Understanding GHG Inventories: A Guide to Measuring and Managing Your Emissions Footprint

Introduction

So, you’re wondering how you got here. A GHG inventory is usually the first step of visualising an organisation’s environmental impact, and involves developing a high-level overview of its emissions footprint. It lists an organisation’s emissions sources, and accounts for generated emissions through standardised metrics. Depending on its time-frame, or boundaries, it can cover large enterprises or even small businesses, and its general format makes it easier to measure and assess progress. 

What is a GHG inventory? Why is a GHG inventory usually required?

So, you’re wondering how you got here. A GHG inventory is usually the first step of visualising an organisation’s environmental impact, and involves developing a high-level overview of its emissions footprint. It lists an organisation’s emissions sources, and accounts for generated emissions through standardised metrics. Depending on its time-frame, or boundaries, it can cover large enterprises or even small businesses, and its general format makes it easier to measure and assess progress. 

The main standard for corporate GHG inventories is the GHG Protocol’s Corporate Accounting and Reporting Standard. It gives key guidance and information about how best to account and report accurately and comprehensively.

Though a GHG inventory can support a company’s reporting goals, it shouldn’t be confused with GHG emissions reporting, which presents emission data in formats tailored to the needs of various reporting requirements. 

Coming up with a GHG inventory before emissions reporting is a sure-fire way of knowing at a glance, about your organisation’s emissions, and is generally the quickest way of guiding any emissions disclosure process, since major sources of materiality that need to be reported under IFRS S2 are already identified, reducing the amount of groundwork done.

When GHG inventories are done, they are typically conducted as part of assessing an organisation’s environmental footprint. They delve deeper into specific sources of a company’s greenhouse gas emissions that impact the environment. Other uses of a GHG inventory usually involve:

1. Assessing material GHG risks and opportunities
2. Taking climate action early
3. Participating in voluntary/mandatory GHG programs

Any GHG inventory depends heavily on emission factors (EFs), which present a quantity of emitted GHG as associated with specific activities. These EFs are generally classified into the emission sources they assess, for example, stationary, mobile, electricity, which maps onto specific scope categories. 

These when multiplied against the duration of the activity can be quantified through the metric, tonnes of carbon dioxide equivalent (tCO₂e), as a way of standardising and assessing progress. 

In line with the GHG Protocol Corporate Standard, identifying emission sources and calculating their magnitude is part of this process.

Key things to determine ahead of GHG inventory creation

GHG inventories are done in four main steps of 1) Inventory Scoping and Planning, 2) Collecting Data and Quantifying Emissions, 3) Developing a GHG Inventory Management Plan, and 4) Setting a Target, and Assessing/Reporting Progress.

At the early stages of this creation, companies should be careful to establish organizational boundaries, and determine which facilities, operations, and subsidiaries to include in their inventory. This depends on the selected consolidation approach, which can be chosen from:

• Equity share – where depending on its share of equity in an operation, an organisation determines and accounts for GHG emissions from its assets and operations.
• Financial control – where an organisation accounts for all of the GHG emissions over which it has direct financial control. It does not account for GHG emissions from operations it has equity in but no financial control over.
• Operational control – where an organisation accounts for all of the GHG emissions over which it has direct control. It does not account for GHG emissions from operations it has equity in but no operational control over. As long as an organisation or its subsidiary operates a facility, it will have full authority and control. 
  

In the next article in this series, we'll talk more about how to choose them. For now, after this, they should establish a baseline year, and mention if any scope 1, 2, or 3 activities have been excluded from this report and why. We’ll explain what these scopes are shortly, but we would add that these reports generally require methodologies for data collection to be included.

During this process of data collection, inventories should then identify emission sources across three scopes of:

• Scope 1: Direct emissions from owned or controlled sources, such as company vehicles and on-site fuel combustion
• Scope 2: Indirect emissions from purchased electricity, steam, heating, and cooling
• Scope 3: All other indirect emissions occurring in the company's value chain, including purchased goods, employee commuting, and product use

What principles usually structure a GHG inventory?

Any good GHG inventory returns to the basics of creating GHG inventories. They depend on a baseline year, emissions measured, and finally identifies key emissions sources.

They generally abide by what the GHG Protocol's Corporate Accounting and Reporting Standard has determined as five main principles of relevance, completeness, consistency, transparency and accuracy. 

Under relevance, your GHG inventory should be relevant to your emissions profile, by reflecting your company’s emissions and serving your business’s internal and external decision-making purposes.

Under completeness, your GHG inventory should report emission sources within specified organisational and operational boundaries as completely as possible.

Under consistency, the emission data collected in your GHG inventory should be able to be consistently tracked over time, using consistent accounting and quantification practices.

Under transparency, any assumptions, methods, and limitations should be transparent, clearly identified and stated.

Under accuracy, data collection under your inventory should be as accurate as possible, and be as close to primary data where possible, with as little uncertainty as possible.

In other words, account vicariously, accurately, and consistently. Not certain if you’re including the wrong item?

How do you get a good GHG inventory/how do you start?

Although it is strongly recommended, any use of a GHG inventory must be accompanied by a clear sense of purpose behind why it is done.

It takes time. But even under constraints, accounting should aim to be as complete and accurate as possible.

Depending on practicality, GHG inventories involve concerted effort, and engagement from across a company’s partners and suppliers to get it done. If you’re looking for key pitfalls and gaps to watch out for, this resource created by Terrascope’s Principal Decarbonisation Specialist, Liu Xinlu, identifies key areas of data quality that will streamline the process of creating your GHG inventory, and gives good tips on how to start.

The SASB Standards, while used for emissions reporting, can also provide a baseline for the type of activities that are material to companies in specific industries. In most cases, there is an excess of industry-specific manufacturing, processing, distribution, and retail activities. 

Another alternative could be to work with Terrascope towards data collection and conducting a GHG inventory. The beauty of our platform is that we combine deep cross-industry expertise with a structured data discovery process. Our platform fully harnesses industry-specific realities with decades of experience to conduct best-practice data collection tasks and templates tailored to specific verticals, covering Scope 1, Scope 2, and all Scope 3 subcategories. 

We take your entire value chain and analyse it for potential data sources, integrating into systems of record like SAP, ServiceNow, and Oracle. We complement this with a data availability assessment and leverage a GHG Protocol-based checklist to identify accessibility of their required data, and how best to find it.

Check out what we can do here.