Introduction
As the response to climate change rapidly increases, companies and organizations are measuring and disclosing their CO2 emissions and strengthening measures to reduce them. To gain trust in the CO2 emissions and sustainability/non-financial information disclosed by companies and organizations, transparency and reliability are essential. In this regard, third-party assurance of CO2 emissions is attracting attention.
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What is a third-party guarantee?
Third-party assurance of CO2 emissions is a process in which independent experts or organizations (third parties) evaluate whether the CO2 emissions reported by a company are fair and accurate. In other words, CO2 emissions that have been third-party assured can be said to have a certain degree of accuracy.
Third-party warranties are provided based on the following principles:
- objectivityThe third-party guarantee body must be independent of the company.
- transparencyThe process must be made public, and the results must be clear.
- consistencyThey will be evaluated using the same criteria and methods.
Why is third-party assurance necessary?
CO2 emissions information is directly linked to a company's sustainability assessment, non-financial information assessment, and assessment of climate change-related risks and opportunities. Misinformation and inaccurate information can lead investors, consumers, and other stakeholders to make wrong decisions. Third-party assurance is considered a means of preventing such problems.
Furthermore, the third-party assurance process is also valuable for companies. It guarantees the validity of the CO2 emissions figures calculated by the company, thereby revealing areas for improvement and helping to plan strategies for emission reduction. Such third-party assurance provides companies with important management information from a sustainability perspective.
The introduction of this third-party assurance will build trust between businesses, consumers, governments, and investors, paving the way for sustainable economic growth.
Third-party assurance process
The third-party assurance process for CO2 emissions generally follows these steps:
Preliminary evaluation
Third-party assurance bodies conduct preliminary investigations to evaluate the reliability of a company's CO2 emission calculation methods and data.
Field survey
Experts from a third-party assurance organization will conduct an on-site investigation and compare the company's report with the actual situation.
Verification and Authentication
Ultimately, a third-party assurance body verifies and certifies the accuracy of the data and methodology. This third-party assurance proves that the company is reporting fairly.
Main types of international third-party assurance standards
The following is a list of major international third-party assurance standards.
| International standard name | Summary of the standards | Main uses | Management organization |
|---|---|---|---|
| ISAE 3410 | GHG's standards for information assurance engagement. | Enhancing the reliability and transparency of GHG reporting | International Audit and Assurance Standards Board (IAASB) |
| ISO 14064-3 | GHG Verification and Specifications and Guidelines for Verification | GHG data validation and specifications and guidelines for validation. | International Organization for Standardization (ISO) |
| PAS 2060 | Specifications for carbon neutrality declaration and verification | Proof of carbon neutrality for an organization or activity | British Standards Institution (BSI) |
| AA1000AS | Standards for guaranteeing sustainability. Includes information on GHGs (Globally Friendly, High-Grade, and High-Quality) activities. | Improving the reliability of sustainability reports | Account Ability |
| ISO 14067 | Standards for calculating and reporting the carbon footprint of products | Comparison and evaluation of carbon footprints between products. | International Organization for Standardization (ISO) |
| ISO 14069 | Guidelines for the quantitative assessment of GHGs (including calculations of direct and indirect energy emissions) | Calculation of GHG emissions for the entire organization | International Organization for Standardization (ISO) |
| PAS 2080 | Specifications for carbon management in infrastructure projects | CO2 reduction in infrastructure projects | British Standards Institution (BSI) |
Below, we will explain some typical criteria.
ISAE 3410
ISAE 3410 is part of the International Standard on Assurance Engagements (ISAE), an international standard for assurance work related to greenhouse gas (GHG) reporting. This standard was developed by the International Auditing and Assurance Standards Board (IAASB) and applies to assurance activities performed by auditors and assurance providers worldwide regarding GHG information.
The main contents and features are as follows:
- Warranty levelISAE 3410 categorizes the level of assurance activity into "reasonable assurance" and "limited assurance." Reasonable assurance indicates a higher level of assurance, while limited assurance indicates a lower level of assurance.
- Coverage under warrantyISAE 3410 covers reporting on GHG emissions and reductions. This includes Scope 1, Scope 2, and Scope 3 GHG emissions, GHG reduction projects, carbon offsets, and carbon footprint.
- Warranty ProcedureISAE 3410 defines in detail the procedures for carrying out assurance activities. These include reviewing reports, verifying data, confirming calculation methods, applying appropriate standards, assessing risks, and drawing conclusions.
