The impact of human activities began to be felt especially from the second and third phases of the Industrial Revolution (late 19th and 20th centuries). The figure below represents data from the Global Carbon Project and a NOAA palaeoclimate study carried out by Frank et al. (2010), which was based on the acquisition of information from three samples of Antarctic ice cores, with the aim of reconstructing data related to temperature and the amount of CO₂ over a period of 1000 years. These CO₂ reconstructions were then associated with temperature changes in order to understand how the global carbon cycle influences climate variations over time.

It is on this basis that the regulators and government institutions that have designed limits on temperature variations, I am referring to the Paris agreement, and more recently, impose limits on greenhouse gas emissions (GHG) for various industries, namely the Fit for 55 package, which has already been the subject of discussion in an article of mine entitled Explore the European legislative process with a practical case and highlight its implications.

More than 190 countries have already signed international agreements related to climate change, the most significant being the 2015 Paris Agreement, which aims to limit the global temperature increase to well below 2°C compared to pre-industrial levels, with efforts to restrict it to 1.5°C. In addition, other initiatives, such as the Kyoto Protocol, and regional commitments, such as the European Green Deal, reinforce global efforts to mitigate climate change and adapt to its impacts.

In addition, to date, more than 140 countries and around 5,000 organisations around the world have made formal commitments to achieve net-zero emissions by 2050. These commitments include drastically reducing greenhouse gas emissions and adopting more sustainable practices, such as the transition to renewable energies and the implementation of carbon capture and storage technologies. The aim is to limit global warming to 1.5°C, as established in the Paris Agreement.

As a result, a need has arisen to create a universal and unified process for companies to be able to group, interpret and report their carbon performance in order to achieve the climate objectives imposed by current legislation. The main problems are on fronts such as the vocabulary to be used, validating the results obtained and the methodologies to be used as a result of these two problems.

Implementing an effective carbon accounting system presents a number of operational challenges. Many companies face difficulties collecting accurate data from multiple sources and integrating this information into a cohesive report. In addition, training teams to use the correct methodologies and ensuring the validity of the data are barriers that require significant investments in time and resources. For many organisations, especially those in complex sectors such as manufacturing and logistics, setting up an infrastructure to support carbon accounting can be time-consuming and costly. However, overcoming these obstacles is essential to ensure reliable reporting and to meet growing regulatory demands.

To respond to this need, the GHG Protocol and the ISO 14064 standard emerged, establishing global standards for measuring and managing greenhouse gas emissions. The GHG Protocol, widely adopted by companies and governments, offers guidelines for accounting and reporting emissions, while ISO 14064 defines specific rules for quantification and verification. Together, these frameworks promote transparency and standardisation, helping organisations to align their efforts with global climate commitments.

The Greenhouse Gas Protocol was published in 1998 by the World Resources Institute and the World Business Council for Sustainable Development, serves as the foundation for corporate emissions disclosures, both voluntary and mandatory. It provides a standardized framework for measuring and managing greenhouse gas emissions. More on this topic ahead.

The standardisation promoted by the GHG Protocol and ISO 14064 brings more than just regulatory compliance. It ensures that companies provide consistent and verifiable information on their environmental performance, promoting transparency for stakeholders. This level of uniformity not only makes it easier to compare companies from different sectors, but also contributes to mitigating greenwashing by ensuring that organisations committed to sustainability meet their emissions reduction targets. By aligning themselves with recognised standards, companies can build trust with investors, regulators and consumers, while demonstrating their commitment to the fight against climate change.

Many organisations are choosing to participate involuntary sustainability reporting initiatives wich require GHG emissions disclosures.

In July 2023, the European Commission officially adopted the European Sustainability Reporting Standards (ESRS), which are mandatory for large companies covered by the Corporate Sustainability Reporting Directive (CSRD). These standards guarantee comprehensive reporting on sustainability issues and the ESRS incorporates guidelines from the International Sustainability Standards Board (ISSB).

The CSRD applies to large companies and groups that meet at least two of the following criteria: having more than 250 employees, a turnover exceeding €40 million, or total assets above €20 million. Listed small and medium-sized enterprises (SMEs) will also be required to report, though they have a longer timeline to comply. This directive extends beyond EU companies, impacting non-EU companies generating significant revenue within the EU. The goal is to create transparency in sustainability practices, ensuring that environmental, social, and governance (ESG) factors are thoroughly reported by companies across various sectors, contributing to Europe’s sustainability objectives.

