Third-party Verification Report on Carbon Emissions
The research institution CDP has released a third-party verification report on carbon emissions, aiming to provide enterprises with a verification process for environmental data and increase their credibility in information disclosure.
CDP believes that honest and transparent information disclosure is an essential component of future business operations, and countries have begun to introduce third-party verification requirements in carbon emissions to increase the reliability of data. The European Union requires companies to report greenhouse gas emissions in the Corporate Sustainability Reporting Directive (CSRD) and expects auditors to verify the data.
The Role of Third-party Verification
CDP believes that introducing third-party verification in environmental data disclosure can help enterprises in the following ways:
- Improve the reputation of the enterprise. Verified data can provide assistance to stakeholders (customers, consumers, investors, regulatory agencies) and reduce the likelihood of greenwashing. These checks can also avoid or refute some erroneous views regarding the environmental aspect of the enterprise.
- Increase competitive advantage. Due to Scope 3 involving upstream and downstream partners in the supply chain, some suppliers should start requiring partners to verify environmental data. Enterprises that adopt data verification can gain an advantage over competitors and improve the accuracy of company information disclosure.
- Improve company efficiency. Third party verification can re-examine the environmental data and optimize some production and operation processes to reduce emission costs.
Report Framework for Third-party Verification
More and more reporting frameworks have emerged globally, many of which are related to environmental data verification, such as the Task Force for Climate Related Financial Disclosures (TCFD) and the Science Based Targets Initiative (SBTi).
CDP believes that the overall verification work will take approximately six months, with planning and contract processes accounting for two-thirds and verification accounting for one-third. Enterprises need to clarify the boundaries of the report before data verification, and choose appropriate reporting methods and the data scope.
After completing the work, the verification agency will issue a Reasonable Assurance statement. For example, based on the evidence provided and the samples selected for verification, the auditor believes that greenhouse gas data and information are correct and have been prepared in accordance with relevant standards. Companies can attach this statement in its disclosure document.
Verification Method for Scope 3
Among numerous environmental data, the measurement and calculation of Scope 3 are more complex, and third-party verification is important for enterprises. From procurement, production and transportation, these broad application scenarios may increase carbon emission errors and provide space for verification.
CDP believes that companies should understand whether numerous categories of carbon emissions (from GHG protocol) are applicable to their business activities, distinguish which pose the greatest risk, and prioritize addressing these contents. Regulatory authorities also require companies to clarify which data in Scope 3 has been verified and the level of assurance provided by the agency.
Practical Verification of Corporate Carbon Emissions
CDP analyzed the carbon emission disclosure of 8372 companies worldwide last year, with the European Union (18%), the United States (16%), and China (15%) occupying the top three. The most commonly used disclosure standard for enterprises is ISO 14064-3 (Greenhouse Gases—Part 3: Specification with Guidance for the Verification and Validation of Greenhouse Gas Statements), followed by ISAE 3000 (International Standard on Assurance Engagements 3000).
In terms of third-party verification of carbon emissions, 33% of enterprises verify Scope 1 and Scope 2 data, and 25% of enterprises verify Scope 3 data. In terms of verification results, most companies have received Limited Assurance, while some performing companies have received Reasonable Assurance. For enterprises undergoing initial verification, the proportion of Limited Assurance is higher.