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Sustainability now: GHG Protocol update—Scope 3 and more · PwC's accounting podcast

• 0:00
  SPEAKER_00: Thought leadership from PWC's national office.
• 0:09
  SPEAKER_03: Hello, I'm Heather Horn, PWC's U.S.
• 0:12
  SPEAKER_03: Sustainability Technical Leader, and welcome back to PWC's Accounting Podcast.
• 0:17
  SPEAKER_03: This is Sustainability Now.
• 0:19
  SPEAKER_03: Last fall, we explored the GHG protocol's proposed revisions to the Scope 3 standard.
• 0:25
  SPEAKER_03: Today, we're revisiting that conversation to share the latest developments, highlight areas that have evolved, and take a closer look at what these proposed updates could mean in practice.
• 0:35
  SPEAKER_03: Joining me again today for this discussion, I'm happy to welcome Colin Powell, a partner in PwC Canada.
• 0:41
  SPEAKER_03: Colin serves on the GHG Protocols Technical Working Group for the Scope 3 standard, which is quite a long title.
• 0:47
  SPEAKER_03: It's not even your title.
• 0:49
  SPEAKER_03: But that gives him direct insight into the ongoing deliberations.
• 0:52
  SPEAKER_03: And I would be remiss if I didn't note here that Colin also is working closely with clients, so he can give us a lot of perspective from those conversations too.
• 1:00
  SPEAKER_03: So in today's episode, we're going to unpack what's new since our last discussion, dig deeper into some of the more complex proposed changes, and talk through how companies can position themselves as that standard continues to take shape.
• 1:13
  SPEAKER_03: In addition, we are going to touch on changes to the corporate standard as well as the recently released land sector and removals guidance.
• 1:21
  SPEAKER_03: Are you concerned?
• 1:22
  SPEAKER_03: Standard standard.
• 1:23
  SPEAKER_03: Yes, sorry, standard.
• 1:24
  SPEAKER_03: So definitely stay tuned to the end for that part of the discussion.
• 1:28
  SPEAKER_03: Before we get started, though, a quick note.
• 1:30
  SPEAKER_03: If you'd like to watch the video version of this conversation, you'll find a link in the show notes.
• 1:35
  SPEAKER_03: All right.
• 1:35
  SPEAKER_03: So with that, Colin, welcome back.
• 1:37
  SPEAKER_03: We have an enormous amount to cover today.
• 1:39
  SPEAKER_03: So let's see how far we can get too.
• 1:42
  SPEAKER_03: But as I said, we really focus in the intro on the scope three standard because that is the technical working group you're on.
• 1:49
  SPEAKER_03: And I think right now, probably one of the biggest challenges companies are having.
• 1:53
  SPEAKER_03: That said, I think the corporate standard is foundational.
• 1:57
  SPEAKER_03: And so getting some insight into what's going on with that uh working group as well would be helpful.
• 2:02
  SPEAKER_01: So at the beginning of December in 2025, they released like their end-of-year update.
• 2:08
  SPEAKER_01: Um it's uh it's a fairly concise document, and it basically summarizes the decisions that have been made in the working group.
• 2:14
  SPEAKER_01: Um, but I mean we we've highlighted probably two that are the biggest.
• 2:18
  SPEAKER_01: And I and I think we've talked about these before, but certainly they've gone through more of the revisions process.
• 2:23
  SPEAKER_01: Um, and the document that was put out also went to the independent standards board, so the body above the technical working group.
• 2:29
  SPEAKER_01: So they're a bit more um baked, I guess.
• 2:33
  SPEAKER_01: Um again, nothing set in stone.
• 2:34
  SPEAKER_01: Yeah.
• 2:34
  SPEAKER_01: Maybe a little bit more secured.
• 2:37
  SPEAKER_01: Um so two big changes.
• 2:38
  SPEAKER_01: One is on the organizational boundary side, so getting rid of equity share.
• 2:43
  SPEAKER_01: Um, I imagine this is probably going to stick around in the public consult period.
• 2:47
  SPEAKER_01: But um, so getting rid of equity share and keeping financial and operational control.
• 2:52
  SPEAKER_01: So there's only only those two approaches to consolidate your inventory.
• 2:56
  SPEAKER_01: Um, but a prime recommendation to use financial control.
• 2:59
  SPEAKER_01: Um so this aligns more with IFRSS2, um, ESRS as well.
• 3:04
  SPEAKER_01: So using that financial consolidation to build your GHG inventory.
• 3:08
  SPEAKER_01: Um, but they're not getting rid of operational control.
• 3:11
  SPEAKER_01: Ultimately, it's still there for a couple of reasons.
• 3:13
  SPEAKER_01: One, it could be used as like a top-up or a marginal difference where um a financial control inventory may not give a full, complete picture of your inventory, um, or where an operational control boundary actually just makes more sense uh overall as an entity.
• 3:30
  SPEAKER_01: So, and and I've had these conversations with clients, and you know, it reflects like the operating reality, whether there's joint control, joint operation, where an operational control boundary may actually make much more sense.
• 3:40
  SPEAKER_02: Yes.
• 3:41
  SPEAKER_01: And so they're not completely getting rid of it.
• 3:42
  SPEAKER_01: Um it's still there, but better interoperability with IFRSS2, ESRS, and just aligning with financial consolidation, which is, I think, always kind of the intention of the protocol.
• 3:52
  SPEAKER_01: Yes.
• 3:52
  SPEAKER_01: But now it's firmer.
• 3:53
  SPEAKER_03: Yeah.
• 3:54
  SPEAKER_01: Tentatively firmer.
• 3:55
  SPEAKER_03: So before you go on, I think a key point here for our listeners that are thinking, hmm, IFRSS2 though, permits the all of the methods that are in the corporate standard.
• 4:05
  SPEAKER_03: I think really the point you're making, Colin, is the fact that the underlying report for both ESRS and under the ISB standards is based on the consolidated financial statements.
• 4:15
  SPEAKER_03: And actually, this has been a consistent uh recommendation from PWC that it just makes more sense if you're just talking about the same entities, assets, and operations uh that are in the financial statements.
• 4:26
  SPEAKER_03: So, one thing then also, Colin, just to touch on there is you talked about sort of this idea of operational control being a top-off.
• 4:34
  SPEAKER_03: And, you know, in the current ESRS, we see this additive approach.
• 4:38
  SPEAKER_03: But I do think it's interesting because this is coming closer, it seems like, to then what was at least in FREG's technical advice to the commission.
• 4:46
  SPEAKER_03: So I just any thoughts on what may happen in terms of bringing those together more completely.
• 4:52
  SPEAKER_01: Yeah, I think the intention is for them to align, I think, in the end.
• 4:55
  SPEAKER_01: And so again, this isn't hasn't been out for public consult yet.
• 4:59
  SPEAKER_01: Um, it likely won't be until the end of the year, but that is one of the flags for decision-making criteria is to ensure or to support interoperability.
• 5:06
  SPEAKER_01: Yeah.
• 5:06
  SPEAKER_01: So I imagine there's going to be a lot some alignment as it goes through the process.
• 5:10
  SPEAKER_03: Yeah.
• 5:10
  SPEAKER_03: And then I guess from uh interoperability from IFRSS II, financial control, what just using the financial control approach aligns with the financial symbols.
• 5:20
  SPEAKER_03: Exactly.
• 5:20
  SPEAKER_03: Right.
• 5:21
  SPEAKER_03: So more to come, but I do think it'll be interesting to see if we hear any complaints from people using Equity Share, although I don't think there's very many of them.
• 5:29
  SPEAKER_01: There aren't many, although we have do we have some clients who certainly have used it in the past.
• 5:33
  SPEAKER_01: Yes.
• 5:33
  SPEAKER_01: But I think generally they're like, okay, well, no, we're gonna shift to a control approach.
• 5:37
  SPEAKER_01: And so it's a financial or operational at this point.
• 5:40
  SPEAKER_03: Yeah.
• 5:41
  SPEAKER_03: I I guess the question then is there are a lot of companies that use operational control.
• 5:46
  SPEAKER_03: So this would be a big change.
• 5:49
  SPEAKER_03: And I guess it will remains to be seen how strong the push is that you should is it you should use financial control, you know, where they go with with the wording there.
• 5:59
  SPEAKER_01: It is currently it's should.
• 6:01
  SPEAKER_01: And they've been discussing like, is there a strong should that's not a shall?
• 6:05
  SPEAKER_02: Yeah.
• 6:06
  SPEAKER_01: And that this is part of the issue with all the language of around requirements, but so still it's a shall.
• 6:10
  SPEAKER_01: Um, and then justification if you don't to go with that shall.
• 6:14
  SPEAKER_01: Um, but yeah, you'll see you'll see a lot of companies have to sh have to shift.
• 6:18
  SPEAKER_02: Yes.
