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Talking GHG: Reporting requirements for greenhouse gas emissions · PwC's accounting podcast

• 0:00
  SPEAKER_01: Thought leadership from PWC's National Office.
• 0:06
  SPEAKER_00: I think for anybody reporting emissions, it's critical that they familiarize themselves with all these documents, corporate standards, scope 2 guidance, scope 3 standards, scope 3 calculation guidance, to really have a good overview how to go about identifying, measuring, and reporting those uh those emissions.
• 0:27
  SPEAKER_02: Hello.
• 0:28
  SPEAKER_02: Today we're back talking ESG, and this week we kick off a series breaking down the building blocks of greenhouse gas, also known as GHG Emissions Reporting.
• 0:38
  SPEAKER_02: In today's episode, we'll start with the five steps of reporting and we'll begin to dissect the process by focusing specifically on step one, understanding your GHG reporting requirements.
• 0:54
  SPEAKER_02: I'm Heather Horn, and thanks so much for joining us today.
• 0:57
  SPEAKER_02: In this step, we'll dive into the foundational step of understanding GHG reporting requirements once you've determined that you're in scope of one of the required reporting frameworks.
• 1:07
  SPEAKER_02: I'm joined today by Marchina Lewinsky, an assurance partner who also leads our global technical working group focused on GHG, and Kelsey Paisa, a senior manager in the PWC National Office who also focuses on GHG, and who both are, together with me and Carolina Cosby, the primary authors of our chapter in the Global Sustainability Reporting Guide focused in on greenhouse gas emissions reporting.
• 1:31
  SPEAKER_02: Whether you're preparing for mandatory regulations or considering your voluntary reporting, you'll be sure to find some helpful words in today's episode.
• 1:39
  SPEAKER_02: With that, here's my conversation with Marchin and Kelsey.
• 1:43
  SPEAKER_02: March and Kelsey, welcome to the podcast.
• 1:45
  SPEAKER_02: And thanks so much for joining me today to kick off the first episode in our multi-part GHG emissions series.
• 1:52
  SPEAKER_02: And I think this is a great topic because no matter which framework you're reporting under, you're going to be reporting in some way GHG emissions, with maybe a small exception for SEC registrants that we'll get to.
• 2:05
  SPEAKER_02: With all of that said though, Marchin, I think it might be helpful to run through the overall approach we developed as part of writing the GHG chapter in our sustainability reporting guide.
• 2:16
  SPEAKER_02: We kind of broke down the process of reporting emissions into steps.
• 2:20
  SPEAKER_02: So can you share some background on that?
• 2:23
  SPEAKER_00: Thank you, Heather.
• 2:24
  SPEAKER_00: Nice to be here as always.
• 2:26
  SPEAKER_00: And uh good memories writing SRG.
• 2:28
  SPEAKER_00: And I'm really excited about this mini-series.
• 2:30
  SPEAKER_00: I think it's gonna be beneficial for our listeners and kind of additional to the SRG.
• 2:35
  SPEAKER_00: So I encourage everybody to uh well as they go through the chapters, also listen to the to the mini-series because it we're gonna we're gonna give some explanations and maybe put put some of the theory into life.
• 2:46
  SPEAKER_00: So, okay, but like let me get back on uh on a topic.
• 2:49
  SPEAKER_00: So, yes, so what we kind of design in our SRG is like a five-step process that every company planning to report emissions needs to be thinking.
• 2:57
  SPEAKER_00: It's kind of an easy, logical way to dissect that in a in a uh sizable bytes, I would say.
• 3:04
  SPEAKER_00: So the first step is um to make sure they understand the GHG emissions reporting requirement.
• 3:09
  SPEAKER_00: So, as you mentioned, there's a plenty of new uh requirements that are gonna drive require companies to report emissions.
• 3:15
  SPEAKER_00: And some of these requirements differ, right?
• 3:18
  SPEAKER_00: Um have a different kind of a guidance.
• 3:20
  SPEAKER_00: So it's really crucial to understand what you have to report it, report and where you have when you where you have to report.
• 3:27
  SPEAKER_00: Second step is to establish the organization on boundary, uh, which kind of helps companies determine what is subject to the reporting.
• 3:35
  SPEAKER_00: The third is to determine operational boundary.
• 3:38
  SPEAKER_00: Then we move to the step four, measurement of GHG emissions itself.
• 3:42
  SPEAKER_00: And finally, the step number five is to report the emissions that we measured.
