GHG Accounting with Dr. Michael Gillenwater (Part 2)

This is the second part of a two-part podcast episode. Listen to the first episode here.

In today’s episode, we dive into Dr. Gillenwater’s insights on the best practices for creating greenhouse gas inventories, explore essential resources for those embarking on GHG management, and discuss actionable strategies for organizations looking to reduce their carbon footprint.

Dr. Michael Gillenwater joins Carbon Accounting & Management Podcast to discuss:

1. Navigating challenges in greenhouse gas reporting
2. In-depth analysis of greenhouse gas protocols
3. Practical tips for corporate GHG accounting
4. Deep insights into data collection strategies
5. Addressing Scope 3 reporting challenges
6. Utilizing standards for accurate emission inventories
7. Expert advice on greenhouse gas auditing and transparency
8. Identifying optimization opportunities in emission reporting

Here is a summary of the discussion from the podcast.

I find this topic quite fascinating and would like to expand on it. One powerful aspect of the Greenhouse Gas Protocol is its combination of clearly defined mechanisms and inherent ambiguities. While this can create confusion, it also allows organizations to adapt their inventories to reflect their actual corporate practices.  However, when discussing accuracy and completeness, there’s a potential risk of greenwashing. Organizations might inadvertently omit aspects they deem irrelevant, even though those elements could be significant on a larger scale. This scenario can lead well-intentioned organizations to invest considerable time in analyzing data that ultimately has little impact on their overall emissions. They may find that a portion they focused on contributes only 0.0001% to their inventory after weeks of effort.  If we are working with an organization on defining their boundaries, where would you suggest they begin? Specifically, how should they approach defining their boundaries for Scope 3 emissions within their value chain? Should they consider reporting on their supplier’s suppliers, and how far down that rabbit hole should they go? Alternatively, from a philosophical perspective, how should an organization define their boundary?

I think that leads us to the first “T” in TAC: transparency. There’s no such thing as a perfect inventory, as you mentioned. It’s challenging to assert that any company has achieved perfect Scope 3 reporting; all we can aim for is the best possible accuracy. Transparency involves being clear in our reporting by stating the assumptions we made and identifying areas we may have overlooked, along with our efforts to improve in those areas. I believe this is a critical component of transparency. Would you agree that transparency includes not only how the reporting was conducted but also disclosing the assumptions behind it?

Absolutely. It’s essential to consider potential confidentiality issues related to sensitive business information. This challenge is not unique to companies; it also occurs internationally. For instance, in smaller countries with only one firm in a specific industry, disclosing that firm’s detailed data could put it at a competitive disadvantage. This is a concern reflected in statistics across various sectors. That said, if you want credibility, you need to show your work.

That was going to be my next question specifically for companies concerned about exposing data to competitors. What would be the best process for them to engage in to be meaningfully transparent and show accuracy without compromising their position? Would you recommend that they have all their inventories audited and allow the auditor to provide verification? How valid do you find audits at this point, and where do you stand in this conversation?

If you’re seeking credibility and dealing with public disclosure challenges, it’s important to recognize that transparency isn’t a panacea. You can be transparent, but that doesn’t necessarily establish a quality assurance mechanism. For companies that are less visible, even getting someone to pay attention to your report can be difficult. If external assurance is desired, then some form of audit or verification makes sense.

Now, the trick is that an auditor will ask, “What standard or requirements am I auditing against?” You can’t just generically audit something; it must align with a specific standard or set of requirements, often related to the GHG Protocol. The GHG Protocol is technically not an auditable standard; it includes so much flexibility that auditors can struggle with what is actually required versus what is not. You might still proceed with an audit, but most of the choices made will typically fall under the GHG Protocol guidelines. Audits may catch errors—like if you added two numbers incorrectly—but they won’t necessarily determine whether you made the right methodological choices in every case.

Are there any standards that you recommend? Which standard might you use in which situation?

Yeah, the trick is that what we have right now is a landscape where there are several standards in play. For instance, ISO 14064 Part One serves as a companion to the GHG Protocol. It is designed to provide an auditable structure with clear “shalls” and “shoulds.” This combination is quite useful, as the GHG Protocol offers extensive guidance and explanations, while the ISO standard adds a bit more structure for auditors.

However, there’s still a lot of flexibility within the ISO standard itself. Companies need to be clear with themselves and their stakeholders about why they are conducting the inventory in the first place. Sometimes, I hate to say it, but the motivation is simply that they need to report to CDP or meet other expectations. So, there’s a tendency for companies to report just for the sake of reporting. If they don’t do it, they risk criticism. However, it’s crucial to ask: what are you actually using the data for? This question is often not adequately addressed. So, there’s a tendency for companies to report just for the sake of reporting. If they don’t do it, they risk criticism. However, it’s crucial to ask: what are you actually using the data for? This question is often not adequately addressed.

I think it’s worth noting that something I find very interesting in working with organizations on their inventories is how frequently they realize, “Wow, this inventory actually gave us great insight into our business operations.” They often discover insights that they didn’t have before. They may never have looked at all of these aspects holistically, but now that they see the inputs and outputs, they gain insights into optimizing their business. This has been a significant outcome of the inventory process, which they weren’t really expecting. Many organizations initially report merely for compliance and then realize that this reporting provides valuable business insights. I think this reinforces the idea that organizations should view the inventory as an opportunity to gain insights into their business processes—seeing where things come from and where they go. A lot of times, they just don’t look at the whole picture within their organizations. 

