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Sustainability now: Inside the GHG Protocol’s scope 3 update · PwC's accounting podcast

• 0:00
  SPEAKER_00: Thought leadership from PWC's national office.
• 0:09
  SPEAKER_02: Hello, I'm Heather Horn, PWC's U.S.
• 0:12
  SPEAKER_02: sustainability technical leader, and welcome back to PWC's Accounting Podcast.
• 0:18
  SPEAKER_02: This is Sustainability Now.
• 0:20
  SPEAKER_02: In recent episodes, we've explored how sustainability reporting standards continue to evolve.
• 0:26
  SPEAKER_02: Today, we're turning our attention to the GHG protocol and its proposed revisions to the Scope 3 standard to help us break down what it's changing and what it means for companies navigating these updates.
• 0:38
  SPEAKER_02: I'm happy to be joined by Colin Powell, a partner in PWC Canada.
• 0:42
  SPEAKER_02: Colin also serves on the GHG Protocol's technical working group for the Scope 3 standard, giving him a front row seat to these deliberations.
• 0:50
  SPEAKER_02: Together, we're going to discuss the key areas of the Scope 3 standard's proposed changes, the challenges companies may face in implementing them, and what companies should be doing now to prepare.
• 1:02
  SPEAKER_02: Before we get started, just a quick note if you'd like to watch a video version of this conversation, you can find a link in the show notes.
• 1:09
  SPEAKER_02: So with that, let's get started.
• 1:12
  SPEAKER_02: So, Colin, welcome to the podcast.
• 1:14
  SPEAKER_03: Thank you, Heather.
• 1:14
  SPEAKER_02: Very nice to have you on.
• 1:16
  SPEAKER_02: And I think one thing that's very interesting, you know, we've talked a bit before on the podcast with these working groups that have been set up by the GHG protocol, but I do think there's a bit of mystique who's on these working groups.
• 1:27
  SPEAKER_02: How did you get on the working groups?
• 1:29
  SPEAKER_02: How did they work?
• 1:30
  SPEAKER_02: And those types of things.
• 1:31
  SPEAKER_02: So before we even get into the uh background or into what's actually going on, can you just give us a little background of yourself and then specifically how you got involved in this effort?
• 1:44
  SPEAKER_01: Sure.
• 1:44
  SPEAKER_01: Um, so I've been uh quantifying GHG since like 2009, I think.
• 1:49
  SPEAKER_01: So a long time.
• 1:50
  SPEAKER_01: So a long time.
• 1:50
  SPEAKER_01: Uh so that's given me a bit of uh runway to be able to get into these conversations.
• 1:55
  SPEAKER_01: Um I'm a partner in PwC Canada, so I lead our GHG quantification decarbonization team.
• 2:00
  SPEAKER_01: Um, sit within a bigger team of climate change experts and sustainability experts.
• 2:05
  SPEAKER_01: Um, getting on the working group itself, I do believe there were 1200 applicants uh across the world.
• 2:12
  SPEAKER_01: Um they were trying to balance like practitioners, auditors, um, those who may have uh a view from like another standard setting perspective.
• 2:21
  SPEAKER_01: Um and it seems like actually on the working group that I'm on, it does have that balance.
• 2:26
  SPEAKER_01: Um so they were able to split it up, especially the scope three one.
• 2:29
  SPEAKER_01: They were splitting it up into three separate groups, um, focused on particular things.
• 2:34
  SPEAKER_01: And now actually there's a what's called a phase two, and they've brought us all back together.
• 2:38
  SPEAKER_02: Okay.
• 2:39
  SPEAKER_01: Um and I actually do really like this approach because it was a little hard to see what was happening in the other groups.
• 2:44
  SPEAKER_03: Yes.
• 2:45
  SPEAKER_01: Um, so I had to spend my time focusing on my my part.
• 2:48
  SPEAKER_01: But if I really wanted to know what was going on, I'd have to dig into the meetings like anyone here could.
• 2:52
  SPEAKER_03: Yes.
• 2:53
  SPEAKER_01: Um, but I would have to do that.
• 2:54
  SPEAKER_01: And now they're bringing us all back together for phase two, and it seems to be a bit more um evolved and the conversations are uh much more lively and engaged.
• 3:03
  SPEAKER_01: So I'm very happy for that at this point.
• 3:05
  SPEAKER_02: Yeah.
• 3:05
  SPEAKER_02: And I guess um, Colin, just for to level set, just to remind our audience, so there's actually four working groups overall.
• 3:12
  SPEAKER_02: So there's the corporate standard, scope two standard, scope three standard, and then the market-based instruments.
• 3:17
  SPEAKER_02: And so then you're saying within the scope three standard, there's actually there were three groups within that.
• 3:23
  SPEAKER_02: And then now you guys are all coming back to phase two.
• 3:26
  SPEAKER_01: And they did a similar structure, I do believe, in the other uh groups to be able to have people focus on particular parts of it.
• 3:32
  SPEAKER_01: Um, and now they're bringing it all back together.
• 3:34
  SPEAKER_01: And I think it's phase two for most of the groups.
• 3:36
  SPEAKER_01: Yeah.
• 3:37
  SPEAKER_02: And I think you made a very important point there that there is a huge amount of public information available on the website.
• 3:44
  SPEAKER_02: And I do think this is something that for people not on the working groups, this is just a huge benefit that you actually can go on the website, you can see all these sub-working groups, you can see the minutes, you can see the materials, and really, I think get a flavor of what's going on, but not as good, of course, as hearing directly from you.
• 4:03
  SPEAKER_02: But I I really do um, you know, one of our recommendations to the GHG protocol, along with many other people in our letter in 2023, was you need to improve governance.
• 4:12
  SPEAKER_02: And I definitely think this is a huge benefit that they've made this change.
• 4:17
  SPEAKER_01: It's a dramatic improvement.
• 4:18
  SPEAKER_01: And I and they talk about it a lot, honestly, during the meetings.
• 4:21
  SPEAKER_01: So comparing it to the original uh approach to developing the standard, which I believe was just like completely black box people sitting in a basement figuring it out, and that's quite clear, and they're they're deliberately making it more transparent.
• 4:36
  SPEAKER_01: Um, you can see everything, it's all online.
• 4:38
  SPEAKER_01: I it will take a very long time to go and dive in if anyone is very interested.
• 4:43
  SPEAKER_01: But yes, like I do have a bit of that inside view and happy to discuss that.
• 4:47
  SPEAKER_02: Yes.
• 4:48
  SPEAKER_02: And so then just again, a few more, I'll call them almost like logistical issues.
• 4:52
  SPEAKER_02: So, how many people then are on your working group slash the subgroup that you were on?
• 4:58
  SPEAKER_02: And maybe the approach as well that's taken.
• 5:01
  SPEAKER_01: Yeah, so there was about 30 on each of the subgroups within the scope three.
• 5:05
  SPEAKER_02: Oh wow, so like 90 people total.
• 5:07
  SPEAKER_02: Okay.
• 5:07
  SPEAKER_01: Um, and now when they're so not everyone is speaking all the time.
• 5:12
  SPEAKER_01: Um, there is probably you know 20 people who generally go to the meetings or have gone to the meetings.
• 5:18
  SPEAKER_01: I would say five to 10 people speak openly, um, but then they do polling either during the meeting or after the meeting.
• 5:25
  SPEAKER_01: And generally that's like, you know, hitting probably 25 to out of 30 people uh are responding.
• 5:31
  SPEAKER_01: Um they generally do like to consider quorum when they're making decisions, um, at least draft decisions.
• 5:37
  SPEAKER_01: So the the governance is built in there to understand that they generally need consensus on on things, which is they've defined it as like there's no like real roadblocks for agreement on things.
• 5:48
  SPEAKER_01: So if someone is like, I will not agree to this, I uh I have a firm stand on this, they may want to continue uh talking or or put it aside and come back to it.
• 5:57
  SPEAKER_01: So that approach is definitely there, but you can see there is strong consensus in a lot of the changes they put forward, at least in the working group.
• 6:03
  SPEAKER_02: Yeah, and I guess maybe that was actually going to my follow-up question because often, you know, we in the firm have working groups.
• 6:10
  SPEAKER_02: There's lots of different working groups, and often you find in the working groups people are coming at things with maybe their own particular bias or otherwise.
• 6:18
  SPEAKER_02: And so sometimes it is hard to come to consensus because people have strong views, but you're saying you actually feel like you have been fairly successful and in being able to reach that consensus.
