Christopher Lawless Leads the Way in GHG Compliance

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Chris Lawless - Head of ESG Metrics and Disclosure at Cameron-Cole

Audio transcript of Chris Lawless - Head of ESG Metrics and Disclosure at Cameron-Cole" from Carbon Accounting and Management Podcast

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Podcast cover for 'Carbon Accounting & Management' discussing GHG Compliance with host Chris Lawless, showcasing a vibrant image of Earth from space.

As the head of ESG Metrics & Disclosure at Cameron-Cole—an ADEC innovations company—Christopher Lawless brings over two decades of expertise. His career spans various facets of environmental sustainability, including Greenhouse Gas management and ESG consulting. With hands-on experience in developing and verifying Greenhouse Gas reporting, Chris has been involved in everything from inventory development and sustainability reporting to LCAs and inventory verification.

Notably, he has collaborated with the California Air Resources Board, a leading governmental body responsible for managing and regulating Greenhouse Gases. Today, Chris joins us to delve into Greenhouse Gas reporting. We’ll explore how organizations can initiate their sustainability journey, discuss best practices related to Scope 3 emissions, and gain insights into the Greenhouse Gas verification process.

Christopher Lawless joins Carbon Accounting & Management Podcast to discuss:

  1. Scope 1, 2, and 3 Emissions Clarification
  2. Spend-Based Methodologies for Scope 3 Reporting
  3. Verification Process for Emission Inventories
  4. Market-Based vs. Location-Based Reporting Methods
  5. Importance of Detailed Audit Trails
  6. Challenges in Scope 3 Emissions Management

Here is a summary of the discussion from the podcast.

Can you tell us a little bit about yourself, where you work and the work that you do there.

I’ve been working at Cameron-Cole for 16 years. We were one of the early actors in the Greenhouse Gas accounting and verification space. I head up our verification group and metrics and measurement team, which includes Greenhouse Gas inventory work, data, and heavy ESG elements.
We’re active in many of the major programs for Greenhouse Gas emissions throughout the US—California, Oregon, and Washington. We do a lot of work for non-programmatic companies, including verifications, where people verify against the GHG Protocol, disclosing it in their CSR report, as well as to various indices, CDP, and the like.

The work you folks do is super important, and it’s very timely given the recently passed legislation in California. Depending on the organization’s size, many organizations are now going to be moving from optionally reporting their carbon emission inventories to mandatory reporting. Thinking about folks who are having to create their first initial inventory and haven’t gone through the process themselves, I’d like to ask two questions around this.

First, who is the ideal person to lead the carbon emission inventory process within an organization?

The second question is where should organizations begin the carbon emission inventory process?

When starting this process in a large organization, a team of key individuals is essential. This includes representatives from operations, finance or accounting, and individual facility managers, if applicable. However, developing a Greenhouse Gas (GHG) inventory begins with understanding organizational boundaries and business operations. This involves identifying business divisions, partnerships, and other elements that may impact the inventory. Once the organizational boundary is established, determining how to conduct the inventory is crucial. This includes selecting either operational control or financial control, which can significantly affect the resulting carbon footprint.

Organizations should start by engaging individuals with in-depth knowledge of their operations, such as the Chief Operating Officer (COO) or real estate division. The next step is to define the organizational boundary, followed by identifying emission sources within that boundary. This involves collecting data on various sources, including electricity consumption, natural gas usage, mobile fleet emissions, and other relevant factors. Data collection should be conducted to maintain data integrity and accuracy, considering factors such as centralized versus decentralized data management systems.

Understanding the Scope 3 emissions is crucial for organizations, as it represents a significant challenge compared to Scopes 1 and 2. Many organizations have begun utilizing spend-based methodologies for reporting Scope 3 emissions. While this approach can provide insights into certain categories such as purchased goods and services, it may not fully address complexities related to other categories such as the use of sold products. Engaging with suppliers to understand their emissions is essential for organizations seeking to set goals against Scope 3 emissions.

When it comes to verifying emissions inventories, there are several key factors to consider. For Scopes 1 and 2, verification involves ensuring emission source accuracy and the methodologies’ reasonableness. However, Scope 3 emissions verification can be more complex due to the diverse nature of emission sources. Organizations should navigate this process by seeking standardized methodologies and approaches recommended by organizations like the GHG Protocol.

In the discussion about corporate reporting, we’ve dived into the complexities of Scope 1 and Scope 2 emissions. However, Scope 3 presents a different challenge altogether. Many organizations are adopting spend-based methodologies to tackle this aspect. What are your thoughts on this approach, and what strategies can companies employ to effectively manage their Scope 3 emissions?

