Why is third-party verification necessary? An explanation of the process for third-party verification of GHG emission amount
As climate change accelerates, there is a strong demand for companies to take decarbonization measures, and companies are making efforts to reduce GHG emissions. Such companies' responses to the environmental burden are disclosed through the disclosure of GHG emission amount data, but in recent years there has been a growing trend to conduct third-party verification of such disclosures.
What is third-party verification? What are the benefits of obtaining it?
Third-party verification is a process in which an independent organization evaluates information disclosed by a company to determine whether it is substantially accurate and complies with standards, based on objectivity, transparency and consistency.
Assurance from an objective and fair standpoint shows that the disclosed GHG emission amount are legitimate, and serves as evidence of reliability. Increasing reliability will ultimately lead to increased corporate value. Accurately understanding GHG emission amount also highlights Issue and areas for improvement that companies face, and serves as a guide for promoting GHG reduction plans and sustainable corporate management.
On the other hand, from the perspective of stakeholders such as investors and consumers, information that has been verified by a third party to prove that the data is substantially correct and complies with standards can provide a useful criterion for selecting investment destinations and products, helping to avoid risks.
Another aspect of the rise in third-party verification
The increase in the number of companies conducting third-party verification is due not only to the benefits mentioned above, but also to inevitable reasons arising from the current social situation.
1) Rise in ESG investment
In response to worsening environmental issues, ESG investment, which focuses on ESG (environmental, social, and governance) aspects when selecting investment targets, is becoming more widespread in the investment world. Non-financial information such as GHG emission amount will be used as a criterion for investment decisions, so there is a strong demand for reliability. Assurance from a third party verification proves the validity of disclosed information, it is becoming essential to gain investor trust.
②Strengthening regulations and systems related to ESG
Currently*¹ in Japan, there is no legal obligation to disclose or third-party verify GHG emission amount or ESG information. However, in recent years, there has been a gradual movement toward making this mandatory, such as the establishment of SSBJ*² standards and the introduction of an emission amount trading scheme*³. When these regulations are fully adopted, disclosure of sustainability information will become mandatory depending on the Company size, and third-party verification will be required when applying the scheme.
Furthermore, the impact of the EU systems CSRD(Corporate Sustainability Reporting Directive)*4, Carbon Border Adjustment Measures (CBAM)*5, and the EU Battery Regulation*6 cannot be denied. All of these systems require Japanese companies to disclose GHG emission amount data and carbon footprints (CFP), making third-party verification essential.
*1) As of November 2024
*2) SSBJ: Domestic disclosure standards for sustainability information.
*3) emission amount trading system: A system for trading greenhouse gas emission allowances set by countries and companies.
*4) The EU sustainability disclosure regulation came into effect on January 5, 2023. EU member states must take domestic legislative measures to achieve the targets set out in the CSRD by July 6, 2024.
*5) Carbon Border Adjustment Measures (CBAM): A regulation that requires EU importers to report the GHG emission amount of products imported from outside the EU. It is scheduled to come into full operation in 2026.
*6) EU Battery Regulation: A regulation that requires CFP declaration for all types of batteries used within the EU. It will come into effect in the EU from February 2024.
Third-party verification process
Third-party verification is being implemented by an increasing number of companies due to its various benefits and background, and the procedure for GHG emission amount is generally as follows: Verifiers verify the evidence (documents containing actual figures) and guarantee the calculation results.
1) Preliminary evaluation (desk review)
In order for verifiers to assess the reliability of the data, they will conduct a preliminary investigation of the information necessary for verification, such as the calculation rules and calculation system for the collected GHG emission amount.
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② On-site review
Verifiers will inspect the emission sources, data collection operation and management system, calculation results, etc. on-site and compare the company's report with the actual situation. If there are any findings at this point, the verification team and the audited company will reach an agreement on the Contents.
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③ Verification and assurance
After the verifier has addressed the findings, they will issue a verification report after an internal review. If there is sufficient and appropriate evidence and the standards have been properly applied, the verifier will express a "qualified opinion" in the report.
Third-party verification is a time-consuming and labor-intensive task for both company personnel and verification organizations. In addition, as the number of companies wishing to undergo verification is on the rise, there are concerns about a shortage of verification organizations and verifiers. It is essential to schedule the third-party verification process with ample time to obtain certification and to use system tools to proceed efficiently.
Why not systematize data collection and efficiently promote third-party verification?
When conducting third-party verification, it is necessary to collect various data and prepare documents.
The introduction of system tools with effective governance is an effective way to collect and manage a wide range of ESG data efficiently.
Zeroboard , which has functions such as calculating GHG (greenhouse gas) emission amount throughout the supply chain and centrally managing environmental items,By achieving governance and accurate data collection,We will help your company obtain third-party assurance.
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