• 3:47
  SPEAKER_02: Yeah, and I think to be clear, there's some of those uh steps have multiple steps underneath, which I know when I have other guests on, I often make fun of them for saying that's five steps, but it's really 15.
• 3:58
  SPEAKER_02: So we're not quite guilty of that.
• 4:00
  SPEAKER_02: But I, you know, for the listener's benefit, some of these do have more than one part.
• 4:04
  SPEAKER_02: Uh, but I think for today, we're really going to focus in on understanding your reporting requirements.
• 4:11
  SPEAKER_02: And specifically, this is not going to go so much into the applicability of, let's say, the um ESRSs or who's subject to the California rules, or you know, what the requirements and various jurisdictions are for reporting of ISSB.
• 4:27
  SPEAKER_02: There will be some other podcasts covering that.
• 4:30
  SPEAKER_02: But assuming you know you're in the scope one of those standards, then what do you need to think about GHG emissions?
• 4:36
  SPEAKER_02: What are some of the basics?
• 4:37
  SPEAKER_02: We think even if you are generally aware of this, that this is very foundational, and it will really help build our building or our building blocks to report GHG emissions and will help as we move it further into the series.
• 4:52
  SPEAKER_02: So, with that said, Marchin, sticking with you.
• 4:55
  SPEAKER_02: The starting point for companies reporting GHG emissions, even if they're one of the all these one of the other standards, is the GHG protocol.
• 5:04
  SPEAKER_02: So can you explain a bit about the protocol and then we'll talk about the interaction with the other standards?
• 5:10
  SPEAKER_00: Yes, that's I think it's a great starting point.
• 5:12
  SPEAKER_00: And for all our listeners, I mean, emissions are being reported by by companies on a voluntary basis and sometimes regulatory for for quite some time.
• 5:20
  SPEAKER_00: So there uh there's existing guidance, and that guidance is outlined in the GEG protocol.
• 5:25
  SPEAKER_00: It's probably by far one of the most commonly used accounting and reporting standards for GHG emissions.
• 5:33
  SPEAKER_00: As I mentioned, historically it was primarily done on voluntary basis, but now you know the new regulatory sustainability reporting frameworks, uh a lot of them point back to GEGG protocol as it relates to emissions reporting.
• 5:46
  SPEAKER_00: So the background, I mean, the protocol is is is dated, right?
• 5:49
  SPEAKER_00: I mean, it has been introduced in 1998.
• 5:52
  SPEAKER_00: It's an initiative of World Council for Sustainable Sustainable Development and World Resource Institute, right?
• 5:59
  SPEAKER_00: And uh they started an initiative, as I mentioned, in 1998, uh, developed multiple standards and the guidance documents that currently a lot of companies are using as a base for emissions reporting.
• 6:12
  SPEAKER_00: And the one thing that you know I want to maybe clarify upfront, right, when we refer to, because we're gonna continue referring to this set of accounting standards and guidances, like in one common word, GHG protocol.
• 6:25
  SPEAKER_00: But for those who are new to the reporting, it's not like a one document, right?
• 6:29
  SPEAKER_00: So the GHG protocol published multiple guidance and standards on a website that are publicly available to everybody for no price.
• 6:37
  SPEAKER_00: Um, that covers various elements of um emissions reporting.
• 6:42
  SPEAKER_00: So when we talked about this concept, you know, uh in a group together, we talked about corporate standard, which is kind of a foundational.
• 6:49
  SPEAKER_00: We talked about the scope to guidance, we talked about corporate value chain standard and uh and a guidance to uh scope three um uh measurement guidance, right?
• 6:59
  SPEAKER_00: So those are kind of the key elements of GEGG protocol.
• 7:03
  SPEAKER_00: So every time we refer to GEGG protocol, we mean those kind of uh those key documents that they published.
• 7:09
  SPEAKER_02: All right, so I'm gonna pause you right there and maybe Kelsey, um, I'll put you on the spot and ask you about this.
• 7:15
  SPEAKER_02: I think for us, it kind of just rolls off the tongue to talk about these different standards and what they all mean.
• 7:21
  SPEAKER_02: But if we just dig a little bit deeper, so Marchin referenced the corporate standard scope two guidance and then the corporate value chain scope three standard.
• 7:30
  SPEAKER_02: Can you just give us a little more on each of those, what's covered, and then you know, any anything that stand out to you about them?
• 7:38
  SPEAKER_03: Sure.
