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Leading GHG reporting standard needs work to support pending disclosure requirements: ISF and CPA Canada report

September 15, 2022

Clearer direction is required for greenhouse gas (GHG) emissions measurement and disclosure, according to a report by the Institute for Sustainable Finance (ISF) and Chartered Professional Accountants of Canada (CPA Canada).

The Greenhouse Gas Protocol (GHG Protocol) was launched in 1998 and supplies the most commonly used standards for companies to measure and report their GHG emissions. Although the development of the GHG Protocol has been important and helpful, the joint ISF-CPA Canada report finds that more work is required at a global level to ensure that evolving stakeholder needs and expectations are addressed.

The report, titled “A Closer Look at the GHG Protocol: Observations and Implications for Standards Setters and Regulators,” finds that the GHG Protocol is a good start but it offers much more guidance than defined, prescriptive standards, and there is much work needed to provide companies with clear direction for the gathering and reporting of emissions data that will soon be required.

“GHG emissions reporting is a complex area that is not well understood,” said ISF research director Ryan Riordan. “There are decisions that companies make in applying GHG accounting and reporting standards, which can lead to a lack of comparability in disclosures across time and across firms.”

Securities regulators in Canada and globally are moving to make emission disclosure mandatory for many entities and the recently created International Sustainability Standards Board (ISSB) proposes that the GHG Protocol Corporate Accounting and Reporting Standard (Corporate Standard) be applied to measure emissions. Thus, it is important to understand how emissions are measured and disclosed.

“As interest in this area continues to grow, education will be key. Users relying on GHG emissions data would benefit from greater transparency around the  choices made by companies and the methodologies used,” said Rosemary McGuire, director, external reporting and capital markets at CPA Canada.

This high-level review of the GHG Protocol identified specific areas that require attention:

Nature of the GHG Protocol: The GHG Protocol consists of standards and guidance material. The Corporate Standard is not very prescriptive and requires significant application guidance. This mixed approach could be confusing to preparers and create challenges for assurance providers. It is not clear how new standards and amendments factor into the Corporate Standard.

ABOUT THE INSTITUTE FOR SUSTAINABLE FINANCE

The Institute for Sustainable Finance (ISF) is the first-ever multi-disciplinary and collaborative hub in Canada that brings together academia, the private sector and government with the singular focus of increasing Canada’s sustainable finance capacity. Its mission is to align mainstream financial markets with Canada’s transition to a prosperous sustainable economy, including long-term environmental sustainability. Housed at Smith School of Business at Queen’s University, the ISF will fill the gap of relevant data, expertise and business-oriented solutions for sustainable finance. By aligning financial knowledge and tools with climate change imperatives, the ISF will foster Canada’s leadership in the shift to a low-carbon global economy.

ABOUT CPA CANADA

Chartered Professional Accountants of Canada (CPA Canada) works collaboratively with the provincial, territorial and Bermudian CPA bodies, as it represents the Canadian accounting profession both nationally and internationally. This collaboration allows the Canadian profession to champion best practices that benefit business and society, as well as prepare its members for an ever-evolving operating environment featuring unprecedented change. Representing more than 220,000 members, CPA Canada is one of the largest national accounting bodies worldwide.

Media contact

David Watson
Associate Director, Communications, Institute for Sustainable Finance
david.watson@queensu.ca
C: 613.796.3605