Operational boundaries and the three scopes

What are operational boundaries?

The GHG Protocol asks a company to set two boundaries. The organisational boundary decides which operations are included, using equity share, financial control or operational control. The operational boundary then identifies the emissions associated with those operations, classifies them as direct or indirect, and decides which indirect emissions to report. The result is a documented list of sources and their scopes, applied the same way every year. See organisational boundaries.

How do operational boundaries sort the three scopes?

• Scope 1: stationary combustion, such as boilers and generators; mobile combustion in owned or controlled vehicles; process emissions from chemical or physical processes; and fugitive emissions, such as refrigerant leaks and methane from gas systems.
• Scope 2: emissions from generating electricity, steam, heat and cooling the company buys and consumes, reported on both location-based and market-based methods.
• Scope 3: the 15 upstream and downstream categories, from purchased goods to the use of sold products and investments.

See calculating scope 1 and 2 emissions and the 15 scope 3 categories.

Operational boundaries in practice: a food company's sources

A food processor using the operational control approach lists its emission sources and assigns each to a scope.

The gas boilers and refrigerant leaks are scope 1. Grid electricity is scope 2, but the electricity from its own rooftop solar is not purchased, so it has no scope 2 emissions. The anaerobic digester burns biogas made from food waste: its carbon dioxide is biogenic and reported outside the scopes, while its methane and nitrous oxide are scope 1. Delivery vans on an operating lease are scope 1 because the company runs them, while hauliers it pays are scope 3, category 4. Losses in the electricity grid on the way to the plant are scope 3, category 3, not scope 2. See choosing emission factors.

Which cases are often misclassified?

• Electricity sold on: power a company generates and sells to the grid or tenants stays in its scope 1 if it burns fuel to make it; it does not reduce its scope 2.
• Purchased heat from a neighbour: steam or heat bought from another company is scope 2, even if it comes by pipe from the next site.
• Contractors on site: fuel burned by a contractor's equipment is the contractor's scope 1 and usually the company's scope 3, unless the company controls the equipment.
• Company cars: cars the company owns or leases and controls are scope 1; employees' own cars used for business are scope 3, category 6.

How are biogenic emissions treated?

Carbon dioxide from burning biomass, such as wood pellets or biogas, is reported separately from the scopes, because the carbon was recently absorbed by plants. Methane and nitrous oxide from the same combustion are still in scope 1. ESRS E1 asks for biogenic carbon dioxide emissions to be disclosed separately, and the GHG Protocol's Land Sector and Removals Standard, effective from 2027, sets more detailed rules for companies with land-based activities. See the GHG Protocol explained.

Can sources be left out?

The GHG Protocol has no fixed de minimis threshold. A company should include all sources within its boundary and disclose and justify any it excludes, for example a small office where data is unavailable, ideally with an estimate of its size. Assurance providers test completeness, so exclusions should be documented and small. See sustainability assurance.

What do reporting rules require?

IFRS S2 requires scope 1, 2 and 3 emissions, with scope 3 phased in after the first year. ESRS E1 requires gross scope 1, 2 and significant scope 3 categories. California's SB 253 requires scope 1 and 2 from 2026 and scope 3 from 2027. All rely on the GHG Protocol's definitions, so a clear operational boundary serves every regime. See ESRS E1.

This guide is general information. It is not tax or legal advice for your situation.