Navigating the Evolving Standards
When it comes to greenhouse gas (GHG) footprint declarations, it's no secret that many are misleading and widely misunderstood. In the rapidly changing world of sustainability, it's essential to recognize that carbon accounting standards are evolving.
In this blog, I will explore the evolution of carbon accounting standards and shed light on the key principles that ensure highly accurate carbon accounting.
The Evolution of Carbon Accounting Standards
The GHG Protocol the leading global standard for emissions accounting, has been undergoing a review process. The first edition of the GHG Protocol Corporate Standard was published in 2001 and later revised in 2004. In 2011, the Scope 3 Standard was introduced, and in 2015, the Scope 2 Guidance was published. Since then, numerous significant developments have occurred, including the emergence of the Science Based Targets initiative (SBTi), the rise of net-zero targets, and the introduction of climate disclosure regulations.
Recently, on March 21, the United States Security and Exchange Commission (SEC) proposed corporate climate disclosure rules that would standardize climate-related disclosures to investors. These rules specifically require disclosure of scope 1, scope 2, and scope 3 emissions, extensively referring to the GHG Protocol standards. This demonstrates the influence and importance of the GHG Protocol standards over the past two decades.
Moreover, corporations worldwide have gained extensive experience in measuring and reporting emissions following the GHG Protocol standards. Researchers have also conducted studies on the use and impact of these standards. Considering these developments and the need for alignment with major disclosure initiatives, such as the SEC and the European Commission, the GHG Protocol has initiated a process to determine the need and scope for additional guidance. This additional guidance aims to enhance the implementation of the GHG Protocol standards and ensure harmonization with emerging accounting rules.
The Role of the International Sustainability Standards Board (ISSB)
In June, the International Sustainability Standards Board (ISSB) introduced its inaugural sustainability-related standards, IFRS S1 and IFRS S2. These standards mark a new era in sustainability disclosures for global capital markets. They are designed to enhance trust and confidence in company disclosures about sustainability, providing crucial information for investment decisions.
The Key Principles of Highly Accurate Carbon Accounting
Amidst the evolving standards, it's essential to understand the key principles that underpin highly accurate carbon accounting. These principles are widely recognized and essential for reliable carbon accounting. At Emizio, we have incorporated these principles into our design to ensure our customers receive the most accurate and useful information for their sustainability journey.
Carbon accounting results are always a form of estimate. After all, we are estimating the emissions based on a data point that represents an action, and multiplying that data point by an emission factor which approximates what that action results in in terms of carbon emissions. Therefore, there is a spectrum when it comes to accuracy, and an emissions number is not binary or ‘right or wrong’. Emizio’s aim is to drive our customers to report on the most accurate carbon emissions number possible, while also providing a perspective on how accurate that number is.
Our key principles include:
- Activity-Based Approach: Opting for an activity-based approach enables firms to take action to reduce emissions directly, rather than solely focusing on cost reduction. It is also more accurate.
- Uncertainty Quantified: Carbon accounting should provide an uncertainty metric that reflects the accuracy and reliability of the reported data. This metric enables stakeholders to understand the level of confidence in the disclosed emissions.
- Continuity: The ability to make frequent updates to carbon accounting data is crucial, considering the dynamic nature of emissions. Continuous updates ensure that the information remains up-to-date and relevant.
- Transparent Methodology: A transparent and well-defined methodology is essential for carbon accounting. It provides clarity on how emissions are calculated, ensuring consistency and comparability.
- Comprehensive Emission Factors: Utilising the latest and most comprehensive data set of emissions factors is crucial for accurate carbon accounting. It ensures that calculations are based on the most reliable and up-to-date information available.
- Granular Insights: Carbon accounting should provide granular insights into the underlying data behind high-level numbers and therefore enable intelligent data-driven insights into how to reduce emissions.
With the continuous evolution of standards and the collective efforts of businesses and stakeholders, we can demystify carbon accounting and pave the way for a more transparent and impactful approach to measuring and reducing greenhouse gas emissions. Emizio stands ready to support organizations in their pursuit of sustainability, leveraging the power of accurate carbon accounting to drive positive change for our planet.