• 6:19
  SPEAKER_01: Um, and how how much work will that be?
• 6:23
  SPEAKER_01: Depends on the structure of the company and what they do.
• 6:26
  SPEAKER_01: Like if you're just shifting leases, for example, it may not be that that difficult.
• 6:29
  SPEAKER_01: You just have to go lease by lease.
• 6:31
  SPEAKER_01: But um other assets where you actually have to determine control, um, it it may be a bit of work.
• 6:37
  SPEAKER_03: Yeah.
• 6:37
  SPEAKER_03: And I guess it's worth noting here for our listeners that maybe you're dealing more with ESRS or um the ISSB standards.
• 6:44
  SPEAKER_03: So in the GSU protocol, shell is required, should is recommended.
• 6:49
  SPEAKER_03: And it's quite confusing because in ESRS, shell is required.
• 6:53
  SPEAKER_03: In the ISSB standards, should is required.
• 6:56
  SPEAKER_03: So just keep in mind which standard you're using, but that's where this should shell is is important here.
• 7:03
  SPEAKER_03: What else would you highlight then from the corporate standard?
• 7:05
  SPEAKER_01: Yeah, so there's one other change more to the operational boundary piece.
• 7:08
  SPEAKER_01: Um, and this one is is a bit controversial.
• 7:11
  SPEAKER_01: Um, so imparting a prescriptive materiality um exclusion threshold.
• 7:17
  SPEAKER_01: So for scope one, a 1% exclusion.
• 7:20
  SPEAKER_01: So that means like you can only exclude 1% of your scope one, separately 1% of your scope two, and then 5% of your scope three, of your total scope three.
• 7:29
  SPEAKER_01: And so this is certainly a departure from what it is right now.
• 7:32
  SPEAKER_01: This is more based on relevance, um, and then certainly a departure uh from IFRSS2 and ESI.
• 7:38
  SPEAKER_01: Um, so really, really big change here.
• 7:41
  SPEAKER_01: Um, and some of the discussions I think in the working groups are often like, okay, well, companies are asking for this prescription because maybe they didn't know how to conduct a relevance assessment or understand what is relevant.
• 7:53
  SPEAKER_01: Or if you're comparing company A against company B in the same sector, like how do you know that they're excluding the same things?
• 8:00
  SPEAKER_01: And again, it comes back to that relevance concept, like, okay, decide what's relevant to you as an entity and then make your thresholds as such.
• 8:08
  SPEAKER_03: Yeah, I mean, this is really interesting, particularly in light um for those of you who didn't listen, Conn and I had a conversation about the scope two, um, the proposed changes to the scope two guidance.
• 8:20
  SPEAKER_03: And one of the things in there is these prescriptive exemptions.
• 8:24
  SPEAKER_03: Yeah.
• 8:25
  SPEAKER_03: And what we put in PwC's comment letter is that they need to introduce concepts of materiality of information as well as materiality of overall, and that they should be giving guidance for that because we think, and I I know you think, that a framework is what's really important.
• 8:43
  SPEAKER_03: And so this prescriptiveness is is the opposite.
• 8:46
  SPEAKER_03: Like, are are they hearing that feedback from from others or not really?
• 8:51
  SPEAKER_01: It seems to be, again, it comes back to there's a perception in the working groups, I think, that companies are asking for.
• 8:57
  SPEAKER_01: Tell me a number and I'll meet it.
• 8:59
  SPEAKER_01: Um, but then when I talk to our clients, like that's not what's happening.
• 9:03
  SPEAKER_02: No.
• 9:03
  SPEAKER_01: So so it is interesting.
• 9:05
  SPEAKER_01: Like it has passed a few rounds and have have had a few discussions.
• 9:09
  SPEAKER_01: Um, it also impacts scope three because of the 95 slash 5% exclusion.
• 9:14
  SPEAKER_01: Um, but it's gone, it's came out in the uh end of your document for the corporate standards.
• 9:19
  SPEAKER_01: So it's it's like been seen by the independent standards board, seems to be sticking around.
• 9:25
  SPEAKER_01: I mean, so there's a lot of challenges here.
• 9:26
  SPEAKER_01: You know, if you actually have that threshold, you have to you have to quantify 100% to understand what is 1%.
• 9:32
  SPEAKER_01: Um, and then how do you do that?
• 9:34
  SPEAKER_01: Um, it also just gets rid of the relevance discussion completely.
• 9:38
  SPEAKER_03: Which it doesn't, I mean, it just again, it seems like it's going against other standard settings.
• 9:43
  SPEAKER_03: And it's interesting when you think of the fact of ESRS and IFRSS2 referring to the corporate standard, then how is that going to interact?
• 9:51
  SPEAKER_03: And it feels like they're not thinking about all their stakeholders, potentially.
• 9:55
  SPEAKER_01: Yeah, it is.
• 9:56
  SPEAKER_01: And certainly it's that challenge of interoperability that comes up in the decision-making criteria.
• 10:00
  SPEAKER_01: Um, it's like completely opposite to that.
• 10:03
  SPEAKER_01: Um, and so I think, you know, you know, I wonder in the public console period, will this get like watered down or taken away or revert back to the current relevance approach?
• 10:12
  SPEAKER_01: Like I I do hope so personally.
• 10:15
  SPEAKER_01: Um it's interesting because you we go through other conversations in the scope three discussion, for example, and sometimes people forget that they've made a decision to make it 1% or 5%, like they to impart a prescriptive materiality.
• 10:28
  SPEAKER_01: And so sometimes the discussion turns to relevance in scope three, and kind of have to raise my hand.
• 10:33
  SPEAKER_01: It's like, well, we just kind of got rid of that conversation.
• 10:35
  SPEAKER_03: So although you shouldn't have.
• 10:37
  SPEAKER_01: So that so how do we deal with this?
• 10:39
  SPEAKER_01: Because there's repercussions downstream, right?
• 10:41
  SPEAKER_01: And so uh again, that's probably one of the ones where I don't know if it's gonna get a stick around.
• 10:46
  SPEAKER_01: It's like certainly one of the more controversial ones, definitely not helping interoperability.
• 10:51
  SPEAKER_03: No, um, and just from a quality of reporting, like the concepts of materiality are so well founded.
• 10:57
  SPEAKER_03: And again, I think the ask is more so how do you think about materiality from GHG, not just say one percent.
• 11:04
  SPEAKER_03: Like yeah, okay.
• 11:06
  SPEAKER_03: Well, we don't have to well.
• 11:08
  SPEAKER_03: Any others that you would highlight then?
• 11:10
  SPEAKER_01: Uh and so there were changes actually to the to the way they talk about the five principles of the GHG protocol, like completeness, accuracy, transparency.
• 11:18
  SPEAKER_01: Like they've added more prescription there, um, tying, for example, relevance to materiality.
• 11:24
  SPEAKER_03: But then it's funny because then they put on Okay, but I'm not gonna read it.
• 11:28
  SPEAKER_01: No, no, let's not get into it.
• 11:29
  SPEAKER_01: But but I think they've added just like they've emphasized and re-emphasized the the importance of those principles.
• 11:34
  SPEAKER_01: So it's not a change to the way you calculate, but it's again a change to the framework and just adding that specificity, I think, helps.
• 11:41
  SPEAKER_01: Um, and so you'll see that in the end of the year, end of your document as well.
• 11:44
  SPEAKER_03: Yeah, I mean, for those who haven't looked at it, I do recommend looking at the end of your document.
• 11:49
  SPEAKER_03: It's it is an interesting read.
• 11:50
  SPEAKER_03: Yeah.
• 11:51
  SPEAKER_03: One point I should have made at the very beginning, and I didn't, like all of what we're talking about.
• 11:55
  SPEAKER_03: I mean, you're referring to the year-end document, but there's as well, there's lots of minutes, there's a lot, maybe too much information available on the website.
• 12:04
  SPEAKER_03: So everything we're talking about is public.
• 12:07
  SPEAKER_03: Um, and so just for people to keep that in mind, if they want to know more, they can go try to find it.
• 12:12
  SPEAKER_03: Maybe they have to call you to say how can I find it.
• 12:15
  SPEAKER_01: On the website, it's just a bit of a maze to find everything.
• 12:17
  SPEAKER_01: So yeah, just let me know.
• 12:19
  SPEAKER_03: Yeah.
• 12:20
  SPEAKER_03: All right, maybe moving to scope three, because I know that's where you are really focused.
• 12:24
  SPEAKER_03: Uh I have so many questions, but maybe we should start with the new category.
• 12:29
  SPEAKER_03: Yeah.
• 12:29
  SPEAKER_03: 16.
• 12:30
  SPEAKER_01: Okay.
• 12:30
  SPEAKER_03: So can you explain?
• 12:32
  SPEAKER_01: Sure.
• 12:32
  SPEAKER_01: So category 16, um, it was called facilitated emissions.
