Facing new and proposed regulatory changes and heightened public scrutiny, companies today are under pressure to fast-track their plans to capture, measure, and disclose greenhouse gas (GHG) emissions data.

Many companies are now required to report GHG emissions data to comply with evolving local, national, or international regulations, including those set by the EPA, and the SEC, which is considering requiring companies to provide investors with consistent, comparable, and useful climate-related information for making investment decisions. Still others disclose emissions data in response to customer prerequisites, or voluntarily report emissions as a public demonstration of their commitment to environmental, social, and corporate governance (ESG) improvements.

These various drivers can have a significant impact on organizations from an operational as well as a financial risk perspective. When you add in a widespread push by executives to augment annual regulatory reporting with quarterly or even monthly performance metric tracking, it has never been more important for companies to have a deep understanding of greenhouse gas (GHG) emission sources across the value chain.

For most organizations, that understanding starts with a comprehensive GHG inventory. A GHG inventory is a list of direct and indirect emission sources, from production processes to electricity use to transportation and more, and the quantification of the associated emissions using standardized methods. It’s critical for managing GHG risks and identifying opportunities to reduce them, participating in mandatory or voluntary GHG programs, and effecting real, measurable change. After all, you can only set accurate targets and create credible strategies to meet them if you understand your current emissions.

GHG inventories, however, are often quite complex, because they combine measured and estimated emissions data based on available information and regulatory requirements. There are also significant challenges related to data availability and quality as well as the fact that there are multiple accounting programs, depending on whether there are regulatory drivers or corporate imperatives to report out to executive teams.

As a result, we are seeing a hyperfocus on ESG metrics, but many companies don’t know which metrics they should be tracking—or how to track them. Here’s what you need to keep in mind in the GHG inventory process.

Data transparency, completeness, and accuracy is a common concern

Data quality is receiving increased attention as a prerequisite for accurate GHG reporting and emissions reductions, particularly now with the emergence of GHG emissions trading systems and new reporting mechanisms and standards.

Part of the challenge relates to the activity data needed to calculate emissions. This data ranges from electricity and fuel consumption to actual field measurements, which depending on the sector could be leak measurements or lost gases. Many sectors and industries may not have standardized data collection and reporting systems in place, making it difficult to gather the necessary information. And, because emissions occur across complex supply chains involving other organizations, tracking and collecting data can be a complex task.

Your company needs to be able to identify areas where the data is suspect. You need to be able to establish a hierarchy of data, so you understand alternative sources of data and can fill any gaps, for example if you don’t have billing records from your electricity supplier. And you need to be able to develop a plan to work toward improving the quality and availability of data over time.

You need to enable a clearly documented audit trail

With many reporting programs and voluntary frameworks there is widespread concern over greenwashing, and many companies are seeking independent third-party verification of their inventories. Verification requires a clearly documented audit trail to allow verifiers the transparency to understand the inventory development process and evaluate it for relevance, accuracy, and completeness.

A recommended best practice is to develop a detailed GHG monitoring plan and technical support document that includes criteria for when your inventory needs to be revised—for example, when a material discrepancy is uncovered or there is an acquisition or divestiture. If you’re using digital solutions to collect data, perform calculations, and/or disclose emissions, make sure those systems and processes are auditable, so you can demonstrate that you are meeting requirements for transparency, completeness, and accuracy.

It can be challenging to stay up to date on regulatory requirements

Regulations, policies, and frameworks run the gamut from local to national and international and from voluntary to compulsory. These policies and standards are constantly evolving, and the procedures for accounting of emissions often differ between them, making it hard to ensure that you are using the right data for the right purpose.

The challenge is compounded by the fact that many companies simply don’t have the resources or expertise in-house to be able to not only understand which legislation applies to them, and how, but also stay up to date on evolving standards. You should establish a process to monitor regulatory and policy developments related to GHG emissions or proactively engage with regulatory authorities and industry associations to stay informed about upcoming regulations or changes in existing ones. You can also seek assistance from external experts, such as environmental consultants or legal advisors who specialize in GHG emissions and regulatory compliance.

Whether you have well-established processes for measuring and monitoring your GHG emissions or are just starting your journey toward carbon neutrality, a complete and accurate GHG inventory is a critical component of your ability to effect change. By bringing environmental consultants into the process, you can leverage highly experienced industry experts who can provide guidance on ensuring compliance with the latest regulatory requirements and voluntary frameworks. From providing technical support on emissions calculation methodologies to identifying opportunities to streamline and improve disclosure activities, an outside consulting firm can help you establish a complete and accurate GHG inventory that will serve as the foundation for your decarbonization efforts.

For more in-depth discussion on decarbonization strategies, join our complimentary on-demand webinar, From Ambition to Action: Overcoming Decarbonization Hurdles in Construction Materials, as our panel of experts provides a deep dive perspective on Trinity’s latest commissioned research on sustainable decarbonization outcomes and challenges when implementing decarbonization strategies.