How GHG Protocol's emissions standards for business are evolving

Lindsey Hall I'm Lindsey Hall.

And I'm Esther Wheeldon.

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Welcome to All Things Sustainable, a podcast from S and P Global. As your hosts, we'll dive into all the sustainability topics that are reshaping the business world.

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Join us every Friday for in depth analysis and interviews with leaders from around the globe. Together, we'll break down big sustainability headlines and cut through the jargon.

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Our regular listeners know we love to define things on this podcast, and we devote a portion of every episode to explaining any jargon, terminology and acronyms. And the term we've probably defined more than any other is Scope one, two and three emissions.

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Boy, that's definitely true. Over the past seven seasons, I don't know how many times I've said that Scope one emissions are direct from a company's operations Scope two emissions are indirect ones, primarily derived from purchased energy and scope 3 emissions occur up and down a company's supply chain as well as when a customer uses the products and

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Scope 1, 2 and 3 emission standards were invented by an organization called the Greenhouse Gas Protocol. GHG Protocol was launched in 1998 as a joint initiative of the World Resources Institute, or wri, and the World Business Council for Sustainable Development, or wbcsd. GHG Protocol's mission is to develop the most credible, accessible and widely used greenhouse gas accounting and reporting standards and to proactively facilitate their global adoption and implementation. Its stated vision is for all public and private entities to account for their greenhouse gas emissions to accelerate reductions in line with the global warming limits scientists say are necessary to avoid the worst impacts of climate change. GSG Protocol has now published interconnected global standards for application by businesses, countries and cities. The standards for business include a corporate accounting and reporting standard, Scope two Guidance, a Scope three standard and Scope three calculation guidance, a product standard, and most recently, a land sector and removal standard. The standards for countries include a mitigation goal standard and a policy and action standard. There's also a GHG Protocol for cities and a GHG Protocol for project accounting that's relevant for companies, countries and Cities. And in 2026, many of those standards for business are going through updates and revisions to learn what's changing, who's impacted, and why. Now we're talking to a guest who's been involved closely in developing these standards for more than 20 years. Pankaj Bhatia Pankaj is the Global Director of GHG Protocol at the World Resources Institute and part of the GHG Protocol Secretariat. As we'll hear today, GHG Protocol is also launching a new actions and Market Instruments Standard. We'll also hear how GHG Protocol is working with other standard setters to create harmonization. For example, in 2025 announcing a partnership with the International Organization for Standardization or ISO. A note on a couple other acronyms we'll hear today. Pankaj mentions the epa, that's the US Environmental Protection Agency. He also mentions the UK defra, that's the Department for Environment, Food and Rural Affairs. And we'll hear about a whole Alphabet soup of standards organizations that use GHG Protocol standards, including the sbti, that's the Science Based Targets Initiative. Okay, let's dive into my interview.

