofcompanies.(Chapter3,4)ControlTheabilityofacompanytodirectthepoliciesofanotheroperation.Morespecifically,itisdefinedaseitheroperationalcontrol(theorganizationoroneofitssubsidiarieshasthefullauthoritytointroduceandimplementitsoperatingpoliciesattheoperation)orfinancialcontrol(theorganizationhastheabilitytodirectthefinancialandoperatingpoliciesoftheoperationwithaviewtogainingeconomicbenefitsfromitsactivities).(Chapter3)CorporateinventoryprogramAprogramtoproduceannualcorporateinventoriesthatareinkeepingwiththeprinciples,standards,andguidanceoftheGHGProtocolCorporateStandard.Thisincludesallinstitutional,managerialandtechnicalarrangementsmadeforthecollectionofdata,preparationofaGHGinventory,andimple-mentationofthestepstakentomanagethequalityoftheiremissioninventory.CO2equivalent(CO2-e)Theuniversalunitofmeasurementtoindicatetheglobalwarmingpotential(GWP)ofeachofthesixgreenhousegases,expressedintermsoftheGWPofoneunitofcarbondioxide.Itisusedtoevaluatereleasing(oravoidingreleasing)differentgreenhousegasesagainstacommonbasis.Cross-sectorcalculationtoolAGHGProtocolcalculationtoolthataddressesGHGsourcescommontovarioussectors,e.g.emissionsfromstationaryormobilecombustion.SeealsoGHGProtocolcalculationtools(www.ghgprotocol.org).DirectGHGemissionsEmissionsfromsourcesthatareownedorcontrolledbythereportingcompany.(Chapter4)DirectmonitoringDirectmonitoringofexhauststreamcontentsintheformofcontinuousemissionsmonitoring(CEM)orperiodicsampling.(Chapter6)DoublecountingTwoormorereportingcompaniestakeownershipofthesameemissionsorreductions.(Chapter3,4,8,11)EmissionsThereleaseofGHGintotheatmosphere.EmissionfactorAfactorallowingGHGemissionstobeestimatedfromaunitofavailableactivitydata(e.g.tonnesoffuelconsumed,tonnesofproductproduced)andabsoluteGHGemissions.(Chapter6)EmissionReductionUnit(ERU)AunitofemissionreductiongeneratedbyaJointImplementation(JI)project.ERUsaretradablecommoditieswhichcanbeusedbyAnnex1countriestohelpthemmeettheircommitmentundertheKyotoProtocol.EquityshareTheequitysharereflectseconomicinterest,whichistheextentofrightsacompanyhastotherisksandrewardsflowingfromanoperation.Typically,theshareofeconomicrisksandrewardsinanoper-ationisalignedwiththecompany'spercentageownershipofthatoperation,andequitysharewillnormallybethesameastheownershippercentage.(Chapter3)EstimationuncertaintyUncertaintythatariseswheneverGHGemissionsarequantified,duetouncertaintyindatainputsandcalculationmethodologiesusedtoquantifyGHGemissions.(Chapter7)FinanceleaseAleasewhichtransferssubstantiallyalltherisksandrewardsofownershiptothelesseeandisaccountedforasanassetonthebalancesheetofthelessee.AlsoknownasaCapitalorFinancialLease.LeasesotherthanCapital/Financial/FinanceleasesareOperatingleases.Consultanaccountantforfurtherdetailasdefinitionsofleasetypesdifferbetweenvariousacceptedaccountingprinciples.(Chapter4)GLOSSARY97FixedassetinvestmentEquipment,land,stocks,property,incorporatedandnon-incorporatedjointventures,andpartnershipsoverwhichtheparentcompanyhasneithersignificantinfluencenorcontrol.(Chapter3)FugitiveemissionsEmissionsthatarenotphysicallycontrolledbutresultfromtheintentionalorunintentionalreleasesofGHGs.Theycommonlyarisefromtheproduction,processingtransmissionstorageanduseoffuelsandotherchemicals,oftenthroughjoints,seals,packing,gaskets,etc.(Chapter4,6)GreenpowerAgenerictermforrenewableenergysourcesandspecificcleanenergytechnologiesthatemitfewerGHGemissionsrelativetoothersourcesofenergythatsupplytheelectricgrid.Includessolarphotovoltaicpanels,solarthermalenergy,geothermalenergy,landfillgas,low-impacthydropower,andwindturbines.(Chapter4)Greenhousegases(GHG)Forthepurposesofthisstandard,GHGsarethesixgaseslistedintheKyotoProtocol:carbondioxide(CO2);methane(CH4);nitrousoxide(N2O);hydrofluorocarbons(HFCs);perfluorocarbons(PFCs);andsulphurhexafluoride(SF6).GHGcaptureCollectionofGHGemissionsfromaGHGsourceforstorageinasink.GHGcreditGHGoffsetscanbeconvertedintoGHGcreditswhenusedtomeetanexternallyimposedtarget.AGHGcreditisaconvertibleandtransferableinstrumentusuallybestowedbyaGHGprogram.(Chapter8,11)GHGoffsetOffsetsarediscreteGHGreductionsusedtocompensatefor(i.e.,offset)GHGemissionselsewhere,forexampletomeetavoluntaryormandatoryGHGtargetorcap.Offsetsarecalculatedrelativetoabaselinethatrepresentsahypotheticalscenarioforwhatemissionswouldhavebeenintheabsenceofthemitigationprojectthatgeneratestheoffsets.Toavoiddoublecounting,thereductiongivingrisetotheoffsetmustoccuratsourcesorsinksnotincludedinthetargetorcapforwhichitisused.GHGprogramAgenerictermusedtorefertoanyvoluntaryormandatoryinternational,national,sub-national,governmentornon-governmentalauthoritythatregisters,certifies,orregulatesGHGemissionsorremovalsoutsidethecompany.e.g.CDM,EUETS,CCX,andCCAR.GHGprojectAspecificprojectoractivitydesignedtoachieveGHGemissionreductions,storageofcarbon,orenhancementofGHGremovalsfromtheatmosphere.GHGprojectsmaybestand-aloneprojects,orspecificactivitiesorelementswithinalargernon-GHGrelatedproject.