Short answer
The answer, before the reasoning
IFRS S2 does not simply copy the financial-statement consolidation boundary into the GHG inventory. The sustainability disclosures use the same reporting entity as the related financial statements, but greenhouse gas emissions are measured using a GHG consolidation approach - equity share or control under the GHG Protocol, unless a jurisdiction or exchange requires another method for a specified part of the entity.
The entity must explain the method, reasons, inputs, assumptions, factors and changes, and disaggregate Scope 1 and Scope 2 emissions between the consolidated accounting group and other investees.
Technical status
EDITORIAL STATUS
This document is publication-ready in structure and source-grounded in official IFRS Foundation and GHG Protocol materials. Before external release, assign a named technical reviewer, confirm local adoption and reporting-period context, test all links, and approve the final compliance wording.
Why the boundary question matters
A group can have one set of consolidated financial statements and still need several emissions-boundary decisions. The financial reporting perimeter tells users which entity is reporting. It does not, by itself, decide whether every tonne from a joint venture, leased asset, associate or unconsolidated investment is classified as Scope 1, Scope 2 or Scope 3.
The practical risk is not only a wrong total. A boundary mismatch can move emissions between scopes, omit part of the value chain, undermine year-on-year comparability, produce an incorrect Scope 1 and Scope 2 disaggregation, or make the method note impossible to assure. A robust disclosure therefore starts with a documented reconciliation rather than a single inventory spreadsheet.
Quick orientation
Figure 1. Four reconciled boundary decisions behind one IFRS S2 GHG disclosure. London Reporting Academy learning visual.
Quick orientation
- Applies to
- Entities applying IFRS S2 and teams using a GHG Protocol inventory as the measurement basis.
- Primary decision
- Which operations and investees are included, how emissions are consolidated, where local methods apply and how the resulting figures are presented.
- Key source
- IFRS S1 paragraph 20; IFRS S2 paragraph 29(a) and application guidance B20-B29; GHG Protocol Corporate Standard chapters 3-5.
- Common confusion
- The reporting entity, the GHG organisational boundary and the Scope 3 value-chain boundary are often treated as one perimeter.
In practice
The four boundary decisions
| Boundary decision | Main question | Primary rule — Control output |
|---|---|---|
| 1. Reporting entity | Whose sustainability-related financial information is being disclosed? | Use the same reporting entity as the related financial statements. — Financial reporting entity map and consolidation list. |
| 2. GHG organisational boundary | How are emissions from operations and investments consolidated? | Use equity share or a control approach under the GHG Protocol, unless a required alternative method applies. — Approach memo, ownership/control facts and perimeter reconciliation. |
| 3. Operational and value-chain boundary | Which sources fall into Scope 1, Scope 2 and Scope 3? | Classify emissions after the organisational boundary is set; consider the entire upstream and downstream value chain. — Scope classification register, category decisions and exclusions. |
| 4. IFRS S2 presentation boundary | How are the resulting figures explained to investors? | Disclose method, inputs, assumptions, factors, reasons and changes; disaggregate specified figures. — Disclosure note, comparatives and review trail. |
1. Start with the IFRS reporting entity
IFRS S1 requires sustainability-related financial disclosures to be for the same reporting entity as the related financial statements. For consolidated financial statements, that generally means the parent and its subsidiaries. This anchors the disclosure to the same economic reporting unit used by investors, but it does not remove the separate GHG measurement choices described below.
A useful first control is a legal-entity and investment register that labels each item as consolidated subsidiary, joint operation, joint venture, associate, unconsolidated investment, managed asset, leased asset or other value-chain relationship. The register should tie to the financial consolidation system and then show the GHG treatment under the selected approach.
2. Choose and document the GHG consolidation approach
The GHG Protocol Corporate Standard provides equity-share and control approaches. A control approach can be based on financial control or operational control. IFRS S2 does not nominate one universal choice. Instead, when the GHG Protocol is used, the entity identifies the approach and explains why it was selected and how it serves the objective of enabling users to understand climate-related risks and opportunities.
