GHG Accounting Standards and Frameworks for Corporates: A Comparison

The imperative for corporate climate action has never been clearer. With the latest scientific reports warning of the catastrophic impacts of unchecked global warming, and with investors, regulators, and civil society demanding greater transparency and accountability on climate issues, companies across all sectors are under pressure to measure, disclose, and reduce their greenhouse gas (GHG) emissions.

But to do so effectively and credibly, companies need clear and consistent standards and frameworks to guide their GHG accounting practices. These frameworks provide a common language and methodology for quantifying and reporting emissions, ensuring that corporate disclosures are reliable, comparable, and decision-useful for stakeholders.

Over the past few decades, a number of voluntary and mandatory GHG accounting standards and frameworks have emerged, each with its own scope, requirements, and intended audience. Some, like the GHG Protocol, focus specifically on emissions accounting and reporting, while others, like CDP and TCFD, take a broader view of climate-related risks and opportunities.

For companies navigating this landscape, the choice of which standard(s) to follow can be complex and consequential. Different frameworks may be more or less relevant depending on a company's sector, size, geography, and stakeholder expectations. And while there is growing convergence and alignment among standards, there are also important differences in terms of data requirements, calculation methodologies, and disclosure formats.

In this article, we'll provide an overview of the most widely used GHG accounting standards and frameworks for corporates, and compare their key features and applications. We'll also offer some guidance on how companies can select and implement the right approach for their needs, and how they can stay ahead of the curve as the standards landscape continues to evolve.

Overview of Key GHG Accounting Standards and Frameworks

Here are some of the most widely used and influential GHG accounting standards and frameworks for corporates:

The Greenhouse Gas Protocol
Developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the GHG Protocol is the most widely used international standard for corporate GHG accounting and reporting. It provides a comprehensive framework for measuring and managing emissions from direct operations (Scope 1), purchased electricity and heat (Scope 2), and value chain activities (Scope 3).

The GHG Protocol consists of several interlinked standards and guidance documents, including:

- The Corporate Accounting and Reporting Standard, which sets out the principles and requirements for companies to measure and report their Scope 1 and 2 emissions

• The Corporate Value Chain (Scope 3) Accounting and Reporting Standard, which provides guidance on measuring and reporting emissions from 15 categories of upstream and downstream activities
• The Product Life Cycle Accounting and Reporting Standard, which focuses on measuring the emissions associated with individual products or services across their life cycle
• Various sector-specific guidance and calculation tools for industries such as ICT, agriculture, and financial services
  The GHG Protocol is the foundation for many other corporate climate reporting frameworks and initiatives, such as the Science Based Targets initiative (SBTi), which requires companies to set emissions reduction targets in line with the Paris Agreement goals using the GHG Protocol standards.

ISO 14064 and 14065
Developed by the International Organization for Standardization (ISO), the ISO 14064 series provides a set of international standards for quantifying, monitoring, reporting and verifying GHG emissions at the organizational and project level. It consists of three parts:

- ISO 14064-1, which specifies principles and requirements for designing, developing, managing and reporting organization-level GHG inventories

• ISO 14064-2, which provides guidance on quantifying, monitoring and reporting GHG emission reductions or removal enhancements from project-level activities
• ISO 14064-3, which specifies principles and requirements for verifying GHG statements
• ISO 14064 is compatible with the GHG Protocol and can be used by companies to enhance the credibility and consistency of their GHG inventories and disclosures. It is often used in the context of emissions trading schemes or offset projects that require third-party verification.
• ISO also offers a related standard, ISO 14065, which sets out requirements for bodies that validate or verify GHG statements, to ensure their competence, consistency and impartiality.

CDP
Formerly known as the Carbon Disclosure Project, CDP is a global non-profit that runs a disclosure system for companies, cities, states and regions to report their environmental impacts and strategies. Each year, CDP issues questionnaires on climate change, water security, and deforestation, which organizations can respond to voluntarily or at the request of their investors or customers.

The CDP climate change questionnaire covers a wide range of topics related to corporate climate governance, strategy, risk management, and metrics and targets. It is aligned with the TCFD recommendations (see below) and incorporates elements of the GHG Protocol. Companies are scored based on the comprehensiveness and quality of their disclosure, as well as their performance on emissions reduction and climate action.

