The issue of climate change is now recognized as a major driver for business and political decision making. Understanding how to measure and manage climate change at the business level is critical for organizations as they respond to these emerging risks and opportunities (e.g., physical, market, public relations, regulatory and stakeholder). Beyond the climate-change policies, programs and investment actions under discussion at the highest levels, environmental managers require an understanding of the tools and techniques for greenhouse gas emissions accounting and verification. Under the United Nations Framework Convention on Climate Change, the main greenhouse gases of concern include carbon dioxide (CO 2), methane (CH 4), nitrous oxide (N 2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF 6).
Why is greenhouse gas management important to your organization? To answer that question, you must first answer the following:
• Are your key stakeholders (e.g., customers, investors and top management) interested in or concerned about greenhouse gases?
• Does your organization have greenhouse gas risks (i.e., major emission sources), and if so, how do you deal with them from the perspective of branding, public relations and compliance, as well as competitiveness and/or physical issues?
• Can your organization define its greenhouse gas footprint (e.g., facilities, main operations, projects and/or products)?
• Can it define its greenhouse gas reduction opportunities (e.g., upgrades, new technologies, offset projects and/or climate-friendly products)?
• Does your organization have or need in-house capability for this assessment (e.g., tools, training, greenhouse gas management systems and/or verification)?
• Does your organization plan, implement, report, and manage a greenhouse gas inventory or greenhouse gas projects?
Similar to other environmental management systems (EMS), a greenhouse gas management program begins with top management commitment and policies, and extends throughout the organization in a way that complements specific business opportunities.
In March 2006 the International Organization for Standardization completed a multistakeholder process to develop a set of international standards for greenhouse gas accounting and verification, beginning with the release of ISO 14064:2006--"Greenhouse gases." ISO is also working on ISO 14065:2007--"Greenhouse gases: Requirements for greenhouse gas validation and verification bodies for use in accreditation or other forms of recognition," a complementary standard that allows for accrediting verification and validation bodies. That standard is currently in the final draft international standard (FDIS) stage and is expected to be published later this year.
ISO 14064 consists of three parts: Part 1 provides the basis for accounting undertaken at the organizational level, Part 2 provides the basis for accounting at the project level, and Part 3 provides the basis for validation and verification of both organizational and project quantifications.
The goal of both standards is to provide an international, policy-neutral set of tools to be adopted by greenhouse gas programs or used voluntarily to allow for consistency in undertaking and certifying greenhouse gas inventories and projects.
In 2002, ISO's Technical Committee 207, the committee responsible for the ISO 14000 series of environmental management systems, established a working group on climate change with the aim of developing ISO 14064 and ISO 14065 to help in the consistent quantification of greenhouse gases by organizations and greenhouse gas projects. The working group was established and managed jointly by the Department of Standards Malaysia and the Standards Council of Canada. More than 175 experts from 45 countries and 19 liaison organizations were involved in developing these standards between 2002 and 2006.
The need for international consistency in greenhouse gas quantification led TC 207 to form a working group on climate change. Although the Kyoto Protocol brought about by the United Nations Framework Convention on Climate Change was developed in part to address this, other accounting methodologies were being formulated by national and state programs--both voluntary and mandatory--as well as other market participants worldwide, including the United Kingdom and European Union Emissions Trading Schemes, and national and state programs in the United States, Canada and Australia.
ISO 14064's aim is to provide a common basis for greenhouse gas accounting that can be adopted by emerging greenhouse gas programs or used in a purely voluntary context. As such, the standard is consistent with the requirements of the UNFCCC Kyoto Protocol while maintaining a policy-neutral approach to facilitate its use and adoption outside the protocol's national inventory requirements and project flexibility mechanisms. ISO 14064 thus helps to link international efforts on climate change in a way that complements the range of emerging national and regional approaches.
The standard wasn't designed to predetermine or set greenhouse gas program policy but to address matters of quantification consistency. This was considered an important characteristic to increase the standard's flexibility and adoption by a wide range of programs. The standard not only simplifies reporting and development requirements but can also help create equivalent emission reductions with respect to carbon credits. This in turn will help link various greenhouse gas programs globally in the future.
The explicit objectives of ISO 14064 and ISO 14065 are fourfold:
• To enhance environmental integrity by promoting consistency, transparency, and credibility in greenhouse gas quantification, monitoring, reporting and verification
• To enable organizations to identify and manage greenhouse-gas-related liabilities, assets and risks
• To facilitate the trade of greenhouse gas allowances or credits
• To support the design, development, and implementation of comparable and consistent greenhouse gas programs
The standards were designed to be consistent with requirements under the Kyoto Protocol as well as complement the World Business Council for Sustainable Development/World Resources Institute's Greenhouse Gas Protocol Initiative instruments. Part 1 of ISO 14064 used the Greenhouse Gas Protocol for Corporate Accounting (2001) as one of its main resources. Part 2 was developed at the same time as the Greenhouse Gas Protocol for Project Accounting (2005), and both documents are complementary and consistent with each other. The greenhouse gas protocols offer the detailed "how-to" for accounting practices, while ISO 14064 and ISO 14065 provide the more specific "what"--i.e., what must be included or specified and consequently assessed.
ISO 14064 Part 1 details principles and requirements for designing, developing, managing and reporting organization or company-level greenhouse gas inventories. It includes requirements for determining organizational boundaries, greenhouse gas emission boundaries, quantifying an organization's greenhouse gas emissions and removals, and identifying specific company actions or activities aimed at improving greenhouse gas management. It also includes requirements and guidance on inventory quality management, reporting and internal auditing.
