GHG accounting (GHG Protocol) explained

What is a corporate carbon footprint?

The corporate carbon footprint is a company's complete greenhouse gas inventory — direct and indirect emissions from all business activities. The basis is the GHG Protocol Corporate Accounting and Reporting Standard, a widely used framework for it. It defines boundaries, calculation methods and quality requirements so inventories become comparable and auditable.

The three scopes

The GHG Protocol splits emissions into three scopes. Together they give the full picture.

• Scope 1 — direct emissions from sources the company owns or controls: own combustion plants, vehicles, process emissions, fugitive emissions. Direct CO2 from burning biomass is not part of Scope 1 and is reported separately; its CH4 and N2O stay in Scope 1
• Scope 2 — emissions from the generation of purchased electricity, heat, cooling and steam that the company consumes itself. They physically arise at the generator but are attributed to the consumer. Energy bought for resale belongs in Scope 3 category 3
• Scope 3 — the remaining 15 standardised categories along the value chain, upstream (purchased goods, transport, business travel) and downstream (use and end-of-life of sold products). For most companies the largest share

CO2 equivalents: which values apply

Greenhouse gases differ in potency. The GHG Protocol Corporate Standard covers the six Kyoto gases CO2, CH4, N2O, HFCs, PFCs and SF6; NF3 was added later. ESRS E1 names all seven. They are converted into CO2 equivalents via global warming potential. What matters is **which** IPCC values you use: the GHG Protocol recommends AR6, and ESRS E1 points to the latest IPCC assessment. The source used must be disclosed.

• Methane (CH4): 27.0 for non-fossil origin, 29.8 for fossil
• Sulphur hexafluoride (SF6): 24,300
• The fossil methane value should be used for fugitive emissions from fossil sources and for industrial processes where the carbon in the methane is of fossil origin. For everything else — including the combustion of fossil fuels — the non-fossil value should be used
• For comparison, the older AR5 values that still circulate widely: CH4 28 (non-fossil) or 30 (fossil), SF6 23,500
• Horizon: 100 years (GWP100). NetCero calculates on this basis — AR6, with AR5 as a documented fallback where a factor is unavailable in AR6

Emission factors

Emission factors connect activity data — litres of diesel, kWh of electricity, tonnes of purchased goods — with the resulting CO2e. Good factors are specific to energy carrier, country and year. Established sources include national environment agencies, DEFRA/DESNZ, the EPA, EXIOBASE and ecoinvent. Two things drive inventory quality: activity-based data beats spend-based data, and every factor needs a documented origin with year and version.

Scope 2: market-based and location-based

There are two Scope 2 methods, and the dual reporting duty comes with a condition that often goes unmentioned.

• Location-based: the average emission factor of the grid where the consumption occurs
• Market-based: the emissions of the contractually procured energy, evidenced through guarantees of origin, power purchase agreements or the supplier's specific emission factor. For electricity without such evidence, the residual mix applies, not the grid average. The instruments must meet the GHG Protocol Scope 2 Quality Criteria — a certificate alone is not enough
• Both values must be reported where the company operates in markets that offer such contractual instruments. In the EU electricity market they do. Where no such instruments exist, the GHG Protocol accepts the location-based method alone. ESRS E1 always requires both values
• On current status: the GHG Protocol put the Scope 2 Guidance out for consultation in 2025, discussing hourly matching and deliverability rules among other things. That is a draft, not a rule in force — the 2015 guidance remains authoritative

How an inventory is built

The process starts with boundaries and ends with documented reporting.

• Set organisational boundaries (consolidation approach: operational control, financial control or equity share) and determine operational boundaries
• Identify the material Scope 3 categories through a screening instead of working all 15 to the same depth
• Collect activity data and assign suitable emission factors
• Calculate, document origin and methodology, sanity-check the results
• Derive reduction targets and measures — the inventory is the basis, not the outcome

What the inventory is needed for

The reasons largely exist regardless of whether a company has a reporting duty.

• ESRS E1 requires quantified Scope 1 and 2 disclosures and Scope 3 by significant category; any reduction targets set must be disclosed
• Science-based targets require a complete Scope 1 and 2 inventory. Under version 1 of the standard, Scope 3 targets are needed if Scope 3 is 40% of total emissions or more; under version 2.0 (from Feb 1, 2027), near-term Scope 3 targets are required for Category A companies and optional for Category B
• CBAM requires the embedded emissions of imported goods, calculated under its own method at installation level
• Product footprints and supply chain requests build on the same data
• External verification is recommended by the GHG Protocol, not required. For CSRD reporting, limited assurance is mandatory