Understanding the 15 relevant categories within Scope 3 is crucial for organizations embarking on this journey. While a spend-based model provides insights into certain areas like purchased goods and services, it falls short in addressing complexities such as the use of sold products. Engaging suppliers to grasp their Scope 1 and 2 emissions is essential for setting meaningful Scope 3 goals.

As for finding emission factors and methodologies, many initially opt for USEEIO, commodity-based, and spend-based factors. While these offer a decent screening level, navigating Scope 3 requires more than just a standardized approach. It’s a blend of art and science, with the GHG Protocol guiding specific categories like business travel and employee commuting. However, customized methodologies may be necessary for more intricate sectors, especially those involving end-of-life product use.

As I understand it, you’re an accredited emissions verifier. When you’re looking at inventories from organizations, what are some things you want to verify? To say, “Yeah, the methodology they’ve used is reasonable, and their emission sources are correct.” How can an organization navigate some of that, knowing it is more art than science now?  We can start with Scopes 1 and 2 and expand a little bit into Scope 3 as it makes sense for you.

For Scope 1 and 2, California has detailed regulatory guidance aligned with the US EPA GHG reporting rules, which dictate each sector and source’s approach and emission factors. As a verifier in such programs, strict adherence to these standards is required, leaving little room for flexibility in recording emissions. This level of precision is consistent across all mandatory programs and extends to certain voluntary programs like the Climate Registry, which also have specific reporting protocols and default emission factors. Verifiers must ensure compliance with these documents.

In contrast, voluntary reporters often follow the GHG Protocol, which offers broader guidelines and more flexibility in reporting and verifying emissions. This allows for greater discretion in selecting GHG emission factors and accounting methods. Large corporations that voluntarily disclose their emissions, for example, to CDP or in CSR reports, also benefit from this flexibility.

Scope 3, as previously noted, has even less regulatory guidance. Common methods, such as the spend-based model, are widely used, where emissions are calculated based on expenditure. This model requires verification that financial inputs are accurately recorded, which can vary in complexity depending on whether the financial data is centrally managed or decentralized. Verifiers must understand how the financial data is integrated from all business units and how credits and reconciliations are handled during verification for Scope 3 emissions.

So, if I understand correctly, the focus is on ensuring the completeness of the inventory, striving for accuracy, and maintaining transparency. These are fundamental aspects that are consistently evaluated when reviewing the inventory.

These are core principles of GHG accounting. As an auditor, it’s crucial to have a robust audit trail. For instance, when presented with a spreadsheet, it’s concerning to see hard-coded numbers that don’t link back to a larger dataset. Ideally, if the spreadsheet aggregates totals from various accounts, we need to trace each piece of data back to its source with as much detail as possible. This means examining monthly invoices or electricity consumption figures and ensuring they can be connected directly to their corresponding invoices.

An effective tool we often look for is an inventory management plan, that outlines the organization’s boundaries and operational details. It’s common to encounter exclusions, such as missing refrigerant data from a factory abroad. It’s vital for reporters to explicitly state what is excluded, which is not always documented but is essential for transparency. This plan should serve as a comprehensive guide, detailing how the inventory was conducted, the assumptions made, and the emission factors used, and provide a clear path from the most granular activity data to the organizational boundaries.

That’s very insightful. Building on that point, let’s consider an organization with a factory in India that is unsure about its refrigeration data. In such cases, do you find it more common for organizations to exclude this data, or do they typically estimate based on industry standards or benchmarks? What would you recommend for an organization facing this dilemma?

Achieving a complete inventory can certainly be challenging in the initial years and often requires a judgment call. I’ve observed that organizations either make estimates or choose to exclude data. For instance, defensible estimation methods for electricity and natural gas are based on intensity factors relative to square footage and are generally accepted. However, other estimation methods, which rely on multiple layers of unverifiable assumptions, should be avoided. For example, assuming specific equipment and capacity for a restaurant without verifiable data is not meaningful and should not be included.

When data is missing for a short period, such as a month, it is reasonable to interpolate from adjacent months—using January and March to estimate February, for instance. But, fabricating data to appear complete, especially when reporting to stakeholders or setting goals based on these estimates, is inadvisable. These practices can undermine the credibility of the data and should be avoided if the estimates cannot be directly tied to tangible activity data or a reliable source.

Absolutely, and that’s an important point. Organizations often strive for completeness in their reporting, but it’s crucial to recognize that excluding data may sometimes be preferable to making unfounded assumptions, provided these exclusions are transparently disclosed. This is a valuable perspective to consider.

Regarding Scope 2, the distinction between market-based and location-based data is particularly intriguing. Organizations typically need to report using both methodologies. Could you confirm that this is the case? Furthermore, when developing this part of their inventory, what strategies would you recommend to ensure the accuracy and relevance of the data so it genuinely reflects the underlying activity?

