Published: 24 January 2024
Contributors: Amanda McGrath, Alexandra Jonker
Greenhouse gas reporting is the process of documenting the amount of greenhouse gases (GHGs) emitted by a business, organization or country. Total emissions are calculated from a variety of sources, including industrial processes, energy use and transportation and reported on a recurring basis to inform business practices and international policies.
Greenhouse gas emissions are a leading cause of climate change. The release of carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) and fluorinated gases (including hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), chlorofluorocarbons (CFCs) and others) can create a “greenhouse effect,” in which heat becomes trapped within the Earth’s atmosphere, causing global temperatures to rise. Such emissions are primarily the result of human activities, especially the burning of fossil fuels such as coal, oil and natural gas. As countries and corporations seek standards and policies that will address climate change and reduce environmental impact, standardized GHG reporting offers consistent, transparent data to inform decision-making.
Learn about the processes used to manage environmental performance data and the steps required to account for greenhouse gas (GHG) emissions.
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In 1994, the United Nations Framework Convention on Climate Change (UNFCCC) set goals to stabilize greenhouse gas concentrations as a means of addressing climate change. The Kyoto Protocol, which was passed three years later, set specific emissions reduction targets for industrialized countries. And at the 2015 United Nations Climate Change Conference (COP21), countries around the world committed to the Paris Agreement, a landmark international treaty that aims to limit Earth’s warming to less than 2°C (3.6°F) above pre-industrial levels, with a long-term goal of limiting the increase to 1.5°C (2.7°F). Today, more than 40 countries have laws requiring mandatory greenhouse gas emissions reporting.
While carbon dioxide (CO2) is considered the primary driver of the greenhouse effect, it isn’t the only contributor. The impacts of other greenhouse gases, including methane, nitrous oxide and fluorinated gases such as chlorofluorocarbons, are measured in terms of carbon dioxide equivalents (CO2e). The impact of each type of greenhouse gas is collectively measured in terms of its Global Warming Potential (GWP). This metric compares the heat-trapping ability of a gas to that of carbon dioxide over a particular period of time. CO2e measurements help to show the overall impact of all greenhouse gases in a comparable way.
For corporations, emissions fall into three categories:
- Scope 1 emissions: those produced directly by the company
- Scope 2 emissions: those generated by power and other resources the company uses
- Scope 3 emissions: those that result from indirect sources within the supply chain
Measurement techniques vary, including direct monitoring of emissions at their source and indirect methods like estimating emissions based on fuel consumption data.
A greenhouse gas inventory is a type of sustainability reporting that offers a full account of all GHG emissions and removals from a company or entity over a given period of time. It compiles data on all of the primary greenhouse gases from both direct emissions (those from sources the company owns or controls) and indirect emissions (those incurred by the generation of energy used by the company). It also includes data on any efforts to balance emissions output. An emissions inventory can help inform decision-making about GHG usage and mitigation efforts, identify trends and opportunities for reduction, and is often part of mandatory reporting requirements. Inventories are often made public as part of annual reports and other efforts.
A number of reporting tools and reporting systems offer guidance on how to measure, analyze and communicate the relevant data. The most widely used GHG accounting tool is the GHG Protocol Corporate Accounting and Reporting Standard, often referred to as the Greenhouse Gas Protocol, GHG Protocol or GHGP. A joint initiative of World Resources Institute and World Business Council for Sustainable Development (WBCSD), the GHG Protocol provides principles, guidance, tools and methodologies for creating GHG inventories and reporting relevant data. It is structured around five principles: relevance, completeness, consistency, transparency and accuracy.
Global policymakers consider the GHG Protocol the benchmark for GHG reporting standards and it is often used by countries and companies as they develop their own policies for emissions measurement and reporting. It can be used to track emissions data for individual products, specific companies or countries, or even an entire value chain. Because it is so widely used, it has helped make global emissions reporting more consistent and datasets more comparable.
The reporting of greenhouse gas emissions helps companies pursuing environmental, social and governance (ESG) goals by offering a clear picture of their environmental impact and identifying key areas for improvement. Through this transparency, businesses may be able to better set realistic sustainability goals and pursue corporate social responsibility. Accurate and thorough data is key: trends in reported emissions data and better information on emissions sources may shed light on opportunities to adopt more environmentally friendly practices, and help determine the results of mitigation efforts such as carbon capture and storage (CCS) and carbon sequestration. This data is essential to maintaining compliance with international GHG reporting requirements, but also offers a window into opportunities for cost savings and operational efficiencies.