1. GHG Protocol Scopes across the value chain

GHG emissions are categorized into different scopes. Scope 1 covers direct emissions from sources owned or controlled by the reporting organization, such as on-site fuel combustion. Scope 2 includes indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the organization. Scope 3 addresses indirect emissions throughout the organization’s entire value chain, such as those from suppliers or product use, but outside its direct control. Scope 4 refers to emissions reductions or avoidance resulting from the use of a company’s products or services, though it is not an official term under the GHG Protocol.

2. GHG Accounting Methodologies Lanscape

The GHG Protocol has become essential for methodologies and target-setting initiatives across industries. Some of the most recognized frameworks that align with the protocol include the:

• Carbon Disclosure Project (CDP);

• Science Based Targets initiative (SBTi);

• Global Reporting Initiative (GRI);

• U.S. Environmental Protection Agency (EPA);

• International Sustainability Standards Board (ISSB).

I will be writing a separate article dedicated to analyzing each of these methodologies in detail. For now, I will softly explain their frameworks, benefits, and how they influence corporate sustainability strategies.

• The Carbon Disclosure Project (CDP) is a widely used framework that encourages companies to disclose their environmental impact, focusing on emissions, water use, and climate risks. It helps organizations manage their environmental data and provides transparency to stakeholders.
• The Science Based Targets initiative (SBTi) supports companies in setting emissions reduction targets that align with climate science, aiming to limit global warming to 1.5°C. This framework drives businesses to set ambitious, science-based goals.
• The Global Reporting Initiative (GRI) offers comprehensive standards for sustainability reporting, covering a wide range of topics, including GHG emissions, and helps companies disclose their impacts on the environment and society.
• The U.S. Environmental Protection Agency (EPA) provides guidelines and regulations for managing GHG emissions in the United States, supporting businesses in compliance with environmental laws and promoting sustainable practices.
• The International Sustainability Standards Board (ISSB) is focused on developing globally consistent sustainability disclosure standards to help investors assess corporate sustainability performance. It aims to integrate sustainability into financial reporting.

In addition to the widely adopted global methodologies, there are also sector-specific guidelines that help adapt the GHG Protocol guidelines to the unique needs of different industries.

• Airline industry: The International Air Transport Association (IATA) has developed specialized guides for measuring and reporting greenhouse gas emissions. These guidelines focus on aviation-specific methods, such as calculating emissions per passenger and per flight.
• Maritime sector: The Maersk McKinney Moller Center for Zero Carbon Shipping is leading the development of guidelines on maritime fuels, providing a solid basis for shipping companies to set emissions targets based on alternative fuels and emerging technologies.
• Construction: The Royal Institute of Chartered Surveyors (RICS) has created guidelines for the built environment, addressing the impact of buildings and infrastructure throughout their life cycle, from construction to demolition.
• Logistics sector: The Global Logistics Emissions Council (GLEC) has developed global standards for measuring and reporting emissions in supply chains and freight transport, helping companies to optimize their operations and reduce their environmental impact.
• Financial services: The Partnership for Carbon Accounting Financials (PCAF) provides guidelines that help financial institutions measure and disclose the emissions associated with their investments and loan portfolios, enabling the financial sector to align itself with global climate goals.

3. Conclusion

The future of carbon accounting promises an evolution driven by technological advances and stricter regulation. Digital tools such as artificial intelligence and real-time monitoring platforms are set to become essential for companies seeking greater accuracy and agility in their reporting. As the pressure to reduce emissions increases, we will see greater integration of environmental data into daily operations, allowing for more informed and sustainable decisions. Carbon accounting will thus be consolidated as a central pillar of corporate strategy, helping companies to stay in line with global climate goals.

In future articles, I will go more in-depth into the following topics mentioned above:

• Detailed analysis of carbon accounting methodologies, such as the Carbon Disclosure Project (CDP), Science Based Targets initiative (SBTi), Global Reporting Initiative (GRI), among others.
• Discussion of specific guides for sectors such as aviation, construction, maritime transport and financial services, which adapt the GHG Protocol guidelines to the particularities of each industry.
• Practical explanation of the process companies must follow to report their environmental performance, from data collection to verification and validation.

This structure makes it possible to organise the next contents in a clear way, keeping the focus on what is to come without deviating from the main theme of this article.

Best regards.