• 7:38
  SPEAKER_03: So I think with the corporate standard, which is the initial standard that was published by the protocol, really lays the foundation for measurement and reporting of GHG emissions by a corporate entity.
• 7:51
  SPEAKER_03: Um it's probably by far the standard that's used the most because it covers broadly measurement as well as more specifics on measuring, you know, scope one and two emissions.
• 8:02
  SPEAKER_03: The scope two calculation guidance is um also an amendment to or an addendum to the corporate standard and really focuses on measurement of scope two um GHG emissions and the various methods in which companies can report scope two emissions.
• 8:20
  SPEAKER_02: And then so Kelsey, I'll pause you there because I do think this is important because people often say, okay, but I don't see the scope two guidance, for example, referenced in the ESRSs or it's not referenced in uh the ISSB standards.
• 8:34
  SPEAKER_02: But I think it's very important that from the GH2 protocol perspective, they specifically the scope two guidance is an amendment to the GHG protocol corporate standard.
• 8:46
  SPEAKER_02: So as we're looking at these standards, if if someone is referring to the corporate standard, the scope two guidance is actually part of that.
• 8:54
  SPEAKER_02: We often will call it out separately just for ease.
• 8:57
  SPEAKER_02: So you you know you know where to go look.
• 9:00
  SPEAKER_02: But I think it's again important to highlight.
• 9:02
  SPEAKER_02: So then go to the the third one, scope three.
• 9:04
  SPEAKER_03: Yeah, so then the third one, which is the corporate value chain or scope three guidance, really lays um the foundation measurement concepts for scope three emissions reporting and is also supplemental to the um corporate standard for measurement.
• 9:20
  SPEAKER_02: So I think that's super helpful.
• 9:21
  SPEAKER_02: And again, just so we get our terminology right here.
• 9:23
  SPEAKER_02: So that final standard we set is the corporate value chain scope three accounting and reporting standard, referred to as the scope three standard.
• 9:31
  SPEAKER_02: And that is specifically referenced in ESRS and that does give guidance about scope three measurement.
• 9:39
  SPEAKER_02: There's a companion to that though, Marchin, that people may also want to be aware of, even though it may not be specifically referenced.
• 9:46
  SPEAKER_02: And so, what can you share about that other document?
• 9:49
  SPEAKER_00: Yeah, so the other documents is essentially calculation guidance.
• 9:52
  SPEAKER_00: So when you look at the standard itself, it introduces the concept of scope three uh categories.
• 9:58
  SPEAKER_00: It kind of broadly expects how to think about those categories, what should be reported, how to prioritize each category and reporting of those kind of uh categories within scope three, while the calculation guidance goes more into detail about the data gathering and actually calculation methodologies for each category of scope three.
• 10:21
  SPEAKER_00: There's like 15 of them.
• 10:22
  SPEAKER_00: So every single one, the calculation guidelines outlines you know uh allowable calculation methodologies and goes through the details.
• 10:30
  SPEAKER_00: So it's very helpful considering scope three is, I don't want to say relatively new, but less developed compared to other scopes, scopes, or being reported maybe not as consistently as other scope one and scope two.
• 10:42
  SPEAKER_00: So scope three calculation guidance actually provides a lot of valuable examples, you know, starting with where to get the data, to how to actually calculate emissions and how to uh think about which methodology to use.
• 10:58
  SPEAKER_02: All right, and then to the point, I think Kelsey, maybe maybe it was March, and when we say GHG protocol, we actually mean all three of the corporate standard, the scope two guidance, and the scope three standard.
• 11:12
  SPEAKER_02: Uh we use that as shorthand.
• 11:14
  SPEAKER_02: However, obviously, if you're reporting under, say, ESRS or the ISSB standards, there are some subtleties we'll get into.
• 11:20
  SPEAKER_02: And so you'll want to make sure you are looking at that specific guidance.
• 11:24
  SPEAKER_02: But again, both in the Sustainability Reporting Guide and in this uh podcast series, we will say GHG protocol to mean those standards.
• 11:34
  SPEAKER_02: That said, if someone goes onto the GHG protocol website, there's a lot of other guidance there.
• 11:40
  SPEAKER_02: And I think this can get very confusing for people very quickly.
• 11:44
  SPEAKER_02: So I'll start with Kelsey and March, and you can add in.
• 11:47
  SPEAKER_02: Kelsey, if you can just give some sense to people when you're on the website, some of the other things you might see and how we may think about those.
