GHG Protocol Revision Interim Report: How will Scope 3, renewable energy procurement, and avoided emissions change?

Board Member, Global Sustainability Standards Board (GSSB)
GHG Protocol Technical Working Group (TWG) Members
Zeroboard Research Institute Director Tomoo Machiba

Mahiro Endo

Since its first edition in 2001, the GHG Protocol has served as the global foundation for greenhouse gas (GHG) accounting and disclosure. The first major revision in nearly 20 years, commencing in 2024, is currently underway, with discussions reaching the midpoint. Taking into account accounting practices, the spread of renewable energy technologies, and consistency with various decarbonization initiatives, this revision could significantly change renewable energy procurement through non-fossil fuel certificates, J-Credits, and direct power purchase agreements (PPAs), the scope and data accuracy of Scope 3 accounting, and the treatment of avoided emissions beyond a company's own emissions. In this article, Machiba, Director of Zeroboard Research Institute, who is directly involved in the revision discussions as a member of the Technical Working Group (TWG), provides a brief explanation of the background and key issues surrounding the revision and its impact on corporate practice.

1. Background and necessity of the GHG Protocol revision

The GHG Protocol is a standard for calculating and reporting GHG emission amount that was launched in 1998 as a joint project between the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).Private international standardsAlthough they are voluntary, many international sustainability disclosure frameworks (GRI, IFRS standards), mandatory disclosure and reporting standards of national and regional governments (SSBJ, European ESRS, etc.), and international private target Settings and benchmarking standards (SBTi, CDPs)GHG emission amount calculation standardsIt is adopted as.

Currently, work is underway to revise the foundational "Corporate Standards," "Scope 2 Guidance," and "Value Chain (Scope 3) Calculation Standards." The main objectives of the revisions are to ensure that the standards remain effective toward achieving the 1.5°C target of the Paris Agreement, and to promote interoperability with the various international frameworks that have emerged in the more than 20 years since the establishment of the Corporate Standards.

The revisions are due to the rapid increase in Scope 3 accounting organizations, which has led to growing demands for more detailed guidance and clarification; the need to respond to the spread of market instruments such as Energy Attribute Certificates (EACs) and carbon credits; and changes in the external environment, such as the emergence of new Energy sources such as hydrogen, ammonia, and synthetic fuels. A stakeholder survey conducted by the GHG Protocol Secretariat from November 2022 to March 2023 revealed concerns that the previous accounting rules were not in line with actual emissions, while many respondents expressed concerns that they were unable to fully reflect new reduction measures. In particular, with regard to Scope 3 emission amount management across value chains beyond one company, there is a growing trend away from rough estimates based on monetary values ​​such as raw material purchases toward obtaining more accurate data from suppliers, raising concerns about the need to improve the comparability of calculated values ​​between companies (* 1).

With this awareness of the Issue, this revision is not just an update,International harmonization and practical applicationIt was designed as a redesign process that aims to achieve both.

2. Basic concepts of GHG emission amount calculation

The GHG Protocol defines an organization's emission amount into 3 scopes: Scope 1, Scope 2, and Scope 3 .

• Scope 1: GHGs emitted directly by the business itself (direct use of boilers and fuel, etc.).

• Scope 2: Indirect emission amount associated with the use of Energy (electricity, heat, steam, cooling) supplied by others. Scope 1 and Scope 2 emissions are considered to be a company's own emission amount.

• Scope 3: This refers to emission amount throughout the entire upstream and downstream value chain beyond the company itself, and is divided into 15 categories based on the characteristics of the emission source.

Except in cases where direct measurement is possible, emission amount are basically calculated by multiplying "activity amount x Emission intensity(Emission factor)."

3. GHG Protocol Revision Process

The GHG Protocol is being revised through a three-tiered structure consisting of the Steering Committee (SC), the Independent Standards Board (ISB), and the Technical Working Group (TWG). The TWG is composed of four groups: Corporate Standards, Scope 2, Scope 3, and activity and Market Instruments (AMI). Each TWG is further divided into several subgroups, each of which conducts deliberations in 2 phases. Machiba has been a member of Subgroup 4 of the Corporate Standards TWG since March 2025, and has been participating in online discussions 1 every 3 to 4 weeks. 1 3 the discussion topics for each TWG subgroup and phase.

Table 1. Discussion topics for each TWG

Note: This indicates the scope of discussion based on the initial plan and may be subject to revision as the discussion progresses.
Source: Greenhouse Gas Protocol, Standard Development Plans.

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Below is a summary of the column that is available for download:

4. Direction of protocol revision (summarization of Phase 1 discussions)

4.1 Corporate Standards: Clarifying organizational boundaries and data quality (Key points)

• Clarification of reporting principles: Discussion on the relationship between relevance and materiality, and the introduction of accuracy + conservatism.

• Connecting organizational boundaries: Moving towards integrating the ownership approach into the financial management approach, with emphasis on consistency with financial reporting.

• Improving the comprehensiveness of Scope 3 calculations: 95% reporting is in the works. Exceptions for small and medium-sized enterprises are under consideration.

• Levels of data quality: Leveling of Tier 1 to 4, percentage disclosure, and uncertainty assessment required.

