Know your emissions’ sources

This week, we want to continue with the topic of Greenhouse Gas (GHG) inventories. Let’s double click on what you must think ok if you want to calculate an estimate of your GHG inventory yourself. The first step we want to discuss in depth is how to know your emissions’ sources.

The GHG Protocol Corporate Standard provides guidance for companies and organizations preparing for this process. Identifying your sources allows you to measure consumption by source. Then you can classify them in two: direct and indirect. Based on the GHG Protocol’s definition:  

Direct emissions are

• Scope 1 emissions: Direct GHG emissions occur from sources that are owned or controlled by the company. They come from sources that are controlled or owned by an organization. Example: combustion in owned or controlled boilers, furnaces, vehicles, emissions from chemical production in owned or controlled process equipment, etc.  

Indirect emissions are  

• Scope 2: Indirect emissions that are a consequence of the activities of the company but occur at sources owned or controlled by another company. These include GHG emissions from the generation of purchased electricity consumed by the company, associated with the purchase of electricity, steam, heat, or cooling. 
• Scope 3: Other indirect GHG emissions that are a consequence of the activities of the company but occur from sources not owned or by the company.  These emissions are the most difficult to measure. Accounting Scope 3 emissions involve understanding multiple processes and analyzing your products’ operations cycle in the value chain.   

It is tough to decide on which Scope 3 emissions to consider, but you must know, there are 15 categories that you can look into.  For further information you can check our former blog: The 101 on Scope 3 in Mexico.  

Once you have identified your emissions sources, the next step is to choose a method for consolidating your GHG emissions. This involves setting the organizational boundaries, which basically means deciding which parts of your business will be included in your GHG inventory. 

1. Equity Share Approach – Emissions are accounted for based on the company’s share of equity in each operation. It is best suited for companies that: 

• Have multiple joint ventures or partnerships. 
• Want to reflect their true economic exposure to emissions, regardless of operational control. 
• Prefer alignment with financial reporting practices based on economic interest. 
• Operate in sectors like energy, mining, or infrastructure, where joint ownership is common. 
• This approach provides a more financially accurate picture of a company’s emissions responsibility, especially when it doesn’t have full control over operations but still shares in the profits and risks. 

2. Control Approach – Emissions are reported based on the operations over which the company has control. This can be further divided into: Operational Control and Financial Control. It is ideal for companies that:

• Fully manage or operate their facilities, even if they don’t own them entirely. 
• Want to simplify reporting by including only the operations they control. 
• Operate in sectors where control is more relevant than ownership, such as: Manufacturing, Utilities, Oil and gas (especially when operational control differs from ownership).  

This method ensures that companies are accountable for emissions from operations they can influence. 

So…which method is more suitable for you? It depends on the size and nature of your operations. 

I hope you found this interesting. As usual, if there is anything we can help you with, or if there is an ESG topic you would like to know more about, please let us know.

Best,

Marimar

CEO, Miranda ESG