• 12:36
  SPEAKER_01: I think a couple meetings ago it got changed to other value chain emissions.
• 12:40
  SPEAKER_01: Um, and so it's it's there's like two levels to it.
• 12:44
  SPEAKER_01: First, it was introduced because of the need to move some financed emissions activities to another category because they were not like strictly financed, they weren't meeting that definition.
• 12:54
  SPEAKER_01: Um, these would be facilitated emissions as they're known in PCAF.
• 12:58
  SPEAKER_01: Um, and so they these would be like an insurance associated emissions, so the emissions associated with an asset that an insurer would insure.
• 13:05
  SPEAKER_01: Or um like a bank underwriting um like uh an issuance, for example.
• 13:10
  SPEAKER_01: So the emissions associated with that.
• 13:11
  SPEAKER_01: So those aren't financing, and so they don't really sit in financed emissions.
• 13:15
  SPEAKER_01: So they they found them at home in this new category.
• 13:18
  SPEAKER_01: Um, and then it was seen as there are other real economy activities that are facilitation.
• 13:23
  SPEAKER_01: Um, maybe the most concrete example would be a you know, a pipeline operator.
• 13:28
  SPEAKER_01: They don't take control over the crude or oil that's going through that pipeline.
• 13:32
  SPEAKER_01: Um they're facilitating its movement and eventually facilitating its combustion, if that was the intended end use.
• 13:39
  SPEAKER_01: And so currently there's not really a home for that in the existing scope three categories.
• 13:44
  SPEAKER_01: Some pipeline companies put it in category 11, but they don't, they never sold that crude.
• 13:50
  SPEAKER_02: Yes.
• 13:50
  SPEAKER_01: So strictly it was like, uh, this is maybe not in there.
• 13:53
  SPEAKER_01: Um, and so other activities like that, facilitation, there could be some software licenses, there could be there's a lot of activities that could fit under there, um, are put into this new category.
• 14:04
  SPEAKER_01: Currently, it is proposed to be optional, and so you don't have to report on it to be in conformance with the GC protocol.
• 14:11
  SPEAKER_01: Um, however, there's now been a debate of like should parts of it be mandatory.
• 14:17
  SPEAKER_01: Um the last couple meetings we had, and this is this is public, you can go look at this.
• 14:23
  SPEAKER_01: Um, the facilitation from if you're a distributor of oil and gas um was voted to be required to be reported on.
• 14:31
  SPEAKER_01: And so again, that pipeline operator may be then required to calculate a category 16 emissions, but every other sector is not.
• 14:39
  SPEAKER_01: Um so I I certainly raised my hand at that.
• 14:43
  SPEAKER_01: Uh the vote was actually quite close.
• 14:44
  SPEAKER_01: You can go look this up on the website.
• 14:46
  SPEAKER_01: I think it was like 58% to 42 of shall versus may, so required versus uh recommended.
• 14:53
  SPEAKER_02: Yeah.
• 14:54
  SPEAKER_01: Um so that would that's like a good example of where the working group is going, and maybe it's not considering all of the decision-making criteria at the same time, or the challenges of considering all of the decision-making criteria, which one of them would be feasibility or you know, equitable application of the protocol.
• 15:10
  SPEAKER_01: So that's like that's kind of the big category 16 change.
• 15:14
  SPEAKER_01: Like it is a change, but it's mostly optional, but maybe not for everyone.
• 15:19
  SPEAKER_01: And so I think there's gonna still be some um some changes to the way that's approached, but it's very likely there will be a new category who will have that like facilitation lens.
• 15:28
  SPEAKER_03: Yes.
• 15:29
  SPEAKER_03: Is there any concept that uh for a lot of people just understanding the concept of scope three emissions is already complicated?
• 15:38
  SPEAKER_03: And then all the existing categories are rather complicated.
• 15:42
  SPEAKER_03: And and then it's this is almost like one step beyond.
• 15:45
  SPEAKER_03: Like obviously, I I mean, I 100% understand the example you're giving.
• 15:48
  SPEAKER_03: And if you didn't have that pipeline, those you know, that gas couldn't get to where it was going, it couldn't be combusted.
• 15:54
  SPEAKER_03: But on the other hand, you know, at some point it's like is everyone counting all emissions and it becomes a little less meaningful.
• 16:01
  SPEAKER_03: I'm not saying that example is the case.
• 16:03
  SPEAKER_03: I'm just saying it seems like there's a some practicality lens or something, but I don't know if that comes up at all.
• 16:10
  SPEAKER_01: Uh yeah, I was in discussion with um, I think there's like 12 clients in the room, and I was like, okay, new category, and all I hear was like, oh so like I think maybe it's just a bit of a frustration when I think of like, okay, is this necessary?
• 16:25
  SPEAKER_01: Is this really just like, you know, how is this gonna help um an investor or a reporter?
• 16:30
  SPEAKER_01: Is the information that is put out in this category specifically, like, how is it making helping me make decisions?
• 16:35
  SPEAKER_01: I think that's probably a critical piece for us to get across.
• 16:38
  SPEAKER_01: Like, I don't disagree that this category should exist.
• 16:41
  SPEAKER_01: Obviously, there's a home for the finance or the previously financed emissions calculations.
• 16:45
  SPEAKER_01: There are a lot of activities that are facilitated that don't have a home currently in the category, uh, in the other categories.
• 16:53
  SPEAKER_01: And so I understand the intention.
• 16:55
  SPEAKER_01: It does come back from that to that decision usefulness.
• 16:57
  SPEAKER_01: Like, is this reporting for the sake of reporting or is it actually going to help someone make a decision?
• 17:01
  SPEAKER_03: Yeah, this goes back to why you need materiality of information instead of just this 5% exclusion for categories for scope three.
• 17:09
  SPEAKER_03: So a related topic then is minimum boundaries, which you could probably do another episode on.
• 17:15
  SPEAKER_03: But uh, this has been a lot of discussion, particularly from entities reporting under ESRES or IFRSS2, and how does the guidance on minimum boundaries and GHG protocol interact with those standards?
• 17:27
  SPEAKER_03: Um if you want to know more, you can look in our sustainability reporting guide.
• 17:30
  SPEAKER_03: But where is the working group on this?
• 17:33
  SPEAKER_01: It's certainly, I think, more aligning with that like full value chain, considering your full value chain piece.
• 17:38
  SPEAKER_01: So um in some of the categories, I think like category four through 13, um, you're thinking through the scope one and two of those activities.
• 17:47
  SPEAKER_01: So like uh upstream transportation distribution, um, you're considering the emissions associated with the transport of the product to you to as a reporter.
• 17:56
  SPEAKER_01: Um and so the expansion of that minimum boundary is to include now the upstream emissions associated with that fuel.
• 18:02
  SPEAKER_01: So if I'm getting a truck delivered, delivering a widget to me and I change my, I do something in that widget, I now account for the combustion of that fuel and then the upstream emissions of that fuel.
• 18:12
  SPEAKER_01: So an expansion of the full value chain.
• 18:15
  SPEAKER_01: I think it's a bit of a recognition that um in category one and two, you account for the cradle to gate of those products and services.
• 18:23
  SPEAKER_01: And so currently in the protocol, you only do scope one and two of those things in category four to thirteen.
• 18:28
  SPEAKER_01: And so it's seen as like that, making them kind of more on a level playing field.
• 18:33
  SPEAKER_03: I guess I have a question though, because in the scope, current scope three standard, it talks about not having to calculate emissions at infinitum.
• 18:42
  SPEAKER_03: And this is starting to go into that direction.
• 18:45
  SPEAKER_03: And again, the is how practical is this?
• 18:49
  SPEAKER_03: And I understand, I mean, I definitely understand the point of you want alignment and there is this inconsistency and otherwise, but I feel like people are still struggling just to calculate things the way they are now.
• 19:00
  SPEAKER_01: Yeah, especially if you're using like a spend-based approach, which should incorporate that that cradle to gate anyway.
• 19:06
  SPEAKER_01: Um, but if you know the availability and accessibility of the data has been something that like a lot of the working group has flagged.
• 19:14
  SPEAKER_01: Um, and like, how do you expect companies to actually get this information?
• 19:18
  SPEAKER_02: Yes.
• 19:18
  SPEAKER_01: Um, and and there's been a discussion as well because yes, the upstream, but then what about the capital goods emissions for the infrastructure to get that stuff to you?
• 19:28
  SPEAKER_01: So that has currently been pulled out of the minimum boundary.
• 19:31
  SPEAKER_01: So you have the option to report on the like capital goods of the infrastructure or the emissions of the infrastructure, but you do have to report on the upstream emissions to get it to you, for example.
• 19:41
  SPEAKER_01: So I think there's been a there's a bit of a push and pull of like what is full value chain, where do you stop?
• 19:46
  SPEAKER_01: And now it's currently seen as like don't do the uh infrastructure emissions, but do like the actual upstream.