• 11:55
  SPEAKER_03: Sure.
• 11:56
  SPEAKER_03: There is some additional and whether I won't say it's it's not part of necessarily the corporate standard or supplemental to the corporate standard, but as I mentioned before, the corporate standard is for corporations or corporate entities reporting.
• 12:09
  SPEAKER_03: Some of the other documents and guidance the GHG protocol has on their website is maybe some sector-specific guidance or asset-specific guidance that companies might look at, and they're in various processes of developing that or various stages of it.
• 12:27
  SPEAKER_03: But companies might go look at the land sector guidance that I believe is on the GHG Protocol's website for specific requirements or methodologies or better understanding of how one would go about reporting GHG emissions for that particular sector.
• 12:44
  SPEAKER_00: Yeah, and Heather, we we also see things like you know, product standard or you know, a project development standard, which again can be used in specific circumstances.
• 12:54
  SPEAKER_00: For example, for companies that are developing like emission reduction projects, uh, you know, how to think about the calculations, or the companies that are willing to allocate emissions to specific products that they are selling.
• 13:07
  SPEAKER_00: So again, it's all useful uh uh guidance, it all depends, you know, what are your circumstances.
• 13:12
  SPEAKER_00: But I think, and I don't want to short, you know, hand uh like all the other additional guidance, but I think that three standards or guidance that we mentioned, they are really critical to understanding like wholesome or you know, understanding of emissions reporting.
• 13:28
  SPEAKER_00: I think, and I and I like your comments that you know when you look at this regulatory framework, whether this is ESRS, whether this is ISSB, they all might have a subtleties as to which documents they point to.
• 13:41
  SPEAKER_00: But I think for anybody reporting emissions, it's critical that they familiarize themselves with all these documents, corporate standards, scope two guidance, uh, scope three standards, scope three uh calculation guidance, to really have a good overview how to go about identifying, measuring, and reporting those uh those emissions.
• 14:01
  SPEAKER_02: Yeah, I definitely agree with both of you.
• 14:03
  SPEAKER_02: I think it gives some helpful sort of background setting.
• 14:07
  SPEAKER_02: Uh we do go into more detail in the SRG on all of these different sources of guidance and how you might think about them and how you may use them.
• 14:15
  SPEAKER_02: But I think to the point Kelsey made, for example, if you are in like need guidance on land use, or there's agricultural guidance, or there's supplemental guidance for forests and trees, those are things you may look at specifically to help with those sectors.
• 14:32
  SPEAKER_02: In addition, I would highlight that there are various tools on the GHG protocol website.
• 14:38
  SPEAKER_02: You know, they have gone through a process with those tools, but anytime, you know, any website where you're starting to deal with those types of things, we would definitely say, and we do say this in the SRG, that that is a case where the companies should make sure that they understand the methodologies that are used and the underlying assumptions and otherwise in those tools before using them.
• 14:58
  SPEAKER_02: And that will become more important when we get into some of the measurement guidance.
• 15:02
  SPEAKER_02: But again, if if you're new to this or even if you're not, I think definitely worth poking around in the GSG protocol and understanding what's there.
• 15:12
  SPEAKER_02: Before we go on, one of the other points that comes up is Kelsey mentioned this, that the corporate standard was the first standard that was developed.
• 15:22
  SPEAKER_02: It was originally issued, I think, in 2004.
• 15:25
  SPEAKER_02: And anyone who starts to use that standard is going to see that there are some concepts in it that are outdated, specifically related to leases, but there are some other things as well that are out of date.
• 15:36
  SPEAKER_02: And so I think the question we get and the GHG protocol gets when is this going to be updated?
• 15:43
  SPEAKER_02: Uh so March, and just really big picture, what have we seen coming from the GHG protocol in terms of uh getting input on these standards?
• 15:52
  SPEAKER_02: And then what have they shared about what their plan is?
• 15:55
  SPEAKER_00: Yeah, so I heard that it's a great, great question.
• 15:57
  SPEAKER_00: So uh I think because we have uh such a huge number of mandatory sustainability reporting um you know standards that like were issued during the last few years, I think GHG protocol realized that they need to have a look at the whether you know how the existing GHG protocol standards and guidance fits the new reality, realizing that now it's no longer used for voluntary purposes, but now it's going to be way more prominent in terms of regulatory reporting frameworks.
• 16:27
  SPEAKER_00: And I think it's a good initiative.