Over 9,600 companies worldwide disclosed through CDP in 2020, representing over 50% of global market capitalization. CDP data is widely used by investors, policymakers, and other stakeholders to assess corporate climate performance and inform decision-making.

Task Force on Climate-related Financial Disclosures (TCFD)
Established by the Financial Stability Board in 2015, the TCFD is a market-driven initiative that aims to improve the quality and consistency of climate-related financial disclosures by companies. The TCFD has developed a set of recommendations for companies to disclose information on four core elements of how they manage climate-related risks and opportunities:

**Governance:**The organization's governance around climate-related risks and opportunities
Strategy: The actual and potential impacts of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning
Risk Management: The processes used by the organization to identify, assess, and manage climate-related risks
Metrics and Targets: The metrics and targets used to assess and manage relevant climate-related risks and opportunities
While the TCFD recommendations are voluntary, they have gained significant traction among companies, investors, and regulators as a framework for integrating climate considerations into mainstream financial reporting. Many jurisdictions, such as the EU and UK, are moving towards mandatory TCFD-aligned disclosure requirements for certain companies.

The TCFD recommendations are closely aligned with other frameworks like CDP and the GHG Protocol, but have a specific focus on the financial materiality of climate-related risks and opportunities.

Global Reporting Initiative (GRI) Standards
The GRI Standards are a set of global best practice standards for sustainability reporting, covering a wide range of economic, environmental, and social topics. The GRI Standards include several standards relevant to GHG accounting and climate change, such as:

GRI 305: Emissions, which specifies requirements for reporting on an organization's GHG emissions and other significant air emissions
GRI 302: Energy, which covers an organization's energy consumption within and outside the organization, as well as energy intensity and reduction initiatives
GRI 201: Economic Performance, which includes disclosure on the financial implications and risks and opportunities posed by climate change
The GRI Standards are designed to be used by organizations of any size, sector or location, and can be applied in whole or in part depending on the organization's reporting needs and stakeholder expectations. They are often used in conjunction with other frameworks like CDP or the UN Global Compact.

Sustainability Accounting Standards Board (SASB) Standards
Developed by the US-based non-profit SASB (now part of the Value Reporting Foundation), the SASB Standards provide industry-specific disclosure guidance on sustainability topics that are financially material to investors. The Standards cover 77 industries across 11 sectors, and include metrics and disclosures related to GHG emissions, energy management, and climate risk for industries where these issues are deemed material.

The SASB Standards are designed to be integrated into mainstream financial reporting, such as annual reports and financial filings, to provide investors with decision-useful information on a company's sustainability performance and its impact on long-term value creation. They are often used alongside other frameworks like TCFD or GRI to provide a more complete picture of a company's sustainability risks and opportunities.

Comparison of Key Features and Applications

While there is significant overlap and alignment among these different GHG accounting standards and frameworks, there are also some key differences in terms of their scope, requirements, and intended users. Here are some of the main dimensions on which these frameworks can be compared:

Scope and focus

The GHG Protocol and ISO 14064 focus specifically on GHG emissions accounting and reporting, while CDP, TCFD, GRI, and SASB take a broader view of climate-related and sustainability issues.
The GHG Protocol and ISO 14064 provide detailed guidance on measuring and calculating emissions from different scopes and activities, while the other frameworks focus more on disclosure and risk management.

Mandatory vs. voluntary

Most of these frameworks are currently voluntary, meaning that companies can choose whether and to what extent to apply them. However, there is a growing trend towards mandatory disclosure requirements aligned with frameworks like TCFD, particularly in the financial sector.
CDP disclosure is often requested by investors or customers, creating a de facto requirement for many companies to respond.
Prescriptiveness and flexibility

The GHG Protocol and ISO 14064 provide more prescriptive guidance on emissions calculation methodologies and data requirements, while frameworks like CDP and TCFD allow for more flexibility in how companies disclose their climate-related information.
The SASB Standards are industry-specific and focus on a narrower set of financially material topics, while the GRI Standards are more comprehensive and can be applied across sectors.