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My name is Pankaj Bhatia and presently I am the Global Director of the Greenhouse Gas Protocol at the World Resources institute in Washington, DC. I formally stepped into this role about 20 years back in 2006, but my journey started with JG Protocol actually much earlier, about a year after it was launched in 1998. At that time I was invited to join a very small founding management team of JG Protocol. It consisted of business representatives and civil society representatives. So overall, it's almost been more than 25 years of being part of this journey, seeing and helping shape what I would say a very powerful idea that took birth in 1998 and now has matured into a global carbon architecture, the GHG Protocol. In its early phase, it really operated in a voluntary environment and and so after we published our first edition standard in 2001 and then revised edition of the Corporate Accounting and reporting standard in 2004, securing adoption was quite challenging. But progress came country by country, starting with US epa, UK defra, then national reporting programs in Mexico, Brazil, India, China, and then partners by partners. ISO was the first one to adopt ghg Protocol in 2004. Then came CDP Carbon Disclosure Project, GRI, Global Reporting Initiative, WWF, Climate Savers Program, and then continued with SPTI was another major program that adopted GHG Protocol. In the first early phase of the program, I think there were some very important decisions that we made in the GHG Protocol design that were critical in enabling such an adoption in a voluntary context. First of all, we maintained some flexibility. We were providing some options that were linked to business or reporting objectives. So that means that depending on the company specific reporting objective, they could either use primary data or secondary data. At that time, if we had required perfect primary data from the beginning, I think adoption could have been very challenging. We would not see the scale that we are seeing now. So giving such an optionality example on secondary data lowered some of the barriers and Enabled scale. We also provided a very modular architecture in the design of the GAZ protocol. So the standards function like building blocks. They could support multiple policy objectives or business objectives, disclosure programs, internal strategy development, investor analysis, risk management, market mechanisms. So these different objectives could pick and choose different building blocks depending on what would work best for their specific goals. Then finally, I would say that we also ensured a very inclusive and multi stakeholder process which enabled many important initiatives. They were participants in that process and they contributed to the drafting of the standards and they had a sense of ownership with the standards and they were successfully adopting these standards. Later we also introduced pilot testing so that standards are grounded in field conditions. Maybe I would also comment on scope 3, which was explicitly designed not just as a reporting category, but as a mechanism for collaborative climate action across value chains and a risk management tool. In a way, it was designed to reflect how the economy actually functions, interconnected through supply decisions, demand signals and capital allocation. So this was one of the greatest innovations of the GHG Protocol. We did not imagine at that time how this will actually result in some major incentives for carbon markets by way of having such a large portfolio of interested stakeholders who could work together towards net zero business strategies for investors and regulators to assess climate risk exposure. So overall, I think these were some of the features and responses that played a key role in facilitating the adoption of GHG Protocol in the marketplace place and today it is the world's most widely adopted framework, used by 97% of S&P 500 companies and 9 in 10 Fortune 500 companies.

3:24

And as you've described, GHG Protocol is widely adopted around the world. But we're having this conversation now at a time when you're in the process of updating or changing some of your standards. What should our audience understand about how the GHG Protocol is changing its standards?

7:50

Right. This is a very good question and actually it has to be contextualized in a way. There was a journey of GHG Protocol. I see there there were two important phases to it. The early phase was entirely voluntary context, which happened by voluntary programs and country level national reporting programs, all voluntary. But most recently in the last five years, the GHG Protocol has moved from voluntary uptake to regulatory integration. And this was spurred by the work that U.S. securities and exchange Commission started as they started working on their climate rules using GHG Protocol framework as its foundation. Even though the rule itself is on pause. It actually began something very profound. It started to signal that emission reporting was moving from voluntary towards regulatory expectation in one of the world's largest capital markets and this started to catalyze a global momentum. European Unions has established their reporting standards. The International Sustainability Standards Board has incorporated GHG reporting into its framework and it is being integrated by almost 40 plus jurisdictions representing 60% of global GDP. So why this context is important? It is important because as we enter into the regulatory phase, it also was followed by greater scrutiny. There were questions raised around the optionality that GSG Protocol provides around different consolidation methods, scope 3 data quality and investment Related Emissions so in response we initiated a global stakeholder consultation. In 2022 we received over 1400 survey responses and more than 230 proposals so that feedback directly informed the scope of our standards updates. We currently have four active technical working groups working with more than 200 experts updating our corporate standards, scope 2 guidance and scope 3 standard as well as working on a new standard. The new standard is called Actions and Market Instruments. So this is the first time we will have a formal reporting structure that will allow companies to report market instruments such as Environmental Attribute Certificates, Carbon Credit Instruments, Removal certificates within the GHG Protocol reporting structure. Our planned approach is to provide a multi statement reporting framework that will bring transparency and credibility to how companies will use market instruments to meet their net zero commitments and also to help unlock capital investments. In addition, now we are launching a fifth Technical Working Group in partnership with ISO. This is a product standard Technical Working Group. This group in itself is expected to have about 150 to 200 members. And so this is just in summary the updates that we are now undertaking in the business suite of GHG Protocol standards.

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I've been hearing a lot of interest recently in GHG Protocol's proposed updates to scope 2 guidance. A public consultation regarding these proposed Updates ended in January 2026 and some of my colleagues at S and P Global Energy Horizons provided comment in that process. We'll include a link in our show notes if you'd like to read that. I asked Pankaj what's next for Scope two? Here's what he said.