• 19:52
  SPEAKER_03: Yeah, like the operational emissions.
• 19:54
  SPEAKER_03: So we talked again when we're talking about the scope two standard about data availability, data management.
• 19:59
  SPEAKER_03: Otherwise, I mean, this seems like you're gonna have the exact same challenge then that the emission factors aren't available, the data's not available.
• 20:07
  SPEAKER_03: And so is this another one that needs to wait a bit?
• 20:11
  SPEAKER_01: It's interesting.
• 20:12
  SPEAKER_01: These, like we just did another vote on these, these have very strong support in the working groups.
• 20:17
  SPEAKER_01: Um, mostly I think it's around that consistency of of like of consideration.
• 20:22
  SPEAKER_01: Yeah.
• 20:23
  SPEAKER_01: Um, and and so then the feasibility, it's expected that it will come, like the the data availability will come over time.
• 20:30
  SPEAKER_01: Uh, you know, some of these, some of this information is available in LCA databases, for example.
• 20:34
  SPEAKER_01: Like you go to EcoIvent, some of the information is there.
• 20:37
  SPEAKER_03: What's LCA?
• 20:38
  SPEAKER_01: Uh life cycle assessment.
• 20:39
  SPEAKER_01: And so you could pull data, uh, pull emission factors from there, and some of them will have that in there.
• 20:43
  SPEAKER_01: But that goes against one of the principles of emission, like they're trying to put in this new protocol of having free and accessible information because you often have to pay for those databases.
• 20:53
  SPEAKER_01: And so the information is sometimes there, it is sometimes free, um, probably not uh equally accessible to all.
• 21:01
  SPEAKER_01: And so I think that will be one of the challenges they'll work through.
• 21:04
  SPEAKER_01: But again, like this has gone through a lot of votes, and it is there's a pretty strong consensus to keep it in there.
• 21:10
  SPEAKER_03: All right.
• 21:10
  SPEAKER_03: Well, so people will have to pay attention and and start to think about what their views are on that.
• 21:15
  SPEAKER_01: Yeah.
• 21:16
  SPEAKER_03: Uh how about the disaggregation and data quality and some of those types of considerations?
• 21:23
  SPEAKER_03: What have you guys been talking about there?
• 21:24
  SPEAKER_01: Yeah, it's it's this has been a bit of a disclosure piece.
• 21:27
  SPEAKER_01: So talking about how to actually present your scope three, there's been a lot of discussion of this because ultimately it was optional.
• 21:32
  SPEAKER_01: Well, it's currently optional, right?
• 21:34
  SPEAKER_01: There, there's only a few shalls in there um of how to disclose in your scope three.
• 21:39
  SPEAKER_01: And so I think this goes to a lot of the data quality conversation around scope three.
• 21:43
  SPEAKER_01: Like, I you know, I don't I can't get good data, the emission factors aren't great, it's hard to find them.
• 21:48
  SPEAKER_01: Um, and so the protocol, one of the scopes of work was like, how do I actually show the data quality of my scope three?
• 21:55
  SPEAKER_01: You're just putting a number out there, you may have a qualitative disclosure under it that says, like, Like, you know, spend based idea.
• 22:01
  SPEAKER_01: I use spend based for this.
• 22:02
  SPEAKER_01: Um, and and that's been how it's done, if if there is a disclosure at all.
• 22:06
  SPEAKER_01: And so this certainly goes a lot further.
• 22:09
  SPEAKER_01: And the ask is to disaggregate your scope three emissions by category and then by um data quality.
• 22:17
  SPEAKER_01: And so it's like almost like a matrix um format.
• 22:22
  SPEAKER_01: Um, the data quality disaggregation, very similar to what's in PCAF right now.
• 22:26
  SPEAKER_01: So if when you disclose in your finance emissions, you would give a data quality score.
• 22:30
  SPEAKER_01: So between one and five.
• 22:32
  SPEAKER_01: Um, this goes a step further in that it's not just a number, it's like you're that's representative of the distribution.
• 22:37
  SPEAKER_01: You're actually giving the distribution.
• 22:39
  SPEAKER_01: And so if you're you know 100 tons in category one, you might have 30 tons in this like um specific example or specific bucket, 100 or 30 tons in spend and 30 tons in this unclassified bucket, or 40 tons to add up to 100.
• 22:54
  SPEAKER_01: Um, and so that you'll ultimately see which uh emissions are calculated using different approaches.
• 22:59
  SPEAKER_01: Um, so it is a lot more effort to be able to and a lot more information to give to the public, to the to investor, to to the um to the general public.
• 23:09
  SPEAKER_01: And a lot of the question I have is like, how useful is this?
• 23:13
  SPEAKER_01: Is this decision useful for companies?
• 23:15
  SPEAKER_01: One of the interesting things that uh of where we're at right now is that there's three buckets of data quality disaggregation.
• 23:21
  SPEAKER_01: So you have three options to put your emissions in.
• 23:24
  SPEAKER_01: But the final one, unclassified, is you can put everything in there if you want.
• 23:29
  SPEAKER_01: So there's no like required disaggregation, but there's an option to do it, but you have to disaggregate.
• 23:36
  SPEAKER_01: So there's a bit of like a roundabout shall and should in here.
• 23:40
  SPEAKER_02: Yeah.
• 23:41
  SPEAKER_01: And so again, it comes back to like, okay, if we're asking companies to actually do this, requiring it, then why are we given the option to put them all in one bucket?
• 23:48
  SPEAKER_01: Yeah.
• 23:48
  SPEAKER_01: Yeah.
• 23:49
  SPEAKER_03: It's a very interesting point.
• 23:50
  SPEAKER_03: And I come from a from a few perspectives, you know, when on for we have a lot of financial accountants listening, and so when the fair value measurement frameworks came up with their levels, there, I mean, there's a huge amount of work and you know, level one, two, three, but I think now it's you know well used, people accept it, and it it does give you information.
• 24:13
  SPEAKER_02: Yeah.
• 24:14
  SPEAKER_03: And in our scope two letter, we actually recommend that they consider something like this because in particular, as we talked about in our scope two podcast, what they're proposing is incredibly complicated.
• 24:25
  SPEAKER_03: And so, you know, can you make it a bit easier, but then have some data quality scores?
• 24:30
  SPEAKER_03: So if someone is going the step further, they're almost getting like a benefit for it.
• 24:34
  SPEAKER_03: But I don't think, at least when we made that recommendation, we were um contemplating the level of complexity of what you're talking about.
• 24:42
  SPEAKER_03: Because I think it's one thing to say, I I don't it just seems like it's gone a too far in a way.
• 24:48
  SPEAKER_03: Yes.
• 24:49
  SPEAKER_01: There's actually been a lot of discussion of, you know, because one of the buckets is specific.
• 24:52
  SPEAKER_01: And so you have a specific emission factor multiplied by a specific activity data.
• 24:57
  SPEAKER_01: And the the discussion of what is specific and what is not specific is is very long.
• 25:03
  SPEAKER_01: And again, a reader could go to the website and understand all the options there.
• 25:07
  SPEAKER_01: Um, but it seems like a lot of work for a company to then have to classify their emission factors and their activity data by a specific like criteria.
• 25:16
  SPEAKER_01: Right.
• 25:16
  SPEAKER_03: Um and then for every category and for all of their activities and yes.
• 25:21
  SPEAKER_01: Yeah, I think we generally agree there should be a discussion on data quality.
• 25:25
  SPEAKER_01: I'm supportive of it being quantitative as well.
• 25:27
  SPEAKER_01: Me too.
• 25:27
  SPEAKER_01: Like the PCAF score is is indicative of where like all the inputs into that calculation.
• 25:32
  SPEAKER_01: But I think where I'm where I'm having trouble is just the the breakdown of what should be specific and what should be not specific and spend.
• 25:40
  SPEAKER_01: Where I think like the pay PCAF data quality guidance is pretty clear.
• 25:44
  SPEAKER_01: There's some shifts but there and there, but it's pretty straightforward.
• 25:47
  SPEAKER_01: And so I think this goes a bit far and too far.
• 25:50
  SPEAKER_01: And then the ability to just put everything in unclassified kind of renders the rest of it a bit.
• 25:55
  SPEAKER_03: Yeah, not meaningful.
• 25:57
  SPEAKER_03: Yeah.
• 25:57
  SPEAKER_03: And then what how are companies going to be viewed if they use that category and otherwise?
• 26:02
  SPEAKER_03: So you mentioned PCAF a few times.
• 26:04
  SPEAKER_03: So maybe for I think most of our listeners would know who PCAF is, but maybe just remind us and then let's talk about alignment of category 15 with PCAF.
• 26:13
  SPEAKER_01: So PCAF is the partnership for carbon accounting financials.