In practice
| Approach | What is consolidated | Typical boundary effect — Evidence to retain |
|---|---|---|
| Equity share | Emissions according to the entity’s share of equity in an operation. | Partially owned operations can contribute a proportional share even without control. — Ownership percentage, substance of economic interest, joint-arrangement terms and calculation file. |
| Financial control | Emissions from operations over which the entity can direct financial and operating policies to gain benefits. | Often aligns more closely with financial control facts, but classification still needs a GHG-specific review. — Control assessment, governance rights, contractual arrangements and accounting conclusions. |
| Operational control | Emissions from operations where the entity has authority to introduce and implement operating policies. | May include operated assets not financially controlled and exclude non-operated interests. — Operating agreements, HSE and energy-management authority, operator status and site controls. |
Rule
IMPLEMENTATION PRACTICE
Do not choose the approach only because the existing carbon software defaults to it. Record the decision owner, the alternatives considered, the effect on major assets and investees, and why the approach produces decision-useful information for the entity’s facts.
3. Apply jurisdictional or exchange methods only where required
The December 2025 text of IFRS S2 clarifies that a jurisdictional authority or listing exchange can require a different GHG measurement method for the whole entity or for a specified part. The entity may use that required method for the affected part for as long as the requirement applies. The rest of the group continues to use the GHG Protocol unless another valid requirement applies.
This is a method overlay, not an exemption from whole-entity reporting. Even where the local rule covers only Scope 1 and Scope 2, IFRS S2 still requires the entity as a whole to disclose Scope 1, Scope 2 and Scope 3. The disclosure must make the different methods, measurement approaches and reasons understandable.
In practice
| Group part | Applicable method | Why used — What the group must still control |
|---|---|---|
| Parent and most subsidiaries | GHG Protocol Corporate Standard | Default IFRS S2 method. — Consistent approach, factors and Scope classification. |
| Listed subsidiary in jurisdiction A | Jurisdiction A statutory method | Required by jurisdictional authority. — Affected perimeter, duration, conversion logic and reconciliation to group totals. |
| Exchange-listed operation in jurisdiction B | Exchange-prescribed method | Required by listing exchange. — Scope of exchange rule, treatment of categories outside the rule and disclosure of the alternative method. |
| Whole entity | IFRS S2 disclosure architecture | Investor-focused reporting output. — Complete Scope 1, Scope 2 and Scope 3 totals plus methods, assumptions, disaggregation and changes. |
4. Control GWP values and emission factors
The inventory must convert relevant greenhouse gases into carbon-dioxide equivalent. Under IFRS S2, direct measurement and emission factors that have not already converted gases into CO2e use the latest 100-year global warming potential values available from the Intergovernmental Panel on Climate Change at the reporting date, unless a jurisdiction or exchange requires different values for the affected part of the entity. If an emission factor already expresses the activity in CO2e, the entity does not recalculate that factor merely to substitute a different GWP value.
Emission-factor selection is a related but separate judgement. IFRS S2 does not prescribe one factor database; it requires factors that best represent the entity’s activities. The factor register should therefore include source, version, geography, technology, unit, period, GWP treatment, approver and change history.
In practice
| Input situation | Control question | Treatment |
|---|---|---|
| Direct measurement by gas | Which GWP set is current at the reporting date? | Apply the latest available 100-year IPCC GWP, unless a valid required alternative applies. |
| Factor expressed in gas mass, not CO2e | Does the factor require a separate gas-to-CO2e conversion? | Apply the relevant GWP and retain the source and version. |
| Factor already expressed in CO2e | Was the factor created using an embedded GWP? | Use the factor without reconstructing it solely to replace its embedded GWP; disclose factor information needed for understanding. |
| Jurisdiction-required GWP | Which legal entity, scope and period are covered? | Use the required value for the affected part, document the overlay and explain it. |
5. Prepare the required Scope 1 and Scope 2 disaggregation
IFRS S2 requires Scope 1 and Scope 2 emissions to be disaggregated between the consolidated accounting group and other investees. This presentation is not the same as the GHG consolidation total. It gives users visibility over emissions associated with the group that appears in the financial consolidation and emissions associated with investees outside that consolidated group.
