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Greenhouse Gas Protocol
We are publishing a series of posts to do with the 490 page SEC proposed rule to do with climate-related reporting. The first posts in this series are:
The proposed rule was not created out of whole cloth. It has roots in many of the standards and guidance documents published by many other organizations. Therefore, we are taking a short detour to review at some of these external standards. We have already looked at the Task Force on Climate-Related Financial Disclosures (TCFD) standard. In this post we consider the Greenhouse Gas Protocol.
The Greenhouse Gas Protocol (GHG) is an organization that “sets the standards to measure and manage emissions.” The organization says of itself,
GHG Protocol establishes comprehensive global standardized frameworks to measure and manage greenhouse gas (GHG) emissions from private and public sector operations, value chains and mitigation actions.
In 2016, 92% of Fortune 500 companies responding to the CDP* used GHG Protocol directly or indirectly through a program based on GHG Protocol.
GHG Protocol supplies the world's most widely used greenhouse gas accounting standards. The Corporate Accounting and Reporting Standard provides the accounting platform for virtually every corporate GHG reporting program in the world.
* The CDP is “. . . not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. The world’s economy looks to CDP as the gold standard of environmental reporting with the richest and most comprehensive dataset on corporate and city action.”
Corporate Accounting and Reporting Standard
The GHG has prepared an Accounting and Reporting Standard. The following is from the Introduction to that document.
The GHG Protocol Corporate Accounting and Reporting Standard provides requirements and guidance for companies and other organizations preparing a corporate-level GHG emissions inventory.
The standard covers the accounting and reporting of seven greenhouse gases covered by the Kyoto Protocol – carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PCFs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3). It was updated in 2015 with the Scope 2 Guidance, which allows companies to credibly measure and report emissions from purchased or acquired electricity, steam, heat, and cooling.
The GHG Protocol Corporate Accounting and Reporting Standard provides requirements and guidance for companies and other organizations preparing a GHG emissions inventory. It was designed with the following objectives in mind:
To help companies prepare a GHG inventory that represents a true and fair account of their emissions through the use of standardized approaches and principles
To simplify and reduce the costs of compiling a GHG inventory
To provide business with information that can be used to build an effective strategy to manage and reduce GHG emissions
To increase consistency and transparency in GHG accounting and reporting among various companies and GHG programs
The module builds on the experience and knowledge of over 350 leading experts drawn from businesses, NGOs, governments and accounting associations. It has been road-tested by over 30 companies in nine countries.
This standard is written primarily from the perspective of a business developing a GHG inventory. However, it applies equally to other types of organizations with operations that give rise to GHG emissions, e.g., NGOs, government agencies, and universities. It should not be used to quantify the reductions associated with GHG mitigation projects for use as offsets or credits; the GHG Protocol for Project Accounting provides requirements and guidance for this purpose. Policy makers and architects of GHG programs can also use relevant parts of this standard as a basis for their own accounting and reporting requirements.
The Greenhouse Gas Protocol introduced the concept of “Scopes” in order to classify the different types of emission. (They are described in the post Greenhouse Gas Protocol: Four Scopes and the corresponding video.) Some of the difficulties to do with Scope 3 are described in the post Scope 3 Emissions: Systems Complexity and Limitations to Scope 3 Reporting.