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I think I would qualify when we say what is changing. These are all proposals that have been submitted for review and feedback in scope 2. In particular, we just completed a public consultation process. The feedback will inform the next set of revisions in the scope 2. One of the major change is in the market based method which is to require that all certificates are matched on an hourly basis in the market based approach. So this is an hourly matching then the other requirement is called deliverability that all certificates are sourced from generation deemed deliverable so these are two major changes in the market based methodology. In the location based methodology, we are updating the location based emission factor hierarchy. We are introducing the requirement to use the most precise location based emission factors and we are also providing definition of what is accessible publicly available information from a credible source. Finally, in the scope 2, we are also providing some feasibility clauses because some of the changes in the market based approach are very significant and they depend on hourly matching data which may not be available in many regional markets or global markets. So we are also providing measures for feasibilities that are dependent on load profiles, exemption thresholds, legacy clauses for those contracts which have been signed and which may have a long period for their continued applicability and then phased implementation. So these are some of the changes in the scope too that yeah, they're still going through a review and consultation process and we are waiting to synthesize the feedback received and then it will go through our decision making.

11:25

When we talk about market based and location based, can you explain in simple terms what that means?

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Right. In simple terms, location based is based on the grid average emission factor. So when a company draws electricity from a grid, from a regional grid, most cases whatever is the average emission factor of that grid is defined as a location based approach. So it's a physical connection to the grid that is the location based approach. And the market based is based on the contract a company has with its supplier. So that becomes a contractual based inventory where depending on your supplier and the emission factor provided by the supplier, your market based method follows that and not location based method. So although in the GHG protocol we require that companies report on both methods.

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Okay. And the goal of the proposed changes to market based and location based approaches

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is what is to improve the accuracy of the information to drive towards a future trend where we believe that such accurate matching with the location and deliverability in the market based would actually drive more reliable reduction strategies for business. We'll ensure that the reductions that are quantified using the revised approach can provide a more reliable metric. Because ultimately if in the marketplace there is a doubt about, for example, whether the certificates represent the reductions accurately or not, then the market can sooner or later experience a lack of trust. And so the purpose is to ensure that the methods are accurate, that will ensure that the market can trust those numbers. Now, of course there is a challenge in pursuing this. As with any, any change in the standard that pursues greater accuracy is the feasibility element. And so that's why we need to understand how do we ensure that the standards will not result in lower uptake and actually may not achieve the ultimate objective. And so we are studying how feasible these changes are in different markets and how effective their adoption would be. And then based on those judgment, we may come back to if any changes are needed.

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So let's turn to Scope three emissions. What should our audience understand about GHG Protocol's approach to SCOPE three and then how that's changing?

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I think it's very important to understand also a little bit of a historical context on how SCOPE three was introduced. So as I said, GHC protocol started in 1998. We had this small management team that was tasked with some of the basic decisions very early. And one of them was of course, decision on what types of standards the GSG Protocol should establish. The original plan was to do three separate standards, one for entity level core operational emissions, one for product life cycle accounting and one for sequestration. However, in the very first year of consultations, it became clear that climate change is not a siloed operational issue. It's a systemic issue. And if the problem is systemic, the accounting system must also be systemic. So instead of separating lifecycle accounting from corporate accounting, we integrated lifecycle thinking directly into entity level reporting. And that decision led to the creation of the scope framework. Scope 1, scope 2 and scope 3. Scope 3 in particular, it became the bridge between lifecycle accounting and the global economic architecture of business. So it captured not only direct emissions from companies own operations means, the overall scopes framework, but also indirect emissions via scope 3 from the various interdependencies, the economic interdependencies between suppliers, customers, investors who influence emissions across the value chain. So the objective behind Scope three was very clear to develop an accounting and reporting system that ensures visibility and leverages the role and influence of all actors in advancing climate action. We understand that SCOPE three has some double counting issues, but we saw that as actually a design feature and to serve as a mechanism for collaborative climate action across value chain partners. And it also became a risk management tool. And we have understood from our stakeholders that it has functioned very well. In fact, it has functioned the way NAMI actually functions. It provides very good signals, particularly for investors and also for business in making some important decisions and now in the current updates of SCOPE three. So we will be maintaining this overall framework. It has proven very successful, very effective. We of course understand that there are issues in terms of companies using secondary data because data availability is an issue. It is also a cost issue and we will be improving with some guidance on how to improve data quality. We will be also providing some additional tools likely that will be helpful for companies to improve the quality of data. In Scope three, we will also be introducing a new category. All this is still under discussion. This new category, if It's a category 16, if it is approved, will be focused on facilitated emissions. So this will be focused on platforms like E commerce platforms, for example, insurance brokers, intermediaries who are themselves not owning the assets, but they are facilitating transactions. And so they do have a very important role to play. And we intend to capture that in this new category.