• 26:16
  SPEAKER_01: Um, for a number of years now, they've been the body that's putting out methodologies for calculating financed emissions, insurance associated emissions, facilitated emissions.
• 26:25
  SPEAKER_01: Um, so they've been kind of taking the mantle from the protocol almost.
• 26:30
  SPEAKER_01: Um, the current version of Category 15 in the GHG protocol is very bare bones.
• 26:35
  SPEAKER_01: Um, there's not a lot of information in there.
• 26:37
  SPEAKER_01: There's not a lot of asset classes for calculation in their minimum boundary.
• 26:41
  SPEAKER_01: Um, and so PCAF has kind of taken it on.
• 26:43
  SPEAKER_01: There's a lot more asset class methodologies.
• 26:46
  SPEAKER_01: Um, they're more a methodology provider, not necessarily like a you have to do this, you have to do this.
• 26:52
  SPEAKER_01: Um so that's likely where the category 15 will sit, in that it will reference reference PCAF as like a good source of methodologies.
• 27:00
  SPEAKER_01: Um, it's likely that some of them, like the insurance associated emissions, will say you have to use um PCAf, um, the insurance associated emissions um calculation.
• 27:08
  SPEAKER_01: But generally it's like you can go here for methodologies, the they're they're what's considered to be good.
• 27:15
  SPEAKER_01: Um and so one of the big things in 15 is like, do we mention PCAF?
• 27:20
  SPEAKER_01: Do we say you have to use PCAF?
• 27:22
  SPEAKER_01: Um and so it's it seems like they're lining on like mentioning PCAF, but not requiring PCAF.
• 27:27
  SPEAKER_03: Um but if you deviate from PCAF, like justify why or at least have some explanation of like sort of requiring sort of doing it, but again, not getting to that shell or the but it's quite interesting because so right now in category 15, you have only three asset classes in the G protocol.
• 27:44
  SPEAKER_03: And I think PCAF's up to 10, nine or 10.
• 27:47
  SPEAKER_03: And so then would it be contemplated all those asset classes would become required, or that is still uh to come?
• 27:54
  SPEAKER_01: There is the draft 15 like in minimum boundary language now.
• 27:59
  SPEAKER_01: So um there is an expansion of a few of them.
• 28:01
  SPEAKER_01: So like equity with um or without control, like project finance is there now, um uh assets under management.
• 28:08
  SPEAKER_01: So if you have third-party assets under management, so that's now in the minimum boundary, it was never it was unclear.
• 28:14
  SPEAKER_01: Yeah, it was unclear it was in there.
• 28:15
  SPEAKER_01: Yeah.
• 28:15
  SPEAKER_01: But there is a bit more alignment with the IFRSS2 definition of finance submissions.
• 28:20
  SPEAKER_01: Uh and so the discussion now is like, okay, well, if there isn't a um methodology for a particular asset class, do they have to calculate or and like can they calculate it?
• 28:29
  SPEAKER_01: So there are some exemptions proposed there.
• 28:31
  SPEAKER_01: Um, if no methodology, you don't have to calculate it or find a way to calculate it.
• 28:36
  SPEAKER_03: Yeah.
• 28:36
  SPEAKER_03: And I guess I've misspoke.
• 28:37
  SPEAKER_03: So for assets under management, right now it's optional.
• 28:40
  SPEAKER_03: So I guess then this would make it in yeah, yeah, in the current GHG protocol is optional.
• 28:46
  SPEAKER_01: So this would make it included, yeah, including in the minimum boundary.
• 28:48
  SPEAKER_03: Yes, and then under IFRSS2, it is required.
• 28:52
  SPEAKER_03: So yeah.
• 28:52
  SPEAKER_03: So yeah, you need to, there's a lot of variations here, and then I think ESRS, you can take a point of view.
• 28:59
  SPEAKER_01: Yeah.
• 28:59
  SPEAKER_01: So but it's a very, it's it's a good touch point, I think, just because of the way PCAF has come up over the last couple of years.
• 29:06
  SPEAKER_01: And um, you know, part of the initial discussion on 15 is was do we just give up and hand this category to PCAF?
• 29:13
  SPEAKER_01: Um, and I think most people were like, no, I don't think we can do that, because then you know it just kind of gets rid of the continuity.
• 29:19
  SPEAKER_03: Yeah, and it's an industry group, so it doesn't have the same type, I mean, I'm not saying it doesn't have good oversight, but it does not have the same type of oversight that's been put into place with the GHC protocol.
• 29:29
  SPEAKER_01: And independence, I guess.
• 29:30
  SPEAKER_01: Yes.
• 29:30
  SPEAKER_01: Yeah.
• 29:30
  SPEAKER_01: So so it's obviously it's sticking around, and now the discussion is how much how much does PCAF interplay?
• 29:36
  SPEAKER_01: Um, the other thing is you know, the protocol had this like stamp on stamp approval for exactly like stamped by GHC protocol.
• 29:43
  SPEAKER_01: So the first um like part one of the finance admission standard is stamped by the GP Programme.
• 29:49
  SPEAKER_03: Yeah, I think only the 2020 version.
• 29:51
  SPEAKER_03: Yeah.
• 29:51
  SPEAKER_01: But now GC protocol has gotten rid of that.
• 29:53
  SPEAKER_01: So it's been a very interesting discussion of like how they interplay.
• 29:56
  SPEAKER_01: Yeah.
• 29:57
  SPEAKER_01: Um PCAF is in my working group.
• 29:59
  SPEAKER_01: They're very vocal, they're great.
• 30:01
  SPEAKER_01: Um, just like a really open discussion, but also good to see where they're going on these things.
• 30:06
  SPEAKER_01: So ultimately, where it's going to be, I think, is protocol gives a minimum boundary for category 15.
• 30:11
  SPEAKER_01: PCAF develops methodologies.
• 30:13
  SPEAKER_03: Yeah.
• 30:13
  SPEAKER_03: So the measurement approaches, basically.
• 30:15
  SPEAKER_03: Which if you think of how much PCAF has put out, I mean it's a huge amount of information.
• 30:21
  SPEAKER_03: So uh how about other categories, maybe 10 and 11?
• 30:25
  SPEAKER_01: Yeah.
• 30:25
  SPEAKER_01: And this is like pretty a fresh conversation.
• 30:27
  SPEAKER_03: I think one and maybe remind people um what 10 and 11 are.
• 30:31
  SPEAKER_01: Sure, yeah.
• 30:32
  SPEAKER_01: So category 10 is processing of sole products.
• 30:34
  SPEAKER_01: So if you sell something, like basically the next user of it or the process of processor of it, um, you account for those emissions.
• 30:41
  SPEAKER_01: And then 11 is uh use of sole products, so the user of that product that you sold.
• 30:46
  SPEAKER_01: Um there's slight definitions that are a bit hazy.
• 30:49
  SPEAKER_01: Yeah.
• 30:49
  SPEAKER_01: And that's where a lot of the work is now being done.
• 30:52
  SPEAKER_01: Because I think the comments from the original ask of how do we change things is that the definition of processing and use and and sold product and end product were all a bit bit fuzzy, um, in that the framework they provided wasn't probably the best to um to really nail it down.
• 31:09
  SPEAKER_01: That this has been an ongoing discussion of okay, well, where do we stop processing?
• 31:13
  SPEAKER_01: Um, so if I'm um if I make methanol, for example, that can be processed into formaldehyde by another company, but that formaldehyde can then be processed into plastics by another company.
• 31:25
  SPEAKER_01: And so if I'm a methanol producer, where does it actually stop?
• 31:28
  SPEAKER_03: Yeah, and how do I know what happened?
• 31:30
  SPEAKER_01: How do I know what happened?
• 31:31
  SPEAKER_01: Yeah, and so it's a big thing.
• 31:32
  SPEAKER_01: And so I think there's a big recognition of just some like um just you don't know what's going on, and you don't necessarily have like no one's asking you to do that.
• 31:40
  SPEAKER_01: Like, sure, you should be tracking your value chain, but do I like to do that?
• 31:42
  SPEAKER_03: And how much control do you have?
• 31:44
  SPEAKER_03: And there's a lot of questions.
• 31:47
  SPEAKER_01: So it's an ongoing conversation, I think.
• 31:49
  SPEAKER_01: Um, where one of the things I think actually we just decided on is they're going to be a separate discussion on what actually is processing and what actually is use and where do you stop.
• 31:59
  SPEAKER_02: Oh, okay.
• 32:00
  SPEAKER_01: Um and so that's a I think that's a very good thing to happen.
• 32:03
  SPEAKER_01: The other piece of category 11, for example, is the direct use phase and the indirect use phase, direct being like it actually uses energy.
• 32:11
  SPEAKER_01: Um, indirect is that you know, the the thing that you sold is is existing, but really to use it, it does require energy.
• 32:19
  SPEAKER_01: Um, a good example would be like a t-shirt.
• 32:21
  SPEAKER_01: Um, a t-shirt exists.
