Your CSRD auditor will scrutinise your GHG calculation more than any other part of your sustainability report. Wrong emission factors, inconsistent boundaries, undocumented methodology — any of these will trigger a qualified assurance opinion. This guide shows you how to build carbon accounting that holds up.
Why GHG Protocol is the mandatory methodology
ESRS E1-5 requires companies to calculate and disclose Scope 1, 2 and 3 GHG emissions using the GHG Protocol Corporate Accounting and Reporting Standard. This is not a recommendation — it is the mandated methodology. Any other approach will fail your assurance engagement.
The GHG Protocol was developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) and has been the global standard for corporate GHG accounting since 2001. It defines scope boundaries, calculation methods, emission factor sources, and the rules for consolidating emissions across corporate structures.
§ Key fact
GHG Protocol = the rulebook, DEFRA = the conversion table
The GHG Protocol tells you HOW to calculate emissions — the methodology, boundaries and rules. DEFRA (UK Government) publishes annual conversion factors that tell you the actual numbers — how many kg CO2e per litre of diesel, per kWh of electricity, per tonne-kilometre of freight. You need both. DEFRA factors are updated every year — always use the current year version.
Step 1: Define your organisational boundary
Before calculating a single emission, you must define which entities and operations fall within your GHG reporting boundary. The GHG Protocol offers two consolidation approaches. Choose one and document it — changing approach between years requires full restatement.
Equity share approach
- ▸Include emissions in proportion to your equity share
- ▸50% owned subsidiary: account for 50% of its emissions
- ▸Matches economic ownership of emissions
- ▸More complex for diversified corporate structures
- ▸Less common for CSRD reporting
- ▸Requires equity percentage data for each entity
Control approach (recommended)
- ▸Include 100% of emissions from operations you control
- ▸Operational control: you set operating policies
- ▸Financial control: you have majority financial control
- ▸More common — aligns with financial reporting boundary
- ▸Easier to explain and defend to auditors
- ▸Consistent with how most companies approach CSRD
✓ Practical tip
Use financial control — it matches your financial reporting boundary
Most companies should use the financial control approach and align their GHG boundary with their consolidated financial reporting boundary. This makes cross-referencing with your financial statements straightforward — and your auditor will already understand it.
Step 2: Identify your Scope 1 emission sources
Scope 1 covers direct emissions from sources owned or controlled by your company. These are the easiest to calculate because you have direct access to the activity data — fuel bills, vehicle logs, refrigerant top-up records.
S1-AEasy
Stationary combustion
Gas boilers, diesel generators, on-site furnaces, industrial processes. Activity data: cubic metres of gas, litres of fuel. Multiply by DEFRA stationary combustion factors.
S1-BEasy
Mobile combustion
Company-owned or leased vehicles — cars, vans, HGVs, forklifts. Activity data: litres of fuel OR kilometres travelled by vehicle type. DEFRA road transport factors.
S1-CMedium
Fugitive emissions
Refrigerant leaks from air conditioning and refrigeration. Activity data: kg of refrigerant purchased for top-up. Use GWP values from IPCC AR6. Often overlooked — can be significant.
S1-DHard
Process emissions
Chemical reactions in manufacturing (cement, steel, chemicals). Activity data: tonnes of product or input material. Sector-specific emission factors from IPCC or industry bodies.
Step 3: Calculate Scope 2 using both methods
ESRS E1-5 requires companies to report Scope 2 emissions using BOTH the location-based and market-based methods. This is a common mistake — many companies only calculate one. Your auditor will ask for both.
Location-based method
- ▸Uses average emission factor for the national or regional grid
- ▸Data source: national grid emission factors (IEA, Eurostat)
- ▸Does not reflect renewable energy purchases or certificates
- ▸Simpler to calculate — one factor per country
- ▸Required alongside market-based for ESRS compliance
- ▸Useful for understanding actual grid emissions
Market-based method
- ▸Reflects contractual instruments — PPAs, RECs, GOs
- ▸Supplier-specific emission factors where available
- ▸Residual mix factors for uncontracted electricity
- ▸Can achieve zero Scope 2 if 100% renewable contracts
- ▸More complex but reflects actual procurement choices
- ▸The method investors and customers typically focus on
⚠ Important
Renewable energy certificates do not automatically mean zero Scope 2
Many companies assume purchasing RECs or Guarantees of Origin (GOs) gives them zero market-based Scope 2. This is only true if the certificate corresponds to actual renewable generation in the same grid area and period. Generic certificates from a different country or period may not be accepted by your assurer or meet ESRS E1 requirements. Check with your energy supplier.
Step 4: Set your base year correctly
Your base year is the reference point against which you measure progress. Choose it carefully — changing it later requires full restatement of all historical data. GHG Protocol requires you to restate the base year if significant structural changes occur (acquisitions, divestments, methodology changes).
For CSRD purposes, your base year should be 2021 or earlier if possible — this gives you a pre-pandemic baseline unaffected by COVID-19 operational changes. The base year must be the same for all scopes. Document why you chose it, what boundary it reflects, and the circumstances under which you will restate it.
Step 5: Build your data management system
The most common assurance failure point is not wrong calculations — it is undocumented calculations. Your assurer needs to trace every number in your GHG report back to a source document. Without a proper data management system, this process takes weeks of painful reconstruction.
ESRS E1 checklist
0/8 complete
Create a GHG data register — one row per emission source with source document reference Store all source documents — utility bills, fuel receipts, refrigerant logs — for 10 years Document every emission factor used — source, version year, units, date accessed Record your organisational boundary decision and which entities are included/excluded Document your base year selection rationale and restatement policy Build an internal review process — someone other than the preparer checks all calculations Use current-year DEFRA factors — not last year's version Calculate and report both location-based and market-based Scope 2 Common GHG accounting mistakes that fail assurance
These are the errors that most frequently result in qualified assurance opinions. All are preventable with proper process.
Most common errors
- ▸Using outdated DEFRA or IEA emission factors
- ▸Inconsistent organisational boundary year on year
- ▸Missing fugitive emissions from refrigerants
- ▸Reporting only market-based Scope 2 (not both)
- ▸No documentation trail from report to source data
- ▸Incorrect GWP values for non-CO2 gases (use AR6)
What good looks like
- ▸Current year DEFRA factors, version referenced in report
- ▸Same boundary as financial consolidation, documented
- ▸Refrigerant log with kg top-up per unit per year
- ▸Both Scope 2 methods with explanation of difference
- ▸Complete audit trail from every figure to source document
- ▸IPCC AR6 GWP values for all F-gases and N2O
AR6
IPCC report to use for GWP values (not AR4 or AR5)
2025
DEFRA factor version to use for FY2025 reporting
10yr
Minimum document retention for GHG source data
Both
Scope 2 methods required under ESRS E1-5
Free tool
ESGMaster automates every step of GHG Protocol accounting.
Connect your utility data, vehicle logs and supplier invoices. ESGMaster applies current DEFRA 2025 factors, calculates both Scope 2 methods, builds your audit trail, and generates ESRS E1-5 compliant disclosures automatically. Free for 6 months.