Climate-Related Disclosures and GHG Accounting
Domain 4 covers the GHG Protocol inventory rules and the disclosure architecture inherited from TCFD and codified in IFRS S2. Items test scope classification, base-year policy, target credibility, and whether scenario analysis is genuinely connected to strategy.
Scopes and boundaries
Scope 1 is direct emissions: combustion, process emissions, fugitive losses and company-owned vehicles. Scope 2 is purchased electricity, heat, steam and cooling, reported on both a location-based and a market-based basis. Scope 3 is the fifteen value chain categories; category 1 (purchased goods and services) and category 11 (use of sold products) are often the largest. Screen first, then prioritise by size, influence, risk and stakeholder expectation, and disclose the exclusion rationale.
Disclosure architecture
IFRS S2 and TCFD use four pillars: governance (board and management oversight), strategy (risks, opportunities, financial planning effects, resilience including scenario analysis), risk management (identify, assess, manage), and metrics and targets. S2 adds cross-industry and industry-based metrics, an internal carbon price where used, and remuneration linkage.
Targets
Science-based targets require a base year, a target year, a boundary covering at least 95 percent of Scope 1 and 2, and interim milestones. Near-term 1.5 degrees Celsius pathways equate to roughly 4.2 percent linear annual reduction. Net-zero standards require deep prior reductions, with offsets reserved for residual emissions rather than counted as progress.
Worked example
An acquisition adds 9 percent to base-year Scope 1 and 2. With a 5 percent significance threshold in the recalculation policy, the base year must be recalculated, prior-year comparatives restated, and the change disclosed. Reasoning: the change is structural, not organic growth, so keeping the old base year would break comparability.
Traps that cost marks
- Netting purchased offsets against gross Scope 1 emissions.
- Claiming carbon neutrality from offsets without reductions.
- Reporting market-based figures only.
- Presenting avoided emissions as inventory reductions; they belong outside the inventory.
- Running a scenario analysis that never touches strategy or financial planning.