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Organizations are increasingly under pressure from regulators or demands from customers, employees, and investors to transparently disclose and act on their carbon emissions. Measuring your organization’s climate impact not only meets these mounting demands, but it also provides strategic insights on your emissions that can help you take informed action to reduce emissions and operational costs.

If you’re just getting started measuring emissions, this process can appear daunting. In this article, we’ll discuss the steps to create a GHG inventory, and provide tips on how to navigate the needful and select tools that will help your team collect accurate, actionable data.

Top Challenges to Creating a GHG Inventory: 

  • Data Availability and Quality: Accurate, reliable, and comprehensive collection of data on emissions sources can be challenging, especially for intricate operations and supply chains.
  • Selecting Emission Factors: Using the appropriate factors for different activities and sources is essential for accurate calculations. Emission factors may vary based on location, technology, and other variables, making their selection complex.

To avoid these common challenges, consider carbon accounting software that makes collaboration across your organization simple. The tools should allow for easy data ingestion including bulk data upload and mapping – so you and your team do not need to spend hours manually manipulating your data outside of the system. Carbon accounting software can also provide recommendations, or out-of-the-box use of the best emission factors, to be applied to your specific data. These factors should be deeply researched and chosen from well-established sources, alleviating the burden of having to find them yourself.

GHG Inventory Checklist

If your organization is new to measuring emissions or does so outside the Greenhouse Gas Protocol (GHGP) standard, below is a high level summary of the steps needed to create a GHG inventory and take action on your climate impact:

PlanningReview GHG carbon accounting and disclosure standards
Establish inventory boundaries (operational and organizational)
Choose a base year
Data Collection and Emissions CalculationIdentify emission sources and data requirements
Develop data collection procedures and tools 
Gather and review data
Use estimates to fill data gaps
Quantify emissions using emission factors from well-established sources
Audit DataComplete internal quality assurance
Obtain assurance of data from external audit firm
  1. Planning

Review GHG accounting standards: The GHGP is the primary and most widely used international standard for measuring and managing emissions. The GHGP provides guidance for preparing an inventory for the greenhouse gases covered by the Kyoto Protocol: carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), sulfur hexafluoride (SF₆), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and nitrogen trifluoride (NF3).

Under the GHGP, emissions are classified into scope 1, scope 2, and 15 categories of scope 3 emissions.

Using carbon accounting software can help lighten the need for you to become a GHGP expert. However, having a base understanding is still good practice, especially if your carbon accounting tool does not categorize your emissions for you or if you are required to disclose because of regulatory requirements.

Establish inventory boundaries (operational and organizational): Boundaries help you measure emissions consistently throughout the company, which is especially important for complex business structures.

  • Operational boundaries: Identifies all operational activities that generate GHG emissions (e.g. fossil fuel combustion in equipment or purchased electricity, heat, or steam, etc.) and determines which will be included in the inventory.
  • Organizational boundaries: Determines which assets (e.g. vehicles and facilities, etc.) and entities (e.g. joint ventures, subsidiaries, etc.) will be included in a GHG inventory. 

Choose a base year: In order to have a consistent comparison of emissions performance over time, organizations typically select a base year. The base year should have data that is representative of typical operational conditions.

It is best practice for base years to be recalculated if an organization experiences significant changes (e.g. acquisitions, divestments, changes in calculation methodologies or emissions factors, etc.).

  1. Data Collection and Emissions Calculation

Once you’ve successfully completed planning, the next step is to identify emission sources and data requirements: 

Scope 1: 

You’ll want to identify all sources of fuel combustion in company owned or leased assets (e.g. heating fuels in buildings, vehicles, or stationary and mobile equipment), process emissions (e.g. industrial activity emissions), and fugitive emissions (e.g. refrigerant leaks). We recommend ensuring that your organization tracks purchases of energy, fuels, and refrigerants in your accounting systems to simplify your processes. Having this data centrally located in your accounting systems makes for easy uploading to carbon accounting software that will then automatically calculate your emissions.

