Emission Inventory Boundary

Under this approach, a company accounts for GHG emissions from operations according to its share of equity in the operation. The equity share reflects the company's economic interest, which is the extent of rights it has to the risks and rewards flowing from an operation.

• Typically aligns with the percentage of ownership or legal control.
• Ensures the inventory mirrors the company's financial accounting boundaries.
• Commonly used when financial control is the primary lens for risk management.

A company accounts for 100% of emissions from operations over which it has financial control. Financial control exists if the company can direct the financial and operating policies of an operation with a view to gaining economic benefits from its activities.

• Usually applies when a company holds the majority of the operational risks and rewards.
• Does not require majority equity ownership; a contract can confer financial control.
• Results in a complete accounting of emissions from controlled assets.

A company accounts for 100% of emissions from operations over which it or one of its subsidiaries has operational control. Operational control exists if the company has the full authority to introduce and implement its operating policies.

• The most common consolidation approach for environmental reporting.
• Directly links the inventory to the operational policies a company can influence.
• A company with operational control but no equity share still reports 100% of emissions.

The organizational boundary defines which legal entities and assets are included based on the consolidation approach (equity share or control). The operational boundary then defines which specific emission sources within those entities are categorized as Scope 1, 2, or 3.

• Organizational boundary answers: Which operations do we own or control?
• Operational boundary answers: Which emissions do we report from those operations?
• A clear distinction prevents double-counting or omission across complex corporate structures.

Once the organizational boundary is set, the operational boundary classifies emissions into three distinct scopes to prevent double counting between companies.

• Scope 1: Direct emissions from owned or controlled sources (e.g., company vehicles, on-site fuel combustion).
• Scope 2: Indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company.
• Scope 3: All other indirect emissions that occur in a company's value chain, both upstream and downstream (e.g., purchased goods, business travel, use of sold products).

A company must establish a base year for which verifiable emissions data is available and consistently apply the chosen organizational and operational boundaries over time. Any significant structural changes, such as acquisitions, divestitures, or changes in calculation methodologies, must trigger a base year recalculation to maintain the integrity and comparability of the emission reduction trajectory.

• Ensures emission reduction targets are measured against a stable, like-for-like baseline.
• Prevents "paper reductions" caused by simply selling off high-emitting assets.