• 6:31
  SPEAKER_01: Yeah, and it and it could be just the subject matter that's been covered to date.
• 6:35
  SPEAKER_01: Um, so we've been talking about like um allocation processes in scope three, uh, the uncertainty analysis, um, looking at specific things in category 15.
• 6:46
  SPEAKER_01: And so there's not nothing that controversial there other than addition of requirements.
• 6:51
  SPEAKER_01: But now we're getting into minimum boundary.
• 6:53
  SPEAKER_01: And so that is where I think there'll be a lot of particular sector-specific input and challenges.
• 6:59
  SPEAKER_01: And I'm already starting to see that.
• 7:00
  SPEAKER_01: So we had a meeting on Thursday of last week and a lot of discussion on category four and nine.
• 7:06
  SPEAKER_01: And like we don't need to get into it today, but very, you know, people who would always have emissions in that category who may have a particular way of doing it, where there may be also sector-specific frameworks that may not agree with the GHC protocol, that's where we're going to start to see that that the challenges, I think.
• 7:22
  SPEAKER_01: And it's an opportunity for those who are not on those working groups to really um have an input.
• 7:27
  SPEAKER_01: And that's where you would read the minutes, uh, be able to understand like what from a draft perspective, what it looks like, and then provide comments.
• 7:33
  SPEAKER_02: Yeah, and I guess um maybe again, just background.
• 7:36
  SPEAKER_02: So you're meeting every few weeks, is that right?
• 7:39
  SPEAKER_01: Every three weeks, every three weeks.
• 7:40
  SPEAKER_02: Every three weeks.
• 7:41
  SPEAKER_02: And then who is preparing all the papers and developing the initial points of view that are being discussed?
• 7:47
  SPEAKER_01: Yeah, and it's a massive undertaking.
• 7:49
  SPEAKER_01: And so for the scope three team, there's three folks from WRI.
• 7:53
  SPEAKER_01: Um, they've been managing the whole process, developing the decks for us to walk through, doing pre-reads, draft content, draft uh language of the standard that is also uh co-developed with some of the technical working group members.
• 8:06
  SPEAKER_01: Um so they're putting an enormous amount of effort, and I thank them very much for doing that to give us the content to discuss.
• 8:13
  SPEAKER_01: Um, and so that I do believe there's other working groups for the other um standards as well.
• 8:18
  SPEAKER_01: And so it's just an enormous effort.
• 8:20
  SPEAKER_01: And one really interesting thing is that that's come up a few times, just because it's been so long since the standard has been revised, they have committed to doing this every five years at least.
• 8:29
  SPEAKER_01: Oh wow.
• 8:29
  SPEAKER_01: Yeah.
• 8:30
  SPEAKER_01: So it is uh just an enormous undertaking.
• 8:32
  SPEAKER_01: And I doubt you're gonna see such a wholesale revision, which my opinion was absolutely necessary.
• 8:38
  SPEAKER_01: Yes.
• 8:38
  SPEAKER_01: Uh, but at least the intention to do the revision every five years is there.
• 8:42
  SPEAKER_02: And if from a level of knowledge point of view, in general, would you say the people involved in these working groups do have a good understanding of the practice issues?
• 8:53
  SPEAKER_02: And also, you mentioned people with prior experience with reporting, like what good reporting is, like you said on quotes, because there could be different definitions.
• 9:02
  SPEAKER_01: But yeah, it's clear.
• 9:04
  SPEAKER_01: Uh you can tell that everyone generally knows what they're talking about, which is very important.
• 9:08
  SPEAKER_01: Yeah, very, very important.
• 9:09
  SPEAKER_01: So it shows they did a very good job of picking the worker groups.
• 9:12
  SPEAKER_01: Um, and it and it's important because the structure they've they've put around decision making has been pretty good and they've been adhering to it.
• 9:20
  SPEAKER_01: So there's been five principles they've focused on.
• 9:23
  SPEAKER_01: So any decision that is made, basically you're looking at like, does it maintain scientific integrity?
• 9:28
  SPEAKER_01: Does it align with the GHC protocol's principles like conservativeness, um, completeness?
• 9:33
  SPEAKER_01: Is it gonna drive ambitious action?
• 9:35
  SPEAKER_01: Um, is it interoperable?
• 9:37
  SPEAKER_01: Is is is it gonna align with the other standards basically?
• 9:40
  SPEAKER_01: Is it interoperable?
• 9:41
  SPEAKER_01: And then um, is it feasible?
• 9:44
  SPEAKER_01: Can you actually do the the changes?
• 9:47
  SPEAKER_01: Can you actually make it happen?
• 9:48
  SPEAKER_01: And that's a key thing.
• 9:49
  SPEAKER_01: And I think this will come up.
• 9:50
  SPEAKER_01: We can talk about it.
• 9:51
  SPEAKER_03: I want to come back to this.
• 9:52
  SPEAKER_03: Yes.
• 9:53
  SPEAKER_01: And so generally the the approach is that so you have to have a knowledge of like how these things are done and you know what other standards have been out there on THES and how you've applied it before.
• 10:02
  SPEAKER_01: And so that is the decision-making process.
• 10:04
  SPEAKER_01: So going through each of those five, saying, like, okay, well, if we make this change, is it gonna promote this thing or is it gonna hurt this thing?
• 10:10
  SPEAKER_01: Um and we've been pretty good at adhering to that.
• 10:12
  SPEAKER_01: So I think that's been a good framework and a good change from the initial development of the standard, which I don't think had such a Yes, these types of principles.
• 10:20
  SPEAKER_02: Well, I definitely want to come back to both feasibility and the broader standard setting uh approach.
• 10:26
  SPEAKER_02: So the principles then, were those developed by the Independent Standards Board?
• 10:30
  SPEAKER_02: Or do you know who was that WBCSD, WRI?
• 10:34
  SPEAKER_01: The original principles.
• 10:34
  SPEAKER_02: Well, these five principles that you're working towards now.
• 10:37
  SPEAKER_01: So that was developed with uh the IBS, the ISBE, I think, and the uh WRI together.
• 10:43
  SPEAKER_01: Okay.
• 10:43
  SPEAKER_01: And they were basically presented to us as if like, okay, this is the way we're going to work.
• 10:47
  SPEAKER_01: There was a discussion of like, are these the right things?
• 10:50
  SPEAKER_01: Um again, consensus-based, like no one was saying, okay, no, I don't want to gauge it against this, or I have an additional one.
• 10:57
  SPEAKER_01: So it was generally like accepted as the way forward.
• 10:59
  SPEAKER_01: Okay.
• 11:00
  SPEAKER_01: And it's worked.
• 11:00
  SPEAKER_02: Yeah, it sounds like it.
• 11:02
  SPEAKER_01: And it you point back to it.
• 11:03
  SPEAKER_01: Um, and and you see it's working because the working group members point back to that thing when there's a bit of like a maybe a head-to-head on something.
• 11:12
  SPEAKER_01: Yeah.
• 11:12
  SPEAKER_01: It's like let's follow back on these like uh five principles, let's evaluate it against that, um, and we can move on if there's um Yeah, because I guess absent those principles, then how are you trying to decide?
• 11:24
  SPEAKER_02: So that is sounds like it's a really good starting point.
• 11:27
  SPEAKER_03: Yeah.
• 11:27
  SPEAKER_02: Okay, so one more question before we get into it.
• 11:30
  SPEAKER_02: So you mentioned that you have three subgroups.
• 11:33
  SPEAKER_02: So what are the three subgroups?
• 11:34
  SPEAKER_02: And then what was your subgroup focused on?
• 11:37
  SPEAKER_01: Yeah, so there was an inventory quality one, and and we can touch on that.
• 11:40
  SPEAKER_01: That was really working through um the different data types.
• 11:44
  SPEAKER_01: So, what data would you use?
• 11:45
  SPEAKER_01: And we can talk on um one particular thing, which has been, at least in draft, some data disaggregation and reporting disaggregation.
• 11:54
  SPEAKER_01: Um, there was a few specific, so you had category specific uh groups.
• 11:58
  SPEAKER_01: So I was on one that was category 15.
• 12:01
  SPEAKER_01: Um, the the new category 16.
• 12:04
  SPEAKER_01: This is a draft, new draft.
• 12:05
  SPEAKER_02: Can't wait to talk about this.
• 12:07
  SPEAKER_01: And then um the last thing we worked on was category 14.
• 12:10
  SPEAKER_01: So there's a been an expansion of the minimum boundary there.
