Organisational Boundary
The organisational boundary defines which operations, subsidiaries, and joint ventures are included in a company's greenhouse gas inventory. Under the GHG Protocol, it is set using either the equity share approach or one of two control-based approaches (financial control or operational control).
What is Organisational Boundary?
The organisational boundary is the first and most consequential decision in setting up a GHG inventory. It determines which entities — subsidiaries, joint ventures, partnerships, franchises, and other operations — fall inside the reporting boundary and therefore contribute emissions to the company's carbon footprint.
The GHG Protocol Corporate Standard provides three approaches for setting the organisational boundary. Under the equity share approach, a company accounts for emissions in proportion to its ownership stake in each operation. If a company owns 60% of a joint venture, it reports 60% of that venture's emissions. Under the financial control approach, a company accounts for 100% of emissions from any operation over which it has the ability to direct financial and operating policies — typically where it consolidates the entity in its financial accounts. Under the operational control approach, a company accounts for 100% of emissions from any operation over which it has the authority to introduce and implement operating policies.
Most companies use the operational control approach because it aligns with their ability to influence emissions and is the most practical to implement. It means you report 100% of emissions from facilities you operate, regardless of your ownership percentage, and 0% from facilities you do not operate (even if you have a financial stake). This approach is recommended by SECR and is the default for most UK reporting.
The choice of organisational boundary has a material impact on reported emissions. A group with many joint ventures will report very different Scope 1 and 2 figures depending on whether it uses equity share or operational control. For this reason, the GHG Protocol requires organisations to disclose which approach they have chosen and to apply it consistently year on year.
Once the organisational boundary is set, the operational boundary defines which emission sources within those entities are categorised as Scope 1, 2, or 3. These two boundary decisions together determine the structure and completeness of the GHG inventory.
Practical Examples
A property company with 100% ownership of five office buildings and a 50% stake in a joint venture development uses the operational control approach — it reports 100% of emissions from the five buildings it operates and none from the JV, which is operated by the other partner.
A multinational using the equity share approach reports 75% of emissions from a subsidiary in which it holds a 75% ownership stake, even though it has full operational control of the facility.
A franchise business using operational control reports only emissions from its corporate-owned locations. Franchise-operated locations fall outside the organisational boundary and are reported under Scope 3 Category 14 (Franchises) instead.
How Climatise Helps
Climatise supports both equity share and operational control boundary approaches. Configure your group structure in the platform and it will automatically allocate emissions to the correct entities, consolidate across subsidiaries, and produce a consistent inventory aligned with your chosen boundary method.
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