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The origins of modern financial accounting standards are centuries old. The origins of greenhouse gas (GHG) accounting, by contrast, are two or three decades old. Is it any wonder we’re still working out the details? At Scope 5, much of our work revolves around helping our clients develop methodologies for and conduct, their greenhouse gas inventories.

In other words, our software lives in the world of greenhouse gas accounting.

For many, this kind of accounting remains voluntary. Until recently, reporting results that were “in the ballpark” was considered good enough. But more and more organizations are seeing the need to apply stricter standards. Audits, carbon fees and material errors in their GHG inventories are suddenly consequential.

In this article, we’ll review an example of just one kind of error that we see frequently in GHG accounting. This example is common among those organizations for which utility activity is a material source of emissions and data from utility invoices contributes to their emissions accounting.

Distribution of Greenhouse Gas Emissions Over Time

This article focuses on distribution of emissions over time.

Consider this example:

A company’s sustainability team is working on their 2016 inventory. They’ve collected a stack of electricity bills that quantifies their electricity activity for calendar year 2016. You might think it would be a simple matter to calculate total usage for the stack and multiply by the appropriate emission factor to get the resulting electricity emissions for the year.

After all, they have a stack of 12 bills. Each bill has a few dates on it. The bill at the top has a bill date of 1/14/2016. We flip through the stack and see that each bill has a bill date for the next month, in sequence, with the last in the stack, dated in December 2016.

Perfect, you may think. But is it?

1/14/2016 is the date the bill was generated – an event that has little to do with when the related emissions were emitted. A closer look reveals each bill has a service start date and a service end date.

Now These Are More Meaningful

Digging deeper, the bill at the top of the stack has a service start date of ‘12/4/2015’ and a service end date of ‘1/5/2016’. It shows a usage of 413,378 kWh.

This is telling us that over the 33 days spanning December 4th, 2015 to January 5th, 2016 the company used 413,378 kWh of electricity. Although this may be the ‘January 2016 bill,’ 28 of the 33 days of electricity use were in 2015, not in 2016!

In other words, including 413,378 kWh of electricity and the resulting emissions in the 2016 emissions inventory would be a mistake.

How Does One Mistake Effect Greenhouse Gas Accounting?

Such an error might not be that meaningful – after all, the activity for December 2016 would be omitted since we don’t have the January 2017 bill in our stack. Totaling the 12 bills in our stack would include a little extra from 2015, but that would be compensated for by the fact that we’d exclude a little from 2016.

No big deal, right?

What if December 2015 was an anomaly?

By way of example, let’s say our company heats warehouses using electricity and December 2015 was a particularly cold month. Digging up the January 2017 bill we see that December 2016 was an unusually warm month and the omitted activity for December 2016 was only 84,089 kWh. So – we’d be including 413,378 kWh erroneously and excluding 84,089 kWh to make up for it. But the numbers for the two Decembers aren’t even close – in December 2015, we used almost 5 times as much electricity as in December 2016! By totaling the 12 bills in or stack, we’d be significantly overstating our 2016 emissions.

Conclusion: We need to prorate the first and last bill to correctly sum all activity attributable to 2016 and none of the activity attributable to 2015 and 2017.

You can step through the math in this Scope 5 Featured Article, “Are You Making Material Mistakes in Your Greenhouse Gas Accounting?” in the Scope 5 Features Article section in Resources.

Scope 5’s Application Design

With greenhouse gas accounting, timing is essential. Underlying activity must align with the time period of interest. In the case of utility activity, numbers are often taken from bills that reflect meter readings corresponding to particular service periods. Activity for service periods that are not entirely included within the period of interest must be prorated.

The overall design of the Scope 5 application, and the fact that the web form specifies service date and internal algorithms prorate, help you avoid material misstatements so your sustainability data has integrity required for critical decision-support.

All it takes for quiet desperation to become outright frustration is one data error or misplaced spreadsheet. As the deadline to submit reports to the Carbon Disclosure Project (CDP) approaches, don’t let this happen to you.

Let’s Take A Step Back

Challenges like this are rooted in the fact that many sustainability directors and managers must manage multiple copies of the same spreadsheet. For example, each time one facility manager makes a change to ‘their’ copy, the sustainability director needs to merge that change into a common copy of the spreadsheet.

Solutions like Dropbox, Google Drive, and SharePoint let multiple users work on a single shared copy of the data. This has made life less complicated since spreadsheets aren’t being emailed back and forth as much. But under the hood, these applications are still flat documents, whether spreadsheets or text files.

This limits their usefulness.

Furthermore, the approach also lacks embedded “smarts” like error detection and correction, emissions libraries, and data normalization among others.

Cloud-based applications like Scope 5 greatly simplify efforts required for CDP reporting, reducing time, and democratizing data to save money.

Why Is this?

How Cloud-based Applications Simplify

The right application improves on the basic spreadsheet in many ways:

• Enabling multiple users to work on a coherent data set.
• Automating unit conversion.
• Warning of outliers and missing or duplicate data.
• Providing an audit trail.

