How to prepare an assurance-ready greenhouse gas inventory

As sustainability reporting becomes increasingly regulated in Australia, organisations must prepare their greenhouse gas (GHG) inventory (i.e. carbon footprint) for independent assurance by your financial auditor. This article outlines how to get your greenhouse gas inventory assurance ready. 

The five essentials for an assurance-ready GHG inventory 

The following key components should be clearly documented to prepare an ‘assurance-ready’ greenhouse gas inventory: 

1. Boundary setting policy outlining the GHG inventory boundary of the entity. The organisational boundary, together with the operational boundary, is known as the inventory boundary. 
    
   The organisational boundary is the boundary that determines the operations that are owned or controlled by the reporting entity. The GHG Protocol includes the following three approaches that could be applied to set the organisational boundary: Equity share approach, financial control approach, or operational control approach. 
    
   The choice of approach to determining the organisational boundary depends on the characteristics of the company, the intended purpose of information, the needs of the users, or, in some cases, the jurisdiction of the reporting entity.
    
   Selecting the operational boundary involves an entity identifying all of its emission sources, categorising them as either direct or indirect emissions, and selecting the scope of which indirect emission sources it should include. 
2. Basis of Preparation (i.e. carbon accounting methodology) outlining the following: 
   • Sources of emissions 
   • Emissions to be included in the measurement of the GHG inventory 
   • Selected appropriate calculation approach, as outlined in the GHG Protocol 
   • Collection of relevant underlying data 
   • Selection of appropriate emissions factor.
3. Underlying data collected as outlined in the Basis of Preparation 
4. Reconciliation of the collected underlying data to the entity’s general ledger. The financial auditor already audits the entity’s general ledger as part of the financial report audit, and therefore, a reconciliation of the underlying carbon data to the general ledger would ensure the completeness of the carbon data and lead to audit efficiencies and effectiveness. 
5. Calculation of the greenhouse gas inventory, including actual emissions factors used and the sources of emissions factors. This calculation could be an extract from a software product. 

How to prepare greenhouse emissions data for assurance 

Preparing for assurance is a proactive process. Here are the key steps to consider: 

• Form a cross-functional team: Include sustainability leads, finance, and data owners. Those familiar with financial audits can help bridge knowledge gaps. 
• Identify third-party data and estimates: Emissions data often includes estimates and supplier-provided figures. These should be clearly documented and flagged for the assurance provider. 
• Gather source documentation: Maintain a clear audit trail. This may include:
  • Utility bills 
  • Fuel card statements 
  • Travel provider reports 
  • Supplier emissions reports. 
• Document methodologies and controls: Be ready to explain how emissions are calculated (e.g. using the Greenhouse Gas Protocol) and what controls are in place. If using carbon accounting software, ensure it’s up to date and well-documented. 
• Conduct a readiness assessment: If time permits, consider undertaking a pre-assurance review to identify material gaps and opportunities to improve data quality before the formal engagement begins. 

How BDO can help 

Whether you're just starting out or well on your way, our experts can help you with everything from evaluating your current state to calculating your carbon footprint and developing a decarbonisation strategy. Get in touch.