GHG Accounting: ISO 14064-1

Note: I know this is quite technical, but it’s about accounting, so that’s natural. Financial accounting tends to be technical too, right?

The ISO 14064 series is a family of international standards by the International Organization for Standardization (ISO) for quantification, monitoring, reporting, and verification of GHG emissions. They were developed by Technical Committee ISO/TC 207 on Environmental Management, Subcommittee SC 7 on Greenhouse Gas Management, can be adopted across different sectors, regions, and organisational types.

The ISO 14064 series currently comprises four main parts:

ISO 14064-1:2018 – “Greenhouse gases – Part 1: Specification with guidance at the organisation level for quantification and reporting of greenhouse gas emissions and removals.” This standard enables organisations to measure and report their total greenhouse gas emissions and removals.
ISO 14064-2:2019 – “Greenhouse gases – Part 2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements.” This standard applies to specific projects designed to reduce emissions or enhance carbon removals, such as renewable energy installations, energy efficiency retrofits, reforestation programs, or methane capture projects.
ISO 14064-3:2019 – “Greenhouse gases – Part 3: Specification with guidance for the verification and validation of greenhouse gas statements.” This standard provides the framework for independent third-party verification and validation of GHG claims. It is the assurance mechanism that gives stakeholders confidence in reported emissions data.
ISO/TS 14064-4:2025 – “Greenhouse gases – Part 4: Guidance for the application of ISO 14064-1.” This newest addition, published in November 2025, is a Technical Specification that provides practical, step-by-step guidance for implementing ISO 14064-1. It bridges the gap between the normative requirements of the standard and real-world application, with detailed examples and case studies for different organisational types and sectors.

Additionally, the broader ISO 14060 family includes ISO 14065:2020 (requirements for bodies validating and verifying GHG statements), ISO 14066:2023 (competence requirements for verifiers and validators), and ISO 14067:2018 (carbon footprint of products).

This ecosystem of standards creates a framework:

Organisations use ISO 14064-1 and 14064-4 to calculate their emissions;
Project developers use ISO 14064-2 to quantify project benefits;
Independent verifiers use ISO 14064-3 to audit these claims; and a
Accreditation bodies use ISO 14065 and 14066 to ensure the competence and impartiality of the verifiers themselves.

The Five Core Principles

Relevance: Select the GHG sources, GHG sinks, GHG reservoirs, data and methodologies appropriate to the needs of the intended user.
Completeness: Include all relevant GHG emissions and removals.
Consistency: Enable meaningful comparisons in GHG-related information.
Accuracy: Reduce bias and uncertainties as far as is practical.
Transparency: Disclose sufficient and appropriate GHG-related information to allow intended users to make decisions with reasonable confidence.

As stated explicitly in ISO 14064-1, “The application of principles is fundamental to ensure that GHG-related information is a true and fair account. The principles are the basis for, and will guide the application of, the requirements in this document”.

Relevance: Appropriateness to User Needs
This principle recognises that GHG inventories and reports serve specific purposes and must be designed to meet the needs of those who will rely on the information to make decisions.

Relevance begins with clearly identifying the intended users of the GHG inventory and understanding their information needs. Intended users may include the organisation’s own management, investors, lenders, customers, regulators, GHG programme administrators, or other stakeholders. Different users may have different information needs. For example, investors may focus primarily on climate-related financial risks and opportunities, while regulators may require specific emissions data for compliance purposes.

The relevance principle requires organisations to make appropriate boundary decisions (determining which operations, facilities, and emissions sources to include in the inventory based on what is material and meaningful to intended users): an inventory that excludes significant emission sources or includes irrelevant information fails to serve user needs effectively.

In practice, applying the relevance principle means that organisations must engage with their stakeholders to understand what information they need and why, design inventory boundaries and methodologies to provide this information, focus effort on quantifying the most significant emissions sources, and regularly reassess whether the inventory continues to meet user needs as circumstances change.

Completeness: Including All Relevant Emissions
The completeness principle requires organisations to include all relevant GHG emissions and removals within the chosen inventory boundaries. This principle ensures that GHG inventories provide a comprehensive picture of an organisation’s climate impact rather than selectively reporting only favorable information.