Note: some scope 1 emissions will not be relevant to your organization. For example, process emissions are typically associated with specific industry sectors such as cement production, oil and gas, and aluminum. Professional services organizations may not have any scope 1 emissions except for cases in which they own or operate combustion assets like vehicles, or heating, air conditioning, and refrigeration equipment.

Scope 2: 

The data needed to calculate your scope 2 emissions will come from metered electricity consumption. These emission sources are purchased electricity, heat, and/or steam. This means best practice is for organizations to keep records of all utility bills to accurately account for scope 2 emissions.

Scope 3: 

Collecting the information needed for scope 3 emissions comes with challenges such as data availability, data decentralization, and supplier engagement. Utilizing carbon accounting software enables more efficient data collection and integration from decentralized external sources, and may help provide actionable insights to engage with suppliers and reduce their emissions.

If you are just starting to measure your scope 3 emissions, consider starting with a spend-based approach and then work towards more granularity of volume or activity-based data provided directly by suppliers. In order to ensure the collection of more primary supplier data, some organizations will codify data sharing, typically through procurement contracts/renewals.

Note: Instead of a comprehensive GHG inventory for all three scopes, organizations sometimes begin by measuring one specific activity of their climate impact. For example, often in professional services, companies will start with measuring their business travel or employee commute emissions and work their way toward building out their data collection capabilities in order to have a complete inventory. Here at Climate Vault, we know that, for some organizations, starting small is a huge step forward! 

Develop data collection procedures and tools: One of the primary challenges in creating a GHG inventory is that data can be very decentralized. It is typically located in different internal and external systems, in different functions of an organization, and possibly across different countries, which requires multiple stakeholders to work together. Often, organizations centralize this data manually and in spreadsheets.

Utilizing carbon accounting tools helps streamline and automate the data collection and analysis process. These tools calculate emissions, identify emissions hotspots, track progress, and generate reports in line with international standards and reporting frameworks. They also have automatic checks and built-in audit trails that capture the steps of your data collection and processing, which assists in the accuracy, integrity, and completeness of data.

It is best practice for the data collection and management tools your organization chooses to be thoroughly documented in a formalized record. Developing inventory management plans and/or internal controls are considered the best way to do this. Robust internal controls are crucial for accurate climate data and replicable processes.  They mitigate risks related to data collection, processing, and management, which is crucial for decentralized data subject to public review, regulation, or the basis for major investment decisions.

A GHG inventory management plan and/or controls document the data, processes, methodologies, systems, responsible parties, assumptions, materiality thresholds, and estimates used to prepare and govern an inventory, as well as the data review and verification processes that ensure quality, completeness, and consistency.

With the upcoming emissions disclosure regulations (e.g. Europe’s Corporate Sustainability Reporting Directive, California’s Climate Accountability Package – SB 261 and SB 253, and the SEC climate disclosure rule), your organization may want to consider audit-ready carbon accounting documentation guidance from organizations like the EPA and COSO. Audit-ready carbon accounting software can help. With these increased regulations, your company’s climate related data faces heightened scrutiny. Because of this, your organization needs to think of, manage, and report your climate data with the same degree of rigor as your financial data disclosures.

Gather and review data: Follow the processes established in your GHG inventory management plan and/or controls to collect and input your data into your carbon accounting tools.

Use estimates to fill data gaps: When you create a GHG inventory, it’s not uncommon to be missing data needed to calculate emissions, especially for organizations early in the process. For example, you may only have a portion of your organization’s travel-related data, or you may be missing a few months of utility bills. Using estimates to fill the gaps of missing data is common practice, in the short term, in order to avoid underreporting emissions, given there is transparency of the approach and data used.

If using estimates, you’ll want to account for and track the percentage of estimated data so that you understand where in your operations you need to improve data accuracy. You may also be required to report how much of your GHG inventory is based on estimates with some reporting frameworks like the Carbon Disclosure Project (CDP).

