How to prepare for a greenhouse gas audit
With many companies now measuring and reporting their greenhouse gas (GHG) emissions, we are seeing a growing level of interest in independent audit and assurance over emissions inventories.
As both preparers of greenhouse gas inventories and independent carbon auditors (never at the same time!), we have good insight into the practical things that will make for a good GHG inventory and a smooth audit, and some of the areas where companies can get stuck.
So we thought we’d share our top tips to ensure your emissions inventory is audit-ready.
Use standards
Prepare your greenhouse gas emissions inventory in accordance with an international standard. First and foremost, this will help you to develop a consistent method for preparing your inventory and will facilitate robust comparability over time. It also sets you up for success from an audit perspective – auditors will be reviewing your emissions inventory against an international standard. The common standards are the Greenhouse Gas Protocol Corporate Accounting and reporting standard, and ISO 14064-1:2018. The GHG Protocol standard (and supporting standards around scope 3 emissions and products) are free open source guides and provide a lot of instruction to enable you to prepare a great inventory. The ISO 14064-1:2018 costs around NZ$350 and is a more succinct specification of the principles and requirements at the organisation level for the quantification and reporting of greenhouse gas emissions and removals.
Use emissions factors that have come from credible emissions libraries and ensure these are reviewed and kept up to date each year – overlooking this is one of the more common banana skins we come across as auditors. Open source libraries where you can find emissions factors include Ministry for the Environment (usually updated in August each year), UK Government, and Australian Government. Be sure to select emissions factors for the country that they are associated with. For example, another common error we come across is New Zealand electricity emissions factors used for Australian operations. The emissions associated with power generated in Australia are much higher than New Zealand due to the larger amount of fossisl fuels used in the generation of this electricity.
Set clear boundaries
If you are using one of the international standards above, you’ll find guidance on setting the boundaries for your emissions profile. The two types of boundaries are firstly, your organisational boundaries – the organisational entities, business units and physcial sites that are included in the measurement. The second is the operational boundary, or the emissions sources that will be measured (i.e. the various Scope 1, 2 and 3 emissions sources). It’s really important that you take some time to determine which boundary setting approach (also called a consolidation method) is appropriate for your organisation and why. For complex organisations, getting this wrong can mean a lot of heavy lifting is then needed to collect data on material emissions sources if the incorrect consolidation method is selected.
Get good data and solid methods
Some emissions sources (e.g. fleet fuel, purchased electricity, air travel) have accurate and reliable activity data readily provided by the supplier to the reporting entity each month. Other data may be more challenging to obtain, less regular and require some work with the supplier, or bespoke reporting to be provided. In other cases, only an estimate may be possible, based on reasonable supporting data. A degree of inherent uncertainty is expected by auditors when verifying emissions data, however there is a difference between pulling numbers out of thin air and making good assumptions on reasonable supporting data to calculate a result. Ask yourself if the method is repeatable in years to come, will it be able to measure the impact of any changes made to manage the emissions source, and what can be done to continuosly improve the method so that future reporting is more reliable and accurate. We often come across estimates associated with emissions from waste, employee commuting and last mile freighting.
Share the load
While it might be on one person to ‘do sustainability’, you’ll find that when preparing an emissions inventory, you’ll be drawing on information from a range of sources – commonly this is housed with the people in your finance team (who are paying all the bills, but also have a lot of the information on your company structure that will be useful for boundary setting) and also people in your procurement team (who hold the relationships with the suppliers who you may need to reach out to for activity data). While one person may be coordinating the overall emissions inventory preparation, its important to share the load and if appropriate, establish key stakeholders in other parts of the business as the ‘data owners’, who are responsible for managing the collection of data from their respective emissions sources, inputting this to your data collection tool (e.g. spreadsheet), keeping a record of the original source data (e.g. invoices, bespoke reports) and being part of the development of any methods for estimating missing data in their area. This not only shares the load, but increases engagement on sustainability within the organisation and may also improve the quality of your data, by reducing potential handling error.
Document the lot
The emissions inventory - You don’t need fancy software to ensure you collect and report your emissions inventory appropriately. Spreadsheets are often a great tool to start and continue to record your emissions inventory. They are straightforward and familiar to a range of users, are also very versatile and adpatable to tailor to your specific reporting boundaries, and can be integrated within other company reporting systems. Ministry for the Environment provides an emissions workbook, which may provide a starting template that you can manipulate to your needs, and we would recommend capturing your data monthly, so you can monitor change associated with any reduction activities you’ve put in place.
Definitions, systems and processes – apart from the inventory, it’s impotant that you have documented somewhere the key information relating to its preparation. This may include: your reporting year; consolidation method chosen and a diagram of your reporting boundaries, or list of entities and operations included in the measure; the emissions source defintions, methods and assumptions for data collection, storage and any estimation; identification of responsible business/data owners. This is a great source of information for your carbon auditors, but even if you are not planning to get an audit, it acts as a bit of a Hansel and Gretal bread crumb trail in the event that the ‘sustainability person’ or a data owner leaves – the new owner can come in and easily pick up on what to do.
Source data – Ensure you know where the source data is supporting your emissions inventory. This may include invoices, reports or emails from suppliers that include the activity or unit data that goes into your emissions inventory, e.g. Litres of fuel, kWh of electricity, Passenger km for air travel. If you don’t want to duplicate all these records into one folder, ensure you have documented where these records can be found (per the second point above). For example, ‘air travel records can be found in the Finance Team Travel and Entertainment folder’.
The emissions inventory report – otherwise known as the EIR, or an Emissions Statement, is the formal presentation of your emission inventory and what your auditor will be asking you for as part of their engagement with you. It is a fairly standardised report that summarises your emissions results, as well as all the juicy bits you will have already documented, such as your consolidation method, emissions sources selected or excluded, and data methodologies and uncertainties. Ministry for the Environment provides an example of an EIR that aligns with the ISO14064-1:2018 standard, which can be used as a template.
If you’ve been audited before, your next audit will look for the action you’ve undertaken to address any issues that came up in the previous audit. So it’s worth documenting this as you make progress before your next audit.
All of the above documentation is what your auditor will be keen to review when conducting their audit, so if you have this all sorted then you are well prepared.
If you are looking for further support in measuring your emissions, preparing for an audit, or even just want to know where to begin, do reach out to our team. Oxygen Consulting has specialist experience in preparing carbon inventories, undertaking pre-audit review, and providing independent verification and assurance over GHG emission statements. We are trained carbon auditors and are licensed AA1000 Assurance providers.
Get in touch: kiaora@oxygen-consulting.co.nz
