The Importance of Auditable Emissions Data: Preparing for Verification

In the coming years, well over 200,000 companies will be subject to mandatory greenhouse gas (GHG) emissions reporting under the Securities and Exchange and Commission (SEC) Climate Disclosure rules, the Corporate Sustainability Reporting Directive (CSRD), the International Sustainability Standards Board (ISSB)’s IFRS S2, and other regional disclosure requirements worldwide¹. GHG emissions are a primary driver of climate change, making accurate and reliable data critical for global climate mitigation efforts and accountability. In 2023, over 23,000 companies voluntarily disclosed their emissions inventories to CDP, over 4,000 have committed to SBTi reduction targets, and 400 organizations have committed to adopting the ISSB’s sustainability standards, including emissions reporting at a global level.²

Ensuring the integrity of GHG data involves developing rigorous data management processes that encompass data collection, quality controls, calculation methodologies for any reported metrics, and verification.

Verification Process

Following the development and reporting of a company’s emissions inventory, the next step for a company is to voluntarily or mandatorily verify the methodology and calculations to publicly affirm the accuracy of the disclosed data. There are two levels of verification: Limited Assurance and Reasonable Assurance. The verification type will impact the depth, cost, and duration of the verification process and the associated confidence in the accuracy of the reported inventory.

Key differences:

A data verification strategy is essential to comply with regulatory standards, maintain stakeholder trust, and guide effective environmental policies. Companies should allocate one to three months for their inventories to be verified. However, the exact timeline will depend on inventory complexity (number of data systems, number of assets operations, the number of metrics included (e.g., Scope 3 categories, inclusion of water or waste), and the level of assurance. Selection of the level of assurance will depend on stakeholder expectations, corporate strategy, and compliance with regulatory standards.

Standardization and Regulatory Compliance

Compliance with international standards such as the Greenhouse Gas Protocol⁵ and the ISO 14064 series is fundamental to accurate and reportable inventory development. Data accounting principles provide guidelines for quantifying, monitoring, reporting, and verifying GHG emissions. These standards ensure consistency, completeness, accuracy, comparability, and transparency in GHG data management.

Organizations must understand GHG emission verification and reporting requirements within each governing jurisdiction. This includes the recent SEC climate disclosures, the California Corporate Data Accountability Act (SB-253/219) in the US, and the CSRD in the European Union.

In addition, various voluntary annual sustainability assessments, such as CDP, GRESB, EcoVadis, and the S&P Global’s Corporate Sustainability Assessment (CSA) place a greater value on data that has been assured by a third party. 

Reporting and verification compliance timelines vary based on a company’s given regulatory exposure.

Inventory Management Plan

To report robust, verifiable emissions inventories, companies will need to develop clear methodologies around data collection and storage, data responsibility, quality controls and checks, calculations and emission factors, and baseline recalculation policies for trend and target tracking. All procedures should be comprehensively documented in an inventory management plan (IMP) that is reviewed and updated annually. IMPs should be clear on the reported emissions’ boundary and explain any exclusions or limitations. Below are some strategies to effectively manage GHG inventory data for improved IMP development.

Automated Data Collection and Integration

• Leverage automated data syncs from energy meters, production equipment, utility providers, and other direct activity sources to minimize the risk of input error or data loss
• Ensure consistent collection of granular activity data facilitates the identification of anomalies
• Maintain detailed logs of data collection methods, sources, equipment used, calibration records, and the personnel responsible for data collection and updates is vital for a clear audit trail

Centralized Data Management System

• Utilize available systems ranging from free, government-supported utility management software to purchased software with assigned customer sustainability experts
• Assign a dedicated internal resource or team responsible for maintaining accuracy of the collected and reported outputs and ensuring adherence to the IMP
• Implement version controls for datasets to track revisions and document the reasons for changes and individuals responsible, thereby ensuring that historical data remains intact and accessible

Data Quality and Validation

• Implement stringent internal quality control procedures such as regular calibration of measurement instruments, cross-checking data entries, and conducting periodic reviews of data collection processes to reinforce the accuracy and completeness of GHG data
• Apply additional quality controls such as year-over-year trend analyses, comparison of activity or emissions intensity to regional benchmarks or industry expectations set the precedence for regular internal and external audits

Data Analysis and Reporting

• Establish a schedule for regular reporting to stakeholders, including regulatory bodies, investors, and the public, to demonstrate a commitment to transparency and accountability
• Utilize automated GHG reporting tools and software that aggregate or pivot data, perform emissions calculations, and consistently generate reports based on predefined templates and methodologies

In the face of growing climate-related environmental challenges, accurate and reliable GHG data is critical for developing effective mitigation strategies. Organizations can ensure data integrity, comply with regulatory requirements, and maintain stakeholder transparency by implementing robust data management strategies. From adopting international standards and automating data collection to rigorous quality control and comprehensive documentation, each step in the data management process plays a vital role in the overall emissions calculation and subsequent verification effort. As technology advances and regulatory landscapes evolve, companies should remain flexible and agile in their inventory management processes to continuously improve accuracy and precision. Ultimately, effective GHG data management and verification contribute significantly to tracking progress towards global climate goals, helping to build a more sustainable future.

1. The Evolution of GHG Accounting and Corporate Climate Disclosures | World Resources Institute (wri.org)
2. CDP: CDP 2023 disclosure data factsheet - CDP
   SBTi: SBTi Says Number of Companies Setting Validated Climate Targets Doubles in Past Year - ESG Today
   ISSB: The Evolution of GHG Accounting and Corporate Climate Disclosures | World Resources Institute (wri.org)
3. Standards & Guidance | GHG Protocol
4. International Organization for Standardization (ISO 14064-3:2019)
5. Standard & Guidance | GHG Protocol
6. Scope 3 emissions require limited verification for the first year of reporting and reasonable verification after the initial reporting year.
7. The CSRD initially requires limited assurance for GHG data and other sustainability information, with an anticipated move towards reasonable assurance in the future