• 32:23
  SPEAKER_01: When you use a t-shirt, you're not using energy, but you do have to wash that t-shirt.
• 32:27
  SPEAKER_01: And so the emissions associated with that washing is an indirect use phase emission.
• 32:31
  SPEAKER_01: And so the ask from the like scope of work is to provide a lot more prescription on that.
• 32:36
  SPEAKER_01: So that is my fear that it gets too prescriptive and then it's like this, this, this, this.
• 32:40
  SPEAKER_03: And you can't really contemplate all products and all uses.
• 32:44
  SPEAKER_03: And I mean, it just seems like an enormous task.
• 32:47
  SPEAKER_01: Exactly.
• 32:47
  SPEAKER_01: And so, so hopefully it stays within the framework.
• 32:49
  SPEAKER_01: But I think you know, there is a consensus that it needs the the definition needs to get a bit better.
• 32:54
  SPEAKER_01: Um, maybe more concrete examples, but maybe not you're not gonna provide one for every sector or every um activity.
• 33:01
  SPEAKER_01: So you really have to be like selective in those to show the intention.
• 33:05
  SPEAKER_01: Um, but again, that's like one of the bigger things I think that has to be dealt with.
• 33:08
  SPEAKER_01: And and so honestly, one of the more exciting things to me, because I love that 10-11.
• 33:13
  SPEAKER_01: I have a lot of clients in those sectors which are processing things or or end up um downstream.
• 33:17
  SPEAKER_01: And so it's always questions we get.
• 33:19
  SPEAKER_01: Okay, when do we stop?
• 33:20
  SPEAKER_01: When do we stop?
• 33:21
  SPEAKER_03: Right.
• 33:21
  SPEAKER_03: So having more guidance, but again, back to more of a framework and examples versus prescriptions is helpful.
• 33:28
  SPEAKER_03: So, Colin, from your point of view, other big topics that you would hit that are covered?
• 33:34
  SPEAKER_01: Yeah, I think the other one um is the inclusion of scope three.
• 33:38
  SPEAKER_01: I mean, this goes to the considering the broader value chain.
• 33:41
  SPEAKER_01: So scope three now in franchises, category 14, um, category 15.
• 33:46
  SPEAKER_01: So that is a slight difference with PCAF in that the current protocol um scope three is not required.
• 33:54
  SPEAKER_01: PCAF, it's required if relevant, depending on the sector you're in, and the asset class.
• 33:59
  SPEAKER_01: Um and now the proposed change to GHC protocol category 15 is is all scope three.
• 34:04
  SPEAKER_01: So include the scope three of your scope three of three, basically.
• 34:08
  SPEAKER_01: And so that is a big change.
• 34:09
  SPEAKER_01: Um, it's probably where a lot of this will go.
• 34:12
  SPEAKER_01: Um, and so by the time this is published, maybe it will be market practice to incorporate that.
• 34:17
  SPEAKER_01: But big questions on data availability, like you know, getting the scope three or even estimating the scope three of a of a lender or your you know, your franchised operation, like it it's it certainly a challenge.
• 34:27
  SPEAKER_03: Yeah.
• 34:28
  SPEAKER_03: Do you it?
• 34:29
  SPEAKER_03: I mean, just listening, this is a huge amount that has to get done.
• 34:33
  SPEAKER_03: Yeah.
• 34:34
  SPEAKER_03: And the timeline is very tight.
• 34:35
  SPEAKER_03: So is there a constant feeling of there's too much to do, or it's moving at a pace that feels like, okay, there's enough time for consideration of the decisions that are being made?
• 34:46
  SPEAKER_01: I think so.
• 34:47
  SPEAKER_01: I mean, uh there is a lot of time still.
• 34:49
  SPEAKER_01: Like the intention is to get the standard finished out by the beginning of 2028.
• 34:54
  SPEAKER_01: Um, so like under two years from today.
• 34:57
  SPEAKER_01: Um and so we know there, we know exactly what we have in front of us.
• 35:01
  SPEAKER_01: Like it's pretty clear what the scope of work is.
• 35:03
  SPEAKER_01: We're generally on schedule.
• 35:05
  SPEAKER_01: Um, what has shifted a little bit is some of the input from the ISO uh ISO group.
• 35:10
  SPEAKER_01: Um, and so ultimately shifting things by a couple months, but um, that input is is necessary and required.
• 35:16
  SPEAKER_01: And I think um generally we're on schedule.
• 35:19
  SPEAKER_01: So happy.
• 35:20
  SPEAKER_01: Okay, fingers crossed.
• 35:21
  SPEAKER_03: So we talked about uh the ISO relationship with the GHG protocol in our other podcast.
• 35:26
  SPEAKER_03: So I don't want to go into detail, but can you give like the 30 second of what has changed there?
• 35:31
  SPEAKER_01: Yeah, so ISO International Standards Organization has its own corporate accounting GHG um standard.
• 35:37
  SPEAKER_01: Um and GHG protocol was ultimately like built off that, but but but significantly different.
• 35:42
  SPEAKER_01: There are big differences, some similarities.
• 35:44
  SPEAKER_03: And I mean it was 20 years ago.
• 35:46
  SPEAKER_03: Exactly.
• 35:46
  SPEAKER_03: So yeah.
• 35:48
  SPEAKER_01: Um and so they announced a relationship uh to co-brand their standards going forward.
• 35:52
  SPEAKER_01: Um, but it just so happens that the protocol revisions were happening before that uh relationship was announced.
• 35:58
  SPEAKER_01: And so now the ISO group is like getting involved more um as it should be.
• 36:03
  SPEAKER_01: You want to have these these standards aligned um or at least co-branded, and so um they will require more time to like um ask questions and provide input and and provide updates, um, and then more time for us as the working group to consider them.
• 36:17
  SPEAKER_01: So it just will require a bit more time because of that.
• 36:20
  SPEAKER_03: All right, more to come.
• 36:21
  SPEAKER_03: Um let's move on because we have a few other topics, and I didn't mention this in my intro, but we do have another working group, the actions and markets.
• 36:29
  SPEAKER_03: So, what's going on with that group?
• 36:31
  SPEAKER_01: Yeah, it's good.
• 36:31
  SPEAKER_01: So they put out a um basically a discussion document uh for where they think a lot of things will go.
• 36:36
  SPEAKER_01: So that is publicly available.
• 36:38
  SPEAKER_01: Um, the big thing that a lot of my clients have asked, and we've had these discussions of where things will stand with uh like the concept of book and claim.
• 36:46
  SPEAKER_01: Um and so these are very similar to like you'd consider it be contractual instruments for all of your physical inventory.
• 36:53
  SPEAKER_01: So contractual instruments for your scope one, your scope two, and scope three.
• 36:57
  SPEAKER_01: The concept currently in the discussion document is that you would have like a physical inventory of your normal scope one, scope two, scope three.
• 37:05
  SPEAKER_03: So basically location.
• 37:06
  SPEAKER_01: Yeah, location based, yeah.
• 37:08
  SPEAKER_01: And then you would have like a contractual or a market-based scope one, two, three next to it.
• 37:13
  SPEAKER_01: And so the idea then is that there would be a place for like scope one, you know, natural gas contracts.
• 37:20
  SPEAKER_01: If you're able to procure a renewable natural gas contract, for example, that the reflection of that, those emissions would sit in your scope one contracted or scope one market-based, lots of big quotes around that.
• 37:31
  SPEAKER_03: Yeah, because lots of terminology, right?
• 37:34
  SPEAKER_03: Yeah, yeah.
• 37:35
  SPEAKER_01: And then the permission, then it seems, to have our market-based scope three.
• 37:39
  SPEAKER_01: And so you're reflecting, you know, different parts of the value chains, emissions from a contracted um perspective in your scope three.
• 37:46
  SPEAKER_01: So can you account for your a scope two market-based in a scope three, a scope one market-based in a scope three?
• 37:51
  SPEAKER_01: So the idea is here to reflect more of that.
• 37:54
  SPEAKER_01: I think the ask for for precision on this, or at least guidance.
• 37:58
  SPEAKER_01: Um, in so that's the direction they're going.
• 38:00
  SPEAKER_01: That those are the biggest takeaway of like, okay, we've thought about this a little bit.
• 38:04
  SPEAKER_01: Here's where we may be thinking of how we're going to structure it.
• 38:07
  SPEAKER_01: Um, some concepts are there open for discussion, but nothing is like decided.
• 38:12
  SPEAKER_01: There isn't that much to like to blow up in the water right now.
• 38:16
  SPEAKER_03: But so uh the last timeline I looked at, but this is is a bit of time ago, that group was I'll use the word lagging, although it's probably not a fair characterization, but it's just they were going to be issuing guidance after.
• 38:30
  SPEAKER_03: Um, and the other three groups were going to be issuing their guidance together.
