Defining GHG Inventory boundaries: Why early choices matter

In greenhouse gas (GHG) reporting, boundary setting is not a technical preface. It is the most consequential judgment an organisation will make in its emissions accounting.

Before a single dataset is collected, organisations must be clear about what the inventory represents. Boundaries define the perimeter of responsibility, determine comparability over time and ultimately decide whether reported emissions are decision-useful or merely descriptive.

In practice, when inventories fail under scrutiny, the issue is rarely an emissions factor. It is almost always the boundary.

The GHG Protocol places boundary definition at the start of the accounting process for good reason. It is where governance, operational reality and reporting discipline intersect. Get it right, and the inventory becomes a stable foundation. Get it wrong, and no amount of methodological sophistication will compensate.

Organisational Boundaries:

Organisational boundaries determine which entities, assets and activities are included in the GHG inventory. For organisations with subsidiaries, joint ventures, managed assets or complex contractual arrangements, this is rarely a simple exercise.

The GHG Protocol provides three recognised consolidation approaches:

• operational control

• financial control

• equity share

Each approach answers a different question about responsibility.

Under operational control, an organisation accounts for emissions from operations over which it has authority to introduce and implement operating policies. This is the most commonly applied approach in practice, as it aligns emissions reporting with day-to-day management, risk control and abatement decision-making.

The financial control approach includes entities over which the organisation has the ability to direct financial and operating policies with a view to gaining economic benefits. This approach is often used when financial consolidation is already well-defined and closely monitored.

The equity share approach allocates emissions in proportion to ownership interest. It can be appropriate where economic exposure is the primary lens through which performance is assessed, particularly in investment-led structures. However, it relies on access to reliable emissions data from partners and can introduce additional uncertainty where governance or data maturity is uneven.

None of these approaches is inherently superior. What matters is that the chosen approach reflects how the organisation actually exercises responsibility and influence, is applied consistently across the inventory and is not changed opportunistically. Changes to organisational boundaries affect reported performance and must be clearly justified and disclosed.

Operational Boundaries:

Once organisational boundaries are established, operational boundaries define which emission sources are included and how they are classified across Scope 1, Scope 2 and Scope 3.

• Scope 1 emissions cover direct emissions from sources owned or controlled by the organisation, such as fuel combustion, process emissions and fugitive releases. These emissions are typically the most clearly attributable and closely linked to operational decisions.

• Scope 2 emissions represent indirect emissions from purchased electricity, heating, cooling or steam. Although they occur off-site, they are a direct consequence of consumption and procurement choices. For many organisations, Scope 2 emissions are both material and strategically significant.

• Scope 3 emissions extend across the value chain and are often the dominant share of an organisation’s footprint. They are also the most complex, reflecting lower levels of direct control and varying data maturity across suppliers, customers and partners.

Increasingly, leading frameworks and target-setting initiatives expect organisations to develop a complete Scope 3 inventory. In practice, this does not mean waiting for perfect data before acting. It means starting with the available data, applying reasonable, transparent estimation methods, and progressively improving data quality and coverage over time.

Materiality remains central, not as a justification for exclusion, but as a guide for prioritisation. Organisations should focus early efforts on Scope 3 categories that are significant, decision-relevant, and capable of improvement, while maintaining visibility across the full value chain. As systems mature and engagement with value-chain partners improves, inventories should evolve accordingly.

Delaying Scope 3 reporting until data is “perfect” is no longer credible. Equally, including categories without clear methodology, governance or documentation undermines confidence. Robust Scope 3 inventories are built iteratively, with transparency and discipline.

Consistency, Documentation and Control

Boundaries must be aligned to the reporting year and applied consistently across all included entities and activities. Acquisitions, divestments and structural changes require deliberate treatment and clear disclosure. Where changes materially affect comparability, base-year recalculations may be required.

Documentation of boundary decisions, assumptions, estimates and units is not administrative detail. It is control. Clear documentation supports assurance, enables internal challenge and ensures continuity as teams and systems evolve. It also allows organisations to explain changes in emissions with confidence, distinguishing genuine performance change from structural or methodological effects.

In mature reporting environments, this documentation becomes part of the broader climate governance framework.

Boundary Setting Creates Path Dependency

One aspect of boundary setting is often underestimated: once established, boundaries create path dependency.

Early boundary decisions shape data systems, supplier engagement, internal responsibilities, target-setting methodologies and assurance scope. They influence which emissions can be credibly reduced, which can be influenced only indirectly, and which sit outside organisational control. Over time, these decisions become embedded not just in reporting, but in how the organisation understands its own footprint.

This is why boundary setting deserves senior attention early. Poorly defined boundaries are difficult to unwind later without disrupting trend data, targets or disclosures. Conversely, well-judged boundaries create opportunity. They allow inventories to scale, improve and withstand increasing scrutiny without structural redesign.

What Regulators and Target-Setters Look For

As climate reporting matures, external expectations are converging. Regulators, assurance providers and target-setting bodies are not looking for perfect data in early years. They are looking for discipline.

That discipline is demonstrated through clear and stable boundary definitions, transparent treatment of estimates and exclusions, and a visible trajectory of improvement over time. Inventories that show consistency and intent are far more defensible than those that aim for completeness but lack coherence.

The GHG Protocol provides flexibility, but it does not remove the need for judgment. Boundary setting is where that judgement is exercised. Done well, it enables credible reporting today and credible decision-making tomorrow. Done poorly, it constrains both.

In emissions accounting, few decisions have longer-lasting consequences. Boundary setting is one of them.

Turning Data into Action 

By measuring your emissions and completing a robust GHG inventory, your organisation gains the insight needed to move from intention to action. 

At EC Focus, we support organisations across boundary setting, data collection and emissions strategy, helping build reliable, audit-ready inventories that inform real investment decisions. 

If you would like to discuss how this applies to your organisation, contact EC Focus to speak with our climate transition team.

You can also explore our Climate Transition services or read related insights on Scope 3 emissions and decarbonisation pathways on the EC Focus blog.