Establish boundaries to identify relevant emissions sources and how you can account for them. To establish organizational boundaries, determine which company operations and subsidiaries to include in the GHG emissions inventory. Organizational boundaries are determined in terms of the operations that the company owns or controls, through either the equity share approach or the control approach. For more information on these specific approaches for setting organizational boundaries, please refer to Chapter 3 of the GHG Protocol’s Corporate Accounting and Reporting Standard here.

After setting the company’s organizational boundaries, the next step is operational boundaries which define the Scope of emissions included. Identify the emissions associated with operations, classify emissions as direct or indirect, and categorize the emissions Scope (Scope 1, Scope 2, or Scope 3 emissions).

For more information on the emissions Scopes, please refer to Chapter 2.1 “Key sustainability concepts and terminology”. For more information on setting operational boundaries, please refer to Chapter 4 of the GHG Protocol’s Corporate Accounting and Reporting Standard here.

Following the boundaries from step 1, collect activity data and emissions factors, using primary data wherever possible. Activity data measure the level of an activity affecting GHG emissions. Examples of activity data under each Scope include:

• For Scope 1, liters of fuel from trucks directly owned by your company. 
• For Scope 2, kilowatt hours of electricity purchased from the utility company.

Emissions factors then convert activity data into emissions value, e.g., kg of CO2 emitted per liter of fuel or kg of material purchased. 

If no primary data is available, companies may have to use secondary data, e.g., average industry data and other generic data not specific to activities. 

Once activity data and emissions factors have been identified, a company should select an emissions calculation approach and calculate emissions from company activities. Chapter 6 of GHG Protocol’s Corporate Accounting and Reporting Standard discusses data collection and calculation in more depth here.

As a next step, companies should aim to improve the maturity of their GHG emissions reporting to reflect recent data and enhance granularity. Chapter 5 of GHG Protocol’s Corporate Accounting and Reporting Standard discusses emissions tracking over time, and chapter 7 discusses managing inventory quality here. 

Lastly, companies should verify their footprint with a third party for increased credibility before public disclosure. Chapter 10 of GHG Protocol’s Corporate Accounting and Reporting Standard discusses verification in more depth here.

Once you have established your emissions baseline, you should start to set emissions reduction targets.

Scope 1 emissions are direct emissions from owned or controlled sources – or in other words: emissions that occur from your direct operations. To provide an example: if you operate a cement factory, it includes:

• The emissions that occur from burning fossil fuels (e.g., coal or natural gas) to power your blast furnace, and 
• The process emissions that occur as a by-product of clinker production, an intermediate product in the production of cement.

Scope 2 emissions are indirect emissions from the generation of purchased electricity, heat, or cooling. The above example of our cement manufacturer refers to all the electricity that the company purchases from the local utility company to power its offices. If the cement factory purchases heat or cooling for its offices, it would also fall under Scope 2 emissions.

Fossil fuel sector companies currently cannot set science-based targets. However, the SBTi is developing a target setting standard for oil and gas companies. For more guidance on which companies that can and cannot commit to the SBTi until the oil and gas method is finalized, can be found here.

Until fossil fuel sector companies can set science-based targets, they should aim to set “non-science-based” targets, i.e., ambitious emissions reduction targets that tangibly reduce their direct Scope 1-2 emissions. As soon as the sector-specific fossil fuel pathway is available, these “non-science-based” targets should be converted into “science-based targets”.

Several industry-led initiatives support oil and gas companies to reduce emissions intensity through targets. One example is the Oil and Gas Climate Initiative (OGCI), a group of energy companies, launching the Aiming for Zero Methane Emissions Initiative. OGCI’s set of near-term ambitions include reducing upstream methane emissions intensity to well below 0.20% by 2025, bringing carbon intensity from their upstream operations down to 17.0 kg CO2e per barrel of oil equivalent by 2025, and bringing routine flaring to zero by 2030. For more information on the initiative, please reference here.

Scope 3 emissions are all indirect emissions (not included in Scope 2) that occur in the value chain of the reporting company, including both:

• Upstream: in the supply chain and including emissions that are created through the production of all input factors of a company, and
• Downstream: emissions that occur through the company’s products, after they “leave” the company’s workshop.

To see an example of where Scope 3 emissions might occur, please refer to Chapter 2.1 “Key sustainability concepts and terminology”.

Once you have established your emissions baseline, you should start to set emissions reduction targets. Setting Scope 3 targets will either require a strategy of how to use fossil fuels without emitting (e.g., through the application of decarbonization solutions such as Carbon Capture, Utilization and Storage), or a strategy to phase out fossil fuels from a company's product portfolio. When setting Scope 3 targets, the implications of those targets (e.g., on the product portfolio and wider business strategy) should be taken into consideration.

Although fossil fuel sector companies cannot set science-based targets, they should nevertheless set “non-science-based” emissions reduction targets until the SBTi’s target setting standard for oil and gas companies is ready. For more updates on the development of the guidance, please reference here.

After setting and evaluating targets, you need to develop a systematic plan that ensures that your targets are achievable. Systematic reduction activities will ultimately tell you how you can reach your targets, that is, when to apply which decarbonization lever.

To craft your “decarbonization strategy” and prioritize the emission reduction actions, you should understand:

• Which decarbonization levers do you apply at each time point? 
• What impacts will the levers have on total emissions?

The plan for systematic reduction activities is ultimately highly sector- and company-specific. 

Specifically for fossil fuel companies, the Methane Guiding Principles partnership outlines five principles for priority areas of action: continually reduce methane emissions, advance strong performance across the gas supply chain, improve the accuracy of methane emissions data, advocate sound policy and regulations on methane emissions, and increase transparency. For more information on Methane Guiding Principles, and to reference their Best Practice Guides and Methane Library to improve methane emissions management, please reference here.

For more details on systematic reduction strategies more broadly, you can refer to Step 3 “Turn your targets into action” in Chapter 3 of the Climate Drive’s Net Zero Guidebook here.

A PCF (product carbon footprint) examines the GHG emissions of one product across its life cycle, from raw material extraction to recycling or disposal. There are several standards and frameworks that explain how to calculate a PCF, including:

• The PACT Pathfinder Framework: developed by WBCSD, a framework that explains and illustrates how to calculate a PCF. Within the boundary of the Pathfinder Framework, only “cradle-go-gate” emissions are included in your emissions calculations. This includes all materials upstream of your own operations, i.e., material acquisition, preprocessing, production, distribution, and storage. Emissions after the material has reached your company's gate are not considered. For further information, please refer to the Pathfinder Framework here.
• The ISO 14067: specifies principles, requirements and guidelines for the quantification and reporting of the carbon footprint of a product and is consistent with other Standards on life cycle assessment. For more information, please look here.

The PCF can be done on an end-to-end basis (“cradle-to-grave”) or partially (“cradle-to-gate” meaning from the raw material extraction – the “cradle” – until the last manufacturing process before entering your factory’s “gate”).

A comprehensive Net-Zero Transition Plan goes beyond systematic reduction activities and includes other elements, e.g., a holistic implementation roadmap, governance structure, or engagement strategy. A transition plan describes your overall approach to the net-zero transition and shows the credibility of your commitment, which is becoming increasingly necessary as regulatory pressure tightens.

Six commonly observed elements of a transition plan include: ambition, implantation roadmap, initiatives, governance, engagement strategy, and progress measurement and metrics.

A best-in-class transition plan should be impactful, credible, and ensure delivery. Testing your transition plan against those key criteria once developed, can help to pressure test its quality.

In addition, there are a few best practices to consider across each key element, to ensure your transition plan is complete (see guidance graphics below).