The Nickel Report

The Greenhouse Gas (GHG) Protocol Corporate Standard and related guidance are widely accepted as leading sources for companies to use in quantifying and reporting their GHG emissions. Companies report GHG emissions for a number of reasons (both legally mandated and voluntary) and in a number of contexts. Accurate accounting and reporting is critical because inaccuracies in emissions reporting can potentially expose the reporting entity to several types of legal liability, as evidenced by the recent proliferation of lawsuits alleging “greenwashing” claims and increasing regulatory scrutiny in this area.

The Corporate Standard was first published in 2001 and was subsequently updated and re-published as a “revised edition” in 2004. It is often relied upon by businesses and other entities for the development and reporting of company-wide GHG emission inventories. The Standard details generally accepted GHG accounting and reporting principles, as well as how reporting entities should set organizational and operational boundaries, track emissions over time, account for direct and indirect GHG emission reductions, and verify and report GHG emissions, among other things. The GHG Protocol’s Scope 2 Guidance (2015) and Corporate Value Chain (Scope 3) Standard (2011) were developed to be used in conjunction with the Corporate Standard.

Late last year, the GHG Protocol issued a memo and several surveys inviting public input on these standards and guidance documents and how they can be improved. Public input was taken through February 2023, and the GHG Protocol secretariat hosted a webinar on May 2, 2023 reviewing the key themes presented by stakeholders on the Scope 2 Guidance, which garnered the greatest number of survey responses.

Overall, key points in the responses submitted by stakeholders, who requested that they be shared publicly, include:

• Update terminology used in the Corporate Standard to align with widely applied accounting frameworks, such as the US GAAP accounting standard, to drive consistent and comparable reporting.
• Clarify whether, when reporting Scope 3 GHG emissions optionally under the Corporate Standard, entities must report an entire Scope 3 category, or if they can report only selected activities within the category.
• Perform a risk assessment to determine whether the double-claiming of Scope 3 emissions (particularly reductions from intentional activities) among value chain entities that occupy the same segment of the value chain (e.g., multiple retailers) would materially inhibit progress against a 1.5 degree scenario, and, if the assessment determines a material risk, convene a cross-sector expert group to develop new Scope 3 guidance.
• Clarify the Corporate Standard definition of “operational control” to encourage greater consistency in reporting on climate goals and targets that are expressed by reference to operational control boundaries.
• Provide clearer guidance in the Corporate Standard on the selection of a base year and base-year emissions profile.
• Require robust disclosures about material changes between current and prior year periods to ensure that companies are providing meaningful information about emissions over time.

According to the GHG Protocol, the aim of any updates to standards and guidance will be “to align with best practice approaches to ensure GHG Protocol standards for scope 1, scope 2 and scope 3 are effective in providing a rigorous and credible accounting foundation for businesses to measure, plan and track progress toward science-based and net-zero targets in line with the global 1.5°C goal.”

The Protocol Secretariat is currently in the process of reviewing survey submissions and proposals and will develop specific workplans for each survey workstream. The GHG Protocol has a two-year timeline for the standards updates process, and the official start of this process will be informed by the planned restructuring of the GHG Protocol’s governance—a process that is underway by the World Resources Institute (WRI) and World Business Center for Sustainable Development (WBCSD), the co-conveners of GHG Protocol. Thus, the GHG Protocol expects to release drafts of revised text in 2024 and final standards and guidance in 2025.