(Chapter8,11)GHGProtocolcalculationtoolsAnumberofcross-sectorandsector-specifictoolsthatcalculateGHGemissionsonthebasisofactivitydataandemissionfactors(availableatwww.ghgprotocol.org).GHGProtocolInitiativeAmulti-stakeholdercollaborationconvenedbytheWorldResourcesInstituteandWorldBusinessCouncilforSustainableDevelopmenttodesign,developandpromotetheuseofaccountingandreportingstandardsforbusiness.Itcomprisesoftwoseparatebutlinkedstandards—theGHGProtocolCorporateAccountingandReportingStandardandtheGHGProtocolProjectQuantificationStandard.GHGProtocolProjectAnadditionalmoduleoftheGHGProtocolInitiativeaddressingthequantificationofGHGQuantificationStandardreductionprojects.Thisincludesprojectsthatwillbeusedtooffsetemissionselsewhereand/orgeneratecredits.Moreinformationavailableatwww.ghgprotocol.org.(Chapter8,11)GHGProtocolsectorspecificAGHGcalculationtoolthataddressesGHGsourcesthatareuniquetocertainsectors,e.g.,processcalculationtoolsemissionsfromaluminumproduction.(seealsoGHGProtocolCalculationtools)GHGpublicreportProvides,amongotherdetails,thereportingcompany’sphysicalemissionsforitschoseninventoryboundary.(Chapter9)98GlossaryGHGregistryApublicdatabaseoforganizationalGHGemissionsand/orprojectreductions.Forexample,theUSDepartmentofEnergy1605bVoluntaryGHGReportingProgram,CCAR,WorldEconomicForum’sGlobalGHGRegistry.Eachregistryhasitsownrulesregardingwhatandhowinformationisreported.(Introduction,Chapter2,5,8,10)GHGremovalAbsorbtionorsequestrationofGHGsfromtheatmosphere.GHGsinkAnyphysicalunitorprocessthatstoresGHGs;usuallyreferstoforestsandunderground/deepseareservoirsofCO2.GHGsourceAnyphysicalunitorprocesswhichreleasesGHGintotheatmosphere.GHGtradesAllpurchasesorsalesofGHGemissionallowances,offsets,andcredits.GlobalWarmingPotential(GWP)Afactordescribingtheradiativeforcingimpact(degreeofharmtotheatmosphere)ofoneunitofagivenGHGrelativetooneunitofCO2.Groupcompany/subsidiaryTheparentcompanyhastheabilitytodirectthefinancialandoperatingpoliciesofagroupcompany/subsidiarywithaviewtogainingeconomicbenefitsfromitsactivities.(Chapter3)HeatingvalueTheamountofenergyreleasedwhenafuelisburnedcompletely.Caremustbetakennottoconfusehigherheatingvalues(HHVs),usedintheUSandCanada,andlowerheatingvalues,usedinallothercountries(forfurtherdetailsrefertothecalculationtoolforstationarycombustionavailableatwww.ghgprotocol.org).IndirectGHGemissionsEmissionsthatareaconsequenceoftheoperationsofthereportingcompany,butoccuratsourcesownedorcontrolledbyanothercompany.(Chapter4)InsourcingTheadministrationofancillarybusinessactivities,formallyperformedoutsideofthecompany,usingresourceswithinacompany.(Chapter3,4,5,9)IntensityratiosRatiosthatexpressGHGimpactperunitofphysicalactivityorunitofeconomicvalue(e.g.tonnesofCO2emissionsperunitofelectricitygenerated).Intensityratiosaretheinverseofproductivity/effi-ciencyratios.(Chapter9,11)IntensitytargetAtargetdefinedbyreductionintheratioofemissionsandabusinessmetricovertimee.g.,reduceCO2pertonneofcementby12%between2000and2008.(Chapter11)IntergovernmentalPanelonInternationalbodyofclimatechangescientists.TheroleoftheIPCCistoassessthescientific,ClimateChange(IPCC)technicalandsocio-economicinformationrelevanttotheunderstandingoftheriskofhuman-inducedclimatechange(www.ipcc.ch).InventoryAquantifiedlistofanorganization’sGHGemissionsandsources.InventoryboundaryAnimaginarylinethatencompassesthedirectandindirectemissionsthatareincludedintheinven-tory.Itresultsfromthechosenorganizationalandoperationalboundaries.(Chapter3,4)InventoryqualityTheextenttowhichaninventoryprovidesafaithful,trueandfairaccountofanorganization’sGHGemissions.(Chapter7)JointImplementation(JI)TheJImechanismwasestablishedinArticle6oftheKyotoProtocolandreferstoclimatechangemiti-gationprojectsimplementedbetweentwoAnnex1countries.JIallowsforthecreation,acquisitionandtransferof“emissionreductionunits”(ERUs).KyotoProtocolAprotocoltotheUnitedNationsFrameworkConventiononClimateChange(UNFCCC).OnceenteredintoforceitwillrequirecountrieslistedinitsAnnexB(developednations)tomeetreductiontargetsofGHGemissionsrelativetotheir1990levelsduringtheperiodof2008–12.GLOSSARY99Glossary100Leakage(Secondaryeffect)LeakageoccurswhenaprojectchangestheavailabilityorquantityofaproductorservicethatresultsinchangesinGHGemissionselsewhere.(Chapter8)LifeCycleAnalysisAssessmentofthesumofaproduct’seffects(e.g.GHGemissions)ateachstepinitslifecycle,includingresourceextraction,production,useandwastedisposal.(Chapter4)MaterialdiscrepancyAnerror(forexamplefromanoversight,omission,ormiscalculation)thatresultsinthereportedquantitybeingsignificantlydifferenttothetruevaluetoanextentthatwillinfluenceperformanceordecisions.Alsoknownasmaterialmisstatement.(Chapter10)MaterialitythresholdAconceptemployedintheprocessofverification.Itisoftenusedtodeterminewhetheranerrororomissionisamaterialdiscrepancyornot.Itshouldnotbeviewedasademinimusfordefiningacompleteinventory.(Chapter10)MobilecombustionBurningoffuelsbytransportationdevicessuchascars,trucks,trains,airplanes,shipsetc.(Chapter6)ModeluncertaintyGHGquantificationuncertaintyassociatedwithmathematicalequationsusedtocharacterizetherelationshipbetweenvariousparametersandemissionprocesses.