Glossary›Emissions accounting and measurement›Equity share approach
Glossary term
Cluster D · D9
Tier 2
Equity share approach
Definition
Under the equity share approach an organisation accounts for emissions from each operation in proportion to its equity interest in it. A 40 per cent stake contributes 40 per cent of that operation’s emissions. It reflects economic interest rather than control, and it is the only GHG Protocol approach that brings non-controlled operations into Scope 1 and Scope 2.
On this page
In practice
Equity share is the minority approach in Australia and the right one for a specific shape of business: groups whose economic substance sits in joint ventures, associates and minority stakes rather than in wholly owned operations. Property groups, infrastructure investors, resources participants in unincorporated joint ventures and family groups holding syndicated interests are the recurring cases.
The mechanism is proportional throughout. Every operation the entity holds an interest in contributes at the percentage held, and the question of who runs it never arises. That has two consequences worth understanding before adopting it.
It is the approach that stops emissions falling through the gap. Under operational control a 40 per cent non-operated joint venture contributes nothing to Scope 1 and 2, and only reappears in Scope 3 Category 15. Under equity share it contributes 40 per cent directly to Scope 1 and 2, and leaves Category 15 entirely. For a group whose emissions substantially sit in non-operated ventures, equity share gives a reader a considerably more faithful picture, and the entity can say so as its stated reason under Appendix B paragraph B27.
It is more work, every year, forever. Proportional consolidation needs the emissions of every investee, not just the ones you operate, and it needs them at the right percentage at the right date. For an Australian entity whose joint venture partners are private companies with no reporting obligation, obtaining that data is the same problem Category 15 presents, but now it sits inside Scope 1 and 2, which are assured from year one rather than year two. That is the trade a board should be shown explicitly before the approach is adopted.
The percentage itself is a live number rather than a fixed one. Capital raises, dilutions, buy-ins and unit issues move equity percentages mid-year, and the inventory needs a stated rule for how a mid-year change is handled (time-weighted, closing percentage, or opening percentage) applied consistently and disclosed.
Economic interest is also not always the legal shareholding. Where economic substance differs from legal ownership, the GHG Protocol directs the entity to the economic interest, which means preference structures, unit trusts and stapled arrangements need the constituent documents read rather than the share register skimmed.
What the assurer does with it
The assurer tests the percentage and the population, and the percentage is the easier of the two because it is verifiable to a document.
They agree each equity percentage to the shareholders agreement, unit register or constituent documents, and then (this is the test that most often produces a finding) they compare each percentage to the percentage used for equity accounting in the audited financial statements. A mismatch is common and almost always arises because one was updated after a transaction and the other was not.
Population testing works from the investments note and the interests in associates and joint ventures note. Every entity on those lists should appear in the inventory at its percentage. An omission is a completeness finding, and unlike most Scope 3 completeness questions this one has a clean audited population behind it.
They then test the investee emissions input itself, which is the weakest link. An investee’s own assured inventory is accepted readily. An unassured investee figure is accepted with the data quality disclosed. A proxy is accepted only where its basis is stated.
They accept percentages agreed to legal documents and consistent with the financial statements, a population reconciled to the investments notes, and a stated, consistently applied rule for mid-year changes. They reject an equity percentage that does not match the equity accounting percentage with no explanation, an investee included at 100 per cent under an equity share basis, any operation appearing in both Scope 1 and 2 and Category 15, and an investee emissions figure with no stated source.
Commonly confused with
Financial control, which sounds adjacent and behaves completely differently: financial control is all-or-nothing and equity share is proportional. Also confused with Scope 3 Category 15, which handles the same investees at the Scope 3 level under a control approach. It is one or the other, never both, and a reader cannot tell which the entity did unless the basis of preparation says so.
Sources
1
2
Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004 revised edition)
GHG Protocol
Review status
Review required
Last reviewed
15 September 2026
Editorial pass, unsigned
Reviewer required
Carbon accounting specialist and registered company auditor
Next scheduled review
1 July 2027
Part of
Cluster D, Emissions accounting and measurement
49 terms from the head term carbon accounting down to individual Scope 3 categories and the mechanics of factors, boundaries and data quality. The largest cluster in the glossary.
Related terms
The parent choice this approach is one of three answers to
The binary alternative that excludes non-operated ventures from Scope 1 and 2
Where the same investees land if a control approach is chosen instead
Related questions
What is our organisational boundary and who decides it?
−
Your organisational boundary is the set of entities and facilities whose emissions you report, and the basis on which you include them. Management decides it, the board or audit committee approves it, and it should reconcile to the consolidated entity in your financial report. Operational control is the common Australian starting point, and the friction sits in joint ventures, leased sites, franchises and recent acquisitions.
Do our subsidiaries have to report separately or does the parent cover them?
+
Each entity is tested on its own. A subsidiary that must lodge its own financial report under Chapter 2M and meets a section 292A test prepares its own sustainability report, even where the parent reports as well. Being consolidated into the parent’s report does not by itself remove the obligation.
Other terms in this cluster
Equity share approach