This is the second article in our series about on the Greenhouse Gas Emissions Corporate Standard and the methodology behind it. Here is the first one. We hope you find the articles both enlightening and helpful.
Setting Organizational Boundaries
Setting organizational boundaries for the GHG Protocol Corporate Standard is possibly the most important step in the corporate accounting and reporting of greenhouse gas emissions.
The Corporate Standard outlines two distinct approaches for defining the organizational boundaries used to consolidate the GHG emissions. Choosing which approach best defines your business operations is necessary due to the wide variety of legal and organizational structures.
Keep in mind that both approaches may apply in certain situations. Nonetheless, it is highly advisable to choose one approach and stick with it. This creates consistency with GHG emissions inventory tracking and reporting over time.
Business operations may include:
- Wholly owned operations
- Incorporate / Non-incorporated
- Joint ventures
In the first article we briefly explained the GHG Protocol Corporate Standard and the essence of the Corporate Standard is the GHG Emissions Inventory. Determining the organizational, operational, and temporal boundaries for the GHG Emissions Inventory in the early stages establishes what asset emission sources must be identified and accurately tracked.
Over time the organizational boundaries may evolve as the business expands. A recent example of this is Google, which created a parent company, Alphabet, in 2015. The company Google became a subsidiary of the company Alphabet. Google would continue to focus on business drivers of search (advertising), Chrome, and Android, while Alphabet could start new subsidiary companies for more ambitious projects, such as self-driving cars, artificial intelligence and smart contact lenses.
In 2019 Google, now being a separate company from Alphabet and its subsidiaries, still reports for the entire Alphabet corporation. Google has kept consistent organizational boundaries since 2013.
Selecting the Approach
The equity share approach is defined by the percentage stake of the equity of a company in order to calculate the share of the GHG emissions.
Another way to look at this approach is that the organization’s economic interest, or the extent of rights to the risk and rewards generated from an operation, dictates the share of GHG emissions an organization is responsible for in other entities. The equity share approach may require alignment with the organization’s accounting or legal departments to determine the appropriate equity share percentage for each joint ventures