Completeness operates at multiple levels. At the broadest level, it requires that organisations establish appropriate organisational and reporting boundaries and then include all sources and sinks within those boundaries. For organisational-level inventories under ISO 14064-1, this means accounting for all facilities and operations that fall within the defined organisational boundary, whether based on control or equity share. It also means including both direct emissions from sources owned or controlled by the organisation and indirect emissions that are consequences of organisational activities.

The 2018 revision fundamentally changed how organizations handle indirect emissions. Instead of treating “Scope 3” as a monolithic category, ISO now requires systematic evaluation across six specific categories. This shift reflects reality: a manufacturer’s supply chain emissions (Category 4) and product use-phase emissions (Category 5) are fundamentally different and require different strategies. Organisations must systematically identify potential sources of indirect emissions throughout their value chains and include those that are determined to be significant based on magnitude, influence, risk, and stakeholder concerns. The real problem here is data availability: an organisation might know its own production emissions precisely, but will struggle to get Scope 3 data from thousands of distributors, and this makes implementation messy and imprecise.

An important aspect of completeness is the treatment of exclusions. If specific emissions sources or greenhouse gases are excluded from the inventory, ISO 14064-1 requires organisations to disclose and justify these exclusions. Justifications must be based on legitimate reasons such as immateriality, lack of influence, or technical measurement challenges, not simply on a desire to report lower emissions.

For GHG projects under ISO 14064-2, completeness requires identifying and quantifying emissions and removals from all relevant sources, sinks, and reservoirs affected by the project, including controlled, related, and affected SSRs. Failure to account for emission increases from affected sources (often called leakage) would result in overstatement of project benefits.

Consistency: Enabling Meaningful Comparisons
The consistency principle requires that organisations enable meaningful comparisons in GHG-related information over time and, where relevant, across organisations. Consistency is essential for tracking progress toward emission reduction targets, assessing the effectiveness of mitigation initiatives, and enabling external stakeholders to compare performance across organisations or sectors.

Consistency has several dimensions. It requires using consistent methodologies, boundaries, and assumptions over time when quantifying and reporting emissions. When an organisation measures its emissions in one year using specific methodologies and emission factors, it should apply the same approaches in subsequent years to enable valid comparisons.

It is important to note that consistency does not mean organisations can never improve their methodologies or expand their boundaries. Organisations may and should refine their approaches over time to improve accuracy, expand scope, or respond to changing circumstances. However, when such changes occur, consistency requires transparent documentation of what changed and why, recalculation of prior years where necessary to maintain comparability, and clear explanation in reports so users understand the nature and impact of changes.

Case in point, the base year concept embodied in ISO 14064-1 is central to applying the consistency principle. Organisations select a specific historical period as their base year against which future emissions are compared. The base year serves as the reference point for measuring progress toward reduction targets. ISO 14064-1 requires organisations to establish policies for recalculating base year emissions when significant changes occur to organisational structure, boundaries, methodologies, or discovered errors. These recalculation policies ensure that year-over-year comparisons remain valid even as organisations evolve.

The recalculation policy is most commonly triggered by three types of organisational change. First, structural changes: acquisitions, divestitures, or mergers that materially alter the scope of operations. ISO 14064-1 and the GHG Protocol typically define “material” as changes exceeding 5% of Scope 1 and Scope 2 emissions in the base year. For example, if a retail company acquires a logistics provider representing an additional 6% of historical emissions, the base year must be recalculated to include that logistics provider, enabling fair year-on-year comparison. Second, methodology improvements: when an organisation discovers better data or more appropriate emission factors. If a facility previously used regional electricity emission factors but gains access to grid-specific data, or if a company previously estimated employee commuting emissions using averages but now collects actual commute data, these improvements warrant recalculation. The driver is not change for its own sake, but the principle that prior years should benefit from improved accuracy just as current years do. Third, discovered errors: when an organisation identifies that prior-year calculations were systematically wrong—either over or understating emissions—recalculation is not optional; it is mandatory. Transparency requires disclosing both the error and its magnitude, then correcting the historical record. Organisations often establish a threshold (commonly 5%) below which minor corrections do not trigger full recalculation; instead, they are noted as adjustments in the current year.

