Emissions Reporting with Michael Gillenwater-Part 1

This is the first part of a two-part podcast episode.

Dr. Michael Gillenwater is a trailblazer in the field of Greenhouse Gas management (GHG) and a key figure in the global fight against climate change. As the co-founder, executive director, and dean of the Greenhouse Gas Management Institute, Dr. Gillenwater leads a nonprofit organization with a unique mission: to train and professionalize a worldwide community of experts in the measurement, auditing, and management of greenhouse gas emissions.

Beyond his leadership at the Institute, Michael is a recognized thought leader who shapes the organization’s strategy, curriculum development, and educational initiatives. With decades of experience, including his role as a lead author for the Nobel Peace Prize-winning Intergovernmental Panel on Climate Change (IPCC) since 1999, contributions to the United Nations Climate Change Secretariat, and work with the WRI GHG Protocol, Dr. Gillenwater’s influence extends across the globe. Today, we explore his insights on best practices for creating greenhouse gas inventories, delve into resources available for those seeking guidance, and discuss how organizations can begin their journey toward effective greenhouse gas management.

Dr. Michael Gillenwater joins Carbon Accounting & Management Podcast to discuss:

1. Best practises for creating emissions inventories
2. Optimal techniques to understand emissions tracking and reporting
3. Importance of increasing mandatory corporate emissions reporting due to new regulations
4. Key Skills for GHG Inventory Management.

Here is a summary of the discussion from the podcast.

First Question, can I please get your official name and title?

Michael Gillenwater, and I am executive director at the Greenhouse Gas Management Institute.

Perfect. Thank you. Can you explain what the Greenhouse Gas Management Institute does specifically, and how your role fits into the organization?

Sure. The Greenhouse Gas Management Institute is a relatively small nonprofit organization that works internationally, focusing on professional development in the area of capacity building. Specifically, we provide technical capacity building, which includes training and helping to build institutional systems in governments, businesses, and nonprofits related to greenhouse gas analysis, accounting, and mitigation—what we call MRV: measurement, reporting, and verification.

These terms vary depending on the context, but a lot of our work is centered on the international compliance space. In the past, this was under the Kyoto Protocol, and now it’s under the Paris Agreement. Essentially, we help countries develop the necessary infrastructure to meet their emissions reporting obligations and targets.

We also work extensively with businesses, guiding them on how to analyze their emissions, track them, and set targets. Our primary focus is on teaching and building capacity. We are not a consultancy; we don’t perform emissions inventories or prepare disclosure reports for companies. Instead, we train the staff of these companies to do that work themselves. We also train consultants who often perform these tasks for businesses. So, in essence, So we’re kind of the teachers, not the doers.

Got it. And what about your role specifically within the organization?

I co-founded the organization with some colleagues. I handle the responsibilities typical of an executive director or CEO. I’m also heavily involved in guiding our curriculum development. Over the years, we’ve developed a rigorous set of training resources, and we have thousands of alumni worldwide, working in governments, businesses, and other sectors. I also lead our research program, where we aim to be thought leaders in the field.

We focus on the practical aspects of greenhouse gas accounting and inventories. We also delve into the deeper theoretical questions and the “why” behind what we do. For example, several years ago, we conducted an in-depth series on the concept of additionality—a critical issue within the carbon offset markets that remains contentious. I believe our work has significantly influenced the ongoing debate on how additionality is understood and addressed.

That’s great. The work you and your team do is amazing. Personally, I’ve learned a lot from your resources, and I love reading the blogs you publish—there’s always something interesting there. For our listeners, your organization is an invaluable resource. With the recently passed Climate Corporate Data Accountability Act, or California Senate Bill 253, we’re seeing more organizations not just choosing but being required to conduct carbon emission inventories. Given this shift, if an organization has never done this before and wants to assign someone internally to lead the inventory process, what kind of skill set do you think is most suitable for this role? Who typically takes the lead in such tasks?

Sure. And like you said, we’re seeing more mandatory corporate-level reporting expand in various venues. For instance, California recently passed a bill signed by the governor, and the U.S. Securities and Exchange Commission is working on a proposed rule. We also have existing rules in place in Europe. So, this type of reporting is expanding in several countries, focusing primarily on large publicly traded companies. However, for your listeners, these requirements usually do not apply to smaller businesses. They are more targeted at large corporations. To your question, this creates a tricky situation because these regulations are increasingly widespread, which was part of the rationale behind the development of much of the GHG Protocol.

This involves organizations like the World Resources Institute, the World Business Council for Sustainable Development, and WBCSD. These organizations helped shape the GHG Protocol. The Protocol was designed to support corporate reporting of greenhouse gas emissions, aligning it somewhat with financial reporting and disclosure practices. However, it wasn’t a perfect match. We increasingly see an overlap between traditional financial risk disclosures and emissions tracking. In my opinion, it’s not always the best fit, as there are significant differences between accounting for money and tracking greenhouse gas emissions.

