CO₂ Performance Ladder for groups: setting organisational boundaries across multiple entities

What are organisational boundaries and where do you record them?

SKAO, the Dutch foundation that owns the scheme, puts it plainly: "Organisational boundaries define the part of your organisation for which you want to obtain certification." (SKAO, This is how you determine your organisational boundaries)

The rule sits in section 4.1 of Handbook 4.0, worded identically in Step 1, Step 2 and Step 3. It lists seven conditions, a. through g. Four of them shape your year.

Condition a. is the one most often missed: "These are always legal entities only, i.e. not unincorporated departments, branches or trade names." Your business units appear nowhere on the certificate, however central they are to how you actually run.

Condition b. asks for two choices. First a method: top-down or lateral. Then one of the three consolidation approaches from the GHG Protocol: operational control, financial control or equity share.

Condition f. removes the national border: "Organisational boundaries may not be limited by a geographic boundary." A German or French subsidiary sits inside the boundary if the method says so.

Condition e. gives some room back. The organisation "may switch between methods and/or consolidation approaches in each audit provided it provides adequate justification", so this year's choice does not lock you in for three years.

The boundary determines which entities together form the reporting organisation. Which scope 3 emissions and other influenceable emissions (in Dutch, overige beïnvloedbare emissies or OBE) are material inside that boundary is a separate assessment carried out within it, covered in the value chain analysis in practice. If you are not yet sure which step applies to you, start with the three steps of Handbook 4.0.

Why does the boundary decide how much a tender is worth to you?

The Ladder is mostly used as an award criterion in public procurement. Dutch and Belgian contracting authorities call this gunningvoordeel, tender advantage: your bid price is notionally reduced for evaluation purposes only, often as a fictieve korting (fictitious discount) of a few percent, and if you win you are still paid the full quoted price. SKAO's illustrative model for version 4.0 puts Step 1 at 5%, Step 2 at 10% and Step 3 at 15%. Rijkswaterstaat, the Dutch national infrastructure agency, applies 2%, 4% and a maximum of 6% for procurements published from 1 July 2026.

That mechanism runs through the boundary. Only entities inside it carry the certificate into a bid. A subsidiary sitting outside bids as an uncertified company, whatever the parent has achieved.

Why is this harder for a group than for a single company?

One sustainability lead summed it up: "The reason that this is so complicated is because you have two overlapping systems."

Every group of any size runs both. Statutory accounting hangs off legal entities, because that is where the annual accounts, the VAT and the liability sit. Operational accounting hangs off business units, because that is where the budget, the project margin and the management line sit. Both are needed and they do not line up. The Ladder then asks you to report on a boundary that cuts across both.

A business unit can work for two different legal entities, and it remains the same activity throughout. The activity is the stable spine of your reporting. The legal entity is a label that changes at every restructuring.

A second problem sits underneath. The activity taxonomy you inherited was usually invented by someone who has since left, and nobody owns it now. Check that list before you start on allocation keys. Overhead is not an activity. If "overhead" or "general" absorbs a meaningful share of your energy, split that category first, because no allocation key will make sense until you do. Standard industry codes will not rescue you either: a company doing mobility, water and energy work does not fit under one NACE code.

Business unit, legal entity or site: what do you hang the data on?

There are three axes and none of the three is optional. They simply do different jobs.

So you record all three. Meters sit on sites. Accountability sits on business units. The certificate sits on entities. Between them you need two links: site to business unit, and business unit to legal entity.

A realistic profile for a mid-size contracting group: roughly 170 business units, more than 60 sites and 50 legal entities, with operations in several countries. None of those lists tells the whole story on its own.

One rule catches groups out late. Collect fine and report coarse. You can always move up from a fine collection level to a coarser reporting level. The reverse does not exist. If you collect per site this year and per entity next year, you can only compare the two years at the coarser of the two levels, and you lose comparability with your base year.

There is a commercial reason to collect fine as well. A single average intensity across all activities overstates the emissions of your low-intensity work. Clients increasingly ask for that figure to put into their own scope 3 reporting, and for a group doing both earthworks and installation work, the average is the wrong number for both of them.

Top-down or lateral method: which one do you choose?

