Consolidation Approach

What is Consolidation Approach?

The consolidation approach is the first methodological decision in building a GHG inventory and directly determines the organisational boundary. It answers the question: "For which entities do I report emissions, and in what proportion?" The GHG Protocol Corporate Standard provides three consolidation approaches, each with different implications for which emissions end up in the inventory.

The equity share approach accounts for emissions proportionally to the organisation's ownership stake. If you own 60% of a joint venture, you report 60% of its emissions. This approach aligns with how financial equity interests are structured and is familiar to finance teams. It is most common in industries with complex ownership structures, such as oil and gas, mining, and real estate investment.

The financial control approach includes 100% of emissions from any entity over which the reporting organisation has financial control — typically where it consolidates the entity in its financial accounts under IFRS or local GAAP. This approach aligns carbon reporting with financial reporting consolidation and is useful for organisations that want their GHG boundary to match their financial boundary.

The operational control approach includes 100% of emissions from any operation over which the reporting organisation has the authority to introduce and implement operating policies. This is the most commonly used approach in the UK and internationally, because it aligns with the organisation's practical ability to influence emissions. Under operational control, you report 100% of emissions from facilities you operate (regardless of ownership percentage) and 0% from facilities you do not operate (even if you have a financial stake).

The GHG Protocol requires organisations to select one approach and apply it consistently year on year. The choice must be disclosed in the GHG report. If the organisation subsequently changes its consolidation approach, it must recalculate its base year and historical data under the new method to maintain comparability.

SECR does not prescribe a specific consolidation approach but most UK companies adopt operational control because it is the most intuitive and practical. The SBTi accepts all three approaches but requires consistency between the consolidation approach used for the GHG inventory and the one used for target-setting.

How Climatise Helps

Climatise supports all three GHG Protocol consolidation approaches. Configure your group structure — including ownership percentages, joint ventures, and management arrangements — and the platform automatically consolidates emissions according to your chosen approach, with the ability to model the impact of switching between methods.

Frequently Asked Questions