The latter approach, I would argue, is more suited to environmental engineers and professionals experienced in making engineering estimates, understanding chemistry, and the physics of processes. They work with systems diagrams and engineering models, which require a deep understanding of how these systems function. This skill set is required in this field, particularly for managing and interpreting complex technical data. A background in air pollution or air quality can be beneficial because it enables one to grasp the underlying processes that generate greenhouse gas emissions.

This doesn’t mean that people from financial or accounting backgrounds can’t participate in this space. We’ve had alumni and trainees from diverse fields—legal, engineering, science, finance, and accounting—engage successfully. However, I would say it can be challenging, especially if you are uncomfortable with chemical formulas, engineering estimation equations, or understanding system boundaries. It often involves thinking in technical terms, which can be a struggle for those unfamiliar with these concepts.

I want to cover the idea of organizations using their financial reporting systems to handle emissions reporting. I’ve noticed many organizations start with spend-based mechanisms to get things moving. We often say, “Don’t let perfection be the enemy of progress.” How do you advise organizations on striking the right balance when starting out? Would you recommend using financial-based reporting as a first step, or could this be a misstep that misses opportunities?

Yeah, I’d say the original approach to corporate reporting focused almost entirely on scope one emissions—direct emissions from a company’s own assets and operations. You don’t necessarily need spend-based methods for that. If you’re using those methods from the start, you might be missing the point, which is to understand your processes and why emissions occur, then figure out what actions to take.

That kind of thinking requires more of an engineering analysis than just a financial one. When we talk about spend-based methods, we’re primarily addressing indirect emissions, which fall under scope three. And this leads to how we define corporate inventory boundaries—how far out in the value chain you go. As you extend further, you’ll likely need to engage more with financial or spend-based approaches because, by that point, you’re dealing with data from suppliers, and it’s difficult to know exactly what’s happening.

Increasingly, companies rely on default lifecycle assessments or emissions intensity factors. These estimate emissions happening further up the value chain. While this approach can be an interesting exercise, it often acts as a broad snapshot because it makes many assumptions. For example, it links spending on certain items to emissions occurring far upstream.

If your goal is to set a reduction target and actively track your emissions over time, using a spend-based method with default factors from a lifecycle database has limitations. These factors are often outdated, sometimes by a decade, and do not accurately reflect changes in emissions intensity. Even if your suppliers improve their processes or become more energy efficient, these improvements might not show in your calculations because you’re using outdated factors and broad assumptions.

To actually demonstrate reductions, you would need to either spend significantly less money or make major structural changes, like switching materials in manufacturing—for example, using aluminum instead of steel. Such changes would alter the default emission factors applied. The key issue is whether you are simply doing an inventory to fulfill a disclosure requirement, like CDP (Carbon Disclosure Project), or if you are actively managing your emissions and engaging in specific actions to reduce them. Your approach needs to align with the kind of changes you want to achieve. Again, much of this information captured through inventory systems often fails to reflect the real changes happening further up in the supply chain.

The idea that spend can only be reduced if you reduce your spend highlights a major limitation. However, it can serve as a first step for organizations that need to get something reported. The goal of reporting is not just to report but to have a real impact. I think that’s a refreshing perspective and a good way to frame the conversation.

Yes, and I’d like to add that doing spend-based analysis or a broad lifecycle assessment of your entire value chain can be a useful exercise. It’s included in the GHG Protocol, and there was a reason scope three emissions were initially emphasized. However, it was deprioritized in the early years of the GHG Protocol because it only provides a snapshot of where emissions are in the value chain if done carefully.

When you use one emission factor for the entire value chain, you don’t really understand where the emissions are coming from. It’s like taking a broad snapshot with a spend-based method. The problem is that this approach doesn’t track changes over time very well, so it only provides a momentary look at your value chain, often with low resolution. If you want to make targeted interventions—say, asking a supplier to change a process to reduce emissions—you need more detailed information. Treating the value chain as one big, undifferentiated block means you miss the specifics of where emissions occur. To effectively lower emissions, you need a deeper analysis that identifies which stages in the value chain are the most significant contributors.

To do this effectively, you need to dive into more detail and break down the value chain. You have to identify where emissions are occurring and at what stage in the value chain, rather than treating it as one big block. Understanding these specifics requires more effort, but it’s crucial. A quick spend-based snapshot can still be useful as a first step because it helps you identify which product or consumption categories in your business are the biggest contributors. From there, you can narrow it down to a few major spend categories and analyze them in more detail to see where emissions are coming from within the value chain.

