The GHG Protocol and Scope 1 and 2 Emissions

The Core Requirement: Absolute Gross GHG Emissions

Paragraph 29(a) of IFRS S2 requires entities to disclose absolute gross greenhouse gas emissions in metric tonnes of CO2 equivalent (tCO2e), disaggregated into:

• (1) Scope 1: Direct GHG emissions from sources the entity owns or controls
• (2) Scope 2: Indirect GHG emissions from purchased or acquired electricity, steam, heating, or cooling
• (3) Scope 3: All other indirect GHG emissions in the entity's value chain

The word "absolute" means the total quantity of emissions, not normalised by revenue, output, or any other activity metric. The word "gross" means before any removal or offset. Emissions reductions from carbon credits or carbon sinks are not deducted from the disclosed figure.

The Seven Greenhouse Gases

IFRS S2 covers the seven greenhouse gases listed in the Kyoto Protocol:

Converting to CO2 Equivalent (B20 to B22)

All seven gases must be aggregated into a single metric, CO2 equivalent (CO2e), using their 100-year global warming potential (GWP) values.

Application Guidance B21 specifies that entities must use GWP values based on a 100-year time horizon from the latest IPCC assessment report, currently IPCC Sixth Assessment Report (AR6, 2021). The 2025 amendments provide relief for entities in jurisdictions that require different GWP values (covered in Module 6).

The GHG Protocol: The Mandatory Basis (B23 to B25)

IFRS S2 requires entities to apply the GHG Protocol Corporate Accounting and Reporting Standard (2004) as the basis for measuring and reporting GHG emissions, unless a jurisdictional authority or exchange requires a different method (B24).

Two key choices under the GHG Protocol:

Consolidation approach (B27): The entity must choose between:

• Equity share approach: Report GHG emissions proportional to the entity's equity share in each operation
• Control approach: Report 100% of GHG emissions from operations over which the entity has financial or operational control

The entity must disclose which approach it uses and why.

Disaggregation by consolidated group vs other investees (Para 29(a)(iv)): Scope 1 and Scope 2 emissions must be disaggregated between:

• Emissions from the consolidated accounting group (subsidiaries included in financial consolidation)
• Emissions from other investees excluded from the consolidated group (associates, joint ventures, unconsolidated subsidiaries)

This disaggregation aligns GHG reporting with financial reporting boundaries, enabling investors to connect emissions data to financial statements.

Scope 1: Direct Emissions

Scope 1 covers direct GHG emissions from sources that the entity owns or controls:

• Combustion of fossil fuels in owned buildings, vehicles, and machinery
• Fugitive emissions (for example, methane leaks from gas infrastructure)
• Process emissions (for example, CO2 from cement production, N2O from chemical manufacturing)
• Agricultural emissions

Scope 2: Purchased Energy (B30 to B31)

Scope 2 covers indirect emissions from purchased or acquired electricity, steam, heat, or cooling. The entity does not generate these itself but is responsible for the emissions generated on its behalf at power stations or heat plants.

IFRS S2 requires two specific disclosures for Scope 2:

• (a) Location-based emissions: Calculated using average emission factors for the electricity grid(s) where the entity operates. This reflects the actual carbon intensity of the regional grid.
• (b) Information about contractual instruments: If the entity holds renewable energy certificates (RECs), power purchase agreements (PPAs), or other instruments that allow it to claim lower-emission electricity, it must disclose the existence and nature of these instruments.

Note: IFRS S2 requires the location-based figure as the primary disclosure. A market-based figure (using emission factors from contractual instruments) may be provided as additional information but is not required.

Emission Factors and Measurement Approach (B26 to B29)

Entities must disclose the emission factors used in their GHG calculations and the reasoning for their selection. B29 requires entities to use emission factors that best represent their specific activities, for example, using country-specific electricity grid emission factors rather than a global average.