• 12:13
  SPEAKER_01: Um 14 was franchises, it's could be draft franchises and lens licensing.
• 12:19
  SPEAKER_01: So happy to talk about that.
• 12:20
  SPEAKER_03: Okay.
• 12:21
  SPEAKER_01: Um, and the other um was focused more on like what should be in and out.
• 12:26
  SPEAKER_01: So exclusions, um applying different parts of the like other standards.
• 12:30
  SPEAKER_01: So what was decided in the corporate standard, how do we apply it to the scope three piece, really?
• 12:35
  SPEAKER_02: Yeah.
• 12:36
  SPEAKER_02: So lots of follow-up questions, but you mentioned minimum boundaries.
• 12:39
  SPEAKER_02: And I think for anyone who listened ESRS wave one or who otherwise is is entering into the world of required reporting, this question of minimum boundaries, huge question.
• 12:50
  SPEAKER_02: Obviously, that's been in place in the GHG protocol.
• 12:53
  SPEAKER_02: I think there's questions under, you know, potentially the other frameworks if you should apply them or not.
• 12:58
  SPEAKER_02: But sticking, so for this purpose, really sticking with the GHG protocol, what were the discussions?
• 13:03
  SPEAKER_02: Well, maybe we can remind listeners what those are.
• 13:05
  SPEAKER_02: Yeah.
• 13:06
  SPEAKER_02: And then what's some of the areas that you guys were focused on in looking at those?
• 13:10
  SPEAKER_01: Yeah, and we're actually still mid um discussion on these.
• 13:13
  SPEAKER_01: There have been proposed minimum boundaries.
• 13:15
  SPEAKER_01: Um, the last meeting I was at, I think we got to category seven.
• 13:19
  SPEAKER_01: And so the next meeting will continue.
• 13:21
  SPEAKER_03: Yeah.
• 13:22
  SPEAKER_01: Um, but there's a few like broader structural changes.
• 13:26
  SPEAKER_01: Um, one of them is related to category two and how that's going to be treated.
• 13:30
  SPEAKER_01: So anything, anything capital um equipment and how is it going to be treated?
• 13:34
  SPEAKER_01: Is it going to be amortized or is it going to be the same way, which is like point of sale?
• 13:39
  SPEAKER_01: Um and that actually impacts a lot of other categories.
• 13:43
  SPEAKER_01: An additional change is do you incorporate the capital equipment associated with upstream uh emissions?
• 13:50
  SPEAKER_01: So uh from a transportation and distribution perspective, if you are paying or paying someone to deliver your good, um, do you account for the upstream emissions?
• 14:01
  SPEAKER_01: That's one addition to the minimum boundary or draft.
• 14:04
  SPEAKER_01: And then do you account for the capital equipment to produce those fuels, for example?
• 14:08
  SPEAKER_01: Again, this is all in discussion.
• 14:10
  SPEAKER_01: There's nothing that is final, but that is the type of conversations we're having, which basically is like, okay, how how much of that cradle to grave are you including in the accounting part of it?
• 14:21
  SPEAKER_01: Because before that was all optional, it was not in the minimum boundary.
• 14:24
  SPEAKER_02: Yeah.
• 14:25
  SPEAKER_02: And I think it's important for this.
• 14:27
  SPEAKER_02: And again, I think most of our listeners will be aware of minimum boundaries, but I will very simplistically explain them to say that if it's in the minimum boundary, then you consider it and measuring your scope three.
• 14:38
  SPEAKER_02: And if it's outside the minimum boundary or optional, then you can say, okay, that's outside.
• 14:42
  SPEAKER_02: And really the idea there is so you don't have to keep measuring your GHG emissions.
• 14:47
  SPEAKER_02: I think the original standard says ad infinitum.
• 14:50
  SPEAKER_02: So forever.
• 14:51
  SPEAKER_02: And I mean, you can very quickly go down some rabbit holes, even sounds like you almost were going down some rabbit holes.
• 14:57
  SPEAKER_02: So maybe on those two particular issues, starting with uh, you know, whether or not you include the equipment otherwise, and then the the capital, where is the working group coming out?
• 15:08
  SPEAKER_02: Because it sounds like it could be more complicated.
• 15:10
  SPEAKER_01: I think so.
• 15:11
  SPEAKER_01: It doesn't seem like there's strong consensus yet.
• 15:14
  SPEAKER_01: Um, they did uh there's going to be a very focused discussion on how to treat category two, anything like capital equipment.
• 15:20
  SPEAKER_01: Um so it really hasn't come up.
• 15:22
  SPEAKER_01: Um generally, that does seem like it impacts, it's very cross-cutting, cross-category cutting.
• 15:27
  SPEAKER_01: So it seems like something we should discuss prior to a lot of those things, but it is like, you know, we're we're we're trundling along as best we can.
• 15:35
  SPEAKER_01: Um it seems like there's a bit of a split on how um we want to incorporate that, say, in upstream fuels.
• 15:43
  SPEAKER_01: So upstream fuels, it may be harder to allocate um the impact of like the actual infrastructure to a fuel than say electricity, um, which is also a change to because before category two or category three did not mention electricity.
• 15:58
  SPEAKER_01: It was only fuels.
• 15:59
  SPEAKER_02: I know we're getting into the weeds here, but like I think our listeners are interested at least in a taste.
• 16:03
  SPEAKER_01: Yeah, so like these are the decisions, right?
• 16:05
  SPEAKER_01: It's like it said fuels in category three.
• 16:08
  SPEAKER_01: And so the uh WRI said, well, why don't we expand it to electricity?
• 16:13
  SPEAKER_01: And then although that is scope two.
• 16:15
  SPEAKER_01: Yeah, so so then why don't we add on and add on the infrastructure to that?
• 16:19
  SPEAKER_01: And so then how do you amoritize that either either over the time period that the equipment has existed and then per unit fuel or electricity?
• 16:28
  SPEAKER_01: So these are the things that are uh really getting into, yeah, which I think is important.
• 16:32
  SPEAKER_01: Like we have to have these discussions.
• 16:35
  SPEAKER_01: It's just a little bit like hard to gather gather everyone's focus and attention and like balance the different competing priorities.
• 16:44
  SPEAKER_02: Yeah, and I think even this amortization question has come up a lot with even office buildings or otherwise, or if you've built a factory, then how do you consider those emissions?
• 16:53
  SPEAKER_02: Yeah.
• 16:53
  SPEAKER_02: I also do think we're we're starting to hit the edge of feasibility, at least in my view, because you start to get where then everyone is just counting all emissions, and so it it starts to lose a bit of meaning.
• 17:05
  SPEAKER_02: So has that come up at all in the discussions?
• 17:08
  SPEAKER_01: In this discussion, I think a lot of it was around feasibility in that, you know, for this bucket, emission factors are are probably fine to obtain.
• 17:15
  SPEAKER_03: Yeah.
• 17:16
  SPEAKER_01: This one, no idea where you'd even start to get emission factors for this.
• 17:20
  SPEAKER_01: So what would you do?
• 17:21
  SPEAKER_01: Are you are you going to make it zero, which is also not correct?
• 17:24
  SPEAKER_01: Or so there's been that discussion, I think, has been the primary one.
• 17:28
  SPEAKER_01: Um and again, there's competing priorities.
• 17:31
  SPEAKER_01: Some folks on the working groups are like, well, we should be, you know, at infinite.
• 17:34
  SPEAKER_01: I'm like, I don't know why you would be stopping.
• 17:37
  SPEAKER_01: Um, others are like, well, I don't have the data for this, so how could I, how am I intending to like fill the gap?
• 17:42
  SPEAKER_01: How can I, how can I be complete in my inventory?
• 17:45
  SPEAKER_02: Yeah.
• 17:45
  SPEAKER_02: And it's one of the things we've been talking a more broadly when it comes to standard setting in the sustainability space, is if you look at the relative maturity or we would say infancy of sustainability reporting, then aren't we better off with the 80%?
• 17:58
  SPEAKER_02: Yeah.
• 17:58
  SPEAKER_02: And then it sounds a bit like you're talking about, you know, the 20% if we're talking about 80-20 rule.
• 18:03
  SPEAKER_02: And so don't we want everyone to do a really, really good job first before we start adding this?
• 18:09
  SPEAKER_02: So has any of that flavor come up?
• 18:11
  SPEAKER_01: It's come in mostly because so when the working groups, the sub the sub-working groups came back together, it was kind of a presentation of how everyone had evolved and the draft decisions made.
