A director’s guide to greenhouse gas accounting

Embracing climate-focused strategies based on accurate greenhouse gas emissions data can turn compliance into a powerful competitive edge.

Proactive climate strategies based on robust GHG accounting practices ensure compliance, enhance market positioning and drive long-term value creation. Directors who understand the fundamentals of GHG accounting can ask the right probing questions around the complexities that may exist and contribute effective oversight of their organisation’s climate journey.

GHG emissions measurement and reporting are rapidly evolving. Reporting of emissions is expanding from Scope 1 and 2 emissions to include greater disclosure of Scope 3 emissions, covering indirect emissions across the entire value chain (which typically represent the largest portion of an organisation’s emissions). An understanding of what is being reported is essential for if directors are to provide robust oversight.

The global shift to a low-carbon economy is accelerating, demanding new levels of transparency and innovative ways to report organisational performance. In New Zealand and worldwide, regulations are progressively mandating the disclosure of GHG emissions. Organisations must measure, disclose and critically assess their GHG emissions and other climate-related information. Stakeholders including banks, customers, suppliers, regulators, insurers and employees are increasingly requesting this information – even if it is not legally required. 

Directors who understand this changing environment will see opportunities to participate in transformative change – and may identify a competitive edge. 

Common key areas where complexities arise include:

• Commitment to targets: Will you know early enough when you need to review and update your targets. How do you convey the message to external stakeholders?
• Data accuracy: What is the level of confidence in the internal control environment for GHG emissions information? 
• Data availability: Are there any unexpected omissions due to data availability and, if so, what is the rationale for omissions? Is that reasonable and has it been transparently disclosed?
• Estimation and assumptions: What underpins the estimations and any judgements applied? How does this impact on comfort levels?
• Methodologies: How appropriate are the methodologies used (including those specific to the industry and any bespoke methodologies)?
• Capability: Do we have the right mix of skills and capability within the organisation?

As climate-related reporting becomes a more important indicator of organisational performance, increasingly connecting with value assessment, directors should be ensuring they have the appropriate capability and resources to understand and operate within this new paradigm. Directors who understand GHG emissions accounting can guide their organisations to make meaningful contributions to climate goals, ensure business viability in a changing world and  identify opportunities to grow organisation value, while complying with the relevant regulatory reporting requirements.

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KPMG's GHG Emissions Accounting Fundamentals and Financed Emissions Training Series provide an excellent opportunity to build your understanding of the rapidly evolving GHG emissions reporting landscape. Alternatively, speak to us about running bespoke programmes at your organisation.

The IoD’s Chapter Zero NZ also offers a range of resources and courses with a climate governance focus.