Read more in DL: Definitions and evaluation examples of Tiers 1 to 4, supplement to Scope 3 exceptions/
Organizing Scope 1 and 2 exclusion conditions/Directions for disclosure formats under consideration

4.2. Contents to Scope 2 calculations: Tightening of renewable energy inclusion standards (Key points)

• Continued parallel disclosure of location-based and market-based criteria

• Clarification of location criteria: Prioritize coefficients with small geographical ranges, recommend coefficients with high time accuracy.

• Tighter market standards: Strengthening requirements for simultaneity (hourly) and deliverability, and moving towards prohibiting SSS (publicly supported power sources) from claiming monopoly.

• Clarification of consequential accounting: The treatment of avoided emissions using marginal Emission factor is still under discussion at AMI, and is clearly separated from organizational inventory.

• Transitional measures: Issues include the scope of exclusions from hourly calculations, how to handle long-term contracts, and gradual implementation.

Read more in DL: Basic concepts of result calculation and example of calculation process,
Direction of transitional measures, handling of residual mix, and precedent application cases overseas

4.3. Scope 3 Contents: Addition of new categories and 95% calculation rule (Key points)

• 95% calculation and disclosure + Settings of minimum required boundaries, specifying data quality levels

• Category 14(Franchise) Expansion

• Clarification of Category 15(Investment): Emphasis on consistency with PCAF, handling of project finance, etc.

• Introducing new category 16(intermediary emission amount): Organizing intermediary activity such as insurance, underwriting, and advice (many of which are voluntary disclosures)

Read more in DL: overview of Categories 14 to 16 ,
PCAF consistency concept, examples of data quality level indication, and practical points for exclusion decisions

4.4. activity and Market Instruments (AMI) TWG Discussion (Summary)

• We are currently considering a framework for parallel disclosure that adds intervention activity and market instruments to physical inventories ( Scope 1 3 , etc.).

Read more on DL: Intervention activity and market instrumentsWhen disclosing in parallel
Basic concepts, examples of supply shed and inset organization

5. Impact of the GHG Protocol Revision on GHG Accounting Practices of Japanese Companies

We have narrowed it down to 2 points that will have a particularly large impact on Japanese companies, and are releasing only the main points. Details will be included in the downloadable version.

5.1. Impact on Scope 2 Renewable Energy Procurement: Impact on Renewable Energy Certificates and PPA Transactions and Countermeasures (Key Points)

• Strengthened requirements for simultaneity (hourly) and supply availability presuppose a restructuring of the certificate system and PPA design.

• Proof of physical reach is key for wide-area certificate claims and virtual PPAs. Claims of monopoly originating from SSS are becoming more difficult.

5.2. Increasing Burden of Scope 3 Calculations: Expanding the Scope of Calculations Due to the 95% Rule and Increasing Demands for Data Accuracy (Key Points)

• In effect, 15 categories will be covered. Increased data collection and calculation load is inevitable.

• There is a trend towards requiring an increase in the Tier 4(specific coefficient/direct measurement) ratio and disclosure of the ratio.

6. Future revision schedule

The revised Corporate Standards, Scope 2 Guidance, and Scope 3 Standards are scheduled to be completed by the end of 2027, but as the AMI discussions, which are expected to be concluded by the end of 2028, will ultimately need to be integrated into each standard, it has been suggested that it may take until 2030 for them to be fully applied after a phased trial run.

Once each TWG has concluded its discussions, 1 or 2 public consultations will be held and the plan will be finalized based on the feedback.

Regarding Scope 2, we are accepting comments until January 31, 2026 regarding the above-mentioned simultaneity, supply possibility, and calculation of results, so we would like to hear from you in Japan, although only in English.HereI would encourage you to submit your opinions.

In conjunction with the revision of the GHG Protocol, related standards that reference the Protocol, such as SBTi, CDPs, IFRS S/SSBJ, ESRS, and GRI, are also expected to be updated and harmonized.

7. Establish a system early without waiting for the revision to be finalized

The revision of the GHG Protocol will require companies to tighten accounting methods and improve data quality, including renewable energy procurement, to ensure the effectiveness of the transition to net zero. Although there are still several years until implementation, it will involve significant changes to data collection and accounting systems, renewable energy procurement, and decarbonization plans, so it may be too late to wait until the revision is finalized before starting to respond.

By understanding the direction of the revisions at this stage and proceeding with establishing a system that takes into account the use of data solutions, it will be possible to minimize the costs of responding to future transitions, such as improving the accuracy of Scope 3 data, including primary data acquisition, and reviewing the handling of renewable energy certificates.

To access information on the ongoing public consultation, please visit the GHG Protocol website.Newsletter SignupWe will continue to report on the progress of the revision discussions in this column.

Includes detailed text and figures from Chapters 4 and 5, a summary of the Scope 2 revision issues, an explanation of Scope 3 data quality levels, and a check of perspectives for reviewing renewable energy procurement!

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source:

*1) Greenhouse Gas Protocol, Detailed Summary of Responses from Corporate Standard Stakeholder Survey, March 2024. https://ghgprotocol.org/blog/ghg-protocol-releases-corporate-standard-survey-final-summary-report-and-proposal-summary 

* 2) Greenhouse Gas Protocol, Standards Development and Governance Repository website. https://ghgprotocol.org/standards-development-and-governance-repository 

* 3) Takase Kae, "Direction of the proposed revision of the GHG Protocol Scope 2 (based on publicly available information)," Renewable Energy Institute, October 1, 2025 www.renewable-ei.org/activities/column/REupdate/20251001.php