GHG Protocol - setting organisational and operational boundaries

In the second half of 2023, our sustainability webinar series walks step-by-step through the GHG Protocol. Aletta Boshoff and Dylan Byrne summarise the key messages from our event, "Setting the organisation and operational boundaries".

Establishing a carbon footprint is essential for organisations in developing their sustainability report. The Greenhouse Gas Protocol (GHG Protocol) supports organisations by providing 'standards, guidance, tools and training' to support organisations in measuring and managing emissions. The GHG Protocol is framework agnostic and designed to provide consistency and transparency.

The first steps in approaching greenhouse gas (GHG) accounting include establishing organisational and operational boundaries to clarify the scope of accounting and reporting based on direct and indirect emissions.

GHG accounting and reporting principles

There are five generally accepted principles underpinning and guiding the accounting of greenhouse gases. These principles ensure that reported information is a 'faithful, true and fair' account of the organisation's GHG emissions.

In instances where the GHG Protocol has provided detailed rules, organisations should follow them. Organisations should revert to these underpinning principles for guidance when there are no clear rules in the GHG Protocol.

The five generally accepted principles for GHG accounting are:

  1. Relevance
    Ensures the GHG inventory reflects the organisation's relevant emissions and supports all decision-making needs. To ensure relevance is achieved, an appropriate inventory boundary must be established. That is, a clear definition of what GHG emissions will be considered in the calculation. The inventory boundary should consider the substance and economic reality of the company's business relationships over its legal form.
  2. Completeness
    Requires all emissions and sources to be accounted for within the agreed scope of the boundaries. The most time is often spent on this principle, as it is often the most problematic. This principle requires the consideration of materiality and the disclosure and justification of any specific exclusions, of which there could be many – especially in the early years of this process.
  3. Consistency
    Use of consistent methodologies to support meaningful comparisons over time. The principle requires documenting and disclosing changes over time, like date range, inventory boundary, methods, and other relevant factors.
  4. Transparency
    Requires all relevant issues to be addressed factually and coherently. This principle notes the importance of a clear audit trail. It also involves the disclosure of all appropriate assumptions and methodology references, including data sources used.
  5. Accuracy
    Supports the systematic quantification of emissions for correctness, as well as the reduction of uncertainties. Reinforces the purpose of the information to support decision-making, requiring integrity of the reported data.

Determining the inventory boundary

An inventory boundary reflects more than just an entity's legal form; it should reflect the organisation's ‘substance and economic reality'. Factors for consideration include:

  • The organisational structures, including control and ownership, legal structure and joint ventures
  • Any operational boundaries – on-site and off-site activities, processes, services and the impacts, and
  • Business context – including the nature of activities, location, sector, as well as the purpose and users of the information.

Determining the inventory boundary includes a two-step process:

  1. Set the organisational boundary
  2. Set the operational boundary.

Setting the organisational boundary

Organisational boundaries are essential for complex business structures to ensure consistency of emissions measurement across the entity and is the same as a consolidation approach.

In selecting an approach for consolidating GHG emissions, entities must consistently define which businesses and operations constitute the company to provide a complete picture when reporting the carbon footprint.

Consolidation approach options include the review of factors including:

  • Control – assessed either through the financial management (aligned to accounting) or the operational control, or
  • The equity share of the ownership of the organisation, which is then reflected in the emissions.

If there are joint owners, they should ensure a consistent consolidation approach is applied to avoid over or under-calculating emissions, and consideration should also be given to the relevant financial reporting principles – i.e. IFRS 10 Consolidated Financial Statements.


Defined by

GHG accounting


Financial control

Directing financial policies to gain economic benefits

If yes: 100%

If no: 0%

If joint: % owned

Operational control

Authority to introduce and implement operating policies

If yes: 100%

If no: 0%

Equity share

Per cent ownership

% owned


There is no one right (or wrong) approach, and consideration needs to be given to several aspects including:

  • Commercial reality
  • Influence over emissions
  • Program or regulatory requirements
  • Liability and risk management
  • Financial accounting
  • Management information and performance
  • Administrative costs and data access, and
  • Completeness of reporting.

Setting the operational boundary

Now that there is clarity on the company operations to include within the scope of the carbon footprint, it's time to set the operational boundary. This includes determining the emissions sources to include, and their categorisations:

  • Direct emissions are those produced on-site, typically through energy creation or methane, and are considered 'Scope 1' emissions
  • Indirect emissions fall into two categories:
    • Scope 2 – emissions associated with the generation of electricity, heating and cooling, or steam purchased for consumption
    • Scope 3 – indirect emissions other than those covered in Scope 2.

Three tips for setting emissions boundaries in practice

Organisational and operational boundaries should be established upfront before embarking on the task of calculating the organisation's carbon footprint.

By having the discussions up front, leaders and those charged with calculating the carbon emissions will have a clear and aligned understanding, supporting better data collation. In summary:

  1. Understand the business and agree on the boundaries upfront
  2. Review the annual financial statements for alignment
  3. Compare the inventory boundary to the reporting entity included in the financial statements.

Find out more

Want to understand more about the GHG Protocol? Register now for the remaining events in the webinar series.

If you need a hand in setting operational or organisational boundaries for your organisation's carbon footprint, our national sustainability team can help.

Contact us today.