Handbook 4.0 gives two methods, in 4.1.1 and 4.1.2. SKAO explains the difference: "The top-down method is relatively simple, usually leads to broad boundaries and is in align with the GHG Protocol and the CSRD." And on the other: "The lateral method was developed specifically for the CO2 Performance Ladder. This method is often more complex and can lead to narrower boundaries." (SKAO)

The lateral method is a test you repeat until no group companies remain in your top 80%. SKAO attaches two conditions and both of them count: "If there is too much financial dependence on other entities in the same group or if these entities are too dependent on the entities within the boundaries, you cannot exclude them." Dependency runs in both directions, and group companies that stay in your top 80% come inside the boundary.

Handbook 4.0 states a preference in 4.1 under c.: "The preferred choice for the CO2 Performance Ladder is the combination of the top-down method and operational control. If the organisation departs from this, it must justify its choice."

Then a requirement that is easy to miss, because it sits in chapter 4 rather than with the requirement set, under d.: "The organisation publishes its choices of methods under b. on the organisation page on the CO2 Performance Ladder website." Your method choice and consolidation approach are therefore public. The entity list itself is not covered by that duty.

Which consolidation approach should I choose?

Alongside the method you pick one of the three GHG Protocol consolidation approaches.

Two details in Handbook 4.0 are worth remembering. Section 4.1.3 on leased assets: "For leased assets, the organisation must always consolidate them per operational control, even when it opted for equity share or financial control." And for joint venture projects the handbook offers three routes when emissions would otherwise fall through the gap between partners: agree a proportional split, apply equity share to the project, or have the project entity run its own energy and carbon policy. For a contractor working in construction consortia that is not a footnote.

How do I allocate fuel and energy across entities?

This is where most of the time goes, and where the handbook helps least. One practitioner framing: "I do not have any key to make the connection between the legal entity and the business unit. And if we have to do that, it will be based on cost or revenue, and that will shift every year."

Take one crew invoicing through two legal entities. The diesel goes into one tank, in one machine, driven by the same people. There is no physical key that assigns those litres to an entity. Force one anyway and it almost always becomes cost or revenue, and those ratios move every year, so your carbon figure moves for reasons that have nothing to do with energy.

Sites have the same problem. One building, three business units, one meter. The splits you meet most often in practice are 33/33/33, 70/30 and 40/60. The bases underneath them are few.

One house rule brings the most calm here. Lock the allocation map once a year and leave it alone. If the underlying situation changes by less than five percent, change nothing, but do record that you tested it and that the threshold was not met. Without that rule the map becomes a living document nobody can reconstruct, which is exactly the kind of finding covered in common CO₂ Performance Ladder audit findings.

Group certificate or certify per entity?

Handbook 4.0 says nothing in section 4.1 about which entities may carry the certificate. Handbook 3.1 does, inside a box headed "Een kader voor complexe gevallen bij de boundary bepaling met methode 2", so for the lateral method: "Alleen de juridische eenheden die in het geheel in de boundary zijn meegenomen, kunnen gebruik maken van het certificaat." In English, only the legal units taken into the boundary in their entirety can make use of the certificate. That sentence was written for version 3.1 and sits in a specific context, but the practice it points at is broader. An entity that is not wholly inside your boundary cannot simply rely on your certificate in a tender. Put your intended boundary to your certification body before you fix it.

The document point is structurally underestimated. A climate transition plan or an energy review written at group level does not automatically cover the certificate of one specific entity. The scope of the document has to cover the scope of the certificate, and that means rewriting it.

Handbook 4.0 recommends determining the boundary early and "submitting the outcome to a CB". That costs a phone call and prevents a finding you are stuck with for a year. The migration from 3.1 to 4.0 is a natural moment for it.

What happens to the boundary after an acquisition?

For an acquisitive group the boundary is a moving target by definition. New sites appear, buildings get reshuffled, and the entity list is never finished.

Handbook 4.0 requires in 4.1 under g. that "the organisation annually checks that its organisational boundaries are still current, and if necessary, adjusts them". Then comes the sentence that costs an acquisitive group the most: "If these changes (may) have major consequences, such as acquisitions, mergers or a method change (see e.), this may result in the next audit being an initial audit." An initial audit is heavier and longer than a surveillance audit.

