Defining Materiality For Greenhouse Gas Emissions

The definition of materiality is part of The Climate Registry's general verification protocol (GVP). Such protocol allows 5% threshold for an enterprise's indirect and direct emissions. Indirect emissions refer to greenhouse gases discharged through the use of resources and goods during production. Direct emissions are that which are discharged on-site such as refrigerant leak discharged.

Greenhouse gases lead to global warming, which will cause an adverse change in our climate. There are six main gases being tracked by The Climate Registry. They are hydrofluorocarbons and perfluorocarbons, which are commonly found in refrigerants, carbon dioxide, methane, sulfur hexafluoride and nitrous oxide.

There was confusion with the absolute value basis that specifies the threshold when the greenhouse gas registry's definition of materiality was released. In the most recent clarifications released, such term was omitted and replaced with 5% understatement or overstatement threshold leeway.

The materiality definition in The Climate Registry's verification standards addresses emissions reported by entities located in North America. Since the worldwide emissions reports are geographically different from that of North America's, this registry is requiring a separate verification statements for both. Documents should include materiality threshold including emissions threshold which are calculated through simplified methods.

The 5 percent materiality definition threshold is standard within financial accounting practices and represents the amount of insignificant emissions allowed. Entities have the flexibility to specifically define which greenhouse gas emissions would be classified as insignificant within the scope of their operations.

Materiality defined will address errors in reporting by a company when it comes to GHG emissions. Inaccuracy in reporting occurs when a certain company's indirect or direct emissions have discrepancies from true emissions, more or less 5%. Under the registry, these inherent uncertainties can be a result of rounding errors, numerical mistakes, uncertain emission factors, or other miscalculations.

The Climate Registry was established in 2007 to provide a standardized method for companies in the United States, Canada and Mexico to voluntarily report greenhouse gas emissions. The aim of the nonprofit agency is to get a better understanding of the harmful effects greenhouse gases are having on the environment by asking companies to report their emissions. The registry supports policies that involve voluntary and mandatory reporting and regulatory oversight of greenhouse gas emissions.

The materiality definition is just one aspect of the registry's reporting requirements. Other greenhouse gas emissions reporting protocols include some types of indirect and direct emissions which are calculated at a company, geographical, facility and operational level. Greenhouse Gas Emissions reporting is made annually. As such, many facilities, especially those equipped with refrigeration and air-conditioning (RAC) systems or heating, ventilation and air conditioning (HVAC) systems, have contracted with vendors of refrigerant management programs. Software and other web-based applications now exist to automatically track and report emissions information, ensuring accuracy and compliance.