- Report structureISAE 3410 clearly specifies the components of an assurance report. These include the report title, recipient, information of the assurance provider, report on the items under assurance, reference to standards, description of assurance procedures, conclusions, date, and signature.
- Independence and expertiseISAE 3410 requires that guarantee providers have independence and expertise. Independence means avoiding conflicts of interest, and expertise means possessing the technical skills and knowledge relevant to GHG's guarantee activities.
ISO 14064-3
ISO 14064 is an international standard for the measurement, reporting, and verification of greenhouse gas emissions, and is part of the ISO 14000 series. ISO 14064 provides a framework for companies and organizations to measure, report, and verify greenhouse gas emissions. ISO 14064 consists of the following three parts:
- ISO 14064-1This document sets forth the principles and requirements for measuring and reporting greenhouse gas emissions at the organizational level.
- ISO 14064-2This document sets forth the principles and requirements for measuring and reporting greenhouse gas emissions at the project level.
- ISO 14064-3This document sets forth the principles and requirements for verification regarding the measurement, reporting, and verification of greenhouse gas emissions.
The main contents and features of ISO 14064-3 are as follows:
- Verification and inspectionISO 14064-3 is divided into two processes: verification and inspection. Verification is typically a planned and systematic process that evaluates whether GHG reports conform to specific standards and guidelines. Inspection, on the other hand, involves a more rigorous and detailed evaluation to determine the accuracy of the reported information.
- Third-party guaranteeVerification and inspection are often carried out by independent third parties, and the process and results are provided as third-party assurance.
- Verification processThe verification process consists of the following steps:
- Initial evaluation: Evaluate the scope, purpose, and quality of the data in the report.
- Risk and uncertainty assessment
- Sampling Strategy and Plan
- Data and information verification
- Verification results and report
- Transparency and reliabilityThis standard aims to increase the transparency and reliability of reported data.
PAS 2060
PAS 2060 is a specification developed by the British Standards Institution (BSI) for achieving "carbon neutral" status. This specification sets out the requirements related to achieving and reporting carbon neutrality for organizations, products, services, events, etc.
The main contents and features are as follows:.
- Demonstration of carbon neutralityPAS 2060 provides detailed definitions of how to demonstrate carbon neutrality for products, services, organizations, communities, events, buildings, and more. This allows companies and organizations to claim the carbon neutrality of their activities and products.
- Measurement of carbon footprintThis involves comprehensively evaluating the target CO2 emissions and identifying areas where reductions are possible.
- Reduction planDevelop a plan to implement a series of reduction measures and monitor the progress of those reductions.
- compensationFor emissions that cannot be completely reduced, compensation will be provided through certified offset projects and other means.
- Transparency and verificationIt emphasizes that claims of carbon neutrality should be made in a transparent and verifiable manner.
AA1000AS
Developed by AccountAbility (a UK non-profit organization), AA1000AS provides guidelines for companies to improve the reliability and transparency of their sustainability reporting.
AA1000AS (Account Ability Assurance Standard) is an international standard for providing independent assurance from third-party organizations regarding sustainability reporting conducted by companies and organizations. Sustainability reporting involves disclosing environmental, social, and governance (ESG) information, including GHG information.
The main contents and features are as follows:
- Principle-based approachAA1000AS is based on three principles: inclusivity, relevance, and materiality. This ensures that reports are relevant to stakeholders, that their content is based on relationships with stakeholders, and that their content focuses on important topics that impact the organization's sustainability.
- Specifying the warranty levelAA1000AS categorizes assurance activities into "Type 1" and "Type 2." Type 1 assesses the appropriateness and reliability of the reported content, while Type 2 assesses whether the reported content is consistent with the activities performed.
- Independence and expertiseAA1000AS guarantee providers must be independent and professional. Independence means they have no conflicts of interest with any organization they report to, and professionalism means they possess the technical skills and knowledge relevant to their guarantee activities.
- Stakeholder participationAA1000AS encourages stakeholder participation in assurance activities. This ensures that reports reflect the perspectives of stakeholders.
summary
Third-party assurance in reporting CO2 emissions, sustainability, and non-financial information is essential for enhancing reliability and transparency. By obtaining third-party assurance, companies and organizations can build trust with stakeholders and contribute to a sustainable future.
Third-party assurance of CO2 emissions is becoming an increasingly important topic in climate change mitigation and corporate sustainability. Understanding and appropriately applying third-party assurance standards and methodologies is crucial for businesses.
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