What Are Greenhouse Gases? A Complete Guide to Greenhouse Gas Inventory for Businesses

Climate change has become the defining challenge of the 21st century. From extreme heatwaves and unpredictable storms to rising sea levels and shrinking natural resources—every issue is tied to the excessive emission of greenhouse gases into the atmosphere. For this reason, understanding what greenhouse gases are and why businesses must conduct a greenhouse gas inventory is no longer optional. It is essential.

This article provides a comprehensive, clear, and internationally aligned explanation of Greenhouse Gases (GHGs) and Greenhouse Gas Inventory (GHG Inventory) based on IPCC Guidelines, ISO 14064, and global reporting standards.

1. What Are Greenhouse Gases?

Greenhouse gases (GHGs) are gases in the Earth’s atmosphere that can trap heat by absorbing infrared radiation. This natural process—known as the greenhouse effect—helps maintain a temperature suitable for life. However, human activities have drastically increased GHG concentrations, intensifying the greenhouse effect and causing global warming.

Major Greenhouse Gases (as defined by IPCC)

1. Carbon dioxide (CO₂) – fossil fuel combustion, industrial processes, transportation

2. Methane (CH₄) – agriculture, landfills, wastewater, livestock

3. Nitrous oxide (N₂O) – fertilizers, biomass burning, industrial processes

4. Hydrofluorocarbons (HFCs) – refrigeration, air conditioning

5. Perfluorocarbons (PFCs) – aluminum production, semiconductor manufacturing

6. Sulphur hexafluoride (SF₆) – electrical insulation

7. Nitrogen trifluoride (NF₃) – electronics, LCD panel manufacturing

Each gas has a different Global Warming Potential (GWP). For example, 1 kg of methane can warm the planet 27–30 times more than 1 kg of CO₂ over 100 years.

2. Common Sources of Greenhouse Gas Emissions in Businesses

Businesses emit greenhouse gases from a wide variety of activities. In most cases, almost every operational step-from production to logistics-has a carbon footprint.

Typical sources include:

• Fuel combustion in boilers and generators

• Electricity consumption

• Company-owned vehicles (petrol or diesel)

• Refrigeration systems and cold storage

• Industrial manufacturing (cement, steel, chemicals, textiles…)

• Transportation and logistics

• Air travel for business

• Waste and wastewater treatment

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3. What Is a Greenhouse Gas Inventory?

A Greenhouse Gas Inventory (GHG Inventory) is the systematic process of collecting data, calculating, and reporting the greenhouse gas emissions produced by an organization within a specific period. A proper inventory follows international standards such as:

• IPCC Guidelines

• ISO 14064 – 1:2018

• GHG Protocol

In Vietnam, conducting a GHG inventory is mandatory under the Law on Environmental Protection 2020 and Decree 06/2022/ND-CP.

Purpose of a GHG Inventory

• Quantify total emissions from business operations

• Identify major emission sources

• Ensure compliance with environmental regulations

• Meet ESG reporting requirements

• Prepare for carbon taxes and mechanisms like the EU CBAM

4. Who Must Conduct a Greenhouse Gas Inventory?

Around the world, governments are tightening climate policies. In Vietnam, for example, more than 1,900 facilities in sectors such as energy, industry, transport, construction, and waste management are required to perform GHG inventories under Decree 06/2022/NĐ-CP.

• Power & Energy

• Transportation

• Industry

• Construction

• Waste management

Companies consuming over 1,000 TOE/year must also perform inventories.

5. Emission Scopes: Scope 1, Scope 2, Scope 3

Under the GHG Protocol, emissions are categorized into three scopes:

Scope 1 – Direct Emissions

Emissions directly controlled by the business:

• Industrial boilers

• Company petrol and diesel vehicles

• Generators

• Refrigerant leakage

Scope 2 – Indirect Emissions from Purchased Energy

• Electricity usage in offices

• Electricity usage in factories

• Purchased heat or cooling

Scope 3 – Indirect Emissions in the Supply Chain

The most extensive and complex category, such as:

• Outsourced logistics and equipment transport

• Construction steel and purchased materials

• Business flights

• Supplier-related emissions

Scope 3 often accounts for 70–90% of total emissions.

6. Standard GHG Inventory Process

Step 1: Define Boundaries

• Organizational boundary: parent company, subsidiaries, factories

• Operational boundary: activities generating emissions

Step 2: Collect Activity Data

Such as:

• Fuel consumption

• Electricity usage

• Production volumes

• Travel logs

• Materials used

Step 3: Apply Emission Factors

From:

• IPCC 2006, 2019

• Vietnam MONRE

• DEFRA (Anh)

• Industry datasets

Step 4: Calculate Emissions

Using the formula:

Emissions (tCO₂e) = Activity Data × Emission Factor × GWP

Step 5: Verification

Optional third-party verification under ISO 14064-3.

Step 6: Reporting

A complete GHG Inventory Report includes:

• Total emissions by scope

• Key emission sources

• Trends and comparisons

• Reduction roadmap

7. Benefits of Conducting a GHG Inventory

Beyond being a legal obligation, greenhouse gas inventories bring practical and tangible value to businesses.

1. Prepare for Carbon Taxes & EU CBAM

CBAM requires accurate emission data for exports to Europe.

Without reporting → higher carbon tariffs → reduced competitiveness.

2. Reduce Operational Costs

Identifying high-emission sources helps reduce: Energy consumption, Fuel usage, Productivity losses

3. Improve ESG Reporting

A verified GHG inventory strengthens sustainability scores.

4. Access Green Financing

Banks and funds prioritize businesses with transparent environmental data.

5. Enhance Corporate Reputation

Sustainable companies gain more trust from customers and partners.

8. Challenges in GHG Inventories

• Lack of standardized data

• Heavy reliance on Excel → high error risk

• No dedicated ESG or carbon team

• Difficulty collecting Scope 3 data

• Unclear emission factors

This is especially true for large factories with multiple operational areas, where manually collecting data is extremely time-consuming and prone to errors.

9. Practical Solutions for Businesses

To conduct an effective greenhouse gas inventory, businesses can adopt the following solutions:

1. Standardize Data Collection

Establish monthly/quarterly reporting.

2. Use Carbon Accounting Software

Platforms like iLotusLand help:

• Automate emission calculations

• Manage IPCC/ISO emission factors

• Store historical data

• Generate standard reports

• Reduce 80% manual work

3. Train Internal Teams

Equip staff with ISO 14064 & GHG Protocol knowledge.

4. Set 2030–2050 Reduction Targets

Align with Vietnam’s Net Zero commitment.

10. Conclusion

Greenhouse gases and greenhouse gas inventories are no longer theoretical concepts—they are now essential requirements for businesses during the green transition. Accurate GHG inventories help companies:

• Understand emission levels

• Regulatory compliance

• Lower costs

• Enhance competitiveness

• Support sustainable development

The sooner a business begins its GHG journey, the greater its advantage in facing increasingly strict global carbon regulations.