> For the complete documentation index, see [llms.txt](https://kb.bravegen.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://kb.bravegen.com/carbon/configuration/reporting-settings/materiality.md).
# Materiality
Set and justify the materiality threshold used to exclude immaterial Scope 3 categories from your reports.
A materiality threshold is a quantitative cut-off below which emission sources may be excluded from your inventory without compromising the integrity of your report.
In BraveGen Carbon the threshold is expressed as a percentage of your total organisational emissions. Total Scope 3 category quantities that fall below that percentage are excluded from reports.
The threshold is an organisation-level setting. It applies to every report and disclosure produced from your inventory, so set it once, justify it, and apply it consistently.
***
### How the threshold is applied
* The threshold is assessed against **total organisational emissions**, not against Scope 3 alone.
* It is applied to the **total quantity of each Scope 3 category**, not to individual [Inventory Items](/carbon/core-concepts/inventory-items.md). A category is included or excluded as a whole.
* Scope 1 and Scope 2 are always reported in full. The threshold does not remove direct or purchased-energy emissions from your totals.
* Excluding a category from reports does not remove the underlying activity data. Sources, tasks, and inventory items continue to operate as normal.
The materiality threshold is one of three separate exclusion mechanisms in BraveGen Carbon. Use the right one for the situation:
| Setting | What it does |
| ------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Materiality Threshold | Excludes whole Scope 3 categories from reports when their total falls below your organisation-wide percentage. |
| Exclude Emissions (Inventory Item Template) | Excludes a single item from total emissions with a recorded exclusion reason. The item still appears in reports. See [Inventory Items](/carbon/core-concepts/inventory-items.md). |
| Significance threshold (base year) | Determines when a change triggers a base year restatement. See [Base Year Recalculation Policy](/carbon/configuration/reporting-settings/base-year/base-year-recalculation-policy.md). |
***
### What the GHG Protocol says
The GHG Protocol does not prescribe a materiality threshold. It sets principles you must satisfy, and leaves the number to you.
**Completeness.** Account for and report all emission sources within your chosen inventory boundary. Disclose and justify any specific exclusions. A threshold does not remove the disclosure obligation — it is the basis for it.
**Relevance.** The Corporate Value Chain (Scope 3) Standard requires you to account for all *relevant* [Scope 3](/carbon/configuration/reporting-frameworks/ghg-protocol/scopes-and-categories/scope-3.md) categories. Size is only one test of relevance. A category can be small and still relevant if it:
* Contributes to your exposure to climate-related risk or opportunity.
* Is an activity your stakeholders consider significant.
* Covers an activity you have outsourced, which would otherwise sit in Scope 1 or Scope 2.
* Is identified as significant by your sector's guidance, or by a programme you report under.
**Materiality in assurance.** Materiality is applied by verifiers as an error tolerance, most commonly at 5% of the reported total. Your reporting threshold and your assurer's materiality are not the same number, and the cumulative effect of everything you exclude needs to stay comfortably inside your assurer's tolerance.
**ISO 14064:2018.** If you report under [ISO 14064:2018](/carbon/configuration/reporting-frameworks/iso14064-2018.md), document the criteria you used to determine significance for indirect emissions. Your rationale below is that documentation.
{% hint style="info" %}
Climate-related disclosure regimes such as NZ CS and AASB S2 also apply a qualitative materiality test — information is material if omitting it could reasonably influence a reader's decisions. A category can pass your quantitative threshold and still need to be disclosed.
{% endhint %}
***
### Choose a threshold
Pick a threshold you can defend to an external auditor and apply every year.
* **1%** of total organisational emissions is a common starting point for Scope 3 category exclusions.
* Check whether any programme you report under sets its own de minimis limit. Where it does, that limit takes precedence over your own.
* Model the cumulative impact before you commit. Several categories sitting just under the threshold can add up to a material omission even when none of them is individually material.
* Weigh data availability. Where data already exists, including a small category costs little and strengthens completeness.
* Consider [Data Quality](/carbon/core-concepts/activity-sources/data-quality.md) scores. Excluding a category you have measured well is harder to justify than excluding one you have only estimated.