• 16:28
  SPEAKER_00: Like any any other standard setting body, you uh you have to constantly look at the you know what do we need to update when.
• 16:35
  SPEAKER_00: So they recognize the need, and if I remember my dates correctly, last year they used to issue a series of surveys that anybody could um respond to, and the surveys included very specific questions as to what needs to be updated in any of the standards documents, justifications for that.
• 16:54
  SPEAKER_00: They had very specific questions about some topics that they themselves identify potentially might need the updating.
• 17:00
  SPEAKER_00: Leasing is one of those.
• 17:02
  SPEAKER_00: And um, you know, market participants, practically anybody, could submit their kind of responses to the surveys with more kind of a granular uh descriptions of what and why uh they believe should be updated.
• 17:15
  SPEAKER_00: So uh GEG Protocol you know took those results of the surveys, analyzed, they they uh they issued kind of a detailed analysis of you know groups of questions and suggestions that they received, and they you know out uh uh designed the outline how they're gonna go about the you know updating the um uh the guidance itself, which I think if I get it correctly, Kelsey might correct me if I'm wrong.
• 17:39
  SPEAKER_00: I mean, it's they're planning to update you know standard and guidance documents over the next two years, if I remember correctly.
• 17:46
  SPEAKER_02: Yeah.
• 17:46
  SPEAKER_02: And I think one of the key points of feedback on the standards and guidance was the need for a better uh sort of due process over the standards.
• 17:56
  SPEAKER_02: So they did announce that they're planning to appoint a steering committee, and then that the members of the steering committee then would actually appoint independent standards board, and then that they're going to have various working groups.
• 18:08
  SPEAKER_02: Now we've seen the chairs of those committees announce.
• 18:11
  SPEAKER_02: We haven't seen the membership, but hopefully soon.
• 18:14
  SPEAKER_02: I think they are um we keep getting announcements that it's expected to be soon, so who knows?
• 18:20
  SPEAKER_02: Um, you know, next week is New York Climate Week.
• 18:22
  SPEAKER_02: Maybe we'll see an announcement then.
• 18:25
  SPEAKER_02: But I will say right now, on their website, it says that they anticipate that they'll release draft standards for public consultation in 2025 and publish final standards guidance in the latter half of 2026.
• 18:38
  SPEAKER_02: This is from some time ago, at least I think June, from their website.
• 18:43
  SPEAKER_02: So whether that's still the timeline or it's even beyond that, but I think key reason to bring this up here is that I think it's important to understand the way the guidance is now and then to think about the interaction with ESRS's, ISSB, et cetera, because it's we're not going to get new guidance in the very near term.
• 19:03
  SPEAKER_02: All right.
• 19:04
  SPEAKER_02: So that's a lot of background.
• 19:05
  SPEAKER_02: I think most of our listeners, um, this will come into play if they are reporting in California to know these details about the GHG protocol.
• 19:14
  SPEAKER_02: But otherwise, maybe Kelsey, you can set the landscape for us of sort of how the other standards think about the GHG protocol and what other standards people should be focused on.
• 19:24
  SPEAKER_03: Yeah.
• 19:24
  SPEAKER_03: So as we mentioned, you know, earlier, you know, over the past couple of years, uh various sustainability frameworks have come about.
• 19:31
  SPEAKER_03: And I'd say the primary ones or the key ones globally that companies are focused on and that are requiring reporting in the near future is you know the European sustainability reporting standards, so or ESRSs.
• 19:47
  SPEAKER_03: These standards were really issued under CSRD and are include GHG emissions reporting.
• 19:54
  SPEAKER_03: Um and those requirements for reporting GHG emissions are actually found in ESRS E1, climate change, is the standard.
• 20:02
  SPEAKER_03: The other large global one is the IFRS sustainability disclosure standards.
• 20:08
  SPEAKER_03: Um, these standards were issued by ISSB and also require GHG emissions reporting.
• 20:13
  SPEAKER_03: Um and those GHG emissions reporting requirements are included in IFRS S2, climate climate-related disclosures.
• 20:24
  SPEAKER_00: And uh well then uh let's move to US because we're not you know staying behind.
• 20:28
  SPEAKER_00: Obviously, uh SEC um climate disclosure rules require the uh uh reporting of uh GHG emissions, among other uh reporting requirements.
• 20:38
  SPEAKER_02: Aaron Powell Only for certain registrants.