While countries and companies may take on greenhouse gas reporting voluntarily or to satisfy internal and stakeholder interests, most are also subject to mandatory programs and standards established by governments and international organizations. Many of the programs mandate reporting for businesses or organizations whose emissions exceed a particular number of metric tons. Some of the largest mandatory reporting initiatives include:
Established by the U.S. Environmental Protection Agency (EPA) in 2009, the GHGRP mandates the reporting of GHG emissions from large sources and suppliers in the United States. This program, an extension of the Clean Air Act, covers approximately 85% of the nation's GHG emissions. It focuses on energy industries such as power plants, oil and gas, chemicals and waste. The GHGRP primarily targets facilities that are high emitters of greenhouse gases. They must include data on CO2, methane, nitrous oxide and fluorinated gases; reports are submitted annually and provide GHG data collected during the previous calendar year. The EPA’s Greenhouse Gas Reporting Program includes specific requirements based on size, industry and impact and is subject to adjustment (for example, Subpart W, the GHGRP’s mandate for the oil and gas suppliers, was expanded with new facility-level source categories in 2022.) The agency offers tools to determine the applicability to different facilities1 and GHGRP data is made publicly available to support transparency and accountability.
While the GHGRP applies to energy industries, the US Securities and Exchange Commission (SEC) mandates GHG emissions reporting from large companies across industries. The SEC requires that large publicly traded companies report their Scope 1 and Scope 2 GHG emissions when those emissions are material, or likely to impact investment decisions. The commission also mandates that such companies obtain reports by GHG emissions experts verifying that their disclosures are accurate.
Launched in 2005, the EU ETS, is a cornerstone of the European Union's policy to combat climate change, covering more than 11,000 power stations and industrial plants in 31 countries, as well as airlines. Its cap-and-trade system imposes limits on total GHG emissions from covered entities, which is reduced over time. Entities can buy or sell emission allowances, a provision that aims to provide flexibility and offer incentives for reduction. Reported data must include CO2 levels, with some installations also reporting nitrous oxide and perfluorocarbons.
Under the UNFCCC, established under the Paris Agreement, entire countries are required to perform GHG emissions reporting by creating national inventories that detail overall emissions and removals. The data is used for the Global Stocktake (GST), a report of GHG data made every five years on the status of emissions and climate goals. The UN’s annual Conference of the Parties (COP) evaluates the program each year and makes changes to the treaty and its rules as needed.
Australia's NGERS, established in 2007, requires corporations to report their greenhouse gas emissions, energy production and energy consumption. Its Emissions and Energy Reporting System (EERS) is used to collect the data, including information on various greenhouse gases and energy metrics, facility-specific emissions factors and other areas. The resulting reports inform the Australian government's climate change policies and measures.
South Africa, one of the largest contributors to greenhouse gas emissions in Africa, introduced mandatory GHG reporting requirements for large emitters in 2019. A carbon tax was also set as a financial incentive to reduce emissions, especially from heavy use of coal for fuel. Companies use the South African Greenhouse Gas Emissions Reporting System (SAGERS) to upload emissions data annually and ensure compliance with global reporting practices.
The Japanese government requires companies and organizations to report their GHG emissions annually to aid in meeting its commitments under the Paris Agreement. Mandatory reporting requirements include industrial sectors, energy, transportation and commercial buildings. Reports undergo third-party verification to ensure accuracy and reliability. Additional legislation on reporting is expected in the next few years.
Carbon accounting allows organizations to quantify their greenhouse gas emissions, understand their climate impact and set goals to reduce their emissions.
Scope 3 emissions are a category of greenhouse gas (GHG) emissions originating from business operations by sources that are not directly owned or controlled by an organization.
Decarbonization is a method of climate change mitigation that reduces greenhouse gas (GHG) emissions, as well as removes them from the atmosphere.
Net zero is the point at which greenhouse gases emitted into the atmosphere are balanced by an equivalent amount removed from the atmosphere.
ESG reporting frameworks are used by companies for the disclosure of data covering business operations and opportunities and risks related to the environmental, social and governance issues.
Energy management is the proactive and systematic monitoring, control and optimization of an organization’s energy consumption to conserve use and decrease energy costs.
Footnotes
1 Greenhouse Gas Reporting Program Applicability Tool (link resides outside ibm.com), Environmental Protection Agency (epa.gov), August 2023