When measuring and reporting greenhouse gas (GHG) emissions, companies must define operational boundaries—defining which emissions sources are included in their reporting. An operational boundary is decided once a company has determined an organisational boundary, ensuring consistency in how emissions are categorised.
While organisational boundaries define which parts of a business are included in emissions reporting (based on ownership or control), operational boundaries determine which specific emission sources within those operations are reported. Let's look at how the GHG protocol defines emission sources.
Direct vs indirect emissions
GHG emissions are classified as direct or indirect, depending on whether they come from sources owned or controlled by the company.
Direct emissions emerge from sources that are owned or controlled by the company. (E.g., Fuel combustion in company-owned vehicles).
Indirect emissions emerge as a consequence of the activities of the company but occur at sources owned or controlled by another company. (E.g., emissions from purchased electricity).
Three scopes
To improve transparency and comparability, the GHG Protocol categorises direct and indirect emissions into three scopes:
Scope 1: Direct emissions
These are emissions from sources owned or controlled by the company, such as:
Fuel combustion in company-owned vehicles.
On-site manufacturing processes.
Fugitive emissions from equipment leaks.
Scope 2: Indirect emissions from purchased energy
These emissions result from the generation of purchased electricity, steam, heating, and cooling that the company consumes, including:
Electricity used in corporate offices and factories.
Purchased steam or district heating.
Scope 3: Other indirect emissions
Scope 3 includes all other indirect emissions that occur within a company’s value chain, such as:
Upstream emissions (e.g., purchased goods, supply chain transportation, employee commuting).
Downstream emissions (e.g., product use, customer transportation, end-of-life disposal.
Setting an operational boundary
A company’s operational boundary is influenced by who controls an emission source.
Companies that have operational control must account for 100% of the emissions from sources that fall within their operational control boundary (Scope 1 and Scope 2).
Scope 3 emissions are not automatically required under the operational control approach. However, companies are encouraged to report significant Scope 3 emissions if they are material to the company's total footprint. Scope 3 emission reporting is increasingly becoming required by regulatory bodies, as it offers a valuable opportunity to enhance GHG management, stakeholder engagement, and sustainability reporting.
Defining Scope 3 operational boundaries
When determining which Scope 3 emissions to include within your operational boundary the GHG protocol recommends to:
Map your value chain – Identify all key activities from suppliers to end-users that contribute to emissions.
Determine relevant Scope 3 categories – Focus on categories with the most significant GHG impact.
Identify partners – Identify any partners that contribute potentially significant amounts of GHGs along the value chain; this can be helpful for obtaining data and making decarbonisation decisions.
Quantify emissions – estimate emissions using the best data available.
For more detailed guidance, see the GHG Protocol (p. 32).