Challenges and opportunities from greenhouse gas emissions reporting and independent auditing

Abstract

Purpose -It is clear that the trend toward measuring and managing greenhouse gas (GHG) emissions on a global scale is not slowing, even though different countries and geographic regions are approaching the issue with different points of view and different levels of vigor. Along with an increase in measuring and managing GHG emissions, enterprises around the world should expect to see a higher level of independent assurance and audit reporting needed. The purpose of this paper is to identify and discuss the challenges and opportunities that accompany GHG emissions accounting and auditing, as well as the supply chain and operational dependencies that are different from traditional financial auditing. Design/methodology/approach -This paper explores the challenges and opportunities from measuring and auditing GHG emissions, and contrasts audits of sustainability information with more traditional financial auditing. It also explores some of the issues in supply chain and operational dependencies that are important in measuring and auditing GHG emissions and are different from more traditional accounting practices. Findings -With the importance of processes to independently audit GHG emissions and natural resource consumption expected to grow in the future, it is important to understand how past experience with financial accounting and auditing can play a role in shaping the future for environmental stewardship. This paper shows that there are a number of key differences between financial and carbon auditing, which must be considered as enterprises begin to consider how to best support increasingly important sustainability reporting. As more publicly traded firms voluntarily issue sustainability reports and new legislation drives a greater need for standardized carbon accounting, so too will the need for auditing GHG emissions grow. This paper explains that GHG auditing will require cross-functional skills with operational and process knowledge, accounting capabilities and an understanding of how operational data correlates with estimates for GHG emissions. Originality/value -Much existing work addresses why, where, how, and who should be measuring and managing GHG emissions, but little attention is being given to the unique challenges that must be overcome in order to achieve reporting transparency. Independent auditing of GHG emissions has maintained a low profile while reporting is voluntary and standards are not fully agreed upon. However, with the possibility of legally binding legislation on the horizon, enterprises that are prepared to audit their GHG emissions and resolve issues early will be well positioned from both a compliance and market-competition perspective.

Climate Change and Global Warming Discourses and Disclosures in the Corporate Annual Reports: A Study on the Malaysian Companies

“…Some other authors highlighted the terms like 'disclosure' and 'reporting' rather than 'accounting'. Some of the terms that were used by different authors are: 'disclosure of greenhouse gas emission' (Prado-Lorenzo et al, 2009), 'greenhouse gas emission reporting' (Olson, 2010), 'climate change reporting' (Solomon, Solomon, Norton and Joseph, 2011), 'carbon disclosure' (Luo, Tang and Lan, 2013;Andrew and Cortese, 2011), 'Global warming and corporate disclosure' (Freedman and Jaggi, 2010) and 'climate change disclosures' (Belal, Kabir, Cooper, Dey, Khan, Rahman and Ali, 2010). Though the terms are different, all these researchers used these terms to mention a common topic, i.e., accounting and reporting on the issues related to climate change.…”

Carbon accounting: a systematic literature review

“…Bowen and Wittneben (2011), who take a broader view regarding carbon accounting, include with the measurement of carbon emissions the collation of data and communication. By contrast, Olson (2010) distinguishes between carbon accounting and carbon reporting and auditing. As already mentioned above, Ratnatunga (2007bRatnatunga ( , 2007aRatnatunga ( , 2008 and Ratnatunga et al (2011) suggest using 'CES accounting' if the goal is to measure CO 2 emissions.…”

“…To enhance the credibility of reports, it is recommended to use an established reporting framework and/or independent auditors. Olson (2010) compares GHG emissions reporting and auditing with financial reporting and auditing concerning, for instance, the legal and regulatory environment, materiality thresholds, or accounting calculation methods, and shows that no clear regulation exists overall.…”

“…The GHG Protocol focuses on the company scale; the emission trading schemes mostly focus on the facility scale (Green, 2010). Olson (2010) also indicates the necessity for standardized reporting and additionally, the need to audit the GHG emissions. Currently, the number of companies reporting their GHG emissions is increasing, whereas only a few reports are audited.…”

Emission allocation problems in the maritime logistics chain

“…One of the strategies for logistics providers to competitively differentiate themselves in the market is to provide an environmental efficiency message to their customers (Olson 2010). A prerequisite for this is the correct calculation and allocation of emissions in the logistic chain.…”