• 18:22
  SPEAKER_01: And so there was a lot of input to that conversation like, what does a good inventory look like?
• 18:27
  SPEAKER_01: Um, how do you disaggregate the data to show what is the different levels of quality?
• 18:33
  SPEAKER_01: Um, and then how basically you could uh present an inventory that is very much like still complete, but as best as you can get at the time.
• 18:42
  SPEAKER_01: Yes.
• 18:42
  SPEAKER_01: And you're seeing that, I think that will still evolve, obviously, as a different comment uh comes in.
• 18:47
  SPEAKER_01: But like you're gonna see a change in the way people are reporting these things ultimately.
• 18:52
  SPEAKER_01: And then I think that will show of like you'll see an evolution in data quality because of that.
• 18:57
  SPEAKER_01: There's a lot of discussion of like, you know, should you be forced to change your data quality over time?
• 19:03
  SPEAKER_01: Like, should that be a shall in the inventory in the GHC protocol?
• 19:07
  SPEAKER_01: And then again, the disaggregation of the recording by data quality tier, I think you'll see that probably be a shall as well.
• 19:13
  SPEAKER_01: So that is a big change.
• 19:14
  SPEAKER_02: That will be a huge change.
• 19:16
  SPEAKER_02: And I think maybe can you just step back and give a brief explanation of what that means?
• 19:20
  SPEAKER_02: And then I'm gonna equate it to financial reporting.
• 19:22
  SPEAKER_01: Yeah, yeah.
• 19:23
  SPEAKER_01: So there was, uh I think there was a big discussion of like, how do I, you know, if I disclose my scope one, two, three, I don't know how good that quality is.
• 19:31
  SPEAKER_01: In the previous or the current standard, there is an indication that you should at least have a discussion on data quality.
• 19:37
  SPEAKER_01: You should probably talk about where your emission factors come from, where your data comes from.
• 19:40
  SPEAKER_01: And now the push is well, how do we make sure that like a reader of this in information knows how good the data is?
• 19:48
  SPEAKER_01: Um, and so they went through, I don't even know the number, like eight or nine different ways to chop up an inventory based on the data that went into it.
• 19:58
  SPEAKER_01: Um, and very similar to like a PCAF data quality score, which um rates it based on the data that goes in.
• 20:05
  SPEAKER_01: Um, they were trying to find a way to do this.
• 20:07
  SPEAKER_01: Um, and so it seems like the way they have landed, and this is again all draft, and this is all open, uh you can look it on the internet, um, is specific data, non-specific data, and then spend based data.
• 20:19
  SPEAKER_01: And so if you were to disclose on your scope three or scope one or scope two, you would have a number for your scope one in specific.
• 20:26
  SPEAKER_01: So that's where you know exactly the fuel and you know the emission factor for that fuel, non-specific.
• 20:32
  SPEAKER_01: So maybe you're using proxies and then spend base.
• 20:35
  SPEAKER_01: So you'd have three numbers for each emission source, and then you would have for each category in scope three, you would have three numbers.
• 20:43
  SPEAKER_02: Yeah, see, this is where it starts to get.
• 20:45
  SPEAKER_02: I I mean, it's very complicated then.
• 20:47
  SPEAKER_01: Yes.
• 20:48
  SPEAKER_01: That was, you know, there wasn't a lot of discussion with a big group there because it was a subgroup decision.
• 20:53
  SPEAKER_01: So I I think the time for comment on that will will come.
• 20:56
  SPEAKER_01: Um, but that will be a massive change.
• 20:59
  SPEAKER_01: Yes, obviously.
• 21:00
  SPEAKER_03: Yeah.
• 21:00
  SPEAKER_01: But when I think of it, I like as as I prepare inventories for our clients, for example, we do have that information.
• 21:07
  SPEAKER_01: Like we know, like if we were to a client uses Excel, for example, like that's not a hard thing to do.
• 21:12
  SPEAKER_01: It just may be a bit of a manipulation of the estimations and things like that.
• 21:16
  SPEAKER_01: I guess it'll be a bit more challenging if you have a GHG accounting tool where the infrastructure in that tool is not there to disaggregate the reporting.
• 21:24
  SPEAKER_01: Right.
• 21:24
  SPEAKER_01: So it'll be an interesting change.
• 21:26
  SPEAKER_01: And we'll see what actually the final version comes out.
• 21:29
  SPEAKER_02: But yeah, ultimately.
• 21:30
  SPEAKER_02: I mean, it's interesting.
• 21:31
  SPEAKER_02: I said I'd equate it to financial reporting because people from a financial reporting background will remember for fair values.
• 21:37
  SPEAKER_02: We they brought in a fair value hierarchy at level one, two, three.
• 21:41
  SPEAKER_02: And that was huge questions about time as well.
• 21:43
  SPEAKER_02: It's like this is a lot of data.
• 21:45
  SPEAKER_02: Is this gonna be helpful data?
• 21:46
  SPEAKER_02: And then that, I mean, ultimately now this that's been in place for quite a long time.
• 21:51
  SPEAKER_02: And people are used to reporting the information.
• 21:54
  SPEAKER_02: And and I I think people have found it useful, but also in general, we're reporting less.
• 22:00
  SPEAKER_02: Numbers there, you're not, you know, these different scopes and the different categories.
• 22:04
  SPEAKER_02: So uh it will be interesting to see how that discussion with the broader group comes in.
• 22:09
  SPEAKER_02: Other areas then where there's been sort of something that's come from the well, actually, sorry, I'm I meant to ask you one more question on the minimum boundaries.
• 22:19
  SPEAKER_02: Because one of the things we've talked about previously within PwC on minimum boundaries that I've heard you say is that, well, this should actually not be all the specification, but should just be principles, which I think there's obviously pros and cons.
• 22:35
  SPEAKER_02: And I I know where you stand, but can you just share what are some of those pros and cons and then why the working group seems like it's going in a different direction?
• 22:45
  SPEAKER_01: Yeah, I mean, it's there's been discussion throughout this whole process of like how specific do you want the standard to be?
• 22:51
  SPEAKER_03: Yes.
• 22:52
  SPEAKER_01: Um, and a lot of people are on the principles-based side, like, you know, we have five principles in the GSU protocol.
• 22:58
  SPEAKER_01: If you're generally aligning with them, how um like should you be aligned with the protocol?
• 23:03
  SPEAKER_01: Um, and then it's like, well, how do you audit that?
• 23:06
  SPEAKER_01: How do you audit that?
• 23:07
  SPEAKER_01: You know, you've tried to get completeness in the emission source.
• 23:10
  SPEAKER_01: And so the other side of it is we need to provide prescriptive guidance for every single calculation of an emission source.
• 23:16
  SPEAKER_01: Like, how do you find which categories are relevant and not relevant?
• 23:20
  SPEAKER_01: And so there has been a balance of this throughout, but but it's almost like there's been of a course correction because some of the complaints about the existing GHC protocol is just very vague.
• 23:30
  SPEAKER_01: It's hard to apply it to different sectors.
• 23:33
  SPEAKER_01: And so I think they're doing a bit of, as I said, course correct, but like you're never going to get to a GHC protocol for every single sector or every single problem or every single thing.
• 23:42
  SPEAKER_02: Or if something will change as soon as you get there.
• 23:45
  SPEAKER_02: Even if you did, then within a year, probably something would have changed.
• 23:49
  SPEAKER_01: I have clients come to me and say, hey, where's the GHC protocol section on data centers?
• 23:53
  SPEAKER_01: And I'm like, uh, it doesn't exist.
• 23:55
  SPEAKER_03: Exactly.
• 23:56
  SPEAKER_01: But think through the five principles of the GHG protocol, and we can come up with an approach that generally aligns with those things.
• 24:02
  SPEAKER_01: Yeah.
• 24:02
  SPEAKER_01: So I do like that approach personally.
• 24:05
  SPEAKER_01: Yes.
• 24:05
  SPEAKER_01: Um, it does seem like the the actual standard would lean towards more prescriptive guidance.
• 24:10
  SPEAKER_01: Um, but it's almost to a fault.
• 24:12
  SPEAKER_01: Like I've seen for one of the categories, they're they're trying to list all the um activities that would be there.
• 24:19
  SPEAKER_01: And I was like, you know, there's 30 activities here, but there could be 10,000.
• 24:23
  SPEAKER_01: So where do you stop?
• 24:24
  SPEAKER_03: Yes.
• 24:25
  SPEAKER_01: Um, but it also gives like an example in your head of what they're thinking of uh when you're thinking of those particular categories.
