a corporate accounting and reporting standardconference.tgo.or.th/download/tgo_or_th/seminar/... ·...

A Corporate Accounting and Reporting Standard


Training Curriculum

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2. GHG Accounting and Reporting Principles

3. Setting Organizational Boundaries

4. Setting Operational Boundaries

Lesson Modules


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5. Tracking Emissions Over Time

6. Identifying and Calculating Emissions

7. Reporting GHG Emissions

8. Review


L e s s o n 3

Organizational Boundaries

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In this lesson, you will learn:

• How to determine which of your company’s operations to include in your inventory

Learning Objectives


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• Two approaches to determine a company’s organizational boundaries

• Why an entity might choose one approach over another

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• Boundaries: Imaginary lines encompassing the emissions to include in a company’s GHG inventory

1. Organizational boundaries

• Determine which company operations to include

2. Operational boundaries

• Determine which emissions sources to include

“Boundaries” in a GHG inventory


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• Determine which emissions sources to include

• Determine how to categorize emissions

GHGsGHGs GHGs

Scope 3 Scope 1

GHGsScope 1 Scope 1

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Why are organizational boundaries important?

• Complex business structures



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– Subsidiaries

– Joint ventures

– Franchises

• To measure emissions consistently throughout company

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Example: What are Global Cement’s emissions?

Global Cement, Inc.Global Cement, Inc.


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PhilCemenPhilCemen10,000 10,000 Mt COMt CO22e/yre/yr

CementerosCementeros5,000 5,000 Mt Mt COCO22e/yre/yr

National Cement Co.National Cement Co.1,000 1,000 Mt Mt COCO22e/yre/yr

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What are Global Cement ‘s emissions?

Example: But what if…?



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50% of Cementeros is 50% of Cementeros is owned by another owned by another

organization?organization?

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What are Global Cement’s emissions?

Example: And what if…?



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50% of 50% of CementerosCementeros is is owned by another owned by another

organizationorganizationthat controls all of that controls all of

CementerosCementeros’ operations?’ operations?

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Global Cement’s total emissions

depend on how they define their

Example: Global Cement


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• Which company operations to include in inventory

• What % of each operation to include

Organizational boundaries determine...

0%100%


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30%

75%

Total Total reportedreported emissionsemissions dependdepend onon howhow organizationalorganizational boundariesboundaries are are defineddefined

0%

100%

100%

100%

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• Consolidation: combining emissions data from separate operations

• 2 consolidation approaches1. Equity Share2. Control

Consolidation approach


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2. Controla) Financial Controlb) Operational Control

• Apply selected approach across entire organization

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Definition: % of ownership; economic interest

Account for emissions according to the company’s equity share in the operation– Independent of financial or operational control

1) Equity Share approach

CompanyCompany

Factory AFactory A

Account forAccount for

1. Equity Share

2. Control

a) Financial control

b) Operational Control


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CompanyCompany

1,000 1,000 Mt COMt CO22e/yre/yr

Factory BFactory B


has 50% equity sharehas 50% equity share

has 85% equity sharehas 85% equity share


500 500 Mt COMt CO22e/e/yryr



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Definition: can be defined as

a) financial control

b) operational control

2) Control approach 1. Equity Share

2. Control




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Account for 100% of emissions from operations under the company’s “control”

– Independent of equity share

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Definition: ability to direct an operation’s financial and operational policies– To determine, consider corporate voting rights and financial accounting status

Account for 100% of emissions from each operation under financial control

2a) Financial Control

1. Equity Share

2. Control



CompanyCompanyFactory AFactory A



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CompanyCompany

800 800 Mt COMt CO22e/yre/yr

Factory BFactory B

800 800 Mt COMt CO22e/yre/yr

has financial controlhas financial control

does NOT have does NOT have financial controlfinancial control




00 Mt COMt CO22e/e/yryr

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Definition: authority to introduce and implement operating policies- To determine, consider ownership of operating permit

Account for 100% of the emissions from each operation under operational control

2b) Operational Control

1. Equity Share

2. Control



Factory AFactory A

has operational has operational Account forAccount forCompanyCompany


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Factory BFactory B


has operational has operational controlcontrol

does NOT have does NOT have operational controloperational control


1,000 1,000 Mt COMt CO22e/e/yryr


00 Mt COMt CO22e/e/yryr

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A P P R O A C H D E F I N I T I O N G H G A C C O U N T I N G

Equity share

Summary of consolidation approaches

Percent ownership % owned

If yes: 100%


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Financial control

Operational control

Directs financialpolicies to gain

economic benefits

If yes: 100%

If no: 0%

If joint: % owned

Authority to introduce and implement operating policies

If yes: 100%

If no: 0%

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Which emissions would you include under equity share?