• 20:40
  SPEAKER_02: That was my asterisk I gave earlier.
• 20:42
  SPEAKER_02: So we can we'll go into more detail about that.
• 20:45
  SPEAKER_02: But I think it's an important thing.
• 20:48
  SPEAKER_00: Only for certain uh registrants and all only for certain scopes of emissions, to be to be exact.
• 20:54
  SPEAKER_00: And then last but not least, California.
• 20:56
  SPEAKER_00: We have two bills there that essentially require the reporting of GHG emissions.
• 21:00
  SPEAKER_00: So um uh Senate Bill 253 that requires reporting scope one, two, and three, uh, in accordance with GHG protocol, and um Senate Bill 261 that re uh requires reporting GHG emissions in accordance with TCFD, which is Task 404 on climate-related financial disclosures.
• 21:17
  SPEAKER_02: Right.
• 21:17
  SPEAKER_02: And there's some definitely subtlety to those in terms of particularly 261 that uh we will cover in a completely separate episode.
• 21:26
  SPEAKER_02: But one point I should make here for our listeners is that there were rumors that the timeline for implementation of the requirements for those two laws, um 253 and 261, was going to be pushed back.
• 21:39
  SPEAKER_02: Fake, that's fake news.
• 21:40
  SPEAKER_02: Um, I I shouldn't say, I mean, there were efforts to push back the timeline, but in fact, the amendments that were made, there were some cleanup amendments made, but they did not change the timeline.
• 21:53
  SPEAKER_02: So the reporting of emissions um under 253, which is reported in accordance with the GHG protocol.
• 22:00
  SPEAKER_02: Call is going to be required in 2026 on 2025 information.
• 22:05
  SPEAKER_02: And the reporting of the TCFD slash equivalent reporting will be by January 1, 2026, which is coming very soon, even though it's 2026 date.
• 22:16
  SPEAKER_02: So again, this is a good opportunity to dispel the myth that there is going to be more time for that reporting.
• 22:24
  SPEAKER_02: So with all that said, I think digging a little um deeper into the interaction of the standards is what our listeners need so they can uh continue with us on the series.
• 22:36
  SPEAKER_02: So Kelsey, I think I will start with you.
• 22:38
  SPEAKER_02: And perhaps we can start with the reporting in the EU under CSRD.
• 22:43
  SPEAKER_02: So the requirements of ESRS E1.
• 22:46
  SPEAKER_03: Yeah, and so, you know, as we mentioned before, I think all of those standards that we just listed require GHG emissions reporting.
• 22:55
  SPEAKER_03: And while there are some differences between each of the standards, there are also some similarities.
• 23:00
  SPEAKER_03: One being the reporting of GHG emissions in accordance or suggested the use of using the GHG protocol is consistent throughout these standards.
• 23:11
  SPEAKER_03: And so, you know, given the prevalence of the GHG protocol, each of these global standards as well as the US standards either, you know, recommend or require the use of the GHG protocol when reporting.
• 23:25
  SPEAKER_03: And so specifically, these standards will, you know, either explicitly refer to the GHG protocol or and even more explicitly might refer to the specific um standards we mentioned earlier from the GHG protocol that Marchin went through.
• 23:39
  SPEAKER_03: Um and so companies should really look at kind of a hierarchy of guidance.
• 23:43
  SPEAKER_03: And so if you're talking about ESRS E1, that would, you know, ESRS E1 specifically requires reporting of GHG emissions and defines the scope one, two, and three reporting requirements, but tells you to go look at the GHG protocol for measurement guidance.
• 24:02
  SPEAKER_03: And so companies really should, like I mentioned, kind of follow that hierarchy of guidance.
• 24:07
  SPEAKER_03: Explicitly follow the standard, and then in the absence of guidance or where the standard refers to the protocol, look at the protocol for measurement.
• 24:15
  SPEAKER_02: Yeah, and I think what's interesting there is that um ESRS E1 also references the ISO standards and some EU regulations, but it says you may consider those.
• 24:26
  SPEAKER_02: And then it also does clarify that only in the event they don't conflict with um the with guidance in E1 or the guidance in the GHG protocol.
• 24:37
  SPEAKER_02: The other thing I'd point out, some of that guidance that we said went beyond what we're defining as GHG protocols.
• 24:43
  SPEAKER_02: So the product standard and some of the other guidance is actually referenced as potentially helpful resources, I think, in target setting.
