Understanding GHI: Scope and Carbon Accounting Methods
- Afya Management and Innovation
- Mar 24
- 4 min read
In Part 2 of our GHI column series, we introduced the seven steps for implementing GHI.
In that discussion, key concepts such as:
Scope 1 / Scope 2 / Scope 3
Location-based / Market-based
were introduced. These are essential concepts for understanding the practical implementation of GHI.
In this article, we will clarify these two key areas.
1. What are Scope 1, 2, and 3?
Greenhouse gas (GHG) emissions are categorized into three scopes based on their sources: Scope 1, Scope 2, and Scope 3.
■ Scope 1: Direct Emissions
Scope 1 refers to greenhouse gases that are directly emitted by the healthcare facility.
Examples include:
Fuel use in boilers (e.g., natural gas, heavy oil combustion)
On-site power generation (diesel, oil, or gas combustion)
Hospital-owned vehicles
Anesthetic gases
The key point is that these emissions are generated within the healthcare facility itself.
■ Scope 2: Indirect Emissions from Energy Use
Scope 2 includes emissions that occur indirectly through the consumption of purchased energy.
Examples include:
Electricity consumption
Purchased steam, heating, or cooling
In this case, the actual emissions occur at power plants or energy suppliers.
■ Scope 3: Other Indirect Emissions
Scope 3 covers emissions generated throughout the entire supply chain.
Examples include:
Manufacturing of medical supplies and pharmaceuticals
Outsourced services (e.g., catering, laundry)
Waste treatment
Business travel and commuting
This is generally the largest emission category.
■ Characteristics of Healthcare Facilities
In many industries, Scope 3 is the dominant source of emissions. However, in healthcare:
Facilities operate 24/7
HVAC demand is extremely high
As a result, Scope 2 (electricity) is also a major contributor.
Therefore, when identifying focus areas in Step 2 (“Hotspot Identification”) from Part 2 of this GHI series, it is essential to compare Scope 1, Scope 2, and Scope 3 side by side to identify the largest emission sources.
2. What are Location-based and Market-based Methods?
These are two different approaches for calculating emissions, particularly for Scope 2 (electricity).
■ Location-based Method
This method calculates emissions based on the average energy mix of a specific region.
It represents:
“How much emissions are generated, on average, when electricity is consumed in this region.”
This is a physical and structural representation of emissions, calculated using publicly defined emission factors for the relevant region and year.
■ Market-based Method
This method calculates emissions based on contractual arrangements and energy attributes.
It reflects:
“What type of electricity the organization has chosen to purchase.”
For example, by contracting with a utility to use renewable energy for a portion of electricity consumption, that portion can be reported as having zero emissions.
Therefore, when renewable energy procurement is used as a decarbonization strategy, emissions calculated using the market-based method must be presented.
3. Key Differences Between Location-based and Market-based
The practical difference between these two methods lies in the emission factors used.
However, the difference goes beyond that.
■ What They Represent
Location-based
Represents the overall emission structure of society—
what happens when electricity is used in a given region at a given time.
Market-based
Represents the impact of management decisions—
specifically, which electricity sources are chosen.
■ Verification Requirements
Location-based
Uses publicly available emission factors
Highly objective
Easy to verify
Market-based
Requires electricity contracts
Renewable energy certificates (e.g., RECs)
Consistency with electricity consumption data
In other words, evidence management is required.
■ Differences in Reduction Strategies
These two approaches lead to fundamentally different improvement strategies.
Location-based
Focuses on reducing energy consumption
→ Energy efficiency
Market-based
Focuses on changing procurement
→ Renewable energy adoption
4. Example for Better Understanding
Even with the same electricity usage, emissions vary depending on the contract.
■ Assumption
Annual electricity consumption:
100,000 kWh
■ Location-based
Emission factor:
0.45 kgCO₂e / kWh
Calculation:
100,000 × 0.45 = 45,000 kgCO₂e
■ Market-based (30% Renewable Energy)
Contract breakdown:
70% conventional electricity
30% renewable energy
Calculation:
Conventional electricity:
70,000 × 0.45 = 31,500 kgCO₂e
Renewable energy:
30,000 × 0 = 0
Total:
→ 31,500 kgCO₂e
■ Key Point
Renewable energy ratios are not arbitrarily set.
They are determined based on the amount of renewable electricity (kWh) procured.
Thus, even with the same electricity usage:
Location-based: 45,000
Market-based: 31,500
→ The results differ.
So, which method should be used for GHI under JCI?
6. How to Use These Methods from a GHI Perspective
In principle:
→ Use the location-based method to understand the current situation.
This same method should be used for year-on-year comparisons, applying consistent logic in selecting emission factors.
On the other hand:
→ When reductions are achieved through renewable energy procurement strategies, the impact should be demonstrated using the market-based method.
In practice:
→ Both methods should be presented.
By using both, organizations can clearly explain:
Current status
Improvement
Management decisions
Summary
Scope → Classification of emission sources
Calculation methods → How emissions are evaluated
Understanding these two elements allows organizations to identify where to take action.
Looking Ahead to Part 3
Where do most emissions actually come from?
In many healthcare organizations, the answer lies not within the facility, but outside it—primarily in Scope 2 and Scope 3.
In Part 3, we will focus on Scope 3 and sustainable procurement (GHI.04), providing practical and actionable approaches for implementation.
If you would like to receive immediate updates when Part 3 is published, please subscribe using the “Subscribe to our info” section at the bottom of this page.
Note: This column is based on currently available information and recent survey trends regarding GHI, newly introduced in JCI 8th Edition. As GHI is a new chapter, its interpretation and evaluation may evolve over time. The content of this column may therefore be updated in the future. Please use it as a reference.
---------------------
Thank you for reading.
At Afya Management and Innovation, we provide consulting services for both new JCI accreditation and reaccreditation. For more details, please visit our service page or feel free to contact us through our inquiry form.
Comments