But it goes further:

• Support dynamic and unanticipated data relationships
• Facilitate in-depth and flexible analysis of the data.
• Make it easy to generate many different charts and reports
• Enable data extension and customization through definition of new data sets and calculations
• Automate data collection
• Engage employees

A Deeper Look at the Benefits of a Cloud-based Sustainability Application

Time Savings

Sending spreadsheets back and forth, then trying to combine many into one, is time-consuming. Managers often report spending hundreds of hours just collecting and organizing data.

With a cloud-based application, there’s no need to email spreadsheets around. Each ‘data provider’ logs in to the application and enters their data. Because a single database underlies the application, the data is always up to date and coherent.

Data Quality

Maintaining multiple spreadsheets with multiple users and multiple data sources is error prone. Data must be copied and pasted. Units must be converted. Duplicates must be identified.

The right application incorporates error checking and warns of outlying, missing or duplicate data. Unit conversion is built in, enabling each user to provide data in the units most convenient. The application quantifies the quality of the data so that the user can decide whether he or she can be confident in the data.

Audit Trail

The application provides an audit trail. Since each user logs in under his or her credentials, the application ‘knows’ just who created or updated each data record and when. An audit trail should also allow users to upload files or images with each record to substantiate the data.

Structured Data

Conventional spreadsheets do lend a degree of structure to the data collection task. But often data providers modify parts of the spreadsheet to meet their specific data format. This makes it difficult to combine multiple spreadsheets.

Managers try to “block” parts, or the entire spreadsheet to prevent the data provider from tampering with prescribed format. But the data provider may simply omit that part of the data that doesn’t ‘fit.’

A cloud-based application can give the data provider flexibility in data entry by offering a drop-down with a broad choice of units, and simultaneously restrict them to a common format like requiring monthly data rather than annual.

The application might allow the data provider to define new fields or column names while keeping the basic structure and data relationships intact.

Charting, Reporting, and Analyzing

Data is often collected with one purpose or report in mind. Spreadsheets will typically be structured to suit that purpose specifically.

But the collected data is a potential treasure trove of insight. The value of the data beyond its initial intended purpose might not be realized for months.

In spreadsheets, the data remains static and perishable. When the data is resident in a relational database and accessible through a quality application, the data ‘comes to life.’ Users with different needs and interests can chart one variable as a function of another. They can segment the data in ways never intended, revealing insights that lead to operational improvements.

For the CDP report, only greenhouse gas (GHG) is relevant. But the data includes electricity and fuel use for each facility.

In the cloud-based application, a user might decide to chart their facility’s usage relative to other facilities. If the application stores the area of each facility, that user can chart energy per square foot for each facility. Such a chart reveals facilities that are using much more energy per square foot than the average (or much less). This leads to energy and cost savings.

Flexibility and Customization

Since spreadsheet solutions are often designed for a specific purpose in mind, they collect a specific set of data. When a new type of data is required, a new spreadsheet must be designed and re-circulated.

For example, a new project is launched to collect water and waste use at the same facilities from which energy use was previously collected. This requires the creation of a new spreadsheet, doubling the number of spreadsheets in circulation. Nightmare.

With Scope 5, the administrator can add categories of data and can configure detailed parameters around each category in a manner that supports specific business processes. This exercise should not require a team of experts to customize the application at significant cost but should be doable with a few clicks by any authorized user. The application remains alive, readily updated by those collecting and using the data.

Automated Data Collection

The cloud-based application can automate the otherwise tedious process of data collection. In many cases, data can be periodically retrieved electronically from other data stores, such as online utility accounts or other systems that are already part of an organization’s infrastructure. The data remains current without requiring manual effort.

In cases in which the data is not available electronically, data can be imported from third-party spreadsheets in varying formats.

User Engagement

Finally, one of the benefits of the cloud-based application lies in the democratization of the data. In the old spreadsheet world, data providers often feel like cogs in a machine. They’re asked for data, they provide the data, and they are left wondering.

What role has their data played as a whole? How does their data compare to the data provided by peers? What insights are revealed, and what action does it spur?

At the administrator’s discretion, users can be allowed access to their division’s data, their region’s data, or the whole dataset. They see the part their data plays in the whole, which gets users more engaged and leads to new, actionable insights.

Don’t Settle for Spreadsheets

Many companies continue to use Microsoft Excel spreadsheets for sustainability reporting. Spreadsheets make the work of tracking and reporting such data tedious and error prone.

A cloud-based application like Scope 5 makes this kind of work far easier. In addition to saving time and money, these applications increase the quality of the data and can lead to surprising insights. They promote greater transparency and deeper stakeholder engagement.

At Scope 5, we’re excited to be providing an application that helps customers through another season of CDP reporting.

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Scope 5 helps organizations improve environmental and economic impacts by tracking progress, revealing waste, and driving action. Using Scope 5 Tracker™ technology, Scope 5 software can track any type of sustainability data at any scope by facility or product-line, and much more. Want to learn more? Visit Scope 5. Or contact us at info@scope5.com.