15:56

Okay, so facilitated emissions. And then you mentioned double counting issues. Can you just explain in very simple terms what does that mean?

19:15

Yeah, definitely. Let's use one category as an example. So the scope 3 product use phase categories, let's say that is an example and this is a category which is meant for sellers of products to quantify the emissions from the use of the product. And so fossil fuel product manufacturers or appliance manufacturers, or automotive sector manufacturers, as they sell their products and their use phase, they cause emissions. And so this category captures those emissions for the seller of the product, but at the same time, those emissions are also quantified by the customers in their respective scopes. So that is the double counting issue.

19:24

So you've mentioned the ISO and the partnership there. What should our audience understand about this ISO partnership?

20:11

Yes, the partnership with ISO really represents a paradigm shift. Historically, fragmentation in carbon accounting has been a huge problem. In my 25 plus years of work, I've seen that even though successfully create these very good standards, that there is always a notion that there's an alternative standard set of providers like ISO. And it has been the case for a long time, even though ISO first were fully aligned in 2004 after the GHG protocol published our first standard. But over a period of next 10, 15 years, some gaps emerge between the ISO and GHG protocol standards on some issues. And so this fragmentation really becomes a huge issue because then decision makers have a difficulty as they have to then make a decision which standard or which rule to use for a certain topic. And it becomes a kind of a very confusing choice for them. They're not the best experts also sometimes, and it results in a stalemate. And so I think the ISO partnership really does a big job here to completely avoid fragmentation in carbon accounting and duplication in carbon accounting, so to avoid having different standards evolve in parallel with overlapping objectives. So our collaboration with ISO will reduce the fragmentation through jointly producing corporate and product standards. Here the objective is not so much an institutional consolidation for its own sake, it is harmonization, creating a common global language for emissions measurement and reporting.

20:18

So you use this word fragmentation and that's something I hear a lot of concern about when it comes to to what's been called the Alphabet soup of different standards rules and regulations around sustainability disclosures. You talked a little bit about this, but how does the GHG protocol fit with the work of other global standards and standard setters? Like let's start with the ISSB for example.

21:57

Right. So the ISSB is actually a great example of full alignment. Many times the different initiatives all have a general description which is that they are standard setters. JG Protocol is a standard setter. ISO is a standard setter. ISSB is a standard setter. GRI is a standard setter. SBTI is a standard setter. All of them are standard setters. So sometimes there is an impression that, oh, There may be five different standards, but fortunately there are not five different standards. least on accounting, all of them, they use the same accounting standard which is provided by GHG protocol. The difference I would say is that with respect to ISSB is that they focus on disclosure and they reference GHG Protocol as their accounting standard, period. There's no other choice and that is very good. So ISSB focuses on disclosure. What they have done is they have picked up the accounting standard from Greenhouse Gas protocol and most of our reporting requirements also. But they have layered in their additional reporting specifications as they are focused on disclosure. So one example, what they have done differently from GIG protocol is in the case of GIG Protocol we have scope 3 optional, but ISSP has made scope 3 a requirement. So in a way it is an advancement, but it's not a conflict. We are also going through our updates so maybe if we might end up in the same place. But ISSB and THD Protocol are fully aligned on the accounting and this particular advancement on the reporting side that they have now achieved, we are also aiming at that.

