Glossary›Emissions accounting and measurement›Organisational boundary
Glossary term
Cluster D · D7
Tier 1 · differentiator
Organisational boundary
Definition
The organisational boundary defines which entities, facilities and operations sit inside an organisation’s greenhouse gas inventory. It is set by choosing one of three consolidation approaches, operational control, financial control or equity share, and applying it consistently across every source. It is the first significant judgement in a climate report and it determines everything measured afterwards.
· paragraph 29(a)(iii), Appendix B paragraphs B26 to B27 ·
In force from the first reporting period
On this page
In practice
Every other number in the inventory is downstream of this one. Get it wrong and the emissions figures are not slightly inaccurate; they are answers to a different question.
The choice is genuinely a choice, and AASB S2 constrains it in a specific way. Appendix B paragraph B27 requires an entity measuring in accordance with the GHG Protocol Corporate Standard to use the equity share or control approach, and to disclose both the approach it uses and its reasons for choosing it, including how that choice relates to the disclosure objective. So the boundary is not something an entity may leave implicit in a spreadsheet. It is a disclosed judgement with a stated rationale.
What the boundary decides, concretely: whether a 40 per cent joint venture contributes nothing, 40 per cent or 100 per cent of its emissions; whether a leased warehouse the entity runs but does not own is in Scope 1 or in Scope 3 Category 8; whether a non-controlled associate appears in Scope 1 and 2 or in Category 15; whether a franchised operation is the entity’s or its franchisee’s.
Two disciplines make a boundary defensible.
One approach, applied everywhere. The common failure is not choosing the wrong approach; it is choosing one and then not applying it. The basis of preparation says operational control and the model was built on ownership percentages, because ownership percentages were the numbers that were to hand. An assurer finds this quickly and it is a finding on the boundary itself rather than on any individual figure.
An entity-by-entity list, not a description. A paragraph saying “we apply operational control to the consolidated group” is not a boundary. A schedule listing every entity in the group structure, each marked in or out with the reason, is. The second one can be tested; the first one cannot.
The boundary is deliberately not the same thing as the accounting consolidation, and the divergence between them is where the most expensive structural errors live. That divergence is a term in its own right and is not re-argued here.
One practical note on changing approach. It is permitted, it is a change in method, and it triggers restatement of comparatives and disclosure of the change and its effect. It is not something to do because the current approach produces an unwelcome number, and the timing of such a change relative to the result is exactly what a reviewer examines.
What the assurer does with it
The boundary is one of the first things the assurer tests, before any tonnage, because everything else depends on it.
They ask for the written boundary statement in the basis of preparation: which approach, why, and the entity-level list. Then they take the group structure note, the interests in associates and joint ventures note and the related party disclosures from the audited financial statements (populations that are already audited) and reconcile every entity on those lists to the inventory’s in-or-out determination.
Where an entity is marked out, they ask for the reason and test it against the chosen approach. Under operational control that usually means reading the shareholders or joint venture agreement, because operational control turns on who has the authority to introduce and implement operating policies, which is a documented fact rather than an opinion.
They accept a boundary approach named with reasons, an entity-level schedule reconciled to the consolidation, and exclusions supported by the governing agreements. They reject an approach named in the basis of preparation that the model does not follow, two structurally identical entities treated differently, an entity excluded with no reason recorded, and a boundary that changed between periods with no restatement and no disclosure.
The most common first-year finding across the whole engagement is a subsidiary inside the financial consolidation and outside the emissions inventory, or the reverse, with nothing written down explaining why. Sometimes it is correct. It is always a finding if it is undocumented.
Commonly confused with
The capture test for mandatory reporting, which uses consolidated revenue, gross assets and employee numbers to decide whether an entity reports at all, and has nothing to do with which emissions it then measures. Also confused with the operational boundary, which is the separate decision about which sources and scopes are included once the entities are settled.
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 dominant Australian choice and what it includes
Why the inventory population and the consolidation legitimately differ
Where the boundary approach and its reasons are disclosed
Related questions
What is our organisational boundary and who decides it?
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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?
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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.
What will our auditor actually ask for?
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In year one they ask for evidence behind the disclosures that are actually assured: Scope 1 and Scope 2 emissions, your governance disclosures, and the specified strategy paragraphs on climate risks and opportunities. In practice that means source documents, a calculation they can rebuild from those documents, and minutes showing the governance you described actually happened.
Where this sits commercially
Carbonhalo sets the boundary as an entity-by-entity schedule reconciled to the consolidation, because that is the only version an assurer can test.
Other terms in this cluster
Organisational boundary