• 24:31
  SPEAKER_02: Yeah.
• 24:31
  SPEAKER_02: I mean, have you or has some in a consideration of sort of a combined approach?
• 24:35
  SPEAKER_02: So principles and examples, which is sort of what you just suggest.
• 24:39
  SPEAKER_01: I think that's where it's leading.
• 24:40
  SPEAKER_01: Like they're not going to get rid of the principles, right?
• 24:42
  SPEAKER_01: So they're there and they're they can be leaned upon when there's maybe ambiguity or it's a application that may be a bit harder to see and eke out into the actual written standard.
• 24:53
  SPEAKER_01: So it'll still be there.
• 24:54
  SPEAKER_01: So it is, I think it will end up being beat quite hybrid at the end of the way.
• 24:57
  SPEAKER_01: Yeah.
• 24:58
  SPEAKER_02: Yeah.
• 24:58
  SPEAKER_02: I mean, again, I don't want to get into all the other standard setting right now, but this has been an area of debate under ESRS.
• 25:06
  SPEAKER_02: I think there's a few different approaches where we did come to, at least for now, you could apply these minimum boundaries.
• 25:13
  SPEAKER_02: Um, I think ISSB, there's probably a bit more debate.
• 25:17
  SPEAKER_02: And so it will be interesting to see what happens in the interaction of the standards.
• 25:22
  SPEAKER_02: But I think what we're hearing from reporters is actually a bit more prescriptive, is probably helpful because then where do you stop and and how do you think about something, particularly, you know, in cases where there is industry guidance, then that's quite helpful.
• 25:37
  SPEAKER_02: But if there's not, then it's a bit difficult without the minimum boundaries.
• 25:42
  SPEAKER_01: And one of the just to continue that, like one of the interesting, more prescriptive things is there seems to be a move to put a 90, 95% like ex inclusion requirement there.
• 25:55
  SPEAKER_01: Um I that was part of my working group.
• 25:57
  SPEAKER_01: That was a part of a few other working groups, at least for discussion.
• 26:00
  SPEAKER_01: Yes.
• 26:00
  SPEAKER_01: Um, and so the number was arrived at 95%, which means you have to include 95% of your emissions, your scope three emissions in your inventory.
• 26:09
  SPEAKER_02: Um I other than you have to know 100% of your emissions.
• 26:15
  SPEAKER_01: It's like so how do you know it's fine?
• 26:16
  SPEAKER_01: Exactly.
• 26:17
  SPEAKER_01: Uh, and then the response is generally like, well, you have to estimate those.
• 26:20
  SPEAKER_01: And well, it's like, oh, well, if I'm estimating, I would do it.
• 26:23
  SPEAKER_03: Yes.
• 26:23
  SPEAKER_01: So there's a bit of a rabbit hole there, and I don't think it was actually solved.
• 26:27
  SPEAKER_01: And so I I wonder if that will come back again.
• 26:30
  SPEAKER_02: I bet it will.
• 26:31
  SPEAKER_02: Yeah, yeah.
• 26:32
  SPEAKER_01: There was no like firm like, oh yes, let's do this.
• 26:35
  SPEAKER_01: So that may be an open thing that will come back and probably more direct comment.
• 26:39
  SPEAKER_02: Yes.
• 26:40
  SPEAKER_02: Yeah.
• 26:40
  SPEAKER_02: Yeah.
• 26:41
  SPEAKER_02: So let's go to the specific categories then.
• 26:44
  SPEAKER_02: Because you mentioned 14, 15, 16.
• 26:45
  SPEAKER_02: Yeah.
• 26:46
  SPEAKER_02: 16.
• 26:46
  SPEAKER_02: And so let's start with 14 and then lots of questions on 15, but let's go to 14 first.
• 26:52
  SPEAKER_01: So 14, they've, I mean, there was a discussion of where to put this because it was um something on licensing.
• 26:57
  SPEAKER_01: And I think originally they had made licensing 16.
• 27:01
  SPEAKER_01: So it was a new category.
• 27:03
  SPEAKER_01: Um, but it's been draft put into 14 as like franchises and licensing.
• 27:09
  SPEAKER_01: And so the expectation is that, you know, if I have a software license, which would be like a um more digital service, yes, um, you would account for the emissions associated with the downstream impacts of those of that license.
• 27:23
  SPEAKER_01: Um, but then there's also like hard licenses.
• 27:25
  SPEAKER_01: So um, if I'm selling a design to a home, um, I would account for the emissions associated with the operation of that home, but also scope one, two, and three of that.
• 27:34
  SPEAKER_01: So that's well, building the home too.
• 27:36
  SPEAKER_01: Yeah, yes, yeah.
• 27:37
  SPEAKER_01: Yeah.
• 27:38
  SPEAKER_01: So that's another change of like when franchises originally um on its own, the minimum boundary was scope one and two of the franchise.
• 27:45
  SPEAKER_01: Right.
• 27:45
  SPEAKER_01: Now they're now it's scope one, two, three of the franchise.
• 27:49
  SPEAKER_01: Um, and so then they also expanded the category to include licensing.
• 27:52
  SPEAKER_01: Um it is still very draft.
• 27:55
  SPEAKER_01: You can read um where it is in the minutes.
• 27:57
  SPEAKER_01: Um, we haven't really aligned on much there, but it's certainly the intention is to expand that category.
• 28:03
  SPEAKER_02: So before uh we go to 15 and then 16, one of the other big debates is this question of we say scope three of three.
• 28:13
  SPEAKER_02: Yeah.
• 28:13
  SPEAKER_02: So when you're measuring your scope three emissions, is it just the scope one and two?
• 28:17
  SPEAKER_02: And is it or does it also include scope three?
• 28:20
  SPEAKER_02: Yeah.
• 28:21
  SPEAKER_02: Current GHG protocol, most places is mostly scope one and two.
• 28:27
  SPEAKER_02: And I think that is a bit easier for people, but it sounds like now you guys are moving more towards the scope three of three, but that again becomes a bit circular.
• 28:36
  SPEAKER_01: Yeah, yeah.
• 28:37
  SPEAKER_01: And where's the data being reported?
• 28:39
  SPEAKER_01: Yeah.
• 28:39
  SPEAKER_01: Yeah.
• 28:39
  SPEAKER_01: So I and yes, so it will it is expanded in the draft version of what we see.
• 28:45
  SPEAKER_02: Obviously, way more to come.
• 28:46
  SPEAKER_01: Yeah, way, maybe more to come.
• 28:47
  SPEAKER_01: And I think a lot of discussion there was like, where are we getting this data?
• 28:52
  SPEAKER_01: Um, and generally the response in the discussion is well, if we require it, more people will report on the scope three, and so then it will be available to you.
• 29:00
  SPEAKER_01: And so it's a bit of an evolution, obviously.
• 29:02
  SPEAKER_01: And I think we have always have this discussion.
• 29:04
  SPEAKER_01: It's like, well, if I if I require something, you're gonna see more of it, and then it'll be like a self-fulfilling prophecy.
• 29:11
  SPEAKER_01: Um, so we'll see how it goes.
• 29:14
  SPEAKER_01: Um, you'll have issues with completeness, I think, at the end of the day, and and some very wild estimates um for these things.
• 29:20
  SPEAKER_01: But I think it happened with PCAF's evolution too, when they had the the timeline for including different sectors, including scope three of those companies for different sectors.
• 29:29
  SPEAKER_01: Like you're you're trying to fill that gap somehow, and you're maybe using a revenue-based approach or something that's that at least makes it non-speaking.
• 29:36
  SPEAKER_02: Or lag.
• 29:37
  SPEAKER_02: I mean, yeah, yeah.
• 29:38
  SPEAKER_02: Like you're gonna wind up with a lot of data lag as well.
• 29:41
  SPEAKER_03: Yeah.
• 29:42
  SPEAKER_02: Yeah.
• 29:42
  SPEAKER_02: Uh one question I meant to ask you on the principles, uh, because we didn't pursue this very much, is on the amortization.
• 29:48
  SPEAKER_02: So this is a question that has come up a lot in terms of do you include some type of amortized emissions for a building or otherwise?
• 29:57
  SPEAKER_02: And again, I guess you could build that into a principle, but that does seem like the type of thing that you do need to be fairly specific about what the expectations are.
• 30:08
  SPEAKER_02: What was the thinking about saying, okay, we should be including some type of amortized emissions?
• 30:14
  SPEAKER_01: I think it was alignment with financial reporting at the end of the day.