An acquisition also hits your base year. Section 9.1.4: "A new base year must be selected when there are significant changes in the organisational boundaries of the organisation, for example, due to acquisition or mergers." The energy balance and emission inventory for that new base year then have to be recalculated in full, your reduction percentage is measured against a new reference point, and every piece of communication carrying that percentage has to be checked.

Pace is the other problem. In practice you have two to three months after closing before the ESG data has to line up with the annual accounts cycle. During that window the acquired company usually has no meter list, no activity breakdown and no named contact. Groups that keep the linking tables as a fixed format slot a new company in. Groups that reinvent them per acquisition fall structurally behind.

Why is your Ladder boundary not your CSRD boundary?

ESRS 1 states in paragraph 62: "The sustainability statement shall be for the same reporting undertaking as the financial statements." The CSRD boundary is therefore the consolidation scope of the annual accounts. Your Ladder boundary is the outcome of section 4.1 of the handbook.

SKAO sees little tension there as long as you work top-down. The same SKAO page calls that method "in align with the GHG Protocol and the CSRD", and adds: "SKAO therefore recommends using the same method for determining your organisational boundaries to avoid having to duplicate reporting." That advice is about the method. Handbook 4.0 separately states its own preference in 4.1 under c. for top-down combined with operational control.

Even with the same method the two lists keep differing at the edges. Financial control tracks the accounting consolidation scope more closely than operational control does, and operational control is the approach the handbook prefers. Joint ventures, minority interests and leased assets land differently in the two frameworks, and the lateral method widens the gap further. Expect to maintain two entity lists that overlap heavily, and record where and why they diverge.

A document written for the group also does not automatically cover the certificate of one entity, and a Ladder document does not automatically cover your ESRS E1 disclosure. How the two frameworks relate more broadly is covered in CO₂ Performance Ladder and CSRD. For parts of the group that fall outside CSRD, the combination with VSME is often more relevant.

What does a group pay in annual SKAO contribution?

The annual contribution to SKAO rises with turnover, from €65 for a sole proprietorship to €6,000 from €500 million upward. Groups get a cap, which SKAO words as follows: "A company, including its subsidiaries, will never pay more than €6,000 per year in total contributions." (SKAO, costs)

So the number of certificates inside a group does not push your SKAO contribution up without limit. Certification body fees and internal effort do rise, because those scale with the number of audits. The full cost build-up is in what the CO₂ Performance Ladder costs in 2026.

How do you keep an allocation auditable?

The question that counts is whether someone can reconstruct your key three years from now: "If you have an audit, how will you then keep track of it? Because in the end we will have a value which is not very traceable."

The moment you split one meter reading three ways, you have created a number that no longer appears directly on a source document. That is allowed, and it moves the burden of proof from the invoice to the method. Four things then have to hang off the data point itself, rather than sit in a separate folder:

1. The source document, unaltered: the meter reading or the invoice as you received it.
2. The key and its basis. Record what 40/60 rests on and from what date, rather than the ratio alone.
3. Who set the key and who approved it.
4. The annual test, including in years when nothing changes. A recorded "tested, deviation below five percent, unchanged" is the evidence an auditor asks for.

As one sustainability lead put it: "If we can have a disclosure, all the evidence locked to the data point, and the text with evidence where it got it from, then I think we already won the discussion with the auditor beforehand."

Auditor time is a hard budget. The number of audit days follows from SKAO's auditdagentabel, the audit day table, published in Dutch, which sets a guideline minimum and depends on the size of the organisation being certified and the ladder level sought. Practitioner experience at mid-size groups sits around three audit days a year, with no appetite for pre-engagement. Anything you cannot show in those days does not count.

One observation explains why this work keeps sliding. Colleagues who do not answer your data requests are usually interested enough: "They seem to be not engaged, but in truth they are embarrassed because they do not have the answers." So ask them for the meter reading and the floor area. Build the key yourself.

How Palau handles this

Palau has a module for this: Organisational structure. You map your entities, divisions and sites the way the group actually runs, and every workflow then reuses the same structure. Each unit reports its own data and Palau consolidates it to group level automatically, so you can look at site level or at consolidated group figures. Reef stores the data at the finest level you collect it, so you can report coarser without losing comparability with your base year. Vault locks the source document and the justification for the key to the data point, which is exactly what an auditor asks for on a split meter reading.

Want to see this on your own entity structure? Request a pilot.