(Chapter7)Non-Annex1countriesCountriesthathaveratifiedoraccededtotheUNFCCbutarenotlistedunderAnnex1andarethere-forenotunderanyemissionreductionobligation(seealsoAnnex1countries).OperationAgenerictermusedtodenoteanykindofbusiness,irrespectiveofitsorganizational,governance,orlegalstructures.Anoperationcanbeafacility,subsidiary,affiliatedcompanyorotherformofjointventure.(Chapter3,4)OperatingleaseAleasewhichdoesnottransfertherisksandrewardsofownershiptothelesseeandisnotrecordedasanassetinthebalancesheetofthelessee.LeasesotherthanOperatingleasesareCapital/Financial/Financeleases.Consultanaccountantforfurtherdetailasdefinitionsofleasetypesdifferbetweenvariousacceptedfinancialstandards.(Chapter4)OperationalboundariesTheboundariesthatdeterminethedirectandindirectemissionsassociatedwithoperationsownedorcontrolledbythereportingcompany.Thisassessmentallowsacompanytoestablishwhichoperationsandsourcescausedirectandindirectemissions,andtodecidewhichindirectemissionstoincludethatareaconsequenceofitsoperations.(Chapter4)Organicgrowth/declineIncreasesordecreasesinGHGemissionsasaresultofchangesinproductionoutput,productmix,plantclosuresandtheopeningofnewplants.(Chapter5)OrganizationalboundariesTheboundariesthatdeterminetheoperationsownedorcontrolledbythereportingcompany,dependingontheconsolidationapproachtaken(equityorcontrolapproach).(Chapter3)OutsourcingThecontractingoutofactivitiestootherbusinesses.(Chapter3,4,5)ParameteruncertaintyGHGquantificationuncertaintyassociatedwithquantifyingtheparametersusedasinputstoestima-tionmodels.(Chapter7)PrimaryeffectsThespecificGHGreducingelementsoractivities(reducingGHGemissions,carbonstorage,orenhancingGHGremovals)thattheprojectisintendedtoachieve.(Chapter8)ProcessemissionsEmissionsgeneratedfrommanufacturingprocesses,suchastheCO2thatisarisesfromthebreak-downofcalciumcarbonate(CaCO3)duringcementmanufacture.(Chapter4,AppendixD)Productivity/efficiencyratiosRatiosthatexpressthevalueorachievementofabusinessdividedbyitsGHGimpact.Increasingeffi-ciencyratiosreflectapositiveperformanceimprovement.e.g.resourceproductivity(salespertonneGHG).Productivity/efficiencyratiosaretheinverseofintensityratios.(Chapter9)RatioindicatorIndicatorsprovidinginformationonrelativeperformancesuchasintensityratiosorproductivity/effi-ciencyratios.(Chapter9)RenewableenergyEnergytakenfromsourcesthatareinexhaustible,e.g.wind,water,solar,geothermalenergy,andbiofuels.ReportingPresentingdatatointernalmanagementandexternaluserssuchasregulators,shareholders,thegeneralpublicorspecificstakeholdergroups.(Chapter9)ReversibilityofreductionsThisoccurswhenreductionsaretemporary,orwhereremovedorstoredcarbonmaybereturnedtotheatmosphereatsomepointinthefuture.(Chapter8)RollingbaseyearTheprocessofshiftingorrollingthebaseyearforwardbyacertainnumberofyearsatregularinter-valsoftime.(Chapter5,11)ScientificUncertaintyUncertaintythatariseswhenthescienceoftheactualemissionand/orremovalprocessisnotcompletelyunderstood.(Chapter7)ScopeDefinestheoperationalboundariesinrelationtoindirectanddirectGHGemissions.(Chapter4)Scope1inventoryAreportingorganization’sdirectGHGemissions.(Chapter4)Scope2inventoryAreportingorganization’semissionsassociatedwiththegenerationofelectricity,heating/cooling,orsteampurchasedforownconsumption.(Chapter4)Scope3inventoryAreportingorganization’sindirectemissionsotherthanthosecoveredinscope2.(Chapter4)ScopeofworksAnup-frontspecificationthatindicatesthetypeofverificationtobeundertakenandthelevelofassurancetobeprovidedbetweenthereportingcompanyandtheverifierduringtheverificationprocess.(Chapter10)Secondaryeffects(Leakage)GHGemissionschangesresultingfromtheprojectnotcapturedbytheprimaryeffect(s).Thesearetypicallythesmall,unintendedGHGconsequencesofaproject.(Chapter8)SequesteredatmosphericcarbonCarbonremovedfromtheatmospherebybiologicalsinksandstoredinplanttissue.SequesteredatmosphericcarbondoesnotincludeGHGscapturedthroughcarboncaptureandstorage.SignificancethresholdAqualitativeorquantitativecriteriausedtodefineasignificantstructuralchange.Itistheresponsi-bilityofthecompany/verifiertodeterminethe“significancethreshold”forconsideringbaseyearemissionsrecalculation.Inmostcasesthe“significancethreshold”dependsontheuseoftheinfor-mation,thecharacteristicsofthecompany,andthefeaturesofstructuralchanges.(Chapter5)StationaryCombustionBurningoffuelstogenerateelectricity,steam,heat,orpowerinstationaryequipmentsuchasboilers,furnacesetc.StructuralchangeAchangeintheorganizationaloroperationalboundariesofacompanythatresultinthetransferofownershiporcontrolofemissionsfromonecompanytoanother.Structuralchangesusuallyresultfromatransferofownershipofemissions,suchasmergers,acquisitions,divestitures,butcanalsoincludeoutsourcing/insourcing.(Chapter5)TargetbaseyearThebaseyearusedfordefiningaGHGtarget,e.g.toreduceCO2emissions25%belowthetargetbaseyearlevelsbythetargetbaseyear2000bytheyear2010.(Chapter11)TargetboundaryTheboundarythatdefineswhichGHG’s,geographicoperations,sourcesandactivitiesarecoveredbythetarget.(Chapter11)TargetcommitmentperiodTheperiodoftimeduringwhichemissionsperformanceisactuallymeasuredagainstthetarget.Itendswiththetargetcompletiondate.