Greenhouse Gas Calculations vs. Greenhouse Gas Verification

More and more, organizations are turning a keener eye toward ESG initiatives. Though the Social Governance pillars are no less important, it’s the Environmental cornerstone of ESG that is commanding more scrutiny—more specifically, greenhouse gas (GHG) emissions.

The concerns posited by climate change have many in the global economy searching for more sustainable practices, but to improve your environmental impact, you first have to know where you currently stand. Luckily, there is a way to calculate your GHG emissions.

However, you also stand to benefit should you get those calculations verified, which is an entirely different process—as one of your options for external verification, we want to help you understand that distinction. In this article, we’ll overview both GHG calculations and GHG verification, as well as the importance of both, so that you can ensure you take (all) the right steps in providing this data.

What are Greenhouse Gas Emissions?

First, let’s back up and establish what we’re talking about. Greenhouse gases are those that, while emitted as part of our global ecosystem balance, also trap heat in our atmosphere. The most common of these is carbon dioxide, another is methane, and there are a good number of refrigerant gases included too, but the gist is this—an excess of GHG emissions is a problem.

Trapping too much heat—or releasing more than what our planet can absorb—causes global warming and climate change, which is becoming more and more of a concern, as you may have heard. But not all GHG emissions are created equal—they each have different Global Warming Potential (GWP) that pack different (carbon) footprints than others. As such, some organizations create more emissions than others.

(Most energy emissions derive from a fuel that generates CO2 when combusted. Therefore, if the majority of your electric utility is powered through coal plants then your footprint will be higher compared to an organization consuming the same amount of energy in a region—such as parts of Canada—that is mostly hydropower.)

What are Greenhouse Gas Calculations?

That’s why and where calculations come into play—e.g., figuring your carbon footprint, your GHG inventory, etc.—they’re important to your understanding of your actual, specific impact on the environment so that you can get started in reducing your emissions.

But that understanding—and making your GHG calculations—first requires knowing:

• Where the energy your organization uses comes from (the type of fuel and the location);
• How much is used; and
• What it’s used for.

Once you’ve established your source(s) of fuel and/or electrical energy, you then have several reputable and scientific options to help calculate each of the GHGs your organization is emitting that range from simple to more complex:

In fact, many organizations use a combination of these avenues when calculating their GHG emissions, but when choosing your method, consider the level of detail your stakeholders require and the resources you have available to help. You also have the option to enlist one of many available consultants to help you build up a baseline—or calculate your first GHG inventory—or to maintain it in consecutive years.

Why are Greenhouse Gas Calculations Important?

So why go to the trouble of this at all? Why is anyone?

Three primary drivers are pushing for the availability of GHG data in today’s current business landscape:

1. Supply Chain: Large brands, such as Microsoft, AWS, Apple, and many more are now directly requiring GHG emissions data as part of contractual obligations.
   
   
2. Investors: Whether through private equity or ESG ratings, GHG is often the first area that companies are scored on as part of investor scorings.
   
   
3. Regulations: The EU, California, and SEC have already released new requirements regarding GHG reporting, and you can be sure that more are coming.

Aside from being able to competently answer to all the powers that be and improving your environmental accountability, your organization does stand to benefit from calculating your GHG emissions in other ways, such as through:

• Broadened Risk Mitigation: Calculating your GHG emissions can identify areas of vulnerability and potential risks associated with climate change, which will allow you to develop strategies to minimize them.
• Potential Cost Savings: Identifying and reducing GHG emissions often goes hand in hand with improving energy efficiency and resource use through waste reduction and process optimization, and the first step to that is calculating your baseline.
• Competitive Advantage: Sustainability is becoming more important, not just to investors, but also to customers, and so if you—through GHG emissions calculations—demonstrate and communicate your efforts to environmental responsibility, you may stand out in your market.

What is Greenhouse Gas Verification?

That being said, it may not be enough to simply make the calculations—you may need to invest in the verification of your GHG emissions, which is an assessment that provides independent assurance of the reliability of your organization’s ability to accurately calculate and report emissions.

Using a process that generally involves recreating certain assumptions and estimations as well as validating that your raw data was correctly used to generate a carbon footprint or inventory, your GHG verification can provide reasonable or limited assurance to interested stakeholders:

Whichever route you choose would depend on the insight you and your stakeholders require, but remember that your verification firm must be independent—i.e., if you use a consultant to assist with your GHG calculations, you must use a different firm to perform verification to maintain credibility.

Still, it will be important to get verification performed regardless, as not only can it help you rest easier that your efforts to calculate emissions are an accurate place to move forward from, but those aforementioned enacted and forthcoming regulations include it as part of their requirements. Though the SEC’s rules remain delayed, those in California and the EU both mandate this kind of assurance (and Schellman can help.)

Jumpstarting Your ESG Initiatives

As greenhouse gas emissions remain a primary concern in the fight against climate change, more and more companies are beginning to scrutinize ways to reduce theirs. But that process begins with GHG calculations and is further strengthened by GHG verification, and now that you understand a little about both and why they’re important, you can get started in minimizing your environmental impact and moving toward more sustainable practices.

Should you have any further questions about greenhouse gas emissions or concerns about verification, contact us to speak with our highly experienced ESG team who would be happy to paint you a more detailed picture. Otherwise, check out our other content that can further explain different aspects of making your organization more environmentally conscious:

• What are Greenhouse Gas (GHG) Scope 3 Emissions?
• 5 Key Benefits of Integrating ESG Into Your Compliance Assurance
• What is the Carbon Disclosure Project (CDP) Framework?