With increased regulations, pressure from stakeholders, and scrutiny on public disclosures, third party assurance of greenhouse gas (GHG) inventories has quickly become common practice. Your inventory is the most foundational asset of your sustainability roadmap, and by having it assured, you are protecting that asset and lending credibility to your decarbonization targets and activities.
Sounds pretty important, right? We agree, so here’s our primer on third party assurance.
WHAT IS THIRD PARTY ASSURANCE OF MY GHG INVENTORY?
Just as GHG inventories are akin to financial accounting, GHG assurance is akin to financial auditing. An independent third party reviews your emissions calculations and assesses the accuracy and completeness of any assertions made based on those calculations, then puts their stamp of approval on it.
This process includes:
- Step 1: Auditor schedules interviews with your data analyst, sustainability manager, consultant, and anyone else that was part of the creation of the inventory to gain an understanding of your inventory processes.
- Step 2: Auditor asks for a sample size of utility bills, inventory workbook, emission factors, and the inventory management plan for their review.
- Step 3: Auditor sends you a list of findings, which includes items to improve upon and any discrepancies. Some findings will be items that you can consider changing but will not affect your assurance qualification, while others will be required changes to obtain assurance without qualifications.
- Step 4: Your team decides how they’d like to resolve any findings. Typically, auditors can’t tell you how to resolve findings; however, we advise that once you’ve decided on an approach to resolving findings that you run it by your auditor for input.
- Step 5: Auditor drafts your letter of assurance. Congratulations, you have an assured inventory!
WHAT’S LIMITED VS REASONABLE ASSURANCE?
There are two types of assurance, limited or reasonable assurance:
- Limited assurance states that the auditor is not aware of any material modifications that should be made. This assurance process is the easiest to go through.
- Reasonable assurance is a high but not absolute level of assurance, in which the auditor affirms that the information reported is materially correct. Reasonable assurance requires a deeper level of scrutiny and review of inventory processes, but it is a stronger statement.
If your inventory is still evolving and your team is working on obtaining better data, limited assurance is a great place to start.
HOW CAN I PREPARE FOR ASSURANCE OF MY GHG INVENTORY?
In prepping for your organization’s assurance process, our team recommends the following tips and tricks:
- For those just getting started, we advise developing at least one inventory ahead of seeking assurance. The first effort to develop a GHG inventory is a big lift as it is, there’s a learning curve that comes with it, and often the result is good but not best. Assurance can be much easier to navigate once systems are in place and better data is available.
- When selecting your auditor, share any unusual nuances in your inventory to gauge if there would be a barrier to assurance.
- Collect utility bills and raw data in advance and have clear documentation of who has access to the data and how you prevent data entry errors.
- Prepare your team for their interviews with the auditor.
- Have a clear methodology of how your inventory was calculated in the form of an Inventory Management Plan with all sources clearly cited.
- Have a document noting any exclusions to your inventory, and why they are excluded.
- Plan to have at least 50% of your inventory data coming from actual data. If you have trouble obtaining actual data, you may want to consider waiting to get assurance, as some assurers will not assure inventories with less than 50% actual data.
- Know that you can collaborate with your auditor on what is and isn’t said in your assurance letter.
- Know that you don’t have to take all their suggestions for change. With well documented procedures, you can explain how you came to your chosen approach.
WHAT CAN I DO TO GET STARTED?
At Stok, we act as a guide to clients that are going through assurance. We take on the technical questions from the auditor and provide the pros and cons of updating your methodology versus sticking to what was already documented. We also confirm your letter of assurance is something you are happy with!
The way we like to think of the assurance process is: First your inventory was reviewed by your consultant, then by your team, and now by a third party. Each of these groups approaches their review with a different perspective, and the result is stronger because of the collaboration of all groups. The sustainability space is quickly evolving and having an assured inventory is an asset to a strong sustainability program.
Reach out to our team to discuss your next steps for assuring your inventory.