(Chapter11)TargetcompletiondateThedatethatdefinestheendofthetargetcommitmentperiodanddetermineswhetherthetargetisrelativelyshort-orlong-term.(Chapter11)GLOSSARY101Glossary102TargetdoublecountingpolicyApolicythatdetermineshowdoublecountingofGHGreductionsorotherinstruments,suchasallowancesissuedbyexternaltradingprograms,isdealtwithunderaGHGtarget.Itappliesonlytocompaniesthatengageintrading(saleorpurchase)ofoffsetsorwhosecorporatetargetboundariesinterfacewithothercompanies’targetsorexternalprograms.(Chapter11)Uncertainty1.Statisticaldefinition:Aparameterassociatedwiththeresultofameasurementthatcharacterizesthedispersionofthevaluesthatcouldbereasonablyattributedtothemeasuredquantity.(e.g.,thesamplevarianceorcoefficientofvariation).(Chapter7)2.Inventorydefinition:Ageneralandimprecisetermwhichreferstothelackofcertaintyinemissions-relateddataresultingfromanycausalfactor,suchastheapplicationofnon-representativefactorsormethods,incompletedataonsourcesandsinks,lackoftransparencyetc.Reporteduncertaintyinformationtypicallyspecifiesaquantitativeestimatesofthelikelyorperceiveddifferencebetweenareportedvalueandaqualitativedescriptionofthelikelycausesofthedifference.(Chapter7).UnitedNationsFrameworkSignedin1992attheRioEarthSummit,theUNFCCCisamilestoneConventiononClimateChangeConventiononClimateChangetreatythatprovidesanoverallframeworkforinternationaleffortsto(UNFCCC)mitigateclimate(UNFCCC)change.TheKyotoProtocolisaprotocoltotheUNFCCC.ValuechainemissionsEmissionsfromtheupstreamanddownstreamactivitiesassociatedwiththeoperationsofthereportingcompany.(Chapter4)VerificationAnindependentassessmentofthereliability(consideringcompletenessandaccuracy)ofaGHGinventory.(Chapter10)103ReferencesAPI(2004),CompendiumofGreenhouseGasEmissionsMethodologiesfortheOilandGasIndustry,FinalDraft,AmericanPetroleumInstituteBP(2000),EnvironmentalPerformance:GroupReportingGuidelines,Version2.2CCAR(2003),GeneralReportingGuidelines,CaliforniaClimateActionRegistryDEFRA(2003),GuidelinesfortheMeasurementandReportingofEmissionsbydirectparticipantsintheUKEmissionsTradingScheme,UKDepartmentforEnvironment,FoodandRuralAffairs,London,UKETS(01)05rev2EC-DGE(2000),GuidanceDocumentforEPERImplementation,EuropeanCommissionDirectorate-GeneralforEnvironmentEPA(1999),EmissionInventoryImprovementProgram,VolumeVI:QualityAssurance/QualityControl,U.S.EnvironmentalProtectionAgencyGeorgiaPacific(2002),ProtocolfortheInventoryofGreenhouseGasesinGeorgia-PacificCorporation,Georgia-PacificCorporation,AtlantaGRI(2002),GlobalReportingInitiative,SustainabilityReportingGuidelines,GlobalReportingInitiativeIAI(2003),AluminumSectorGreenhouseGasProtocol,InternationalAluminumInstituteICFPA(2002),CalculationToolsandforEstimatingGreenhouseGasEmissionsfromPulpandPaperMills,ClimateChangeWorkingGroupoftheInternationalCouncilofForestandPaperAssociationsIPCC(1996),RevisedIPCCGuidelinesforNationalGHGInventories:ReferenceManual,IntergovernmentalPanelonClimateChangeIPCC(1997),Revised1996IPCCGuidelinesforNationalGreenhouseGasInventories,IntergovernmentalPanelonClimateChangeIPCC(1998),EvaluatingApproachesforEstimatingNetEmissionsofCarbonDioxidefromForestHarvestingandWoodProducts,byS.Brown,B.Lim,andB.Schlamadinger,IntergovernmentalPanelonClimateChangeIPCC(2000a),GoodPracticeGuidanceandUncertaintyManagementinNationalGreenhouseGasInventories,IntergovernmentalPanelonClimateChangeIPCC(2000b),LandUse,LandUseChange,andForestry:ASpecialReportoftheIPCC,IntergovernmentalPanelonClimateChange.CambridgeUniversityPress,Cambridge,UKIPIECA(2003),PetroleumIndustryGuidelinesforReportingGreenhouseGasEmissions,InternationalPetroleumIndustryEnvironmentalConservationAssociation,LondonISO(1999),InternationalStandardonEnvironmentalPerformanceEvaluation,(ISO14031),InternationalStandardOrganization,GenevaKPMG(2000),GlobalAccounting:UK,US,IASandNetherlandsCompared,2ndEdition,KPMGAccountantsNVNZBCSD(2002),TheChallengeofGHGEmissions:the“why”and“how”ofaccountingandreportingforGHGemissions:AnIndustryGuide,NewZealandBusinessCouncilforSustainableDevelopment,AucklandOntarioMOE(2001),AirborneContaminantDischargeMonitoringandReporting,OntarioMinistryoftheEnvironment,Toronto,OntarioRegulation127/01UNFCCC(2000),SynthesisReportonNationalGreenhouseGasInformationReportedbyAnnexIPartiesfortheLand-UseChangeandForestrySectorandAgriculturalSoilsCategory,FCCC/TP/1997/5,UnitedNationsFrameworkConventiononClimateChangeVerfaillie,H.,andR.Bidwell(2000),MeasuringEco-efficiency:AGuidetoReportingCompanyPerformance,WorldBusinessCouncilforSustainableDevelopment,GenevaWBCSD(2001),TheCementCO2Protocol:CO2EmissionsMonitoringandReportingProtocolfortheCementIndustry,WorldBusinessCouncilforSustainableDevelopment:WorkingGroupCement,GenevaWRI(2002),Working9to5onClimateChange:AnOfficeGuide,WorldResourcesInstitute,Washington,DCWRI(2003),RenewableEnergyCertificates:AnAttractiveMeansforCorporateCustomerstoPurchaseRenewableEnergy,WorldResourcesInstitute,Washington,DCAstraZenecaBirkaEnergiEastmanKodakCo.ENDESAIKEAInternationalA/SInterface,Inc.KansaiElectricPowerCompanyNike,Inc.NorskHydroN.V.NuonRenewableEnergyPhilips&YamingCo.,Ltd.SeattleCityLightSimplexMillsCo.Ltd.SonyCorporationSTMicroelectronicsTataIron&SteelCompanyLtd.TokyoElectricPowerCompanyTokyoGasCo.Ltd.WeEnergiesContributors104StructuredFeedbackCompanies(REVISEDEDITION)BrianSmithInnovationAssociatesHansAkselHaugenNorskHydroVickiArroyoPewCenteronClimateChangeAidanJ.MurphyRoyalDutch/ShellSujataGuptaTheEnergyResearchInstituteYasuoHosoyaTokyoElectricPowerCompanyRebeccaEatonWorldWildlifeFundProjectManagementTeam(FIRSTEDITION)BaxterInternationalBPCODELCODuncansIndustriesDupontCompanyFordMotorCompanyFortumPowerandHeatGeneralMotorsCorporationHindalcoIndustriesIBMCorporationMaiharCementNike,Inc.NorskHydroOntarioPowerGenerationPetro-CanadaPricewaterhouseCoopersroadtestedwithEuropeancompaniesinthenon-ferrousmetalsectorPublicServiceElectricandGasShreeCementShellCanadaSuncorEnergyTokyoElectricPowerCompanyVolkswagenWorldBusinessCouncilforSustainableDevelopmentWorldResourcesInstitute500PPMroadtestedwithseveralsmallandmediumcompaniesinGermanyRoadTesters(FIRSTEDITION)JanetRanganathanWorldResourcesInstitutePankajBhatiaWorldResourcesInstituteDavidMoorcroftWorldBusinessCouncilforSustainableDevelopmentJasperKochWorldBusinessCouncilforSustainableDevelopmentWRI&WBCSDGHGProtocolInitiativeTeam(FIRSTEDITION)HeatherTansey3MCorporationIngoPuhl500PPMDawnFentonABBChristianKornevallABBPaul-AntoineLacourAFOCELKennethMartchekAlcoaVinceVanSonAlcoaRonNielsenAlcanStevePomperAlcanPatQuinnAlleghenyEnergyJoeCascioBoozAllen&HamiltonInc.DavidJaberAlliancetoSaveEnergyAlainBillAlstomPowerEnvironmentRobertGrecoAmericanPetroleumInstituteWalterC.RetzschAmericanPetroleumInstituteKarenRitterAmericanPetroleumInstituteTomCarterAmericanPortlandCementAllianceDaleLoudaAmericanPortlandCementAllianceTedGullisonAnovaJDouglasAkersonAonRiskServicesofTexasIncJohnMolburgArgonneNationalLaboratorySophieJabonskiArthurAndersonFionaGaddArthurAndersenChristopheScheitzkyArthurAndersenScotFosterArthurD.LittleMikeIsenbergArthurD.LittleBillWescottArthurD.LittleKeithMooreAstraZenecaBirgitaThorsinAstraZenecaThomasE.WerkemAtofinaChemicalsJean-BernardCarrascoAustralianGreenhouseOfficeDavidHarrisonAustralianGreenhouseOfficeBronwynPollockAustralianGreenhouseOfficeLindaPowellAustralianGreenhouseOfficeJamesShevlinAustralianGreenhouseOfficeChrisLoretiBattelleMemorialInstituteRonaldE.MeissenBaxterInternationalGöranAnderssonBirkaEnergiSofiHarms-RingdahlBirkaEnergiBrittSahlestromBirkaEnergiDavidEvansBPNickHughesBPTasminLishmanBPMarkBarthelBritishStandardsInstitutionJoAnnaBullockBusinessforSocialResponsibilityRobynCampCaliforniaClimateActionRegistryJillGravenderCaliforniaClimateActionRegistryDianneWittenbergCaliforniaClimateActionRegistryDavidCahnCaliforniaPortlandCementPaulBlacklockCalorGasLimitedJulieChiaravalliCameron-ColeConnieSasalaCameron-ColeEvanJonesCanada’sClimateChangeVoluntaryChallengeandRegistryInc.AlanD.WillisCanadianInstituteofCharteredAccountantsMiguelAGonzalezCEMEXCarlosManuelCEMEXDuarteOliveiraInnaGritsevichCENEf(CenterforEnergyEfficiency)EllinaLevinaCenterforCleanAirPolicySteveWinkelmanCenterforCleanAirPolicyAlegCherpCentralEuropeanUniversity(Hungary)andECOLOGIAMarkFallonCH2MHillLisaNelowetGriceCH2MHillArthurLeeChevronTexacoWilliamC.McLeodChevronTexacoSusannNordrumChevronTexacoAliceLeBlancChicagoClimateExchangeCharleneR.GarlandCleanAir-CoolPlanetDonnaBoysenCleanEnergyGroupJenniferDuBoseClimateNeutralNetworkSueHallClimateNeutralNetworkKarenMeadowsClimateNeutralNetworkMichaelBurnettClimateTrustDavidOlsenClipperWindpowerMarcoBedoyaCimporJoseGuimaraesCimporCONTRIBUTORS105ContributorsElizabethArnerCO2e.com/CantorFitzgeraldFernandoE.ToledoCODELCOBruceSteinerCollierShannonScottLynnPrestonCollins&AikmanAnnickCarpentierConfederationofEuropeanPaperIndustriesK.P.NyatiConfederationofIndianIndustrySonalPandyaConservationInternationalMichaelTottenConservationInternationalDominickJ.MormileConsolidatedEdisonCompanyJohnKesselsCRLEnergyLtd.IanLewisCummingCockburnLimitedRaymondP.CoteDalhousieUniversityOliviaHartridgeDEFRA/EuropeanCommissionRobertCasamentoDeloitte&ToucheMarkusLehniDeloitte&ToucheFlemmingTostDeloitte&TouchePhilipComerDetNorskeVeritasSimonDawesDetNorskeVeritasTrygveRoedLarsenDetNorskeVeritasEinarTelnesDetNorskeVeritasKalipadaChatterjeeDevelopmentAlternativesVivekKumarDevelopmentAlternativesSamratSenguptaDevelopmentAlternativesFrancescoBaloccoTheDowChemicalCompanyPaulCicioTheDowChemicalCompanyFrankFarfoneTheDowChemicalCompanyPeterMolinaroTheDowChemicalCompanyScottNoesenTheDowChemicalCompanyStephenRoseTheDowChemicalCompanyJormaSalmikiviTheDowChemicalCompanyDonHamesTheDowChemicalCompanyR.SwarupDuncansIndustriesJohnB.CarberryDuPontCompanyDavidChildsDuPontCompanyJohnC.DeRuyterDupontCompanyTomJacobDuPontCompanyMackMcFarlandDuPontCompanyEdMonganDuPontCompanyRonReimerDuPontCompanyPaulTeboDuPontCompanyFredWhitingDuPontCompanyRoyWoodEastmanKodakCo.JochenHarnischECOFYSAlanTateEcosCorporationPedroMouraCostaEcoSecuritiesJustinGuestEcoSecuritiesD.GaryMaddenEmissionCreditLLCKyleL.DavisEdisonMissionEnergy/MidAmericanEnergyHoldingsCo.MariaAntoniaENDESAAbadPuértolasDavidCorregidorSanzENDESAElviraElsoTorralbaENDESAJoelBluesteinEnergy&EnvironmentalAnalysis,Inc.YPAbbiTheEnergyResearchInstituteGirishSethiTheEnergyResearchInstituteVivekSharmaTheEnergyResearchInstituteCrosbieBaluchEnergeticsPty.Ltd.MarcusSchneiderEnergyFoundationDavidCrossleyEnergyFuturesAustraliaPtyLtdPatrickNolletEntreprisespourl'EnvironnementJamesL.WolfEnvintaKennethOlsenEnvironmentCanadaAdrianSteenkamerEnvironmentCanadaMillieChuBairdEnvironmentalDefenseSarahWadeEnvironmentalDefenseSatishKumarEnvironmentalEnergyTechnologiesJohnCowanEnvironmentalInterfaceEdwardW.RepaEnvironmentalResearchandEducationFoundationTatianaBosteelsEnvironmentalResourcesManagementWilliamB.WeilEnvironmentalResourcesManagementWileyBarbourEnvironmentalResourcesTrustBarneyBrannenEnvironmentalResourcesTrustBenFeldmanEnvironmentalResourcesTrustAlDailyEnvironmentalSynergyAnitaM.CeldranEnvironmentalTechnologyEvaluationCenterWilliamE.KirkseyEnvironmentalTechnologyEvaluationCenterContributors106JamesBradburyEPOTECAlanB.ReedEPOTECDanieleAgostiniErnst&YoungJuergFuesslerErnstBasler&PartnersStefanLarssonESABLutzBlankEuropeanBankforReconstructionandDevelopmentAlkeSchmidtEuropeanBankforReconstructionandDevelopmentPeterVisEuropeanCommissionChrisEversEuropeanCommissionYunYangExxonMobilResearch&EngineeringCompanyUrsBrodmannFactorConsultingandManagementM.A.J.JeyaseelanFederationofIndianChambersofCommerce&IndustryAnuKaressuoFinnishForestIndustriesFederationTodDelaneyFirstEnvironmentBrianGlazebrookFirstEnvironmentJamesD.HeerenFirstEnvironmentJamesT.WintergreenFirstEnvironmentKevinBradyFiveWindsInternationalDuncanNobleFiveWindsInternationalStevenYoungFiveWindsInternationalLarryMerrittFordMotorCompanyChadMcIntoshFordMotorCompanyJohnSullivanFordMotorCompanyDebbieZemkeFordMotorCompanyDanBlomsterFortumPowerandHeatArtoHeikkinenFortumPowerandHeatJussiNykanenFortumPowerandHeatStevenHellemGlobalEnvironmentManagementInitiativeJudithM.MullinsGeneralMotorsCorporationTerryPritchettGeneralMotorsCorporationRichardSchneiderGeneralMotorsCorporationRobertStephensGeneralMotorsCorporationKristinZimmermanGeneralMotorsCorporationMarkStarikGeorgeWashingtonUniversityMichaelRumbergGerlingGroupofInsurancesJeffreyC.FrostGHGSpacesT.ImaiGlobalEnvironmentandEnergyGroupJosephRommGlobalEnvironmentandTechnologyFoundationArthurHRosenfeldGlobalEnvironmentandTechnologyFoundationDilipBiswasGovernmentofIndiaMinistryofEnvironment&ForestsMatthewDeLucaGreenMountainEnergyRichardTipperGreenergyECCMRalphTaylorGreenleafCompostingCompanyGlennaFordGreenWareEnvironmentalSystemsNickolaiDenisovGRID-Arendal/HindalcoIndustriesY.K.SaxenaGujaratAmbujaCementMihirMoitraHindalcoIndustriesLtd.ClaudeCulemHolcimAdrienneWilliamsHolcimMoLoyaHoneywellAlliedSignalEdanDionneIBMCorporationRaviKuchibhotlaIBMCorporationThomasA.CortinaICCPPaulE.BaileyICFConsultingAnneChoateICFConsultingCraigEbertICFConsultingMarciaM.GowenICFConsultingKamalaR.JayaramanICFConsultingRichardLeeICFConsultingDianaPaperICFConsultingFrancesSussmanICFConsultingMollyTirpakICFConsultingThomasBergmarkIKEAInternationalA/SEvaMayLawsonIKEAInternationalA/SMonaNilssonIKEAInternationalA/SOthmarSchwankINFRASRoelHammerschlagInstituteforLifecycleEnergyAnalysisShannonCoxInterfaceInc.BuddyHayInterfaceInc.AlyssaTippensInterfaceInc.MelissaVernonInterfaceInc.WillyBjerkeInternationalAluminumInstituteJerryMarksInternationalAluminumInstituteRobertDornauInternationalEmissionsTradingAssociationCONTRIBUTORS107AndreiMarcuInternationalEmissionsTradingAssociationAkiraTanabeInternationalFinanceCorporationGeorgeThomasInternationalFinanceCorporationDannyL.AdamsInternationalPaperCompanyJulieC.BrautigamInternationalPaperCompanyCarlGagliardiInternationalPaperCompanyThomasC.JorlingInternationalPaperCompanyMarkE.BatemanInvestorResponsibilityResearchCenterS.K.BezbaroaITCLtd.H.D.KulkamiITCLtd.MichaelNesbitJANConsultantsChrisHunterJohnson&JohnsonInternationalHarryKaufmanJohnson&JohnsonInternationalDanielUsasJohnson&JohnsonWorldwideEngineeringServicesShintaroYokokawaKansaiElectricPowerCo.IainAlexanderKPMGGiuliaGalluccioKPMGLisaGibsonKPMGJedJonesKPMGSophiePunteKPMGMicheleSandersKPMGChrisBoydLafargeCorporationDavidW.CarrollLafargeCorporationEdVineLawrenceBerkeleyNationalLaboratoryRichardKahleLincolnElectricServiceMichaelE.CanesLogisticsManagementInstituteErikBrejlaTheLouisBergerGroupMichaelJ.BradleyM.J.Bradley&AssociatesBrianJonesM.J.Bradley&AssociatesCraigMcBernieMcBernieQERLTracyDysonMeridianEnergyLimitedTimMealeyMeridianInstituteMariaWellischMWAConsultantsMargrietKuijperNAMSukumarDevottaNationalChemicalLaboratoryNeilB.CohnNatsourceGarthEdwardNatsourceRobertYoungmanNatsourceDaleS.BrykNaturalResourcesDefenseCouncilJeffFiedlerNaturalResourcesDefenseCouncilBradUptonNCASITimothyJ.RoskelleyNESCAUMMatthewW.AddisonNexantAtulyaDhunganaNexantDavidH.KingNiagaraMohawkPowerCorporationMartinA.SmithNiagaraMohawkPowerCorporationJimGoddardNikeInc.LetaWinstonNikeInc.AmitMeridorNILITKarinaAasNorskHydroJosvanDanneNorskHydroHansGoosensNorskHydroJonRytterHasleNorskHydroToreK.JenssenNorskHydroHalvorKvandeNorskHydroBerntMalmeNorskHydroLillianSkogenNorskHydroJosteinSoreideNorskHydroLasseNordNorskHydroThorLobbenNorskeSkogindustrierASAMortonA.BarlazNorthCarolinaStateUniversityGeirHusdalNovatechGardPedersenNovatechRonOeiNuonN.V.JanCorfee