To comply with the GHG Protocol, organizations are required to report both location-based and market-based emissions. Market-based reporting reflects your purchasing decisions, such as opting into green power programs or buying renewable energy credits. Some organizations’ location-based and market-based reports might be identical.

However, there is a hierarchy in the methodologies used for calculating market-based emission factors. The most accurate method typically involves power purchase agreements. If you’re using unbundled renewable energy credits, these also factor in. Additionally, a Green-e residual mix factor accounts for renewable energy purchases by other parties, adjusting the emission factor based on what remains in the market. This method is slightly more accurate than a standard location-based emission factor for market-based calculations.

This is a challenge I often face when advising companies on Scope 2 emissions. Consider an organization that generates 100 power units, with 20% produced on-site. How should this be accounted for through both the location-based and market-based frameworks?

Considering on-site generation, such as from a natural gas turbine, is typically included under Scope 1 emissions and should not be accounted for in Scope 2. However, the situation can differ with on-site solar generation, where nuances arise depending on the solar panels’ ownership and the electricity-generated environmental attributes. Another factor is how the energy is metered into your facility—whether fed directly or returned to the grid. These details determine how the energy usage should be appropriately accounted for in your reports.

So, you’re suggesting that if we own the energy source and it directly supplies our organization, this would significantly reduce our market-based emissions. However, if it flows back into the grid, we must consider how we purchase the energy back, which may involve offsets or accounting for the generated energy.

Yes, if there is a direct feed into your facility, this should naturally decrease your consumption from other sources, whether through additional electricity purchases or using your own Scope 1 generation unit. These reductions should be reflected as a decrease in your consumption from these alternate power sources.

That makes sense. Shifting gears slightly, when an organization completes its Greenhouse Gas inventory, does it discover benefits beyond just understanding its carbon footprint? If so, what are some of these benefits, and how can an organization leverage them?

Yes, there are co-benefits, which vary based on the organization’s level of structure. Over the years, working with some very large multinational companies—more so in the past than recently—I’ve noticed that some organizations lack basic information about their operations, such as the number of locations, their geographical distribution, and activities conducted at each site. Gaining a better understanding of these aspects is a clear benefit of performing a Greenhouse Gas inventory.

As organizations advance in data management, I’ve observed improvements in utility management and the adoption of sophisticated software systems. These tools enhance data accuracy regarding consumption at various locations, which is crucial as more companies set environmental goals and strive to make tangible reductions in emissions. Improved measurement and monitoring are key steps toward achieving these emission reduction goals.

Yes, and that’s a point I often emphasize when working with clients—not everyone is eager to engage in carbon reporting; some see it as an obligation rather than a choice. However, by discussing the additional benefits beyond the inventory, such as how it can improve operations and provide valuable business insights, organizations often realize that it’s a strategic decision rather than just a compliance requirement. I appreciate your insights on this matter. And yes, you’re correct—I have been involved in developing carbon offset projects.

We’ve primarily served as a verifier for projects under the California Air Resources Board, focusing on specific types. These include projects related to the destruction of ozone-depleting substances and livestock initiatives.

When an organization is contemplating a carbon offset project—especially considering the current sensitivity around carbon offsets—it raises questions about whether this sensitivity is justified. What strategies should organizations consider when evaluating carbon offsets, or should they even be part of the conversation? Let’s explore this further.

It’s certainly a contentious issue. I recently found an intriguing article on forestry offsets, and I recommend caution regarding the voluntary market. I might avoid pursuing this avenue if I were a corporate reporter seeking emission reductions through offsets. Instead, the most effective approach is reducing your footprint by modifying your operations. 

This could involve various strategies, such as fuel switching or increasing the use of renewable energy. California’s program, which we are actively engaged in, is a robust system with numerous checks and balances. The project types we engage in are tangible and quantifiable, providing a more secure investment than forestry projects, where establishing a deforestation baseline can be challenging. 

Our projects, such as those involving ODS or livestock, offer clear records and tangible outcomes, making them worthwhile endeavors in emission reduction.

If an organization were interested in participating in those projects, is it something accessible to them? I am not familiar with these projects myself. Are they specific to California’s efforts to reduce emissions, or are they open to participation from others?

Within California’s cap and trade program, a small percentage of an organization’s emission reductions can be met through the purchase of offsets. This is a relatively minor aspect of the overall program. These offsets, measured in metric tons, can be purchased by entities not subject to California’s compliance obligations. Therefore, acquiring these offsets is feasible for organizations outside of California or those not regulated by the program.

That’s fascinating. In your experience with various organizations, have you noticed a tendency for people to view offsets as a quick, easy, and inexpensive solution? Regarding more substantial and tangible offset projects, do organizations seem more inclined to explore these options, or do they prefer focusing on capital improvements, fuel switches, or investing in on-site renewable energy production? Have you observed any cost-benefit strategies that have proven particularly valuable for organizations? 