Example: Equity Share


1,000 1,000

••has 25% equity sharehas 25% equity share

••has financial controlhas financial control

••does NOT have operational controldoes NOT have operational control


250 250 250 250 250 250 250 250 Mt COMt CO22e/yre/yr


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Equity share Percent ownership % owned

Financial controlDirects financial and operating policies to gaineconomic benefits

If yes: 100%

If no: 0%

If joint: % owned

Operational controlAuthority to introduce and implement operatingpolicies

If yes: 100%

If no: 0%

(Consult the table below to help you answer)

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Which emissions would you include under financial control?

Example: Financial Control

••has has 25% 25% equity equity shareshare




1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Mt COMt CO22e/yre/yr


1,000 1,000 Mt COMt CO e/yre/yr


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Financial controlDirects financial and operating policies to gain economic benefits

If yes: 100%

If no: 0%

If joint: % owned

Operational controlAuthority to introduce and implement operating policies

If yes: 100%

If no: 0%



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Which emissions would you include under operational control?

Example: Operational Control

••has has 25% 25% equity equity shareshare




0 0 0 0 0 0 0 0 Mt COMt CO22e/yre/yr


1,000 1,000 Mt COMt CO e/yre/yr


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Financial controlDirects financial and operating policies to gain economic benefits

If yes: 100%

If no: 0%

If joint: % owned

Operational controlAuthority to introduce and implement operating policies

If yes: 100%

If no: 0%



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Approach Emissions (metric tons CO2/yr)

Equity share

Financial control

Operational control

What are Global Cement’s emissions?


13,500

16,000

11,000


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CementerosCementeros5,000 5,000 Mt COMt CO22e/yre/yr

National Cement Co.National Cement Co.1,000 1,000 Mt COMt CO22e/yre/yr

50% of Cementeros is 50% of Cementeros is owned by another owned by another

organizationorganizationthat controls all of that controls all of

Cementeros’ operations?Cementeros’ operations?(Global Cement, Inc. has (Global Cement, Inc. has

financial control over financial control over Cementeros)Cementeros)

Global Cement hasGlobal Cement has100% equity share,100% equity share,financial control andfinancial control andoperational controloperational control

Global Cement hasGlobal Cement has100% equity share,100% equity share,financial control andfinancial control andoperational controloperational control

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Consult the Corporate Standard to account for emissions from

• Leased assets

• More complex operating structures:

– Group companies/subsidiaries

Accounting Categories


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– Group companies/subsidiaries

– Associated/affiliated companies

– Non-incorporated joint ventures / partnerships / operations w/ joint financial

control

– Fixed asset investments

– Franchises

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• Apply selected approach across entire company

• Joint owners should coordinate consolidation approach

Organizational boundaries and double-counting


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• Joint owners should coordinate consolidation approach

– Using different consolidation approaches can lead to double- or under-counting emissions

• Joint venture companies can draw up contracts to specify emissions ownership

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• What to consider when choosing consolidation approach:

– Commercial reality

– Influence over emissions

– Program and regulatory requirements

Selecting a consolidation approach


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– Program and regulatory requirements

– Liability and risk management

– Financial accounting

– Management information and performance tracking

– Administrative costs and data access

– Completeness of reporting

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• Organizational boundaries determine which parts of the company are included in the inventory, and at what percentage

• Organizational boundaries can be based on equity share and/or control consolidation approach

Summary


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control consolidation approach

• Total emissions accounted can vary significantly depending on consolidation approach

• Companies can use both approaches to get a more thorough assessment of their emissions

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Further Reading

The Greenhouse Gas Protocol: A Corporate Accounting & Reporting StandardChapter 3: Setting Organizational Boundaries

Hot Climate, Cool Commerce: A Service Sector Guide to


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Hot Climate, Cool Commerce: A Service Sector Guide to Greenhouse Gas ManagementPart I, Step 2: Establishing Boundaries

ISO 14064-1Section 4.1: Organizational Boundaries

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