Accuracy: Reducing Bias and Uncertainty
Accuracy involves reducing systematic bias and reducing uncertainty.

Systematic bias occurs when quantification methods consistently overstate or understate actual emissions. For example, using an emission factor that is inappropriately high or low for the specific activity being quantified would introduce bias. The accuracy principle requires ensuring that quantification approaches are systematically neither over nor under actual emissions, as far as can be judged.
Uncertainty refers to the range of possible values that could be reasonably attributed to a quantified amount. All emission estimates involve some degree of uncertainty arising from measurement imprecision, estimation methods, sampling approaches, lack of complete data, or natural variability. The accuracy principle requires reducing these uncertainties as far as is practical through using high-quality data, appropriate methodologies, and robust measurement and calculation procedures. ISO 14064-1 requires organisations to assess uncertainty in their GHG inventories, providing both quantitative estimates of the likely range of values and qualitative descriptions of the causes of uncertainty. This assessment helps organisations identify where improvements in data quality or methodology could most effectively reduce overall inventory uncertainty.

Achieving accuracy begins with selecting appropriate quantification approaches. ISO 14064-1 recognises multiple approaches to quantification, including direct measurement of emissions, mass balance calculations, and activity-based calculations using emission factors. The most accurate approach depends on the specific source, data availability, and the significance of the emission source.

Organisations should also prioritise primary data (data obtained from direct measurement or calculation based on direct measurements) over secondary data from generic databases. Site-specific data obtained within the organisational boundary is preferable to industry-average or regional data. However, the accuracy principle also recognises practical constraints—perfect accuracy is often unachievable and unnecessary, particularly for minor emission sources.

The requirement to separately report biogenic CO₂ from fossil fuel CO₂ in Category 1 may seem like a technical distinction, but it reflects a fundamental policy divergence emerging globally. Biogenic emissions arise from the combustion of biomass (wood, agricultural waste, biogas) and are considered part of the natural carbon cycle—the carbon released was recently absorbed by growing plants or waste decomposition. Fossil emissions, by contrast, release carbon that has been sequestered for millions of years. Regulatory frameworks increasingly treat these differently. The European Union’s Emissions Trading System (EU ETS) has updated its carbon accounting rules multiple times to refine biogenic CO₂ treatment; the GHG Protocol has issued separate guidance; and emerging carbon credit schemes apply different rules depending on biogenic versus fossil origin. An organisation that reports these separately today is insulated from tomorrow’s regulatory changes. If a company bundles biogenic and fossil emissions together, it cannot easily disaggregate them later without recalculating historical data. Practically, this means a biomass energy facility, a wastewater treatment plant using anaerobic digestion, or a manufacturer using wood waste for process heat must track biogenic emissions in their systems from the outset.

Transparency: Disclosing Sufficient Information
The transparency principle requires that organisations disclose sufficient and appropriate GHG-related information to allow intended users to make decisions with reasonable confidence. Transparency is fundamental to building trust and credibility in GHG reporting—it enables users to understand what was measured, how it was measured, and what limitations exist in the reported information.

Transparency requires that organisations address all relevant issues in a factual and coherent manner, based on a clear audit trail. This means documenting the assumptions, methodologies, data sources, and calculations used to quantify emissions such that an independent party could understand and reproduce the results.

The transparency principle requires that a reader—whether a regulator, investor, or internal stakeholder—could theoretically follow the same calculation path and reach the same answer. This demands more than good intentions; it requires structural discipline in documentation. In practice, an effective audit trail captures the decision journey, not just the numbers. It documents: which emissions sources were identified as material (and why), which were excluded (and why), what data was collected and from which sources, which assumptions were necessary (e.g., assumed product lifespans, allocation methods for shared facilities), what methodologies were applied, and crucially, where uncertainty remains. For example, a beverage manufacturer’s Scope 3 inventory might document that it obtained actual emissions data from 60% of direct suppliers (by volume) but relied on industry-average factors for the remaining 40%. That gap is not hidden; it is documented as a source of uncertainty in the overall inventory. This approach serves two audiences simultaneously. Internal management gains confidence that the number is defensible. External verifiers and stakeholders understand the methodology’s strengths and limitations, enabling better-informed decisions.

