In September, The Greenhouse Gas Protocol (GHG Protocol) Corporate Standard Sub-Group #2 concluded its 9th session on Organizational Boundaries. While no final decisions have been made, momentum is clearly building around some significant revisions:
đź“Ś Equity Share on the way out?
The Sub-Group is leaning toward eliminating the Equity Share approach entirely. In its place, a re-drafted Financial Control option would take on a stronger role, incorporating financial, commercial, and equity elements.
đź“Ś Financial Control = Financial Disclosures
The revised Financial Control boundary will likely be required to mirror the same consolidation approach used for a company’s financial statements, ensuring alignment with frameworks such as IFRS, ESRS, and SBTi, which already point strongly in this direction.
đź“ŚMaintain 'Optionality', but Sharper Definitions
The GHG Protocol seems poised to keep more than one option (i.e. specifically a strengthened Financial Control and a revised Operational Control) giving companies some flexibility but with clearer guardrails.
đź“ŚRevisiting Operational Control (long overdue)
The meeting delivered critical feedback to Operational Control Consolidation, updating the definition from “full authority to introduce or implement operating policies” to:
✅ “Power to direct, implement, or influence policies, processes, or day-to-day activities.”
While this remains somewhat subjective, the Sub-Group is exploring objective tests such as:
• Who pays the energy bills?
• Who selects and manages operating equipment?
• Who is responsible for maintenance?
đź’ˇ Simplifying the Definition
The explicit mention of subsidiaries has been removed in the updated proposed definition of Operational Control Consolidation to avoid unintended cascading requirements across all intermediaries.
đź’ˇ Entity-Level vs. Asset-Level Application
Finally, the Sub-Group recognized ongoing confusion: Operational Control should be assessed at the Entity/Company level (i.e. not applied individually at the asset or facility level). This clarification could bring long-needed consistency while using this consolidation approach.
đź’Ľ These discussions are far from over, but they represent a pivotal shift toward greater alignment between financial reporting and GHG reporting boundaries. For companies, auditors, and regulators, the changes could mean more clarity, more comparability, and fewer inconsistencies in the years ahead.
