On March 31, the GHG Protocol released a Phase 1 Progress Update outlining potentially significant revisions under consideration for its Scope 3 Standard. The Progress Update is expressly described as draft and subject to change, and is intended to provide transparency into the direction of the ongoing standard-setting process ahead of a formal public consultation draft.
The proposed revisions are being developed by the Scope 3 Technical Working Group and focus on three primary areas: boundary setting, data quality, and the classification and reporting of investments.
Proposed 95% Scope 3 Coverage Requirement—One of the most noteworthy proposed changes is the introduction of a quantified boundary requirement for Scope 3 emissions reporting. Under the proposal, companies would be required to report at least 95% of total required Scope 3 emissions, with exclusions limited to no more than 5%. The current standard requires companies to account for all Scope 3 emissions and disclose and justify exclusions, but does not establish a numerical threshold.
The Progress Update explains that the proposed threshold is intended to ensure that “all major activities attributable to a reporting company’s business (by emission magnitude)” are included, while allowing companies to exclude minor sources and focus resources on the largest emissions drivers. In addition, companies would be required to quantify 100% of total required Scope 3 emissions annually to demonstrate that any exclusions fall within the 5% threshold.
New “Category 16” for Other Value Chain Activities—The Progress Update also introduces a new Scope 3 category—“Category 16: Other value chain activities.” This category is intended to capture emissions from activities not clearly covered by the existing 15 categories, including facilitated emissions—that is, emissions generated by third-party activities from which a company earns transactional income but does not own or directly control. Examples discussed include certain financial services and licensing arrangements. Most Category 16 disclosures reportedly would be optional, and required and optional emissions would be reported separately.
Revisions to Category 15 (Investments)—The proposed revisions would also modify the classification and reporting requirements for Scope 3 Category 15 (investments).
Key elements under consideration include:
- Applicability to all companies: Category 15 would explicitly apply to all reporting companies, not only financial institutions or investment managers.
- Narrowing of scope: Category 15 would be focused on investments and financed emissions, while other financial activities would be removed.
- Reclassification of financial services: Activities such as insurance and underwriting would be reassigned to Category 16, generally as optional disclosures.
These changes are intended to improve clarity and comparability in how investment-related emissions are categorized and reported.
Additional Proposed Changes—The Progress Update outlines additional proposed revisions, including enhanced boundary-setting requirements (including clearer rules for exclusions and disclosure); separation of required and optional Scope 3 emissions in disclosures; and expanded data quality and transparency measures, such as disaggregation of emissions by data type and disclosure of verification status.
The GHG Protocol emphasizes that the Progress Update is not a draft standard for consultation, and that all proposed revisions remain under development and subject to change. A formal public consultation draft is expected in a subsequent phase of the process.