A clear audit trail is essential to transparency. Organisations should maintain robust documentation that traces emissions from source data through calculations to final reported totals. This documentation should include:

descriptions of organisational and reporting boundaries;
lists of emission sources and sinks included in the inventory;
methodologies and emission factors used for each source category;
activity data, sources of data, and data collection procedures;
calculations and any assumptions made; and
any exclusions and the justifications for excluding specific sources.

Transparency requires disclosing not only the final emission totals but also the information needed to understand and evaluate those totals. ISO 14064-1 specifies extensive requirements for what must be included in GHG reports, including both mandatory and recommended disclosures. These disclosures cover methodological choices, data quality, uncertainty, significant changes from previous years, verification status, and other information relevant to interpreting the reported emissions.

The transparency principle also requires acknowledging limitations and uncertainties in the reported information. Rather than implying false precision, organisations should clearly communicate where significant uncertainties exist, what assumptions were necessary, and what information was unavailable or excluded. This honest acknowledgment of limitations enhances rather than diminishes credibility, as it demonstrates rigorous and objective assessment.

Establishing Organisational Boundaries
The first step in developing a GHG inventory is determining organisational boundaries, which means that the organisation should define what operations, facilities, and entities are included in the inventory based on the organisation’s relationship to them.

ISO 14064-1 allows organisations to choose from two primary consolidation approaches:

Equity share approach: The organisation accounts for its proportional share of GHG emissions and removals from facilities based on its ownership percentage. The equity share reflects economic interest, which is the extent of rights a company has to the risks and rewards flowing from an operation. Typically, the share of economic risks and rewards in an operation is aligned with the company’s percentage ownership of that operation, and equity share will normally be the same as the ownership percentage. Where this is not the case, the economic substance of the relationship the company has with the operation always overrides the legal ownership form to ensure that equity share reflects the percentage of economic interest.
Control approach (financial or operational): The organisation accounts for 100% of GHG emissions and removals from facilities over which it has financial or operational control, and 0% from facilities it does not control.
- Under the operational control approach, an organisation has operational control over a facility if the organisation or one of its subsidiaries has the authority to introduce and implement its operating policies at the facility. This is the most common approach, as it typically aligns best with what an organisation feels it is responsible for and often leads to the most comprehensive inclusion of assets in the inventory.
- Under the financial control approach, an organisation has financial control over a facility if the organisation has the ability to direct the financial and operating policies of the facility with a view to gaining economic benefits from its activities. Industries with complex ownership structures may be more likely to follow the equity share approach to align the reporting boundary with stakeholder interests.

The choice of consolidation approach should be consistent with the intended use of the inventory and ideally align with how the organisation consolidates financial information. For example, an organisation that consolidates its financial statements based on operational control should typically use operational control for GHG inventory boundaries as well.

Boundary Consistency with Financial Reporting: Why It Matters
The ISO standard recommends (and increasingly, regulators require) that the consolidation approach used for GHG accounting align with the approach used for financial reporting. This is more than administrative convenience. When a company consolidates financial statements using operational control, its financial stakeholders are accustomed to seeing 100% of controlled operations reflected in results. If the GHG inventory uses a different boundary—say, equity share for a joint venture while the finance team uses operational control—the GHG data will seem inconsistent and raise credibility questions. More importantly, alignment simplifies assurance. An auditor examining both financial and GHG statements does not have to reconcile conflicting boundary interpretations. A company that uses control for finance but equity share for emissions is signalling (intentionally or not) that its GHG report is using a narrower or broader lens than its financial results, inviting scrutiny about whether the difference is justified or opportunistic. Alignment also supports integrated reporting. Increasingly, investors want to see how GHG emissions correlate with financial performance—emissions intensity (tonnes CO₂e per unit of revenue, per unit of asset, per FTE), carbon risk premium, or abatement costs. These correlations only make sense if the boundary is consistent.

Defining Reporting Boundaries: The Six-Category Structure
Once organisational boundaries are established, organisations must define their reporting boundaries—what types of emissions and removals are quantified and reported within the organisational boundary.