Target audience

The GHG Protocol, ISO 14064, and CDP are primarily used for voluntary corporate sustainability reporting and target-setting, and are of interest to a wide range of stakeholders including investors, customers, employees, and NGOs.
The TCFD recommendations and SASB Standards are specifically designed for financial market participants and are focused on the integration of climate and sustainability issues into mainstream financial reporting.
The GRI Standards are used for broader sustainability reporting and are of interest to a wide range of stakeholders beyond just investors.
Assurance and verification

The GHG Protocol and ISO 14064 provide guidance on third-party verification of emissions inventories, and many companies choose to have their CDP disclosures externally assured to enhance credibility.
The TCFD recommendations and SASB Standards do not require external assurance, but many investors and regulators are calling for greater reliability and comparability of climate-related financial disclosures.
Choosing and Implementing the Right Approach
Given the variety of GHG accounting standards and frameworks available, how can companies choose the right approach for their needs? Here are some key considerations and steps:

Understand your drivers and stakeholder expectations

What are the primary reasons for your company to measure and report its GHG emissions and climate-related information? Is it for voluntary sustainability reporting, compliance with regulations, or in response to investor or customer requests?
What are the specific expectations and requirements of your key stakeholders, such as investors, customers, regulators, or industry associations, in terms of the scope, format, and assurance of your disclosures?

Assess your current capabilities and gaps

What is your company's current level of maturity and experience in GHG accounting and climate-related disclosure?
Do you have the necessary data, systems, and processes in place to meet the requirements of different frameworks?
What are the key gaps or challenges in your current approach, such as data availability, calculation methodologies, or governance structures, and how can these be addressed?

Map the relevant standards and frameworks for your sector and geography

Which GHG accounting standards and frameworks are most widely used and accepted in your industry and region?
Are there any mandatory reporting requirements that you need to comply with?
How do the different standards and frameworks align with or complement each other, and what are the key differences or trade-offs to consider?

Engage internal and external stakeholders

Who are the key internal stakeholders that need to be involved in the design and implementation of your GHG accounting and reporting approach, such as sustainability, finance, risk, and operations teams?
How can you engage external stakeholders, such as investors, customers, suppliers, and NGOs, to understand their expectations and get their input and feedback on your approach?

Develop a roadmap and implementation plan
Based on your assessment and stakeholder engagement, what is the most appropriate and feasible combination of standards and frameworks for your company to adopt, and over what timeline?
What are the key steps and milestones in your implementation plan, such as data collection, methodology development, system integration, and external communication and assurance?
How will you monitor and review your approach over time, and adapt to new developments and best practices in the standards landscape?
By taking a structured and proactive approach to selecting and implementing GHG accounting standards and frameworks, companies can ensure that their disclosures are robust, credible, and decision-useful, and that they are well-positioned to respond to the growing demands and expectations for corporate climate action and transparency.

The Path Forward

As the urgency of the climate crisis grows, so too does the importance of corporate GHG accounting and disclosure as a foundation for meaningful climate action and risk management. By providing a common language and framework for measuring and reporting emissions and climate-related information, GHG accounting standards and frameworks play a critical role in driving comparability, accountability, and ambition in the corporate response to climate change.

At the same time, the landscape of GHG accounting standards and frameworks is complex and evolving, with a proliferation of voluntary and mandatory approaches that can create confusion and fragmentation for companies and their stakeholders. As calls for greater harmonization and alignment among standards grow louder, it is likely that we will see further convergence and consolidation in the coming years, as well as the emergence of new and innovative approaches that leverage technology and data to enhance the quality and impact of corporate climate disclosure.

For companies navigating this landscape, the key is to stay informed, engaged, and proactive in the development and implementation of their GHG accounting and reporting practices. By understanding the key features and applications of different standards and frameworks, and by engaging internal and external stakeholders in the process, companies can select and implement the approach that best meets their needs and drives meaningful climate action and value creation.

Ultimately, the goal of GHG accounting and disclosure is not just to measure and report emissions, but to drive the transition to a net-zero and climate-resilient economy. By providing clear, consistent, and decision-useful information on their climate performance and strategies, companies can help to mobilize the capital, innovation, and collaboration needed to accelerate this transition and build a more sustainable and prosperous future for all.

The time for action is now, and the stakes have never been higher. As the old adage goes, "what gets measured gets managed" – and when it comes to the existential threat of climate change, measurement and management have never been more critical. By embracing the power and potential of GHG accounting standards and frameworks, companies can be part of the solution and help to create a better world for generations to come.

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