The journey towards achieving net-zero emissions or becoming a carbon-neutral organization primarily hinges on operational changes. While some sectors find it relatively straightforward to achieve carbon neutrality, especially those with predominantly Scope 2 footprints, others face significant challenges. For instance, sectors dealing with waste management struggle due to limited options for mitigating emissions from landfill degradation.

There has been a shift in stakeholder expectations, with less emphasis on purchasing carbon offsets as a solution. Hence, building credibility with customers and stakeholders is vital. Relying solely on offsets for emission reduction may not be the most effective approach.

That makes a lot of sense, and it’s quite helpful. Shifting gears again, let’s focus on Scope 3 emissions and the relationship with suppliers. Have you encountered any strategies organizations have used to encourage suppliers to report their emissions more accurately and to collaborate on reducing emissions, benefiting both parties?

We’re indeed witnessing a rise in such initiatives in the marketplace. This past year, we collaborated with some Microsoft suppliers who were required to disclose their Scope 1, Scope 2, and specific Scope 3 emissions categories. More giant corporations like Microsoft and Amazon are leading the charge in pushing for emissions reductions despite the added time and expense this entails for smaller suppliers. It’s exciting to witness these developments unfold. 

Having been in this field for over 25 years, progress has been slower than anticipated. Nonetheless, there’s a sense of optimism as positive changes emerge. While legal challenges are expected, we’re finally seeing tangible progress.

Do you believe this progress stems from legislative pressure or a growing recognition of the value of sustainability among consumers and businesses?

It’s difficult to pinpoint a single factor. Much of the momentum arises from financial motives. Asset managers and large corporations perceive sustainability as crucial to mitigating operational risks and ensuring supply chain stability, aligning with evolving SEC guidelines. While federal action remains limited, states like California deserve recognition for their ongoing efforts in this area. 

That could serve as a valuable blueprint for federal action. Unfortunately, considering the current political climate at the federal level, it’s unlikely we’ll see significant progress in that direction. Money certainly plays a pivotal role in driving change, although it would have been preferable if other factors were equally influential.

Yeah, that’s fair. Considering the California law, doing business in the state holds significant weight and will likely drive this conversation forward. It’s crucial to help people recognize the ancillary benefits of this process. For instance, I’ve worked with organizations that discovered sites they weren’t aware of operating in—quite eye-opening.

Absolutely. I’d like to emphasize a PSA here—don’t wait. It takes time to develop a good Greenhouse Gas inventory. Larger organizations may need years to gather data, establish processes, and ensure an audit trail. Don’t delay, especially as more companies establish goals reliant on verified baselines.

That’s a fantastic point. If an organization is small to medium-sized and looking to get started, it can utilize GHG Protocol’s calculator tools, available as Excel workbooks. Consulting firms are often necessary for larger ones, especially considering the evolving landscape.

Exactly. And to reiterate, starting now is crucial. Once this becomes mandatory for everyone, there may not be enough consultants available. It’s essential advice for organizations to heed.

Closing Questions:

Are there any newsletters, websites, or professional organizations you recommend for industry professionals?

I’d recommend ADEC ESG’s Greenwatch newsletter for valuable insights into Greenhouse Gas accounting and broader sustainability initiatives. 

Great suggestion. Have you attended any noteworthy events or conferences or you are part of any organizations that our listeners should consider?

Certainly! Conferences like “Navigating the American Carbon World,” which is more of a carbon market and focus conference, and the “Climate Leadership Conference,” which offers valuable insights into GHG accounting, are available. If you are looking for a broader sustainability conference, I recommend the “GreenBiz Conference.”

Have you ever come across surprising or unconventional data sources used in carbon accounting?

When it comes to carbon accounting, while unconventional sources may seem creative, sticking to established methodologies is essential to ensure auditability. 

Definitely. Finally, have you seen any inventive ways organizations have engaged stakeholders to reduce their carbon footprint?

While not always fun, initiatives like incentivizing public transit or carpooling can make a difference, especially on the Scope 3 sides. However, achieving emission reductions often requires careful planning and quantitative analysis across all scopes.

If there’s only one thing that our guests take away from this conversation, what should it be?

Don’t wait. Write everything down.

Sustainability efforts take time to implement and see results. Secondly, write everything down. Document your processes, assumptions, and methodologies. This documentation ensures traceability, auditability, and YoY reporting, especially when staff turnover occurs. A well-documented approach allows for year-over-year comparability and helps organizations stay on track.

That is excellent advice. Thank you for sharing it. Lastly, where can our listeners find more information about your work and your organization?

You can visit my website – Cameron-Cole.com, or simply search for ADEC ESG. Our webpage provides comprehensive information about our broader ESG services under our parent company.