The 2018 revision of ISO 14064-1 introduced a significant innovation: a six-category structure for classifying emissions and removals. This structure evolved from and builds upon the GHG Protocol’s three-scope approach (Scope 1 for direct emissions, Scope 2 for energy indirect emissions, Scope 3 for all other indirect emissions). The ISO categories provide more granular classification of indirect emissions, facilitating identification and management of specific emission sources throughout the value chain.

Category 1: Direct GHG emissions and removals: Direct GHG emissions are emissions from GHG sources owned or controlled by the organisation. These are emissions that occur from operations under the organisation’s direct control—for example, emissions from combustion of fuels in company-owned vehicles or boilers, emissions from industrial processes at company facilities, or fugitive emissions from refrigeration equipment owned by the company. Organisations must quantify direct GHG emissions separately for CO₂, CH₄, N₂O, NF₃, SF₆, and other fluorinated gases. Additionally, ISO 14064-1 requires organisations to report biogenic CO₂ emissions separately from fossil fuel CO₂ emissions in Category 1. This separate reporting recognises that biogenic emissions may have different policy treatments, impacts, and implications than fossil emissions.

Category 2: Indirect GHG emissions from imported energy: This category includes indirect emissions from the generation of imported electricity, steam, heat, or cooling consumed by the organisation. When an organisation purchases electricity, the emissions from generating that electricity occur at the power plant (not owned by the organisation), but they are a consequence of the organisation’s decision to purchase and consume electricity. ISO 14064-1 requires organisations to report all Category 2 emissions, making this a mandatory category alongside Category 1.

Category 3: Indirect GHG emissions from transportation: This category includes emissions from transportation services used by the organisation but operated by third parties. Examples include emissions from business travel on commercial airlines, shipping of products by third-party logistics providers, and employee commuting.

Category 4: Indirect GHG emissions from products used by the organisation: This category includes emissions that occur during the production, transportation, and disposal of goods purchased by the organisation. Examples include emissions from the manufacturing of products the organisation buys, emissions from transporting materials used to make those products, and emissions from disposing of waste created by using those products. The boundary for Category 4 is “cradle-to-gate” from the supplier’s perspective—all emissions associated with producing and delivering products to the organisation.

Category 5: Indirect GHG emissions associated with the use of products from the organisation: This category includes emissions generated by the use and end-of-life treatment of the organisation’s products after their sale. When certain data on products’ final destination is not available, organisations develop plausible scenarios for each product. This category is particularly significant for manufacturers, as use-phase emissions from products often exceed emissions from manufacturing. For example, the emissions from operating a vehicle over its lifetime typically far exceed the emissions from manufacturing it.

For many product-based companies, Category 5 is the elephant in the room. An automotive manufacturer might account for 15–20% of its footprint in manufacturing emissions (Category 1) and another 10% in supply chain emissions (Category 4), but 50%+ in the use phase (Category 5). A household appliance manufacturer faces a similar dynamic—the electricity consumed by an appliance over its 15-year lifespan vastly exceeds the emissions from manufacturing. This creates strategic tension. The organisation has direct control over manufacturing efficiency—it can redesign processes, source renewable energy, or substitute materials. But use-phase emissions depend on the consumer’s electricity grid (which it does not control) and user behaviour (how often and how long the appliance runs). Yet ISO 14064-1 requires organisations to quantify these use-phase emissions and report them transparently, because stakeholders—particularly investors and policymakers—need to understand the full climate footprint of the products being sold. When data on product final destination is unavailable (e.g., a smartphone manufacturer doesn’t know where each unit is sold, or how long consumers keep it), ISO 14064-1 allows organisations to develop “plausible scenarios”—reasonable assumptions about usage patterns, product lifetime, and grid composition. These scenarios must be documented and justified, and they should be reassessed as more data becomes available or as circumstances change (e.g., grid decarbonisation).

Category 6: Indirect GHG emissions from other sources: This category captures any indirect emissions that do not fall into Categories 2-5. It serves as a catch-all to ensure completeness while avoiding double-counting. Organisations must be careful not to count the same emissions in multiple categories—for example, if emissions from a vehicle are included in Category 3 (transportation), they should not also be included in Category 4 (products) if the vehicle was used to transport a product.

Quantifying Emissions: Global Warming Potential and CO₂ Equivalent

Author: Finrod Bites Wolves

A blogger. View all posts by Finrod Bites Wolves

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