In practice
| Disclosure line | Illustrative content | Reconciliation control |
|---|---|---|
| Scope 1 - consolidated accounting group | Emissions attributable to the parent and consolidated subsidiaries under the selected measurement approach. | Tie legal entities to financial consolidation and GHG perimeter. |
| Scope 1 - other investees | Scope 1 emissions associated with investees outside the consolidated accounting group, as captured by the measurement approach. | Investment register, ownership/control assessment and allocation. |
| Scope 2 - consolidated accounting group | Location-based Scope 2 emissions for the consolidated accounting group. | Energy data and entity-level factor calculations. |
| Scope 2 - other investees | Location-based Scope 2 emissions associated with other investees, as captured by the measurement approach. | Investment data, factor basis and allocation. |
In practice
A controlled implementation sequence
| Step | Action | Owner / input — Output / control |
|---|---|---|
| 1 | Freeze the IFRS reporting entity for the reporting period. | Financial reporting owner; consolidation system. — Approved reporting-entity list. |
| 2 | Map subsidiaries, investees, joint arrangements, leases and managed assets. | Legal entity, treasury, property and investment registers. — Boundary universe with ownership and control facts. |
| 3 | Approve the GHG consolidation approach and rationale. | Sustainability, finance, legal and operations. — Methodology memo and governance approval. |
| 4 | Identify mandatory jurisdictional or exchange methods and GWP overlays. | Legal/regulatory register. — Method-by-entity matrix with effective dates. |
| 5 | Classify sources into Scope 1, Scope 2 and Scope 3. | Inventory owners and category specialists. — Scope and category register. |
| 6 | Calculate and reconcile group totals and required disaggregation. | Data owners and finance control. — Scope totals, other-investee split and reconciliation. |
| 7 | Review factors, GWP values, estimates, changes and comparatives. | Methodology owner and independent reviewer. — Factor register, change log and recalculation decision. |
| 8 | Draft the disclosure and retain sign-off evidence. | Reporting owner and governance approver. — Traceable method note, metric table and approval record. |
Hypothetical example: a diversified group
Context. Meridian Group prepares consolidated financial statements for a parent and six subsidiaries. It also owns 35% of a manufacturing joint venture, operates a terminal under a long-term agreement, leases warehouses and manages a client investment fund. One subsidiary is listed in a jurisdiction that mandates a national GHG method for Scope 1 and Scope 2.
Decision. Meridian retains the operational-control approach under the GHG Protocol for the group inventory. The operated terminal is therefore inside Scope 1 and Scope 2 despite not being consolidated financially. The non-operated manufacturing joint venture is outside those scopes under the selected approach and is assessed within Scope 3 Category 15. The listed subsidiary uses the national method for the portion covered by law, while its remaining Scope 3 categories and the rest of the group use the GHG Protocol-based process.
Control outcome. The team creates a bridge from the financial consolidation list to the GHG inventory, documents the local-method overlay, calculates whole-group Scope 1, Scope 2 and Scope 3, and separately presents the required consolidated-group versus other-investee Scope 1 and Scope 2 amounts. The methodology note explains the approach, reasons, factor sources and changes.
Hypothetical scenario
ILLUSTRATIVE SCENARIO
No conclusion should be inferred for a real group without reviewing its legal agreements, accounting control assessment, operational authority, local law, reporting period and applicable IFRS S2 adoption requirements.
Illustrative only. It shows how the decision is made, not wording that can be copied or relied on.
Illustrative disclosure wording
Context. Illustrative multinational group using an operational-control approach with one jurisdiction-required method overlay.
Why the wording is useful
Evidence needed
Financial consolidation list and reporting-entity approval.
Ownership, control and operational-authority assessments.
Jurisdictional or exchange requirement and legal interpretation.