Part 2 of the standard focuses on greenhouse gas projects or project-based activities specifically designed to reduce greenhouse gas emissions or increase greenhouse gas removals. It includes principles and requirements for determining project baseline scenarios, and for monitoring, quantifying and reporting project performance relative to the baseline scenario. It also provides the basis for validating and verifying greenhouse gas projects.
Part 3 details principles and requirements for verifying greenhouse gas inventories and validating or verifying greenhouse gas projects. It describes the process for greenhouse-gas-related validation or verification, and specifies components such as validation or verification planning, assessment procedures, and evaluating organizational or project greenhouse gas assertions.
ISO 14065 provides requirements for bodies that undertake greenhouse gas validation or verification using ISO 14064 or other relevant standards or specifications. It contains a number of principles that these bodies should be able to demonstrate and provides specific requirements that reflect these principles. General requirements relate to matters such as legal and contractual arrangements, responsibilities, impartiality, and managing liability and financing issues. Specific requirements include provisions related to structures, resource requirements and competencies, information and records management, validation and verification processes, appeals, complaints and management systems.
ISO 14065 can be used by greenhouse gas validation or verification bodies to self-declare their competency to carry out validation or verification activities, or may be used by greenhouse gas program administrators, regulators or accreditors to recognize the competency of such bodies. The standard can also be used as the basis of peer assessment among groups of validation or verification bodies.
There are several areas in which ISO 14064 can benefit your organization, including:
• Managing risks. Use the greenhouse gas inventory as part of an environmental risk management strategy to determine what greenhouse gas sources to target, and to reduce emissions.
• Public relations. Use the greenhouse gas inventory to promote an effort in greenhouse gas management and reductions. Results of the greenhouse gas inventory and the company's greenhouse gas management plan could be published on its Web site as well as in promotional material and annual reports.
• Creating value from opportunities. Create a record of early actions taken, e.g., record your organization's greenhouse gas baseline and report the results of specific projects or reduction measures.
• Targeting specific types of reductions. Participate in greenhouse gas programs that target reductions of specific types of greenhouse gas emission sources.
• External reporting to obtain financial benefits. Use the greenhouse gas inventory to demonstrate greenhouse gas risk management to obtain additional funding from venture or angel investors, or to demonstrate that your products are greenhouse-gas-neutral.
• Regulations. Develop a greenhouse gas inventory to comply with current regulations or prepare for future ones.
• Investment disclosure. Demonstrate to stakeholders and insurance companies that your organization is managing and reducing its greenhouse gas emissions.
Both ISO 14064 and ISO 14065 are already being used in program designs. They've informed, been adopted or adapted, or been referenced by the Canadian domestic offsets system, the United Nations Development Program, the Australian Greenhouse Challenge Plus and the U.S. Department of Energy 1605b Greenhouse Gas Registry. Recently, the standards have served as the basis of accounting within the International Emissions Trading Association-led Voluntary Carbon Standard. They're also proving to be important tools for assessment in voluntary emissions reduction, especially in North America.
In Canada, the federal government has utilized ISO 14064 Parts 2 and 3 for several climate change programs that cover greenhouse gas technology demonstrations, and greenhouse gas emission-reduction purchasing. ISO 14064 training programs have been developed and delivered across the country. Currently, the Canadian federal government and standards bodies are working on developing an accreditation program based on ISO 14065. In Australia, the Australian Greenhouse Office has adopted verification guidelines for its greenhouse programs based on the structure and content of ISO 14064 Parts 1 and 3 with guidance from ISO 14065.
In North America, where the WBCSD/WRI Greenhouse Gas Protocol has been extensively utilized to develop corporate greenhouse gas inventories, ISO 14064, as a complementary standard, is emerging as the predominant tool for companies undertaking voluntary certifications of their greenhouse gas inventories and projects.
The underlying objective and principles in developing the ISO greenhouse gas standards were to support market development by providing an auditable, credible and standardized process for faster, better, cheaper quantification and verification while maintaining:
• Neutrality toward specific greenhouse gas policies and programs
• Compatibility with the Kyoto Protocol rules and provisions
• Compatibility with the Greenhouse Gas Protocol (both corporate and project)
ISO 14064 and ISO 14065 provide the basis for accounting and certification of organizational inventories and greenhouse gas projects that are policy-neutral and focus on quantification. The standards have been designed to be applicable to all sectors and all types of greenhouse gas activities, which means that they're necessarily broad with respect to defined criteria.
Although ISO 14064 has been designed to be credible yet flexible, it maintains a level of rigor that's acceptable to a majority of stakeholders, and it can be applied to any type of greenhouse gas activity because it allows for innovation in designing actions aimed at reducing the greenhouse gas levels in the atmosphere.
Probably the main weakness of the standard is its divergence from known and accepted climate-change terms. This is especially the case for Kyoto Protocol-related terminology. Some users find ISO 14064 difficult to follow initially. However, once each criterion is addressed in practice, most users comment that the standard has a clear and logical progression and allows for flexibility in its application while still requiring the fundamentals of reliable greenhouse gas accounting. ISO 14064 is also a process-orientated standard, written and designed similarly to the rest of the ISO 14000 series as well as the ISO 9000 series.
One of the main aims of the standard is to establish a means for undertaking greenhouse gas accounting activities in a consistent manner. This will allow users to achieve comparable reliability in outcomes as compared to established greenhouse gas programs, and will prepare users for an easier progression into greenhouse gas programs as they emerge or become relevant.
Russell Thornton is DNV's North American director for climate change services. This article was written in conjunction with Thomas Baumann, the author of ISO 14064 Part 2 (Projects) as well as a contributor to the development of the WBCSD/WRI's Greenhouse Gas Protocol for Projects.