22:21

In addition to all those standard setters that Pankaj talked about, we've also seen industry led efforts. For example, at the start of 2026, a coalition called Carbon Measures launched, backed by big companies like Exxon and Spanish bank Santander, Carbon Measures calls for product level carbon intensity standards to help enable a ledger based carbon accounting framework. And we'll be hearing from the CEO of Carbon Measures in an upcoming episode of this podcast. But some market participants responded to the Carbon Measures launch with a joint statement calling on new initiatives like this group to engage as contributors to the existing GHG protocol. ISO working group on product carbon accounting, I asked Pankaj how he's thinking about that kind of industry led effort like carbon measures. What should our audience understand about these developments?

24:02

I will start with a statement with respect to what is our common goal, I think for all the initiatives everyone you mentioned, I've mentioned one common goal is climate. We all want to be very successful in solving the problem of climate change and make our own contributions very effectively. And so in the present context, there is no single policy lever or business lever that can just simply drive the climate mitigation. In the present global economic context, political context, you need multiple business levers, you need multiple market levers, policy levers. And when you look at the big picture, we will find that actually these multiple standards, each one of them are making some very unique contributions and also are having some overlapping contributions. And so where there are overlapping contributions, they should be aligned so that there's no fragmentation. One of the biggest overlapping contribution I think is on corporate accounting. Scope one, Scope two, Scope three is a very beautiful framework. Very successful framework means there are some improvements that are underway, but it has worked for more than 25 years. And all the initiatives should follow the same framework. They can make choices. These are different building blocks. Scope 1 is a building block, scope 2 is a building block, scope 3 is a building block. And now there is a new one, actions and market instruments. So they are all building blocks that can be used, combined, sliced or diced in a way that suits their objectives. But ultimately they should all be rooted into one common accounting infrastructure. And that is what is happening. Fortunately, in the choices we see that everybody has made in the ecosystem, there's so many of them. TCFDs, GRIs, CDP, SPTI, ISSB, ISO, they're all on corporate accounting following the same framework. The other system is product accounting. And there are some policy levers and business levers specific to product accounting. GST protocol has a product standard, ISO has a product standard. We are jointly updating it. And that's where I think carbon measures work becomes very relevant. Because GHG protocol already has a product standard. I think they could use the GHG protocol framework to quantify embodied emissions. But they may need to do some customizations to develop product category rules, specific rules for specific products. And I believe carbon Measure is right now undertaking a landscape assessment to identify what would be the right foundational framework for their work. So I don't see any fundamental technical misalignment with them. I actually do see an opportunity for collaboration and opportunity for building on existing architecture. So that's going to help the ecosystem as a whole. In the case of their specific, I think not just accounting but policy objectives and we are waiting to see the results from their landscape assessment and what would be the next steps from that.

24:50

Can you just define for our audience what you mean when you talk about product accounting versus corporate accounting?

27:58

Yes, product accounting is focused on a single product. So let's say if you take an example of car. So the product accounting follows the lifecycle approach similar to the corporate accounting, but it follows that specifically for a single product. So it has different stages, typically at a very high level. One could say that there is one full life cycle stage, cradle to grave it is called. So starting from the mining of materials that are used in the manufacturing of components for a car, then transportation of those materials to the factory that is producing components for a car or parts for a car from different suppliers, then of course all the emissions that occur in the production of those materials, transportation of those materials, then all the emissions that occur during the manufacturing of that car and then the use phase emissions that will occur during the use of that car and then disposal phase. So it's a full life cycle inventory. Sometimes it is called cradle to grave inventory. But there, there's some other sectors where most important emissions will happen in the upstream stages of those products. So like cement or steel. And so for those products we also have a provision for cradle to gate inventory because by the time that product is manufactured, almost all their emissions have already been emitted. And so if the those are called embodied emissions for those products. So cement, steel, aluminum are good examples. So there's a cradle to gate product level inventory and there is a cradle to grave product level inventory. That is product accounting. Corporate accounting is just you imagine if a company is producing, let's say 100 different products and you combine them and you produce a single inventory at the corporate level. But you don't combine product by product, but you rather could do it the way GHG protocol provides. Scope 1, scope 2, scope 3 where you are able to quantify scope 1 emissions which are largely emissions from combustion or process emissions scope 2 emissions which are largely from purchase and use of electricity and then scope 3 emissions which are a large body of upstream and downstream categories emissions. So that becomes a corporate inventory for a company together separate from a single product level lifecycle inventory.