• 24:51
  SPEAKER_02: And so again, I think for people to be aware of what's being asked for in the specific standard and then understanding how that interrelates with what is on the GHG website is important because otherwise these standards just seem to sort of pop up out of nowhere.
• 25:06
  SPEAKER_02: Versus if you're familiar with the suite of guidance, then it I think it's it's easier to understand.
• 25:12
  SPEAKER_02: So all that said, Marchin, I will move to you next to talk about ISSB.
• 25:17
  SPEAKER_00: Yeah, so um, as Kelsey mentioned before, um the the re emissions reporting, measurement and reporting uh guidance is included in IFRS S2.
• 25:27
  SPEAKER_00: And similar to ESRS's, it introduced a hierarchy.
• 25:31
  SPEAKER_00: Uh so basically companies reporting emissions should start with a guidance included in S2.
• 25:36
  SPEAKER_00: Then for measurement, it points to uh GEG protocol, corporate standards specifically.
• 25:42
  SPEAKER_00: And for classification of scope 3 emissions between 15 categories, it refers to scope 3 standard of uh GEG protocol.
• 25:50
  SPEAKER_00: The new ones there in Appendix B uh has to include certain additional guidance as it relates to measurement of emissions, but it's primarily focused on um data quality, how to think about inputs in measurement, and uh, for example, you know, has a guidance that says companies should prioritize direct measurement data to extend uh possible, prioritize, use the verified data.
• 26:16
  SPEAKER_00: So it's really helpful guidance because when you talk about emissions, there's a lot of assumptions and estimates and uh you know third-party data that is being used.
• 26:24
  SPEAKER_00: So having that outline is is going to be very helpful, you know, and help the uh reporting entities to think about what to use first, how to what data is acceptable, and so on and so forth.
• 26:34
  SPEAKER_00: But the general premises of of um of measurements uh are outlined in a GHG protocol.
• 26:41
  SPEAKER_00: So that's kind of uh the the nuance, um uh first nuance of uh S2.
• 26:45
  SPEAKER_00: Then you have a second nuance, it also provides certain relief.
• 26:49
  SPEAKER_00: So the companies that are subject to you know um other jurisdictional uh emissions reporting requirements are allowed to use those kind of a measurement methodology included in those jurisdictional requirements.
• 27:03
  SPEAKER_00: It's kind of a very crafted in a very interesting way.
• 27:06
  SPEAKER_00: You really you cannot use you know um voluntarily other kind of a jurisdiction.
• 27:12
  SPEAKER_00: You have to be subject, you or part of your organization have to has to be subject uh to the to this reporting.
• 27:18
  SPEAKER_00: So it has to be mandatory for them.
• 27:20
  SPEAKER_00: And then if that's the case, they're allowed to use it the this relief and use those other um you know measurement methodologies as opposed to uh GHG protocol.
• 27:30
  SPEAKER_00: So again, recapping, it's a it's a kind of a you know three-step process.
• 27:36
  SPEAKER_00: You start with whatever explicit is listed in S2, then you go to GHG protocol measurement uh guidance, and then you have the jurisdictional relief.
• 27:45
  SPEAKER_00: So um it's kind of a nicely outlined process how to think about it.
• 27:49
  SPEAKER_02: Yeah, and I think for both of those, it's sort of a key thing is that you start with whatever is specific to that standard and then you supplement or fill in with GHG.
• 27:58
  SPEAKER_02: It's a little more complicated than that, but from a big picture perspective, that would be the case.
• 28:04
  SPEAKER_02: All right, now let's move to SEC.
• 28:06
  SPEAKER_02: So it's a little uh more complicated in terms of actually the fact it provides more flexibility.
• 28:12
  SPEAKER_02: So, Kelsey, what can you share?
• 28:13
  SPEAKER_03: Yeah, so out of all the kind of sustainability um disclosure rules or standards, SEC probably provides the most flexibility in how companies measure and report GHG emissions.
• 28:25
  SPEAKER_03: So, you know, the SEC rules actually do not define a specific method or require a registrant to follow a specific protocol or standard, but rather just require the registrant or those registrants that are required to report under the rule to disclose which protocol or standard they are using and the information on the methodology, significant inputs and assumptions they're using for measuring GHG emissions.
• 28:51
  SPEAKER_03: And so um, and so while no specific standard or protocol is listed, they do, in some of the discussion in the rule, they go through some examples of uh standards or protocols companies can use.
