Step 3: Set your operational boundaries
On This Page (7 sections)
This is step 3 of 7 in Build your GHG inventory. Previous: Step 2: Set your organisational boundaries. Next: Step 4: Identify your emission sources.
Your operational boundary decides which types of emissions your inventory includes. In practice, you decide which Scope 3 categories to include, because Scope 1 and Scope 2 are always in. Write down each decision and the reason for it.
Scope 1 and Scope 2: always in
The GHG Protocol requires every company to account for Scope 1 and Scope 2. Scope 1 usually comes from 4 types of source:
| Type | Examples |
|---|---|
| Stationary combustion | Boilers, furnaces, ovens, generators |
| Mobile combustion | Company cars, lorries, forklifts, ships |
| Process emissions | Chemical reactions in cement, steel or chemicals production |
| Fugitive emissions | Refrigerant leaks from air conditioning and chillers, gas leaks |
Scope 2 covers the electricity, steam, heating and cooling that you buy. For most offices and shops, electricity is the largest single source.
Scope 3: decide category by category
The Scope 3 Standard has 15 categories. The rules that apply to you set the minimum:
| Rule | What it asks for |
|---|---|
| GHG Protocol Corporate Standard | Scope 3 is optional. |
| Bursa Malaysia Listing Requirements | At least business travel (category 6) and employee commuting (category 7). |
| IFRS S2 | Consider all 15 categories and report the ones that are material. Scope 3 is not required in the first year. |
| NSRF transition relief | During the relief period, only the Scope 3 categories that your regulator already requires. |
Climate reporting rules in Malaysia and worldwide has the dates for each group.
How to find your relevant categories
Do a quick screening first. Estimate the size of each category with rough data, such as total spend by type of purchase. Then rank the categories. The Scope 3 Technical Guidance gives 6 tests for relevance:
- Size. The category is a large share of your expected Scope 3 total.
- Influence. You can reduce or influence its emissions.
- Risk. It adds to your climate-related risk, for example from carbon prices.
- Stakeholders. Customers, investors or regulators see it as important.
- Outsourcing. It is an activity that you used to do yourself, or that others in your sector do themselves.
- Sector guidance. Guidance for your sector says that it is significant.
Typical results by type of business:
| Business type | Categories that are often large |
|---|---|
| Manufacturing | 1 Purchased goods, 4 Upstream transport, 11 Use of sold products |
| Retail and wholesale | 1 Purchased goods, 4 and 9 Transport |
| Services and offices | 1 Purchased services, 6 Business travel, 7 Employee commuting |
| Property | 2 Capital goods, 13 Downstream leased assets |
| Banks, insurers, asset managers | 15 Investments (financed emissions) |
Use this table only as a starting point. Your screening decides.
After the screening, spend the most effort on the largest categories. For these, look for better data, such as supplier-specific figures. For small categories, average data or spend-based estimates are acceptable. The Scope 3 Technical Guidance describes the methods for each category, from the least to the most specific.
Exclusions
If you leave a category out, say so and give the reason. Good reasons are that the category does not apply to you (for example, franchises if you have none) or that the screening shows it is very small. A lack of data is not a reason to exclude a large category. Estimate it with average data, and improve the data later.
Check your progress
Before you go to step 4, make sure that you have:
- Scope 1 and Scope 2 in the boundary
- A screening estimate for each of the 15 Scope 3 categories
- A list of included categories, and a written reason for each exclusion
In Carbon GPT
In Measures, measures are grouped by Scope 1, 2 and 3 and by category, so your boundary decides which categories you use. Financial institutions measure category 15 with the PCAF guides. For examples of each scope, read our blog post Scope 1, 2 and 3 emissions explained.
Sources
- GHG Protocol Corporate Standard, chapter 4
- GHG Protocol Corporate Value Chain (Scope 3) Standard, chapters 5–7
- GHG Protocol Technical Guidance for Calculating Scope 3 Emissions, table II (relevance criteria)
- IFRS S2 Climate-related Disclosures, paragraphs 29(a)(vi), B32–B57 and C4
- Bursa Malaysia: Main Market Listing Requirements
- Securities Commission Malaysia: National Sustainability Reporting Framework