Entity-level emissions calculations, factor register and GWP source.
Scope 1 and Scope 2 disaggregation reconciliation.
Methodology-change and base-year recalculation log.
Management review and governance approval record.
Hypothetical scenario
ILLUSTRATIVE WORDING - ADAPT TO FACTS
“The Group measured greenhouse gas emissions using the operational-control approach in the GHG Protocol Corporate Standard, except for Subsidiary A’s Scope 1 and Scope 2 emissions, for which Jurisdiction A requires the National Emissions Method. The alternative method applies only to Subsidiary A and does not limit the Group’s disclosure of whole-entity Scope 1, Scope 2 and Scope 3 emissions. Scope 1 and Scope 2 are disaggregated between the consolidated accounting group and other investees in the table below. Emission factors were selected to best represent the relevant activities; factor sources, GWP treatment, estimates and methodology changes are described in the accompanying basis-of-preparation note.”
Illustrative only. It shows how the decision is made, not wording that can be copied or relied on.
In practice
| Element | What it contributes |
|---|---|
| Boundary | Names the GHG consolidation approach and identifies the exception by group part. |
| Method overlay | Explains that the local method is limited and does not remove whole-entity disclosure. |
| Presentation | Signals the required consolidated-group versus other-investee split. |
| Inputs and assumptions | Points users to factors, GWP treatment, estimates and changes. |
| Balance | Does not imply that one method is inherently superior or that the disclosure is fully comparable without qualification. |
Rule
ADAPTATION WARNING
Replace every entity, method, control conclusion and factor statement with the organisation’s actual facts. The wording is not a template compliance clause and does not address all IFRS S2 GHG disclosure requirements.
In practice
Weak versus stronger disclosure
| Version | Illustrative wording | Review comment |
|---|---|---|
| Weak | “Our carbon footprint follows the GHG Protocol and covers the Group.” | Too general, unbounded or unsupported. |
| Stronger | “The inventory uses the operational-control approach. The reporting-entity-to-inventory bridge identifies consolidated subsidiaries, operated assets and other investees; Subsidiary A uses the jurisdiction-required method for its covered Scope 1 and Scope 2 sources. Whole-entity totals and the required disaggregation are presented, with factor and GWP sources described.” | The stronger version identifies the approach, exception, boundary bridge, whole-entity output and evidence needed to understand the number. |
In practice
Common mistakes and corrections
| Mistake | Why it arises | Risk — Correction |
|---|---|---|
| Copying the financial consolidation list into the GHG inventory without review. | The finance perimeter is treated as a ready-made emissions boundary. | Operated assets, leased assets or investees can be misclassified or omitted. — Prepare an entity-by-entity bridge using ownership, financial control and operational-control facts. |
| Using one local method for the entire group because one subsidiary is subject to it. | A limited legal requirement is interpreted as a group-wide replacement. | The method note overstates the relief and can reduce comparability. — Apply the alternative only to the affected part and retain complete whole-entity Scope 1, 2 and 3 disclosure. |
| Naming “control” without stating whether it is financial or operational. | The methodology note relies on shorthand. | Users and reviewers cannot reproduce the boundary. — Name the approach, define the control basis and explain the rationale. |
| Changing factors or GWP values without a controlled change assessment. | Updates are treated as routine master-data maintenance. | Trend information, base year and comparatives may become inconsistent. — Use a factor/GWP change log and assess recalculation or comparative effects. |
| Failing to calculate the consolidated-group versus other-investee split. | The inventory total is assumed to satisfy the presentation requirement. | A required IFRS S2 disaggregation is missing. — Tag each source or investee to the presentation class and reconcile both subtotals to the total. |
Myth versus reality
Practical consequence. The project needs both finance-led entity data and a GHG-specific boundary memo. A single unchecked legal-entity extract is not sufficient evidence.
Myth
“Using the GHG Protocol means the IFRS S2 GHG boundary automatically matches the financial statements.”
Reality
The reporting entity is the same, but the emissions measurement boundary depends on the equity-share or control approach, applicable method overlays and Scope classification. The two systems must be reconciled; they are not automatically identical.