I want to shift topics, but before we do, I have one more question about spend-based analysis. You mentioned databases where organizations can find spend-based emission factors. I know the EPA provides some of these factors. Are there other reputable sources that organizations should consider, particularly ones that offer expansive and valuable data for an initial snapshot view?

Yes, there’s a list of resources on the GHG Protocol website, including different LCA (Lifecycle Assessment) databases. The challenge with free resources is that they’re often not updated as frequently. On the other hand, there are paid databases managed by consultancies, which tend to be more regularly updated because they’re funded. I wouldn’t say one is always better than the other, but you get more current data with paid access.

Not all businesses are willing to pay for this, though. Another consideration is national data sets available in countries like the US, Canada, the UK, and parts of Europe, which are often more representative of local conditions and processes. Depending on where your business operates, I would focus on or prefer to use data sets specific to those regions. These data sets are often more reflective of local conditions, including the processes and fuel types commonly used in that country. As a result, they tend to be more representative and accurate on average.

That’s great. Using country-specific emission factors has been an excellent starting point for the organizations we’ve worked with, offering a different but relevant direction. In one of your articles, you discussed the concept of TAC—Transparency, Accuracy, Comparability—in the context of missing greenhouse gas accounting principles. Could you expand on that? Maybe explain what TAC stands for and break down each section a bit, so organizations can think about how to frame their inventory process?

Sure. TAC stands for Transparency, Accuracy, and Comparability, principles that trace back to the IPCC and the guidelines for national inventory reporting, like those under the Kyoto Protocol. These principles are foundational to corporate reporting.

Transparency means clear documentation of how data is collected and reported; accuracy ensures data reflects true emissions as closely as possible; and comparability allows for consistent comparisons across different reports or entities. In the IPCC guidelines, transparency is considered one of the last listed principles, but it’s as critical as the others.

When we started, we tried to reframe the approach, especially when teaching others about how to implement these principles. This was closely linked to the compliance inspection team certification and training process developed for those determining compliance at the country level for the Kyoto Protocol. You can think of it similarly to a compliance inspection for an international treaty, but in this case, it’s environmental.

We elevated transparency as a fundamental principle because none of the other principles—accuracy, completeness, comparability, and what we call consistency (specifically time series consistency)—matter if transparency is absent. Without transparency, you can’t evaluate or understand any other principle from an external standpoint. So, transparency is the cornerstone of effective reporting and compliance.

This concept naturally extends into the corporate space, particularly in the context of disclosures to investors and stakeholders. One critical point is the use of the term “consistency,” which is often misused without proper definition. The IPCC was rigorous in defining consistency, specifically as time series consistency, meaning that data can be compared over time in a meaningful way without bias. Consistent data accurately reflects what’s happening in the real world, without introducing distortion or errors. Organizations need to understand this principle to ensure their reporting is reliable and transparent.

If you line up the principles used in corporate reporting, they don’t always match those in the corporate reporting space exactly. For instance, the GHG Protocol has its own principles that somewhat align with the IPCC, but there are differences. For example, corporate reporting often excludes the principle of comparability. It’s assumed you can compare one corporate report to another, like between two different companies. However, corporate reporting frameworks aren’t designed to compare across companies; they’re intended for comparing within a single entity over time, focusing on time series consistency. This framework isn’t built for comparing two different companies’ reports, even though it’s often used that way, especially in investor disclosure spaces. Comparability wasn’t a consideration when these methodologies were developed, which can create issues in use cases where cross-company comparisons are expected.

Lastly, the principle of relevance is a topic I find important. It’s present in corporate reporting but often missing from other standards, including those of the IPCC. It is, however, included in the GHG Protocol. The idea is that data produced under a standard should be relevant, which makes sense. But relevance can be a tricky concept to standardize—it needs to clearly define what the data is relevant for. The standard should specify its purpose, otherwise, it risks being too vague. It’s important that the standard applies relevance appropriately to different use cases, ensuring the data serves its intended role effectively.

The current corporate reporting in the GHG Protocol doesn’t provide much specific guidance. It generally advises companies to set their accounting boundaries and methodologies in a way that they deem relevant to their needs. This lack of specificity can be challenging because companies are often left to figure out why they are reporting and how to align their methods without much external guidance.

Despite the resources available, there is still little advice on focusing on specific areas, like assessing investor risk. Companies are often left questioning which accounting approaches within the GHG Protocol best address relevant corporate reporting needs, particularly for assessing investor climate risk. This situation leaves companies to navigate these decisions largely on their own.

Well, that wraps up part one of our conversation with Dr. Gillenwater. Stay tuned for the next episode, where we will dive deeper into strategies, explore various protocols, and discuss the best ways to disclose information without compromising your firm’s competitive advantage.