• 30:17
  SPEAKER_01: So and I imagine that's where it'll land because and that goes to the interoperability uh part of the like decision-making criteria where the intention and IFRS has gone this way, SRS has gone this way, just like in aligning with the way you're reporting your yeah, so connectivity to the financial statements.
• 30:32
  SPEAKER_02: Absolutely.
• 30:33
  SPEAKER_01: Yeah, yeah.
• 30:33
  SPEAKER_01: Yeah.
• 30:34
  SPEAKER_01: So I think that's where it'll land, but we'll see.
• 30:36
  SPEAKER_02: Okay, more to come.
• 30:37
  SPEAKER_02: Yeah.
• 30:38
  SPEAKER_02: So okay, so let's go back.
• 30:40
  SPEAKER_02: So we talked about category 14.
• 30:41
  SPEAKER_02: Now let's talk about current category 15 before we get to this new category.
• 30:46
  SPEAKER_01: Yeah.
• 30:46
  SPEAKER_01: So uh current 15, basically lending, investment activities, through uh, you know, debt project finance with known use proceeds is there, but otherwise, yes.
• 30:56
  SPEAKER_01: So it was pretty bare bones, and ultimately just because it hadn't evolved, it's been so long.
• 31:01
  SPEAKER_01: Yeah.
• 31:01
  SPEAKER_01: Yes.
• 31:01
  SPEAKER_01: And so PCAF has taken the mantle there and and driven methodology and driven like at least somewhat minimum boundary there, but um both are both are in discussion, I think still.
• 31:11
  SPEAKER_01: Um, and so the the broadening of the minimum boundary, um, manage investments on behalf of third parties, like that was out before, that was in optional and outside minimum boundary, now it's in.
• 31:23
  SPEAKER_01: Um, and the I think the other two parts of PCAF, which is facilitated emissions and insurance emissions, that was where it was like, where what do we do with these at the end of the day?
• 31:34
  SPEAKER_01: And so that's where 16 comes into play.
• 31:36
  SPEAKER_01: And so the intention was to expand or or make a new 16 to cover that the facilitated slash insurance emissions um there.
• 31:46
  SPEAKER_02: Wow.
• 31:46
  SPEAKER_02: So definitely some change.
• 31:48
  SPEAKER_02: Was there a discussion then of PCAF is so focused on this?
• 31:51
  SPEAKER_02: They've spent so much time on this, maybe that should just look to PCAF.
• 31:55
  SPEAKER_01: Yeah, there was a very long discussion of like how do we do we refer to PCAF?
• 31:59
  SPEAKER_02: Yes.
• 32:00
  SPEAKER_01: Um, does it say PCAF in the actual standards?
• 32:03
  SPEAKER_02: Yes.
• 32:03
  SPEAKER_01: Um, I do believe it was settled that the answer was no.
• 32:07
  SPEAKER_01: Um, or at least some like that it will be referenced as a guide in general for methodology.
• 32:13
  SPEAKER_01: Maybe, yeah.
• 32:13
  SPEAKER_01: Yeah, exactly.
• 32:14
  SPEAKER_01: So, but it wouldn't be category 15 C PCAF, like it wouldn't won't be so simple.
• 32:18
  SPEAKER_01: Yeah.
• 32:19
  SPEAKER_01: Um, but with a recognition that PCAF has a mandate to develop methodologies, um, but likely not minimum boundary.
• 32:26
  SPEAKER_01: And so PCAF will show you how to do things, but won't say you have to do this and you don't have to do this.
• 32:31
  SPEAKER_01: That's where it seems it's it's going to land.
• 32:34
  SPEAKER_01: Um, and then where, like because PCAF have gone so far into develop facilitated missions, insurance emissions uh methodologies, something has to be done with them in the protocol because otherwise they're just absent.
• 32:45
  SPEAKER_03: Right.
• 32:46
  SPEAKER_01: Um, and that the discussion was well, let's make them category 16.
• 32:50
  SPEAKER_01: But the interesting thing is that they are outside the minimum boundary.
• 32:53
  SPEAKER_01: So 16 is is outside optional.
• 32:56
  SPEAKER_01: Yes.
• 32:57
  SPEAKER_01: Unless you are an insurer.
• 32:59
  SPEAKER_02: Oh.
• 33:00
  SPEAKER_01: So that again, this is all draft.
• 33:01
  SPEAKER_02: Yeah.
• 33:02
  SPEAKER_02: We need to like say that every like minute.
• 33:04
  SPEAKER_01: Every minute I will.
• 33:06
  SPEAKER_01: And again, it's like, okay, what is an insurer?
• 33:09
  SPEAKER_01: Um, so so there's a bit of a rabbit hole there.
• 33:11
  SPEAKER_01: And again, none of this is final, but like the intention is to at least cover it, have it mentioned, and then it's very likely to say, okay, well, a lot of these things don't have methodologies at this point.
• 33:22
  SPEAKER_01: And so that's that's why they were pushed outside of the minimum boundary.
• 33:26
  SPEAKER_02: Well, I mean, and again, back to like you want to be able to present reliable data at some level, then if there's no methodology at all, that doesn't seem like it's actually furthering reporting.
• 33:36
  SPEAKER_01: Exactly.
• 33:37
  SPEAKER_01: It's a challenge.
• 33:38
  SPEAKER_01: But I mean, for so anything insurance related, claims, payments, like there are methodologies and then facilitated from an underwriting perspective, like there are methodologies.
• 33:47
  SPEAKER_01: And so they were they were in the this is where it got confusing.
• 33:51
  SPEAKER_01: It is in the in the minimum boundary for 16, but 16 is outside the minimum boundary for step three.
• 33:57
  SPEAKER_01: So that's something that needs to be resolved, but uh ultimately it's like a discussion for the working group.
• 34:01
  SPEAKER_01: Um, and then there's a lot of other things that are considered facilitation, right?
• 34:06
  SPEAKER_01: Um, one thing that like an obvious example, and it's come up um for my work in Canada for our clients of if I'm a like a midstream oil and gas company and fossil fuels go through my pipeline, but I never really control it, do I account for the emissions?
• 34:23
  SPEAKER_01: And so it's a very like obvious link to facilitated emissions because if I own the pipeline facilitating emissions.
• 34:30
  SPEAKER_01: Delivery, maybe and so there's been nothing, this everything is in draft.
• 34:35
  SPEAKER_01: Like there's been a very big discussion of what that might look like.
• 34:38
  SPEAKER_01: Um, but it seems like it's leaning towards there will be guidance for doing it.
• 34:42
  SPEAKER_01: They rely probably on the ESRS oil and gas sector guidance.
• 34:45
  SPEAKER_02: That was a very specific draft ESRS sector guidance because it was non-finalized.
• 34:51
  SPEAKER_01: Yeah, uh, there's competing priorities there.
• 34:53
  SPEAKER_02: But then that's interesting because you have the same thing with electricity and transmission lines.
• 34:57
  SPEAKER_01: Yeah.
• 34:58
  SPEAKER_02: So, okay, well, it's a whole other thing.
• 35:00
  SPEAKER_01: It's a whole other thing.
• 35:00
  SPEAKER_01: But but again, it just shows like the breadth that is being considered in these conversations.
• 35:04
  SPEAKER_01: So and I think that's a testament to the to the like to the WRI and that the folks working on this.
• 35:09
  SPEAKER_01: Yes.
• 35:10
  SPEAKER_01: They are thinking through these problems um and bringing them to conversation.
• 35:14
  SPEAKER_01: I think it's a very good process that's been happening.
• 35:16
  SPEAKER_02: Yeah, although it is interesting because you mentioned potentially, or that the objective would be to update these every five years.
• 35:23
  SPEAKER_02: It almost seems like for some of these issues, maybe five years from now would be a better like let's deal with all the baseline stuff right now because we're so far behind.
• 35:33
  SPEAKER_02: Yeah.
• 35:33
  SPEAKER_02: And then, okay, five more years of practice, we might have you know more information.
• 35:37
  SPEAKER_02: I mean, I guess it'll be interesting to see as the uh discussions progress.
• 35:42
  SPEAKER_02: It's true.
• 35:42
  SPEAKER_02: What happens on that?
• 35:43
  SPEAKER_01: It's been 20 years, so there's a lot to catch up on.
• 35:46
  SPEAKER_02: So crazy.
• 35:48
  SPEAKER_02: So I I have many questions in my brain, but let's see where I want to focus next.
• 35:53
  SPEAKER_02: So can you talk timeline then in terms of like what particularly for your group, what is coming next?