Quantify emissions using emission factors from well-established sources: Emission factors are a number that represent the amount of GHG emissions produced per unit of a specific activity, process, or fuel combustion. An emission factor is typically expressed as the weight (mass) of the GHG emission divided per unit of the emissions-producing activity (e.g. kg of CO2/ton). Emission factors are critical inputs needed to calculate emissions. They may change over time as carbon intensity of activities change or are more accurately understood.

Emission factors should be specific to the type of activity, fuel, process, or technology being assessed in order to provide accurate estimates, and should be regional or country-specific, where available.

For the most accurate and credible GHG measurement, it’s vital to use emission factors from reputable sources, such as those provided by government agencies, international organizations, or industry-specific sources as these databases are compiled based on scientific research, industry data, and regulatory standards. Factors derived from peer-reviewed studies or industry-standard methodologies are generally more reliable. In some cases, organizations may choose to develop emission factors that are custom to their organization’s emissions activities.

Examples of reputable sources for emission factors include:

It is best practice for the emission factor sources selected to be documented in order to facilitate internal quality assurance, consistency and repeatability of calculations, and allow external auditors to easily provide assurance on your calculations. Additionally, it is important to monitor for updates and/or revisions in emission factors to ensure they remain current and reflective of the latest knowledge and practices.

Carbon accounting software, however, can help remove the need for this step. As you upload data, the carbon accounting software automatically applies deeply researched emission factors from well-established sources to calculate your emissions accurately. This built-in feature saves your organization the significant time required for sourcing and maintaining the latest and most reliable emission factors for your activity data. Because the emission factor data sources are documented within the tool, it is easy to pull this information for any third-party assurance needs.

  1. Audit Data

After you have gathered all of your data and emissions calculations, the final step to create your GHG inventory is auditing:

Complete internal quality assurance: For quality assurance, consider following your organization’s internal controls set around data review and verification processes prior to having your GHG inventory reviewed by a third party.

Obtain assurance of data from external audit firm: To provide verification of your organization’s GHG emissions data, a third-party assurance provider will perform the following tasks: review methodologies, verify that protocol requirements have been met, review underlying data management systems, trace data from source to output/report, conduct spot checks of records and inputs, conduct interviews, verify calculations, conversions, etc., determine if reported emissions are complete, GHGP compliant and accurate, and finally provide an assurance statement. The thoroughness of this review builds the case for implementing tight internal controls and meticulous documentation for your organization’s carbon accounting data, sources, calculations, and processes.

Many emerging climate reporting regulations, such as California’s Climate Accountability Package, require third-party assurance. Even if your organization is not yet subject to mandatory emission disclosures, it is best practice to have your GHG inventory undergo an external audit for credibility, however this may not be possible for everyone.

Analyze and Act on Decarbonizing GHG Inventory Results

Once you have completed your GHG inventory, it’s time to take credible climate action to decarbonize your organization. This may include:

  • Developing commentary for different reporting requirements, as needed.
  • Preparing internal and external reports
  • Identifying your largest sources of emissions and their driving factors.
  • Developing reduction targets and strategies to address the largest sources of emissions and improve performance.
  • Developing specific action plans and allocating resources to execute the strategies.
  • Tracking progress.

Carbon accounting can be time-intensive and complex–but as we’ve discussed, leveraging carbon accounting software can alleviate the burden of data collection, measurement, management, and analysis. It can not only help you meet the needs of various emissions reporting requirements, but it can also help you create, manage, and implement a climate strategy that reduces carbon emissions and costs. 

If your business is new to measuring your emissions for its GHG inventory, Climate Vault is here to help with its accessible, simple to navigate Climate Solutions Platform. Contact our team to learn how we empower you to get a handle on your organization’s emissions profile, simplifying your path to sustainability reporting compliance, stakeholder engagement, and effective climate action.