[Accounting for Decarbonization] Using Internal Controls to Measure and Report Reliable, Credible, and Transparent GHG Emissions Data
September 7, 2023
September 8, 2023
This lesson underscores the importance of establishing internal controls, governance structures, and best practices for accurate and transparent carbon accounting, providing essential guidance for organizations preparing for climate disclosure and effective carbon reduction strategies.
“Building a carbon accounting process with internal controls in mind will help minimize the risk of misstating your emissions, avoid audit findings, and save your organization from having to adjust the process once it is in place."
- Billy Scherba, VP Regulated Reporting Solutions at Persefoni
Measuring and reporting reliable, credible, and transparent greenhouse gas (GHG) emissions data is paramount in your organization's decarbonization journey. Leveraging cross-functional expertise across an organization builds the controls and procedures needed for investor-grade reporting.
Companies should start as early as possible and collect data in a controlled, repeatable, traceable manner. This allows organizations to routinely monitor and assess their progress and make adjustments to stay on track to meet their targets.
Successful investor-grade reporting needs more than just good governance. We recommend the following 10 best practices to ensure the accuracy, auditability, transparency, and effective monitoring of decarbonization-related performance and targets.
Internal Controls - Establish a comprehensive system of internal controls that ensures repeatable processes, provides transparency into data transformations such as CO2e calculations, and supports a single source of truth for climate-related data.
Corporate Governance Structures - Clearly defined and transparent corporate governance structures (such as sustainability committees or board members) which outline the roles and responsibilities of key stakeholders involved in the company’s decarbonization journey.
Executive Buy-in - Engagement with leadership and stakeholders prioritizes decarbonization efforts and is critical to driving forth meaningful change from top to bottom by allocating appropriate resources. This can also include collaboration with partnerships, organizations, and industry peers to share best practices and knowledge on decarbonization.
Guidelines and Policies - Producing sustainability-related guidelines and policies that demonstrate an organization’s commitment to its decarbonization journey, which must also align with the company’s overall corporate strategy.
Reporting Frameworks - Measure and report in alignment with the correct ESG reporting frameworks, such as the TCFD, GHG Protocol, Taskforce for Nature-related Disclosures, and others will ensure the correct data is being collected and reported in the right way.
Risks and Opportunities - Identify and integrate climate risks and opportunities from emission footprints into business strategy. Ensure the long-term sustainability of the company by assessing the market, regulatory, and consumer changes by protecting your company's facilities and products from the physical risks of climate change.
Technology - Make sure you have the right software for investor-grade reporting. Enabling cross-functional teams to aggregate with the full audibility and transparency required for investor-grade reporting can only be achieved at scale with technology.
Employee Awareness - Challenge your employees and suppliers to improve through training and awareness programs, fostering a sustainability-focused culture and strengthening a collective commitment toward decarbonization.
Reduction Targets - Set achievable goals (such as net zero emissions by 2050), increase board diversity, and track and report progress toward them.
Peer Benchmarking - Achieve a better understanding of where the company sits among its competitors and jurisdiction and where improvements need to be made through benchmarking among industry peers.
These are mission-critical for companies gearing up to prepare for climate disclosure and leveraging those insights for carbon reduction strategies, especially when ensuring an organization’s data is accurate, investor-grade, and traceable.
Guidelines and Policy Case Study 📖
Before jumping into the measurement and reporting of their carbon emissions, Quadial Inc. recognizes the value of internal controls. They develop an internal document of GHG Policies and Procedures that accomplishes the following:
Provides a detailed methodology of how data was collected and inputted.
Ensures high quality ESG metrics by leveraging data, technology, processes, and tools.
Outlines the process of internal reviews and control validations, which evaluates and verifies the effectiveness of internal controls.
States an internal goal to continuously refine emissions calculations through more precise and higher quality data.
Because of Quadial Inc.’s ambitious plans for disclosing their emissions, their GHG Policies and Procedures document includes comprehensive coverage of their scope 1, 2, and 3 emissions. For each scope type, the document provides a broad overview of critical data collection stages and considerations, as well as details on data sourcing.
Additionally, Quadial Inc. understands the importance of a holistic approach to decarbonization by not limiting their focus on the environmental impacts of their organization. They push the envelope by also addressing their stance on social and governance reporting, covering the roles and responsibilities of each department in relation to data collection, and consistently reviewing the alignment of leadership values with the organization’s decarbonization journey.