How to Estbalish Greenhouse Gas Emissions Materiality
Posted: Wednesday, January 13, 2010
by Daniel Stouffer
Earth Phone
The materiality definition in The Climate Registry is part of its general verification protocol (GVP). It allows for a threshold of 5 percent, either over or under statement, of an entity's direct or indirect emissions of greenhouse gases. Direct emissions refers to occurrence on-site from the source, such as when refrigerant gas discharges during a leak. Indirect emissions refer to the use of resources or goods that discharge greenhouse gases during their production.
There was confusion with the absolute value basis that specifies the threshold when the greenhouse gas registry's definition of materiality was released. In the most recent clarifications released, such term was omitted and replaced with 5% understatement or overstatement threshold leeway.
The materiality definition in The Climate Registry's verification standards addresses emissions reported by entities located in North America. However, since North American and worldwide emission reports are geographically different, the registry requires separate, stand alone verification statements for both regions. Documents should include materiality threshold including emissions threshold which are calculated through simplified methods.
The 5 percent materiality definition threshold is standard within financial accounting practices and represents the amount of insignificant emissions allowed. Entities have the flexibility to specifically define which greenhouse gas emissions would be classified as insignificant within the scope of their operations.
Materiality defined will address errors in reporting by a company when it comes to GHG emissions. An inaccuracy occurs when a company's stated direct or indirect emissions differs from its true emissions, give or take five percent. Under the registry, these inherent uncertainties can be a result of rounding errors, numerical mistakes, uncertain emission factors, or other miscalculations.
The Climate Registry was established in 2007 to provide a standardized method for companies in the United States, Canada and Mexico to voluntarily report greenhouse gas emissions. The aim of the nonprofit agency is to get a better understanding of the harmful effects greenhouse gases are having on the environment by asking companies to report their emissions. The registry supports policies that involve voluntary and mandatory reporting and regulatory oversight of greenhouse gas emissions.
The materiality definition is just one aspect of the registry's reporting requirements. Other greenhouse gas emissions reporting protocols include some types of indirect and direct emissions which are calculated at a company, geographical, facility and operational level. Greenhouse Gas Emissions reporting is made annually. As such, many facilities, especially those equipped with refrigeration and air-conditioning (RAC) systems or heating, ventilation and air conditioning (HVAC) systems, have contracted with vendors of refrigerant management programs. Software and other web-based applications now exist to automatically track and report emissions information, ensuring accuracy and compliance.
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