• 38:34
  SPEAKER_03: So is that still the intention?
• 38:37
  SPEAKER_01: It seems the same.
• 38:38
  SPEAKER_01: Yeah, exactly.
• 38:38
  SPEAKER_01: Yeah, they were always intended to be after because it's not going to be part of the standard.
• 38:42
  SPEAKER_01: Um, it is meant to reflect like how to account for emissions reductions, potentially beyond the value chain emissions reductions, um, book and claim type things where you're um maybe getting an offset, but it's really quite associated with the activity you're trying to reduce.
• 38:56
  SPEAKER_01: That's just like the scope one market-based concept.
• 38:58
  SPEAKER_01: So those concepts will be more of a disclosure and a guidance on how to disclose on those things.
• 39:04
  SPEAKER_01: It won't be impacting like the actual inventory that you disclose on as it is today.
• 39:09
  SPEAKER_03: All right.
• 39:10
  SPEAKER_03: So it sounds like more to come on that one.
• 39:11
  SPEAKER_03: Although I think that's a good segue uh into our last topic.
• 39:15
  SPEAKER_03: And this, I think, deserves its whole own podcast, but we'll at least touch on it.
• 39:19
  SPEAKER_03: So we did see a new standard issued on January 30th.
• 39:22
  SPEAKER_03: So any highlights that you would share on that?
• 39:25
  SPEAKER_01: Sure.
• 39:25
  SPEAKER_01: Yeah, this is long awaited.
• 39:27
  SPEAKER_01: So the land sector removal standard is out.
• 39:30
  SPEAKER_01: Um, this is a long time coming.
• 39:32
  SPEAKER_01: I think a lot of you know my clients, we've discussed this internally of like, where is it?
• 39:35
  SPEAKER_01: What is happening?
• 39:36
  SPEAKER_03: It has been since like what, 2019 or even yeah.
• 39:39
  SPEAKER_01: It's been a long journey.
• 39:40
  SPEAKER_01: Yeah.
• 39:40
  SPEAKER_01: Um and I think there's been some interesting um things that came out of it.
• 39:44
  SPEAKER_01: Ultimately, it is focused on land use emissions, um, land management emissions.
• 39:49
  SPEAKER_01: So those in the agricultural food um world is where a lot of their emissions will sit in this.
• 39:55
  SPEAKER_01: One of the things that didn't come out of it was a forest carbon accounting methodology.
• 39:59
  SPEAKER_01: Um, I there was a working group there, but I think ultimately they couldn't agree on the standard, and so it was removed in order to get this standard out to the public, because it had been such a long time.
• 40:09
  SPEAKER_01: So they've committed to reconvening that group, and there'll likely be like an amendment to the standard to incorporate forest carbon.
• 40:16
  SPEAKER_01: And so a lot of the stuff in the current standard um has changed significantly from the previous draft standard.
• 40:22
  SPEAKER_01: Like there are big, big changes.
• 40:24
  SPEAKER_01: You know, that some of the criticisms of the draft was it's just very complex, like very hard for most lay people to understand what's going on.
• 40:32
  SPEAKER_01: Um, and I and I would say most lay people would not have an easy time digesting the new version.
• 40:38
  SPEAKER_01: Okay.
• 40:38
  SPEAKER_01: Um, it is very complex.
• 40:40
  SPEAKER_01: Um, it also sits as a standard and there's guidance to come.
• 40:43
  SPEAKER_01: And so the guidance will fill in a lot of blanks.
• 40:46
  SPEAKER_01: But like the normal stuff's there.
• 40:48
  SPEAKER_01: So land use change emissions.
• 40:49
  SPEAKER_01: So when you're turning over a land for another use, the you know, that shall be accounted for if you have a particular, like um your business focus is land.
• 40:58
  SPEAKER_01: So anywhere in the agricultural food value chain.
• 41:01
  SPEAKER_01: Um, so all the normal stuff is in there, like land use.
• 41:04
  SPEAKER_01: There is some really interesting things in there around uh leakage.
• 41:08
  SPEAKER_01: So if I'm um making a biofuel, um, and for example, I'm using like primary um inputs, so food, um, I actually have to account for the food that has to be made elsewhere because I'm taking that food to put into the fuel value chain.
• 41:25
  SPEAKER_01: So it's called leakage because the expectation is that the food is still needed in the world.
• 41:30
  SPEAKER_01: So someone else will create that food somewhere else.
• 41:33
  SPEAKER_03: There's a lot to feed that world that goes to waste in the world.
• 41:37
  SPEAKER_03: So this concept Is that taken into account here or no?
• 41:40
  SPEAKER_01: It is considered.
• 41:41
  SPEAKER_01: Um, and so some of the criticism is like this is a concept that goes well beyond a GHG inventory.
• 41:47
  SPEAKER_01: There's a lot of considerations to play, and so it's it almost simplifies the concept too much.
• 41:53
  SPEAKER_01: Um, I've seen some comments on this in that, like, yeah, it it's outside of the inventory.
• 41:59
  SPEAKER_01: So, how are why are we actually accounting for it inside the physical inventory?
• 42:02
  SPEAKER_01: Um, are the approaches too um extreme to actually calculate the emissions?
• 42:08
  SPEAKER_01: Um, and so so that is a very strong concept.
• 42:11
  SPEAKER_01: I mean, you can understand conceptually that that it's there, but I think it's like, should it be in this inventory?
• 42:18
  SPEAKER_01: Should it be in this standard?
• 42:19
  SPEAKER_01: Is it something that's considered like beyond the value chain?
• 42:21
  SPEAKER_01: And yes, we should know what's happening.
• 42:23
  SPEAKER_01: Um, the criticisms there is that often, yeah, you probably shouldn't be using like a primary food source to make a biofuel.
• 42:30
  SPEAKER_01: Um, and so that changes the emission profile of it.
• 42:33
  SPEAKER_01: And so if you actually do incorporate the leakage associated with that onto a product that is a primary food, then it's not as appealing.
• 42:41
  SPEAKER_03: And so then maybe it's going to cut down the use of this primary food.
• 42:46
  SPEAKER_03: Yeah, it's just it's way more complicated.
• 42:48
  SPEAKER_01: Absolutely.
• 42:48
  SPEAKER_01: And and you're almost thinking, okay, is it now the GHC protocol's job to like advocate for like changing incentives or changing use?
• 42:57
  SPEAKER_01: It's like it is kind of an accounting standard.
• 43:00
  SPEAKER_01: It is not like a you know, policy.
• 43:02
  SPEAKER_01: Yeah.
• 43:02
  SPEAKER_01: And so there's there's some iffy things in there, um, but it is what it is.
• 43:08
  SPEAKER_01: It is the standard.
• 43:09
  SPEAKER_01: Um, but there's some good stuff in there, especially accounting for removals.
• 43:12
  SPEAKER_01: So there's approaches for doing that.
• 43:14
  SPEAKER_01: Um, you can't just net out emissions from your scope one, for example, if you can prove removals, like you have to report both.
• 43:21
  SPEAKER_01: Um, and then there's strict criteria for what could be considered a removal.
• 43:25
  SPEAKER_01: This was in the draft standard.
• 43:26
  SPEAKER_01: I think they tightened it up a little bit.
• 43:28
  SPEAKER_01: It's it's still mostly the same.
• 43:29
  SPEAKER_01: Um, but ultimately this is quite welcome because I think no one necessarily had a good way of accounting for them.
• 43:35
  SPEAKER_01: Always, you know, the net zero concept.
• 43:37
  SPEAKER_01: Functionally, it doesn't really exist in the standard.
• 43:39
  SPEAKER_01: It's saying, you know, report your gross scope one, report your gross removals.
• 43:42
  SPEAKER_01: Sure, someone could do the math, um, but ultimately they have to be reported side by side.
• 43:47
  SPEAKER_01: So it's it's very welcome.
• 43:49
  SPEAKER_01: I think it's been a long time coming.
• 43:51
  SPEAKER_01: Um I said this before, devil's in the details on some of these things.
• 43:54
  SPEAKER_01: So the guidance will come out uh in a couple months, we're told.
• 43:57
  SPEAKER_01: So there's a lot more to come on this.
• 44:00
  SPEAKER_01: Um, one of the interesting things that that for me was that they basically gave it an in effect date.
• 44:06
  SPEAKER_01: And so, you know, it was out January 30th and they said 2026.
• 44:10
  SPEAKER_01: They said in effect January 30th, 2027.
• 44:12
  SPEAKER_01: And so that is something that we've got a lot, a lot of asks on on the scope three piece, the corporate standard.
• 44:18
  SPEAKER_01: Okay, okay, if it's out on one date, when is it actually going to be like in effect?
• 44:22
  SPEAKER_01: But as a voluntary standard, like how do you put something in effect?