28:04

Looking ahead, Pankaj, in your view, what is the biggest issue at stake for carbon accounting in 2026?

30:32

Yes, I think as carbon accounting matures and it's getting into the regulatory space and also Some of the policy applications. I think the center of gravity for the carbon accounting is shifting towards policy integration. I think product accounting is going to become increasingly central, particularly in trade related measures such as carbon border mechanisms and other sector specific policies. So to me that would be one of the biggest issue and biggest opportunity for us to drive our progress together towards decarbonization. I just think that also it is very important for us to remind ourselves that climate is a systemic problem and needs a range of tools that can support a range of business and policy levers and objectives. So that means leveraging corporate accounting, product accounting, market instruments all within one coherent architecture. They are interconnected and we have to ensure those interconnections and interoperability so that they really work as a package. Also, I think market instruments will play a critical role. As I said earlier, we are introducing a multi statement reporting framework which will provide opportunity for companies to report the EACs, Environmental Attribute Certificates, carbon credit and removal certificates within GHG protocol reporting. I think it will also help unlock even bigger scale of capital allocation across Scope three categories. For example, we have understood that in just the introduction of market instruments in scope two resulted in at least 40 to 50 billion dollars of capital allocation. So if you look at scope three it has 15 categories to become 16 categories. And if we introduce these market instruments mechanisms with of course very good accounting rules and eligibility rules, we think that they can further help unlock the capital allocation capital investments in meeting net zero commitments.

30:38

These market instrument mechanisms. Can you say a little bit more about what that looks like in practice?

32:43

So first of all, it has been in practice for a long time. Offsets is a kind of a market mechanism. Similarly, avoiding emissions outside the value chain is another example of a market instrument. Similarly, there could be reduction activities within scope 3 that are not captured within the scope 3 categories, but they result in thg mitigation. That could be also a type of market instruments. It could be a contractual market instrument. So there are different types of market instruments that have not been previously given a place in the JG protocol accounting reporting structure. And this time we are going to do it. We are going to provide not only a disaggregated structure but also quantification methods for these different statements, eligibility criteria for what could qualify as a market instrument and then guidance also for programs and policymakers to use them in their respective policies and programs.

32:49

Well Pankaj, thank you so much for taking me through the history of GHG protocol and also a lot of updates that are currently underway. What have I not asked that you would like to get across to our podcast audience.

33:51

I think you covered it very well and I think I would end by saying that ultimately our shared aspiration is to ensure the world has a single globally accepted carbon accounting standard, complete in scope. Complete in scope means full life cycle that is designed to support multiple business and policy objectives, that is supported by very robust governance and modern data systems, and all focused on driving emissions downward. So carbon accounting is a means, not an end in itself. The end still stays the same. And that is our, I think, North Star. It was our North Star in the past, it is today and it remains in the future.

34:03

So today we got a useful history lesson on how GHG Protocol developed emissions standards that are now widely used by companies, countries and cities around the globe. We also heard what's on the horizon, in particular revisions to scope 2 and scope 3 emissions guidance. Pankaj explained how some of the standards for business are changing based on stakeholder feedback. He also reiterated the importance of harmonization in carbon accounting. He explained how this is already happening across many standard setters and he said there's also an opportunity for collaboration with industry led efforts like carbon measures.

34:43

We'll continue to track carbon accounting developments in upcoming episodes, so please stay tuned and if you have questions or feedback for the show, please use the email in our Show Notes to get in touch.

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Thanks for tuning in to this episode of All Things Sustainable. If you like what you heard, please subscribe, subscribe, share and leave us a review wherever you get your podcasts.

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And a special thanks to our agency partner, the199. See you next time.

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