• 36:00
  SPEAKER_01: Yeah.
• 36:00
  SPEAKER_01: So again, we're still working through minimum boundary.
• 36:02
  SPEAKER_01: I think that is the key part of this particular part uh phase.
• 36:06
  SPEAKER_01: So phase two.
• 36:07
  SPEAKER_01: Um there's there will be draft language.
• 36:10
  SPEAKER_01: Um, and so we've seen a draft category 15 language because it was uh the biggest change to any one of the categories, just because of the change in the minimum boundary.
• 36:21
  SPEAKER_01: So we've seen draft language there.
• 36:23
  SPEAKER_01: Um I don't think it's on the website yet, just because it's there were challenges with a lot of things ultimately.
• 36:29
  SPEAKER_01: I will I will leave it at that.
• 36:31
  SPEAKER_01: Um and so what we'll see is start to see draft language of the different categories for scope three specifically.
• 36:37
  SPEAKER_01: Um that will likely come in mid, like after Q2 of 2026.
• 36:41
  SPEAKER_01: Yeah.
• 36:42
  SPEAKER_01: Um it'll go to public comment um after that because it does still have to go through the ISB.
• 36:48
  SPEAKER_03: Yes.
• 36:49
  SPEAKER_01: Um any changes from phase one, to my knowledge, are still with the ISB.
• 36:54
  SPEAKER_01: Um, and so they are still working through them.
• 36:57
  SPEAKER_01: We will get told when they either come back to us for comment or they are like approved uh tentatively.
• 37:02
  SPEAKER_01: Um so there's a few other points where the ISB will provide comment and then it will go to public comment next year.
• 37:08
  SPEAKER_01: The air their intention is still to publish the standard uh 2027.
• 37:13
  SPEAKER_01: The the one thing about this process I would say is that they were very deliberate in in share, like we're going to do this, this, this, this, and we're gonna have this published by this.
• 37:22
  SPEAKER_01: And so even when there were some um delays, they built in that time into the process.
• 37:28
  SPEAKER_01: So they're like, still on time.
• 37:30
  SPEAKER_02: Okay.
• 37:31
  SPEAKER_01: As far as I know, we're still on time.
• 37:32
  SPEAKER_01: So it's a 2027 published.
• 37:34
  SPEAKER_03: Yes.
• 37:34
  SPEAKER_01: Um it there's a few like structural things still to be discussed, like does the scope three standards sit alone?
• 37:41
  SPEAKER_01: Are they gonna all be put in one thing?
• 37:43
  SPEAKER_01: Um, and I think that probably can come.
• 37:46
  SPEAKER_03: Yes.
• 37:46
  SPEAKER_01: But at least in the near term, it's like language revision, um, having comment, ISB, um, and then go out to it.
• 37:54
  SPEAKER_01: Yeah.
• 37:55
  SPEAKER_02: Although I do think you said it can come, but some of the structural stuff is very important because the fact that right now there's a lot of commingled guidance with sort of practice and otherwise, I do think makes it much harder to apply.
• 38:07
  SPEAKER_02: Yeah.
• 38:07
  SPEAKER_02: So that will be to the extent you can push that along, that that would be very helpful.
• 38:13
  SPEAKER_02: So, yeah.
• 38:14
  SPEAKER_02: So, okay, um, one question you just reminded me when you mentioned PCAF.
• 38:19
  SPEAKER_02: Obviously, there's a lot of other industries that have or sectors that have sector-specific guidance.
• 38:24
  SPEAKER_02: So, as you guys have gone through the process, how has that been pulled in, if at all?
• 38:30
  SPEAKER_01: It's been good.
• 38:31
  SPEAKER_01: I think um just because of the diverse representation.
• 38:34
  SPEAKER_01: Yes.
• 38:34
  SPEAKER_01: Um, for example, last week we're talking about category four and nine, and there's the GLEC framework, which is for transportation and it's very focused on like partial delivery, things delivery.
• 38:45
  SPEAKER_01: Um, and so the discussion is you know, basically, how do we make sure that we're not duplicating efforts for a reporter under that that would be covered, should be covered under the GLEC framework and GHCP.
• 38:56
  SPEAKER_01: How are we at least aligning in the principles of both so that I if I am a reporter of my logistics company, I don't have to do two inventories, basically.
• 39:05
  SPEAKER_01: So there's a there's intention there.
• 39:07
  SPEAKER_01: I think it just remains like how it actually gets executed at the end of the day.
• 39:11
  SPEAKER_01: Um, because I think even in Glec specifically, there it doesn't there are some gaps against the GC protocol.
• 39:18
  SPEAKER_01: Like GSG protocol doesn't do things the exact same way that does it.
• 39:22
  SPEAKER_03: Right.
• 39:22
  SPEAKER_01: Um so the intention is to align these things at the end of the day.
• 39:25
  SPEAKER_01: So hopefully it gets we'll see.
• 39:27
  SPEAKER_02: And then you mentioned the very beginning, one of the principles relates to interoperability.
• 39:31
  SPEAKER_02: And so considering other frameworks, but then this is a bit circular again because the other so if I if we're talking about the IFRS sustainability disclosure standards and the European sustainability reporting standards, then they also referred to the GHC protocol, and they obviously have their own reporting considerations.
• 39:50
  SPEAKER_02: So, how is that feeding into any of the discussions you're having?
• 39:54
  SPEAKER_01: It's it's brought up a lot.
• 39:56
  SPEAKER_01: Um, I think ultimately there is the perception that the GHCP is, it's still standalone.
• 40:02
  SPEAKER_01: It's meant to be referred to.
• 40:04
  SPEAKER_01: Um, it is not going to refer to others.
• 40:07
  SPEAKER_01: So you won't see mention of IFRS S2 in there, right?
• 40:10
  SPEAKER_01: For example.
• 40:11
  SPEAKER_01: But it is considering those standards.
• 40:14
  SPEAKER_01: And like, you know, if IFRS does this, why aren't we doing this?
• 40:17
  SPEAKER_01: Yes, because IFRS got does get a lot more specific on a few things.
• 40:20
  SPEAKER_01: Um so and it should be uh informing the way the GHC protocol evolves at the end of the day.
• 40:25
  SPEAKER_01: So again, a bit of a circular reference here, but because it is going to be and it is still referenced through CGP, um, it still has to kind of like be out in front of some.
• 40:35
  SPEAKER_02: Yes, well, I agree.
• 40:36
  SPEAKER_02: And I mean, we've even been talking about this with there's currently revisions to the ESRSs that you can't hold them static because they were interoperable two years ago.
• 40:45
  SPEAKER_02: Like you need them to continue to evolve, or this reporting in general will not evolve.
• 40:49
  SPEAKER_02: So it sounds like it's sort of that same type of thinking.
• 40:52
  SPEAKER_01: Yeah, I wouldn't say it's formal, but at least informal.
• 40:55
  SPEAKER_01: Yeah, exactly.
• 40:55
  SPEAKER_01: Yeah.
• 40:56
  SPEAKER_01: Being considered.
• 40:57
  SPEAKER_02: So we've talked about the scope three.
• 41:00
  SPEAKER_02: I guess I want to briefly, briefly switch to scope two, because we, I believe, are expecting to see an exposure draft on the scope two guidance coming soon in the next month or something.
• 41:11
  SPEAKER_01: That's what we've been told.
• 41:12
  SPEAKER_02: Yes.
• 41:13
  SPEAKER_01: At the scope three working group.
• 41:14
  SPEAKER_01: Yes.
• 41:14
  SPEAKER_02: Yes, and I believe that's also what's on the website.
• 41:17
  SPEAKER_02: And so just curious, you know, from your perspective, as someone who's on a working group, understand it's not scope two, but in general, that process and how people should try to get involved and maybe why it's important for companies uh to and other stakeholders to get involved in that process.
• 41:36
  SPEAKER_01: Yeah.
• 41:37
  SPEAKER_01: And I think from a like a comment perspective, it's quite important because there's been a lot of input into these uh every single step along the way.
• 41:45
  SPEAKER_01: But ultimately, I have, you know, many people ask me, it's like, well, I wasn't picked for the working group, so I don't know what's going on there.
• 41:51
  SPEAKER_01: And first thing is, okay, we'll go to the website.
• 41:54
  SPEAKER_01: Or um, but there's a lot of information there.
• 41:55
  SPEAKER_01: So it is ultimately like the culmination of a lot of work.
• 41:59
  SPEAKER_01: And so it it is the first opportunity to provide that, like that public comment.