I’ll add to that. Your example illustrates why it’s not just about accuracy, as you described. It’s also not just about comprehensiveness; it’s about resolution. This means delving into specific processes to understand and map them. While it may not involve hyper-rigorous scientific accuracy on every detail, having reasonable resolution is important for understanding what’s happening. This approach is more effective than relying on a simplistic, spin-based method that bundles everything into one large lifecycle number, as that often leads to a loss of resolution and, consequently, valuable insights.

I wanted to touch on one more topic before we conclude our conversation. This relates to consistency over time and accuracy, particularly in the context of the spin-based approach. When an organization conducts its first inventory—possibly not even using a spend-based method—they may make some assumptions and arrive at a number. The following year, they might discover a more accurate method for producing this information, which results in a significant drop in their emissions. This change is not due to any methodological improvements but rather to the way they accounted for it operationally versus methodologically.  How can an organization reconcile this issue when trying to demonstrate consistency over time, especially when they find a more accurate method that may not align with or may even contradict their previous method?

I have a simple answer to this, although it’s not straightforward. Your example highlights why it’s crucial to understand that it’s not just about comprehensiveness; it’s also about resolution. Organizations need to go into the specifics of their processes and understand how to map those accurately. While they may not achieve hyper-rigorous scientific accuracy for every detail, having reasonable resolution is essential for effectively assessing what’s happening.

Reporting should not just be for compliance; organizations must consider how they intend to use the data. This requires clarity in their goals and the standards they choose to follow. For instance, the IPCC guidelines provide substantial guidance on national inventories, which are applicable to any inventory-related work. These guidelines cover how to maintain consistency over time and address different methodologies. In summary, while it’s easy to get caught up in the details, organizations should focus on their purpose for reporting and ensure they have a robust methodology that aligns with their goals. We don’t want to delve into all the statistical details here, but I would like to point people to that resource. It’s excellent. Top thinkers and experts in this field have contributed significantly to those few pages in that chapter on how to address these issues.

That actually leads us into our final closing questions. We’ll start with that. These are the last questions we like to ask all our guests. They’re designed to be quick hitters that can provide ideas to share with our listeners. Thank you so much for your time today. It’s been a fascinating conversation, and I know I’ve taken a lot away from it personally. Are there any newsletters, websites, online resources, or professional organizations you would recommend folks in the industry consider? And it’s totally fine to recommend your own organization because that’s the one I would say.

There’s a large and growing set of resources available regarding CSR, ESG, sustainability, and related topics. People should be keeping track of developments related to the GHG Protocol update process. The World Resources Institute (WRI) is a key resource in this area, and I recommend subscribing to their newsletter. This will help you stay informed about updates to the GHG Protocol and what to expect over the next couple of years.

These updates may shift the landscape of these topics, and it’s also essential to keep track of what’s happening with the Science-Based Targets initiative. You can subscribe to their newsletter as well, as they are closely aligned with the GHG Protocol and the SBTi. Additionally, we have our own newsletter, which may not come out frequently, but we strive to include valuable thought leadership pieces on these subjects. You can sign up by visiting ghgmi.org, where there’s a link at the bottom of the page to join.

What about conferences or professional organizations? Are there events that people entering the industry might consider attending or learning from?

Yeah, I’m not much of a conference person, so I probably haven’t met many of your listeners in person. I tend to be a bit of a hermit, so I’m not the best at recommending conferences. As I pointed out, despite some of the work I’ve done in this area, the majority of my energy and time is focused on the international process under the UN Framework Convention on Climate Change and policy-level issues. I mentioned the GHG Protocol update process, which will involve a series of events and workshops starting in 2024, although none have been announced yet. I would encourage people to track those developments by signing up for the GHG Protocol newsletter, as that’s probably the best way to stay informed.

Have you seen any organizations use fun or interesting incentives to engage their employees and stakeholders in reducing their carbon footprints and participating in carbon reduction initiatives?

Yeah, I’m trying to think of resources from my past. I spent many hours analyzing EIA data, which is more focused at the policy level. The Energy Information Administration (EIA) provides a rich data source. For your listeners, the EIA publishes the Residential Energy Consumption Survey (RECS), which consists of detailed surveys of residential and commercial energy use. If you dive deep into those tables, you can uncover interesting benchmarks and comparisons of energy efficiency and intensity across different industrial sectors. This could be a valuable exercise for anyone in this space looking to benchmark their company against broader national statistics. They often break data out by region, which is useful.

In terms of more recent trends, I pay attention to various factoids, such as ice cover data from the Arctic. If you explore specific websites, including those run by NOAA, you’ll find detailed monthly and quarterly data on various topics. Tracking electric vehicle (EV) sales in different countries and comparing them to actual oil consumption figures can also provide insights into broader trends. Ultimately, these small data sets highlight the ongoing changes in our environment and the importance of understanding the impacts of our actions over time.

Where can we find out more about the work that you and your organization are doing?

Check our website. Specifically, please sign up for the newsletter. We’re lucky if we get it out every other month, so it’s not very frequent. You can find it at ghgmi.org.

We’ll be sure to link that in our show notes as well. Dr. Michael Gillenwater, thank you so much for your time today. We really appreciate it. It has been a pleasure speaking with you, and I’ve taken a lot away from this conversation. Thank you once again for your time. 

Here are some valuable resources by Dr. Michael Gilenwater for understanding the deeper aspects of GHG Accounting –

What is greenhouse gas (GHG) Accounting