• 29:05
  SPEAKER_03: They mention the GHG protocol, they mention reporting under an EPA regulation or an ISO standard.
• 29:12
  SPEAKER_03: And so I'll say while there isn't any specific standard or protocol required, you know, given the prevalence of the GHG protocol, as we mentioned before, and a lot of companies are already voluntarily reporting under that.
• 29:24
  SPEAKER_03: I think in practice, many companies might consider reporting under something like the GHG protocol or even ESRS, um, given they might be required globally to report.
• 29:36
  SPEAKER_02: All right.
• 29:36
  SPEAKER_02: Very helpful.
• 29:37
  SPEAKER_02: And then last but not least, we touched briefly on California, but I do think there's again some subtlety here that's important to understand.
• 29:44
  SPEAKER_02: So, Kelsey, I'll go back to you.
• 29:46
  SPEAKER_03: Yeah, so I think as Martin mentioned, there's two main California bills that require reporting of GHG emissions.
• 29:52
  SPEAKER_03: The first being California's Senate Bill 253 requires reporting of scope one, two, and three GHG emissions in accordance with the GHG protocol.
• 30:03
  SPEAKER_03: Um, and so that's pretty explicit.
• 30:06
  SPEAKER_03: So companies are going to be reporting and following the GHG protocol for for measuring and reporting emissions.
• 30:13
  SPEAKER_03: Whereas Senate Bill 261 requires GHG reporting under TCFD, which is the task force for climate-related financial disclosures.
• 30:25
  SPEAKER_03: And TCFD requires an entity to report scope one and two emissions and strongly encourages reporting scope three emissions in accordance with the GHG protocol.
• 30:35
  SPEAKER_03: So whether you're in scope of both those bills or one of those bills, you will likely be required to report GHG emissions in accordance with the GHG protocol.
• 30:45
  SPEAKER_02: All right, so definitely a lot for companies to think about.
• 30:48
  SPEAKER_02: And we haven't even gotten into the reporting itself, but hopefully this uh again foundation will be helpful for companies as they think about the reporting requirements.
• 30:58
  SPEAKER_02: I know both of you spent a lot of time getting your head around the subtleties to these requirements.
• 31:04
  SPEAKER_02: So before we wrap things up with this first episode, just a question to both of you in terms of advice you have for companies that are trying to understand what's required for them and the interaction of these different standards.
• 31:16
  SPEAKER_02: So, Kelsey, I'll start with you.
• 31:18
  SPEAKER_03: Yeah, I think just again, starting with well, what is required under each of these frameworks.
• 31:25
  SPEAKER_03: Um, we mentioned we're talking about GHG emissions here today, and each of the frameworks we've mentioned have some standard or you know, specific reference to GHG emissions reporting.
• 31:36
  SPEAKER_03: So understanding which standard you're in, and then perhaps which measurement guidance it's going to point you to is the good starting point.
• 31:46
  SPEAKER_02: And Martin?
• 31:47
  SPEAKER_00: Yeah, for me, I think the words I've been repeating for the last two months, like uh, you know, mantra for me, interoperability.
• 31:52
  SPEAKER_00: I think that's gonna be really crucial considering that there are certain subtleties, but a lot of these standards are gonna be require reporting of GHG emissions, and a lot of them point to GHG protocol.
• 32:03
  SPEAKER_00: You know, after you understand where you have to report and making selections, you know, what methodologies you're gonna use, and you're trying to do make a selection of methodologies that can give you the you know the most interoperability between the different standards, because last thing you want to do is maintain multiple GHG inventories in your system that you know and and use them to reporting different numbers after different uh under different regulations.
• 32:27
  SPEAKER_00: So thinking upfront what it is uh you you will have to do and what decisions you're making to make it as easy as possible for yourself and at the same time meeting the requirements of all the other regulatory frameworks.
• 32:40
  SPEAKER_02: All right.
• 32:41
  SPEAKER_02: Well, definitely a great introduction to the topic of GHG reporting.
• 32:45
  SPEAKER_02: Thank you both so much for joining me.
• 32:46
  SPEAKER_02: And for our listeners, stay tuned next week for step two in the process, and this is where it starts to get complicated when we're talking about organizational boundaries.
• 32:55
  SPEAKER_02: Thanks again.
• 32:55
  SPEAKER_00: Thank you.
• 32:57
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• 32:59
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• 33:19
  SPEAKER_02: From Thought Leadership at PWC, I'm Heather Horn.
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