• 42:03
  SPEAKER_01: Um, and it is hopefully like a very good um first view of everything together.
• 42:10
  SPEAKER_01: Because that has been admittedly a bit of a challenge for the working groups.
• 42:14
  SPEAKER_01: Yeah, it's chopped up.
• 42:15
  SPEAKER_01: And so there are probably structural things that we should decide on, but we haven't really covered them because we've been, you know, looking at category 14's minimum boundary, right?
• 42:24
  SPEAKER_01: So it is the first opportunity to see this like full spectrum of the changes.
• 42:28
  SPEAKER_01: Um, and and it is probably going to be more impactful in terms of the final drafts or the final versions than what our working groups have been put in, right?
• 42:37
  SPEAKER_01: It's because it's going to be considering a much broader perspective.
• 42:40
  SPEAKER_01: Um, it's going to look at much, much bigger views.
• 42:43
  SPEAKER_01: There's going to be much more sample size of input.
• 42:45
  SPEAKER_01: So I do think it's quite an important um part not to uh downplay the contributions of the working groups and the WRI that can't do it now.
• 42:53
  SPEAKER_01: Huge to get to this version, but ultimately the next step is where the biggest changes I think will come.
• 42:58
  SPEAKER_02: So then if I'm listening and I'm thinking, oh, that's something I really need to pay attention to.
• 43:03
  SPEAKER_02: And you know, this is actually coming quite quickly, slowly and quickly at the same time, I would say.
• 43:08
  SPEAKER_02: So, what do you recommend when you're talking to clients and others about how to stay informed and what they should be doing like right now?
• 43:17
  SPEAKER_02: First, I say come talk to me, but I don't think you want everyone listening to this podcast to email you or call you.
• 43:22
  SPEAKER_01: I don't have the time.
• 43:23
  SPEAKER_01: Uh so I mean the the minutes of the meetings are actually quite valuable.
• 43:28
  SPEAKER_01: Um they're put up promptly after the um after each of the minutes or sorry, each of the meetings.
• 43:33
  SPEAKER_01: But again, they're a bit they're a bit specific.
• 43:36
  SPEAKER_01: You kind of need to fish through a lot of discussion to see where the versions like where the draft version is.
• 43:43
  SPEAKER_03: Yes.
• 43:43
  SPEAKER_01: Um but that is ultimately the most the the most public view of these things.
• 43:48
  SPEAKER_01: I would say also the the key points of engagement.
• 43:51
  SPEAKER_01: So looking at the exposure drafts is a really that's where you should be providing comment.
• 43:55
  SPEAKER_01: And it again, it provides the most fulsome view.
• 43:58
  SPEAKER_01: Um, I think that's that's Where you need to kind of have that firm view, whoever at a client or anyone, you need to come together and say, okay, well, actually, what how does this impact me?
• 44:08
  SPEAKER_01: Um, and thinking through these things as a company, as a reporter, I think using those the five um criteria for decision making is also important because you'll see it in the same lens that we saw it.
• 44:19
  SPEAKER_03: Yes.
• 44:20
  SPEAKER_01: Um, so looking at feasibility is probably going to be a big big part of uh any reporter's um decision-making criteria.
• 44:27
  SPEAKER_01: So, and that's fine.
• 44:28
  SPEAKER_01: Like ultimately give that comment that I don't have the resources to do this, or I expect this to be quite a burden.
• 44:35
  SPEAKER_01: And those discussions I think are important ones to have.
• 44:37
  SPEAKER_02: Yeah.
• 44:38
  SPEAKER_02: And I think I'll just chime in here.
• 44:40
  SPEAKER_02: I think it's not just preparers, but everyone using this information, whether you are an investor or other type of stakeholder who's interested, you want all those perspectives when you're coming up with the final version of these standards.
• 44:54
  SPEAKER_02: Yeah, exactly.
• 44:55
  SPEAKER_02: Yeah.
• 44:56
  SPEAKER_02: So any final words wisdom then to people either using the current standards or as they look ahead.
• 45:02
  SPEAKER_01: I think, I mean, be prepared for changes ultimately.
• 45:06
  SPEAKER_01: Like there are some bigger changes, there are some smaller changes, there are very good clarifications.
• 45:12
  SPEAKER_01: Um there's also things that will stay the same, like the five principles of the GSU protocol, like they're going to be there.
• 45:19
  SPEAKER_01: Um, I think be a bit nimble in how um you'll prepare for those things.
• 45:25
  SPEAKER_01: You know, I think in one of the first meetings it came up.
• 45:28
  SPEAKER_01: He's like, well, if I am reporting against the GC protocol today, should I just stop because I know it's gonna change?
• 45:35
  SPEAKER_01: Oh my god.
• 45:36
  SPEAKER_01: It was like, no.
• 45:36
  SPEAKER_01: And generally the answer was no, please continue because ultimately the spirit of these reports, like it's going to still be there.
• 45:43
  SPEAKER_01: There's probably just gonna be an expansion of the things that you will have to report against.
• 45:48
  SPEAKER_01: And so I think having a good understanding now of where that where it is directionally will help you prepare for you know two to three years down the road when that will be in place, when the standard will be final.
• 45:59
  SPEAKER_01: Um, because it it will change, it may expand the reporting requirements for some companies.
• 46:03
  SPEAKER_01: So at least having an idea of what it looks like today.
• 46:06
  SPEAKER_01: Um, and ultimately it may not be where it ends up in two years, but you'll have an understanding of what like expanded looks like or or the the additional resource required to do it.
• 46:14
  SPEAKER_01: So I think being prepared.
• 46:16
  SPEAKER_02: Yeah.
• 46:16
  SPEAKER_02: Well, it's really interesting, actually, when you were just speaking, I was thinking we have many clients that have been doing voluntary reporting now are preparing for reporting on GHG in California.
• 46:26
  SPEAKER_02: And so required to report under the GHG protocol, subject to some um interpretations from the California Air Resources Board.
• 46:34
  SPEAKER_02: But you need to know what's going on now.
• 46:37
  SPEAKER_02: But then you also, whatever systems you're putting in place, you made the point at the very, very beginning, you need to make sure you're going to be flexible enough to deal with whatever's coming.
• 46:45
  SPEAKER_01: So it's interesting.
• 46:46
  SPEAKER_01: And a lot of the California requirements in our clients, subject to them.
• 46:50
  SPEAKER_01: We have been talking about doing a scope three in Excel because it is going to change.
• 46:56
  SPEAKER_01: Um, you know, the first reports required in 2028.
• 46:59
  SPEAKER_02: So, Colin, one thing on the timeline is let's just make sure that's confirm with each other.
• 47:04
  SPEAKER_02: So California reporters will do scope one and scope two in 2026 on 2025 information.
• 47:11
  SPEAKER_02: And then scope three one year later.
• 47:13
  SPEAKER_01: Yeah.
• 47:13
  SPEAKER_02: Um, in 2027 on 2026 information.
• 47:16
  SPEAKER_01: Yes, exactly.
• 47:16
  SPEAKER_01: All right, we got that.
• 47:17
  SPEAKER_01: All right.
• 47:18
  SPEAKER_01: It's hard.
• 47:19
  SPEAKER_01: It's been changing.
• 47:20
  SPEAKER_02: The lots of dates to remember.
• 47:22
  SPEAKER_01: Yeah.
• 47:23
  SPEAKER_01: And so by then, the expectation is that the GHG protocol will have changed.
• 47:27
  SPEAKER_01: Yes.
• 47:28
  SPEAKER_01: Um, and so are you prepared for that?
• 47:30
  SPEAKER_01: And you know, we're we're preparing clients for that today.
• 47:33
  SPEAKER_01: Like if they don't have a scope three, we're like, let's think through this starting today because it's a long process.
• 47:37
  SPEAKER_02: Yes, you cannot wait until that's required.
• 47:39
  SPEAKER_01: And so also be prepared that there may be changes to specific things.
• 47:43
  SPEAKER_01: So at least being ready of like directionally where some of these minimum boundaries will go is a very helpful starting point.
• 47:49
  SPEAKER_02: Yes.
• 47:49
  SPEAKER_02: All right.
• 47:49
  SPEAKER_02: Well, Colin, this has been very informative.
• 47:52
  SPEAKER_02: I think I need you to come back to New York and to make sure you never miss any episodes.
• 47:56
  SPEAKER_02: Please subscribe on whatever platform uh you listen or view podcasts on.
• 48:01
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• 48:06
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