Anyone who wants to engage in Carbon Footprinting and ultimately Carbon Added Accounting, must be confident that the numbers are correct. For financial accounting, auditing has been a matter of course for years. Auditors check annual accounts and thereby look at the calculation methods used and the input. If both are in order, the auditor can be confident that the output is correct and thus approve the financial statements. The same principle applies to Carbon Added Accounting: is the methodology correct and has it been applied correctly? And is the input correct with respect to accuracy, completeness and timeliness? Then the accountant can approve the output, or ‘carbon accounting’.
Auditing and certification of software
Auditors review CO2 accounting software packages for their operation:
- Are the calculations correct?
- Are the calculations protected against unauthorized changes?
- Do the calculations continue to be correct even if the software is modified illegally?
In other words: is the software reliable and future-proof? If the answer to that question is yes, the accountant can grant approval for it in the form of an ISAE 3000 certificate. This process is similar to that of the ISAE 3402 certificate used for financial software. This involves matters such as the number of employees on the payroll, the remuneration and the processing of mutations. The underlying principle is the same for both certificates.
Qualification of estimates
One difference is that carbon accounting software packages also work with estimates. This makes it possible for any link in the supply chain to start Carbon Added Accounting at any time, even if not all of its partners provide the same quality of information. Four classifications have been established for information quality: bronze, silver, gold and gold plus. These classifications are transparent and can be followed by everyone in the chain. If 80% of your figures are ‘bronze’, there is still work to do in your chain to produce more accurate figures.
Auditing of input: correlation checks
In addition to software certification, it is necessary to determine that the input is correct in terms of accuracy, completeness and timeliness. Auditors do this by means of what others call “cross checks”: in their jargon, these are called “context checks”. Here they compare different sources of information that must fit together. For example, in payroll records, the number of hours worked according to the roster system must equal the number of hours paid according to payroll records. These kinds of comparisons in transport chains are then about the number of kilometers driven in a period, the average diesel consumption of the vehicles and the amount of diesel tanked in that period. By verifying the input in this way, the accountant can confirm that the input is correct, complete and timely, and that the calculated CO2 emissions are accurate. This makes it possible to start Carbon Added Accounting without the need for specialized and scarce carbon accountants.
Adding to the existing ERP package?
It seems logical to add emissions accounting to the ERP software a company uses for this purpose. Practice is usually more recalcitrant. ERP packages are usually set up in a process of years and adjustments are complex and therefore costly. This means that it is easier and quicker to start with an off-the-shelf package. There are various SaaS solutions on the market that allow anyone to start calculating and allocating emissions immediately.
Who is going to be in charge?
Emission reduction was still part of Corporate Social Responsibility 10 years ago. Many companies find it important to look not only at profit and shareholder value, but also to consider what they are doing for society. But CO2 reduction is no longer optional. And because of the potential to reduce not only emissions but also costs, the business case suddenly becomes much bigger. Not to mention the fact that governments and customers demand reduction from companies. In the wake of this, gaining insight and being able to provide it becomes a condition for continuing to do business. Logically, this has become the domain of the Controller and the CFO.