Can I exclude any expenses from my inventory?

In general, Trace recommends minimising exclusions from your carbon inventory. Best practice GHG aligned reporting aims to capture a complete and transparent picture of emissions, particularly for Scope 3 where completeness and consistency matter more than precision in early years.

Excluding expenses should be the exception, not the rule. Where a material expense is excluded, it is important that there is a clear justification and an audit trail explaining why the exclusion is appropriate. This ensures transparency, supports future assurance, and allows exclusions to be reviewed and reassessed over time.

When can expenses be excluded?

Expenses may be excluded if they are not considered relevant under the GHG Protocol relevance test. An emissions source is generally considered relevant, and should be included, when any two of the following conditions are met:

• The emissions from the source are likely to be large relative to the organisation’s electricity, stationary energy and fuel emissions

• The emissions contribute to the organisation’s greenhouse gas risk exposure, for example where climate impacts could affect the viability of the activity

• The emissions are deemed relevant by key stakeholders

• The organisation has the ability to influence emissions reductions from the source

• The emissions arise from outsourced activities that were previously within the organisation’s boundary, or are typically within the boundary for comparable organisations

If none of these thresholds are met, an exclusion may be reasonable, provided it is documented.

Examples of commonly accepted exclusions

Some expenses are commonly excluded where they do not represent a meaningful emissions source or are captured elsewhere, such as:

• Expenses where more accurate activity based data is already provided and used instead of spend data

• Tax related expenses, including GST, VAT or payroll tax

• Headcount or payroll expenses, including salaries, superannuation or benefits

• Internal transfers or accounting entries that do not reflect a real economic transaction

These exclusions should still be documented so there is a clear record of how the inventory has been constructed.

Documentation and audit trail

Any excluded material expense should have a clear rationale recorded, including why it is not relevant and whether it should be reconsidered in future years. Maintaining this audit trail supports consistency year on year and prepares your inventory for independent review or assurance.

For more detail on which emissions need to be included, refer to the related article on emissions coverage.

Trace expense exclusion categories