• 44:27
  SPEAKER_03: Yeah, although I guess, well, it's a fair point, but because it's a supplement to the corporate standard to report in compliance with the corporate standard, you would need to do to follow it.
• 44:37
  SPEAKER_03: Yeah.
• 44:37
  SPEAKER_03: So I think it's a very key point because you get you do get a little hung up while reporting in accordance with the corporate standard is voluntary in most cases, unless you're in California and during your 253 or directionally at least 253 reporting.
• 44:51
  SPEAKER_03: But if you're saying, okay, I'm in accordance with the protocol, then you wouldn't follow this.
• 44:56
  SPEAKER_03: Yeah.
• 44:56
  SPEAKER_01: As of that date.
• 44:57
  SPEAKER_03: As of that date.
• 44:58
  SPEAKER_03: So that's a very interesting point.
• 45:00
  SPEAKER_03: I guess more to come.
• 45:01
  SPEAKER_03: Yeah.
• 45:02
  SPEAKER_03: Uh, and I do think, you know, a lot of people are gonna read the title and think, oh, I don't I don't need to know this.
• 45:08
  SPEAKER_03: But I think because of some of what you talked about with the removals in particular, and I think it's important for people to understand what's being proposed or not proposed, what's in here.
• 45:17
  SPEAKER_03: Yeah.
• 45:18
  SPEAKER_03: So because I I think ultimately it could interplay with some of what's being done with markets and instruments or otherwise.
• 45:25
  SPEAKER_01: So it's a big part of our world.
• 45:27
  SPEAKER_01: I mean, the clothes we're using right now, like the stores who create these these clothes, like arguably they will have emissions in this category.
• 45:34
  SPEAKER_01: Right.
• 45:34
  SPEAKER_01: The food we eat, those companies who make the food we eat, they have emissions in this category.
• 45:38
  SPEAKER_01: And so accounting for them appropriately and then being able to reflect decarbonization in them.
• 45:42
  SPEAKER_01: That was the intention behind the standard.
• 45:44
  SPEAKER_01: I think it was like uh that was why I was a long time coming.
• 45:47
  SPEAKER_01: Um, and so I think it's a step in the right direction.
• 45:50
  SPEAKER_01: It is just very complex, like obviously.
• 45:52
  SPEAKER_01: Yes.
• 45:53
  SPEAKER_01: Um, and so I think you know that's why companies are like, well, that's good, but like, okay, what am I supposed to do?
• 45:58
  SPEAKER_03: Yeah, and what am I supposed to do now?
• 45:59
  SPEAKER_01: Yeah, so so when the guidance comes out, I think it'll help.
• 46:02
  SPEAKER_03: But that adoption You have a lot riding on this guidance, yes.
• 46:06
  SPEAKER_03: Hey, Colin, have you seen it?
• 46:08
  SPEAKER_03: Yes, okay.
• 46:09
  SPEAKER_03: So maybe we should like hold with hold our judgment, but we're hoping, I guess is fair to say.
• 46:14
  SPEAKER_03: Bring some light to it, yeah.
• 46:16
  SPEAKER_03: Exactly.
• 46:16
  SPEAKER_03: So we've talked about a lot here.
• 46:18
  SPEAKER_03: Anything else from the GHG standard setting landscape other than scope two, which again we talked about in a separate podcast that you would touch on.
• 46:27
  SPEAKER_01: I think just a lot of like, you know, looking towards 2028, the questions we get of like, okay, what do we do?
• 46:34
  SPEAKER_01: What do we do then even?
• 46:36
  SPEAKER_01: Um, and I think just understanding like, you know, this isn't going to completely change things overnight.
• 46:41
  SPEAKER_01: I think there's gonna be a little bit of a pull, like a market pull of like the early adopters trying to understand like what we actually have to do.
• 46:49
  SPEAKER_01: And so we probably won't see full-scale adoption of this new protocol for like until 2029, 30, 31, right?
• 46:56
  SPEAKER_01: And so, you know, that's that's five years from now.
• 46:59
  SPEAKER_01: So I think a recognition that things aren't gonna change overnight, but just to be aware of like what of the direction of travel on these things, like is an important piece.
• 47:06
  SPEAKER_03: Yeah.
• 47:06
  SPEAKER_03: And I guess maybe you can tell me, I've been optimistic that we have so many questions right now about applying the current standards that this will help from that point of view.
• 47:17
  SPEAKER_03: But then listening, do you think that's the case?
• 47:19
  SPEAKER_03: Or we're gonna just wind up as going to be more complicated?
• 47:22
  SPEAKER_01: It's gonna answer some questions, but I think just because of the like the intention behind adding more prescription and like new categories, for example, like it's gonna create more.
• 47:32
  SPEAKER_01: But hopefully, I mean, that's the point of this public consultation period, right?
• 47:35
  SPEAKER_01: Really need to drive home that like this is a big change because it hasn't been changed in so long.
• 47:41
  SPEAKER_03: Right.
• 47:41
  SPEAKER_01: Um, and so it almost has to be a little market leading, but how do we make sure that it's still achievable and usable and doesn't really like push people away from using it?
• 47:50
  SPEAKER_02: Yeah.
• 47:51
  SPEAKER_01: And then the recognition that this is now a process they've introduced and will be done every five years, I think is an important one.
• 47:56
  SPEAKER_01: And probably one they should sing a bit louder, honestly, um, in that like they're not done, but yeah, um, there'll be a lot of more opportunities for feedback.
• 48:05
  SPEAKER_03: Yeah, and also they don't have to do everything right now.
• 48:08
  SPEAKER_01: Yeah, yeah.
• 48:09
  SPEAKER_03: So you kind of touched on this, but just to close things out, if you're if I'm someone listening and I'm responsible for a company's GHD inventory or I'm an auditor, or I, you know, I have some role, what do you say to your comp clients when they ask you how much attention should I pay to the twists and turns and how much should I just wait?
• 48:27
  SPEAKER_01: Yeah, I mean, every single technical working group, like don't need to stay up to date on that.
• 48:32
  SPEAKER_01: I think understanding you're gonna say up at night.
• 48:34
  SPEAKER_03: Yeah, like reading.
• 48:36
  SPEAKER_03: Like me.
• 48:36
  SPEAKER_03: Yeah.
• 48:37
  SPEAKER_01: Um every twist and turn doesn't have to be there.
• 48:40
  SPEAKER_01: But honestly, there haven't been a lot of twists and turns.
• 48:43
  SPEAKER_01: Like from where we were when we started, I started this like a year, a year and a half ago.
• 48:47
  SPEAKER_01: A lot of this stuff have stayed like pretty consistent.
• 48:50
  SPEAKER_01: There's been a few changes here and there, but there's been a consistent direction of travel for a lot of these things.
• 48:56
  SPEAKER_01: Anyone who's talked to me on this have have seen like where we're at.
• 48:59
  SPEAKER_01: Um, and so I think just being aware like periodically on the updates.
• 49:04
  SPEAKER_01: Honestly, I would have liked to see more of summary documents from the the the secretariat just to say, okay, here's where we're at.
• 49:10
  SPEAKER_01: Um no public consult, but here's where we're at.
• 49:13
  SPEAKER_01: Um, maybe like one or two of those, because it is a bit hard to digest all the information in the um in the technical working groups.
• 49:19
  SPEAKER_01: So at least like a six-month, every six-month touch point until there's a a public um document to to to digest.
• 49:27
  SPEAKER_01: And then I think you know, what I'm telling a lot of clients is like have that point person who can you know spend a bit of time every six months and just like download it and understand and ask questions and like come to your consultant or your auditor and and just be like, hey, can you give me a rundown?
• 49:41
  SPEAKER_01: Or are the things I'm not thinking of when I when I'm thinking through this problem or how it's gonna impact us?
• 49:46
  SPEAKER_01: Um and then the other thing I think we touched on this before in a number of conversations is like is um using technology to calculate your GHG emissions, like what is the impact here?
• 49:57
  SPEAKER_01: Um, how quickly will I have to change?
• 49:59
  SPEAKER_01: Will my software change?
• 50:01
  SPEAKER_01: And so having those considerations in mind when you're maybe selecting a vendor or working through some of those tech implementation challenges, I think is an important one.
• 50:09
  SPEAKER_03: Yeah, I think a lot of our listeners are thinking, good.
• 50:11
  SPEAKER_03: I hope Colin comes back in three to six months, which we will be inviting you so you can be the one to give that download.
• 50:18
  SPEAKER_03: Oh, so Colin, it's always such a pleasure to talk to you.
• 50:21
  SPEAKER_03: Thank you so much for joining me today.
• 50:22
  SPEAKER_02: Thank you.
• 50:23
  SPEAKER_03: And to our listenerslash viewers, thank you as well for joining us today.
• 50:27
  SPEAKER_03: As always, we appreciate you tuning in.
• 50:29
  SPEAKER_03: And please join us again next week for more from Sustainability Now.
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