***
### Set the materiality threshold
Only Administrators can set the materiality threshold. See [User Roles](/carbon/configuration/user-management/user-roles.md).
Go to **Carbon Configuration → Reporting → Materiality** and select **Edit Materiality Threshold**.
| Field | Description |
| ----------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- |
| Materiality Threshold | The percentage of total organisational emissions used as the cut-off. Scope 3 categories totalling below this percentage are excluded from reports. |
| Rationale for selection | Your justification for the threshold. Minimum 40 characters. Disclosed in your audit trail. |
Select **Save Changes** to apply the threshold, or **Cancel** to discard it.
{% hint style="warning" %}
Changing the threshold changes what appears in your reported totals. Raising it can drop categories out of your inventory and break year-on-year comparability, and may meet the significance threshold in your [Base Year Recalculation Policy](/carbon/configuration/reporting-settings/base-year/base-year-recalculation-policy.md). Assess the impact before saving.
{% endhint %}
***
### Write the rationale
The rationale is a disclosure that is included in your [audit trail snapshots](/carbon/audit-trail/snapshots.md). Write it for an external auditor or verifier, in the same way you write the rationale for your [Reporting Boundaries](/carbon/configuration/reporting-settings/reporting-boundaries.md).
Cover:
* Why you selected this percentage.
* The quantitative and qualitative factors you assessed.
* Which categories the threshold currently excludes, and why they are not relevant.
* Any programme or scheme requirement that constrained your choice.
{% hint style="info" %}
Even if a source is below the materiality threshold, consider including it if data is readily available. This strengthens completeness and avoids future restatements.
{% endhint %}
***
### Activity Log
Every change to the threshold is recorded in the **Activity Log** on the dialog, with the user, the timestamp, and the rationale supplied at the time. Users can reply to an entry to add context, and pin an entry to keep it at the top.
The log is your evidence that the threshold was set deliberately and applied consistently. Keep the discussion in the log rather than in email, so that an auditor reviewing the setting can see the reasoning alongside the value.
***
### Review the threshold each year
Reassess the threshold as part of your annual reporting cycle. A category that was immaterial last year may not be this year, particularly after growth, an acquisition, or a change in your [Reporting Boundaries](/carbon/configuration/reporting-settings/reporting-boundaries.md).
Where the threshold or the categories it excludes have changed, record the reason in the rationale so that the change is visible in your audit trail.
***
### Frequently asked questions
Does a materiality threshold let me leave Scope 3 categories out of my disclosure?
No. It determines what is excluded from your reported totals. The GHG Protocol still requires you to disclose and justify exclusions. Screen every Scope 3 category, then use the threshold to decide what is quantified in your reported figures.
Can I set a different threshold for different entities?
No. The materiality threshold is set once for your organisation and applied consistently across all reporting. Consistency is what makes the exclusions defensible.
Does the threshold apply to Scope 1 and Scope 2?
No. Scope 1 and Scope 2 are reported in full. To exclude an individual item from total emissions, use the Exclude Emissions option on the Inventory Item Template, which requires an exclusion reason. See [Inventory Items](/carbon/core-concepts/inventory-items.md).
What happens to an excluded category's data?
Activity data continues to be collected and calculated. The exclusion applies to reporting output, so a category that grows past the threshold in a later year is reported without any rework.
Is 5% acceptable as a materiality threshold?
5% is the tolerance verifiers commonly apply to the reported total, not a licence to exclude 5% of your inventory. A reporting threshold set at the same level as your assurer's materiality leaves no room for the errors they are testing for. Set your threshold well below it.
***
### Key points
* The threshold is a percentage of total organisational emissions, applied to Scope 3 category totals.
* The GHG Protocol prescribes no threshold. Choose one you can justify and apply consistently.
* Relevance is not just size. Screen every category before excluding any of them.
* Track the cumulative effect of exclusions against your assurer's materiality.
* The rationale is a disclosure, that is included in your [audit trail snapshots](/carbon/audit-trail/snapshots.md). Write it for an auditor, and update it when the threshold changes.