-MorlotOECDStephaneWillemsOECDAndaKalvinsOntarioPowerGenerationMikakoKokitsuOsakaGasCo.GregSanMartinPacificGasandElectricCompanyKenHumphreysPacificNorthwestNationalLaboratoryMichaelBetzPEEuropeGmbHKathyScalesPetro-CanadaJudithGreenwaldPewCenterNaomiPenaPewCenterDanielL.ChartierPG&EGeneratingZhangFanPhilips&YamingCo.Ltd.XueGongrenPhilips&YamingCo.Ltd.OrestesR.AnastasiaPlanningandDevelopmentCollaborativeInternationalContributorsLISTOFCONTRIBUTORS108RobertHallPlattsResearchandConsultingNeilKolweyPlattsResearchandConsultingDavidB.SussmanPoubelleAssociatesBillKytePowergenSurojitBosePricewaterhouseCoopersMelissaCarringtonPricewaterhouseCoopersRachelCumminsPricewaterhouseCoopersLenEddyPricewaterhouseCoopersDennisJenningsPricewaterhouseCoopersTerjeKronenPricewaterhouseCoopersCraigMcBurniePricewaterhouseCoopersOlivierMullerPricewaterhouseCoopersDorjeMundlePricewaterhouseCoopersThierryRaesPricewaterhouseCoopersAlainSchilliPricewaterhouseCoopersHansWarmenhovenPricewaterhouseCoopersPedroMaldonadoPRIENAlfredoMunozPRIENMarkS.BrownsteinPSEGJamesHoughPSEGSamuelWolfePSEGVinayakKhanolkarPudumjeePulp&PaperMillsLtd.FedericaRanghieriRanghieri&AssociatesJenniferLeeResourcesfortheFutureKajEmbrenRespectEuropeMeiLiHanRespectEuropeDavidW.CrossTheRETECGroupAlanSteinbeckRioTintoKatieSmithRMCGroupRickHeedeRockyMountainInstituteChrisLotspeichRockyMountainInstituteAnitaM.BurkeRoyalDutch/ShellDavidHoneRoyalDutch/ShellThomasRuddyRuddyConsultantsJulieDohertyScienceApplicationsIntl.Corp.RichardY.RichardsScienceApplicationsIntl.Corp.CorinneGrandeSeattleCityLightDougHowellSeattleCityLightEdwinAaldersSGSIrmaLubrechtSGSGarethPhillipsSGSAntoinedeSGSLaRochefordièreMurrayG.JonesShellCanadaSeanKolleeShellCanadaRickWeidelShellCanadaPipopeSiripatananonSiamCementJ.P.SemwalSimplexMillsCo.Ltd.RosTaplinSMECEnvironmentRobertK.HamSolid&HazardousWasteEngineeringJeremyK.O’BrienSolidWasteAssociationofNorthAmericaHidemiTomitaSonyCorporationGwenParkerStanfordUniversityGeorgesAugusteSTMicroelectronicsIvonneBertonciniSTMicroelectronicsGiulianoBoccallettiSTMicroelectronicsEugenioFerroSTMicroelectronicsPhilippeLevavasseurSTMicroelectronicsGeoffreyJohnsSuncorEnergyManueledeGennaroSwissFederalInstituteofTechnology,ETHZurichMarkusOhndorfSwissFederalInstituteofTechnology,ETHZurichMatthiasGyslerSwissFederalOfficeforEnergyChristopherT.SwissReinsuranceCo.WalkerGregoryA.NorrisSylvaticaGSBasuTataIron&SteelCompanyLtd.RPSharmaTataIron&SteelCompanyLtd.RobertGraffTellusInstituteSivanKarthaTellusInstituteMichaelLazarusTellusInstituteAllenL.WhiteTellusInstituteWillGibsonTetraTechEmIncorporatedSatishMalikTetraTechEmIncorporatedFredZobristTetraTechEmIncorporatedSonalAgrawalTetraTechIndiaRanjanaGangulyTetraTechIndiaAshwaniZutshiTetraTechIndiaMarkD.CrowdisThinkEnergyCONTRIBUTORS109TinusPullesTNOMEPYasushiHiedaTokyoElectricPowerCo.LtdMidoriSasakiTokyoElectricPowerCo.Ltd.TsujiYoshiyukiTokyoElectricPowerCo.Ltd.HiroshiHashimotoTokyoGasCo.Ltd.TakahiroNagataTokyoGasCo.LtdKentaroSuzawaTokyoGasCo.Ltd.SatoshiYoshidaTokyoGasCo.Ltd.RalphTorrieTorrieSmithAssociatesManuelaOjanToyotaMotorCompanyEugeneSmithartTraneCompanyLauraKosloffTrexler&AssociatesMarkTrexlerTrexler&AssociatesWalterGreerTrinityConsultantsJochenMundingerUniversityofCambridgeHannuNilsenUPM-KymmeneCorporationNaoIkemotoU.S.AsiaEnvironmentalPartnershipStephenCalopedisU.S.DepartmentofEnergyGregoryH.KatsU.S.DepartmentofEnergyDickRichardsU.S.DepartmentofEnergyArthurRosenfeldU.S.DepartmentofEnergyArthurRypinskiU.S.DepartmentofEnergyMonishaShahU.S.DepartmentofEnergyTatianaStrajnicU.S.DepartmentofEnergyKennethAndraskoU.S.EnvironmentalProtectionAgencyJanCanterburyU.S.EnvironmentalProtectionAgencyEdCoeU.S.EnvironmentalProtectionAgencyLisaH.ChangU.S.EnvironmentalProtectionAgencyAndreaDennyU.S.EnvironmentalProtectionAgencyBobDoyleU.S.EnvironmentalProtectionAgencyHenryFerlandU.S.EnvironmentalProtectionAgencyDaveGodwinU.S.EnvironmentalProtectionAgencyKatherineGroverU.S.EnvironmentalProtectionAgencyJohnHallU.S.EnvironmentalProtectionAgencyLisaHanleU.S.EnvironmentalProtectionAgencyReidHarveyU.S.EnvironmentalProtectionAgencyKathleenHoganU.S.EnvironmentalProtectionAgencyRoyHuntleyU.S.EnvironmentalProtectionAgencyBillN.IrvingU.S.EnvironmentalProtectionAgencyDinaKrugerU.S.EnvironmentalProtectionAgencySkipLaitnerU.S.EnvironmentalProtectionAgencyJosephManginoU.S.EnvironmentalProtectionAgencyPamHermanMilmoeU.S.EnvironmentalProtectionAgencyBethMurrayU.S.EnvironmentalProtectionAgencyDeborahOttingerU.S.EnvironmentalProtectionAgencyPaulStolpmanU.S.EnvironmentalProtectionAgencySusanThorneloeU.S.EnvironmentalProtectionAgencyChloeWeilU.S.EnvironmentalProtectionAgencyPhilJ.WirdzekU.S.EnvironmentalProtectionAgencyTomWirthU.S.EnvironmentalProtectionAgencyMichaelSavonisU.S.FederalHighwayAdministrationM.MichaelMillerU.S.GeologicalSurveyHendrikG.vanOssU.S.GeologicalSurveyValentinV.TepordeiU.S.GeologicalSurveyMargueriteDowneyU.S.PostalServiceHusseinAbazaUNEPLambertKuijpersUNEPGaryNakaradoUNEPMarkRadkaUNEPSteliosPesmajoglouUNFCCCAldenMeyerUnionofConcernedScientistsJudithBayerUnitedTechnologiesCorporationFredKellerUnitedTechnologiesCorporationPaulPatlisUnitedTechnologiesCorporationEllenJ.QuinnUnitedTechnologiesCorporationBillWaltersUnitedTechnologiesCorporationGaryBullUniversityofBritishColombiaZoeHarkinUniversityofBritishColumbiaGerardAllengUniversityofDelawareJacobParkUniversityofMarylandTerriShiresURSCorporationAngelaCrooksUSAIDVirginiaGorsevskiUSAIDCarrieStokesUSAIDSandeepTandonUSAIDA.K.GhoseVamOrganosysLtd.CyrilCoillotVivendiEnvironmentEricLesueurVivendiEnvironmentContributors110MichaelDillmanVolkswagenStephanHerbstVolkswagenHerbertForsterVotorantimClaudeGrinfederVotorantimMahuaAcharyaWorldBusinessCouncilforSustainableDevelopmentChristineElleboodeWorldBusinessCouncilforSustainableDevelopmentMargaretFlahertyWorldBusinessCouncilforSustainableDevelopmentAlFryWorldBusinessCouncilforSustainableDevelopmentSusanneHaefeliWorldBusinessCouncilforSustainableDevelopmentKijaKummerWorldBusinessCouncilforSustainableDevelopmentHeidiSundinWorldBusinessCouncilforSustainableDevelopmentDonnaDanihelWeEnergiesGaryRisnerWeyerhauserThomasF.CataniaWhirlpoolCorporationEricOlafsonWilliamsCompanyJohannesHeisterWorldBankAjayMathurWorldBankRichardSamansWorldEconomicForumAndrewAulisiWorldResourcesInstituteKevinBaumertWorldResourcesInstituteCareyBylinWorldResourcesInstituteFlorenceDavietWorldResourcesInstituteManmitaDuttaWorldResourcesInstituteSuzieGreenhalghWorldResourcesInstituteCraigHansonWorldResourcesInstituteFranIrwinWorldResourcesInstituteDavidJhiradWorldResourcesInstituteNancyKeteWorldResourcesInstituteBillLaRocqueWorldResourcesInstituteJimMacKenzieWorldResourcesInstituteEmilyMatthewsWorldResourcesInstituteSrideviNanjundaramWorldResourcesInstituteJimPerkausWorldResourcesInstituteJonathanPershingWorldResourcesInstituteSamanthaWorldResourcesInstitutePuttdelPinoAnandRaoWorldResourcesInstituteLeeSchipperWorldResourcesInstituteJasonSnyderWorldResourcesInstituteJenniferMorganWorldWildlifeFundWRIandWBCSDwouldalsoliketothankthefollowingindividualsandorganizationsfortheirgenerousfinancialsupport:EnergyFoundation,SpencerT.andAnnW.OlinFoundation,JohnD.andCatherineT.MacArthurFoundation,CharlesStewartMottFoundation,theUSAgencyforInternationalDevelopment,theUSEnvironmentalProtectionAgency,ArthurLee,AngloAmerican,BaxterInternational,BP,DetNorskeVeritas,DuPont,Ford,GeneralMotors,Lafarge,InternationalPaper,NorskHydro,OntarioPowerGeneration,Petro-Canada,PowerGen,S.C.Johnson,SGS,Shell,Statoil,STMicroelectronics,Sulzer,Suncor,SwissRe,Texaco,TheDowChemicalCompany,TokyoElectricPowerCompany,Toyota,TransAltaandVolkswagen.CONTRIBUTORS111Design:AlstonTaggart,BarbieriandGreen112DisclaimerThisdocument,designedtopromotebestpracticeGHGaccountingandreporting,hasbeendevelopedthroughauniquemulti-stakeholderconsultativeprocessinvolvingrepresentativesofreportersandreport-usersfromaroundtheworld.WhileWBCSDandWRIencourageuseoftheGHGProtocolCorporateStandardbyallcorporationsandorganizations,thepreparationandpublicationofreportsbasedfullyorpartiallyontheGHGProtocolisthefullresponsibilityofthoseproducingthem.NeithertheWBCSDandWRI,norotherindividualswhocontributedtothisstandardassumeresponsibilityforanyconse-quencesordamagesresultingdirectlyorindirectlyfromitsuseinthepreparationofreportsortheuseofreportsbasedontheGHGProtocolCorporateStandard.OrderingpublicationsWBCSDWBCSD,c/oEarthprintLimitedTel:(441438)748111Fax:(441438)748844wbcsd@earthprint.comPublicationsareavailableat:www.wbcsd.orgwww.earthprint.comWRIHopkinsFulfillmentServiceTel:(1410)5166956Fax:(1410)5166998e-mail:hfscustserv@mail.press.jhu.eduPublicationscanbeorderedfromWRI’ssecureonlinestore:http://www.wristore.comCopyright©WorldResourcesInstituteandWorldBusinessCouncilforSustainableDevelopment,March2004ISBN1-56973-568-9PrintedinUSATPrintedonPhoenoStar(20%postconsumerwaste,chlorine-freepulpprocessedpaper)withsoy-basedinks.AboutWBCSDTheWorldBusinessCouncilforSustainableDevelopment(WBCSD)isacoalitionof170internationalcompaniesunitedbyasharedcommitmenttosustainabledevelopmentviathethreepillarsofeconomicgrowth,ecologicalbalanceandsocialprogress.Ourmembersaredrawnfrommorethan35countriesand20majorindustrialsectors.Wealsobenefitfromaglobalnetworkof48nationalandregionalbusinesscouncilsandpartnerorgani-zationsinvolvingsome1,000businessleadersglobally.AboutWRIWorldResourcesInstituteisanindependentnonprofitorganizationwithastaffofmorethan100scientists,economists,policyexperts,businessanalysts,statisticalanalysts,mapmakers,andcommunicatorsworkingtoprotecttheEarthandimprovepeople’slives.TheGHGProtocolInitiativeismanagedbyWRI’sSustainableEnterpriseProgramwhichformorethanadecade,hasharnessedthepowerofbusinesstocreateprofitablesolutionstoenvironmentanddevelopmentchallenges.WRIistheonlyorganizationthatbringstogetherfourinfluentialforcestoacceleratechangeinbusinesspractice:corporations,entrepreneurs,investors,andbusinessschools.WORLDRESOURCESINSTITUTE10GStreet,NE(Suite800)Washington,DC20002USATel:(1202)7297600Fax:(1202)7297610E-mail:sepinfo@wri.orgInternet:www.wri.org4,chemindeConches1231Conches-GenevaSwitzerlandTel:(4122)8393100Fax:(4122)8393131E-mail:info@wbcsd.orgInternet:www.wbcsd.org

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