Readiness
Reader checklist
- The IFRS reporting entity and consolidation list are approved for the period.
- All subsidiaries, joint arrangements, associates, investments, managed assets and material leases have a recorded GHG treatment.
- The equity-share, financial-control or operational-control approach is explicit and supported by evidence.
- Every jurisdictional or exchange method is linked to the exact group part, scopes and effective period.
- GWP values and emission factors are version-controlled and mapped to calculations.
- Scope 1 and Scope 2 totals are disaggregated between the consolidated accounting group and other investees.
- Scope 1, Scope 2 and Scope 3 reconcile to the inventory and published tables.
- Method, assumptions, factors, estimates, reasons and changes are described without false certainty.
- Base-year recalculation, comparative and restatement decisions are documented.
- A preparer-reviewer-approver trail supports the final disclosure.
Start with a legal-entity and investment register that identifies each joint venture and associate, ties it to financial consolidation and records its GHG treatment under the selected approach. Present Scope 1 and Scope 2 emissions separately for the consolidated accounting group and other investees, and assess out-of-boundary investees within relevant Scope 3 categories.
Self-check
- Why can the financial reporting perimeter and GHG organisational boundary produce different treatments for the same investment?
- What remains required when a jurisdiction mandates a method only for one subsidiary’s Scope 1 and Scope 2 emissions?
- Which records would allow an assurance practitioner to reproduce the consolidated-group versus other-investee disaggregation?
Questions
Questions people ask
Does the IFRS S2 GHG boundary have to equal the financial-statement boundary?
IFRS S2 does not simply copy the financial-statement consolidation boundary into the GHG inventory. The sustainability disclosures use the same reporting entity as the related financial statements, but greenhouse gas emissions are measured using a GHG consolidation approach - equity share or control under the GHG Protocol, unless a jurisdiction or exchange requires another method for a specified part of the entity.
Can one subsidiary use a local GHG method while the rest of the group uses the GHG Protocol?
The December 2025 text of IFRS S2 clarifies that a jurisdictional authority or listing exchange can require a different GHG measurement method for the whole entity or for a specified part. The entity may use that required method for the affected part for as long as the requirement applies. The rest of the group continues to use the GHG Protocol unless another valid requirement applies.
Must IFRS S2 users choose operational control?
A control approach can be based on financial control or operational control. IFRS S2 does not nominate one universal choice. Instead, when the GHG Protocol is used, the entity identifies the approach and explains why it was selected and how it serves the objective of enabling users to understand climate-related risks and opportunities.
How should joint ventures and associates appear?
Start with a legal-entity and investment register that identifies each joint venture and associate, ties it to financial consolidation and records its GHG treatment under the selected approach. Present Scope 1 and Scope 2 emissions separately for the consolidated accounting group and other investees, and assess out-of-boundary investees within relevant Scope 3 categories.
Next reading and learning path
Next step: IFRS S2 Scope 2 Disclosure: Location-Based Emissions and Contractual Instruments
Apply in practice: IFRS S2 Scope 3: How to Assess All 15 Categories and Improve Data Quality
Transition: IFRS S2 GHG Amendments 2025: What Changed and How to Prepare for 2027
Advanced financial-sector note: IFRS S2 Category 15 and Financed Emissions: What Financial Institutions Must Report
Controlled Knowledge Card package
This section is for editors, technical reviewers, SEO/CMS publishers and AI-content operators. It is not intended to appear in the public body unless individual fields are deliberately surfaced.
Sources
Primary sources
- IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information - Paragraph 20 and Appendix B reporting-entity guidance
- IFRS S2 Climate-related Disclosures - December 2025 issued text - Paragraph 29(a); application guidance B20-B29
- GHG Protocol Corporate Standard - Chapters 3-5: organisational boundaries, operational boundaries and tracking emissions over time
- GHG Protocol Corporate Value Chain (Scope 3) Standard - Section 5.2 and related category guidance
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