Demystifying Emissions Reporting With Doug Hileman
We'll be honest: emissions reporting standards won't be headlining Netflix anytime soon.
But as climate change intensifies—from Hurricane Helene's devastation in North Carolina last fall to the recent California wildfires – risk management topics are going to remain on many properties' watch lists.
Since Q1 is prime time for carbon reporting data collection, let's take a dive into this admittedly wonky topic for good reason: understanding your building's energy consumption can benefit your bottom line whether regulatory requirements apply to you or not.
So grab that double espresso, cue up your "Getting Things Done" playlist, and join sustainability expert Doug Hileman as he transforms dry technical details into actionable insights that actually improve building performance while reducing your carbon footprint.
The following conversations, which took place in January and early February 2025, have been edited for clarity and length. For an expanded perspective, read the full interview on our website.
utiliVisor: You have a background at a Big 4 accounting firm and work with companies around sustainability compliance, reporting, and assurance. What do you think are the biggest issues in sustainability reporting for companies that are required to report?
Hileman: On the engineering-operations-efficiency-cost side, people are trying to dial back the consumption of electricity to save money, and the tenants in all these [commercial] buildings have to get to the granular level for what they consume in their locations as a matter of practice. But they don't have the quality of data they need for that. So what they have to do is estimate. What buildings need is data that is ever more granular to allow the right data to be provided to an array of users that is suitable for a variety of purposes.
On the reporting side, I’d say the issue is rigor. If you’re subject to an assurance (which is a more intensive version of an “audit”), you’ve got to be sure that what you’re providing is right and that the way you got it can be supported. The COSO framework for internal controls was always intended to be “topic-neutral.” It is almost universally adopted for financial reporting; now it is emerging as the go-to model to ensure rigor in data and information for sustainability reporting, including for energy use and carbon emissions.
Here's the difference. Say a tenant can’t get the electricity consumption for their use or even for the entire building. They can look up some general emissions factor that someone (say, a university) came up with five years ago for the electricity consumption of an office building of a specific type of construction.? Perhaps it was built in a certain decade and/or the energy consumption is for a particular city or region. How much better is it to know down to the kilowatt what the usage actually was?
Why Traditional Accounting Systems Aren't Enough
One of the thornier issues in reporting is around accounting systems. The problem with accounting is that those arrangements are usually established to track money and costs and payback, but they don't track the operational input like kilowatt-hours that’s needed for the CO2e.
For example, if a tenant reimbursed a building owner $1800 last year for using EV chargers in the parking garage, how many kWh was that? The cost per kWh changes over time, even by time of day, and we don’t have that operational information. Few companies have the accounting systems set up to pull that data out. So if a company decided, “As long as we're charging EVs, let's not use coal-fired electricity to do that. We're going to insist on using renewable energy to charge EVs. Let's do that.” But how many kilowatt-hours is that? You’ve got to do the accounting on both the dollar side and the operational side. The lack of robust, useful information inhibits accurate reporting.? It also inhibits companies’ ability to develop strategies and programs to reduce carbon emissions.? Which, by the way, can also reduce costs.
A platform that can make that info easily accessible is useful to the tenants. It is a differentiator, and tenant interest in such things is growing. There's now even a demand to put together the carbon inventory for events like a football game or a soccer match. The Olympics are coming here (to Los Angeles, where Hileman is located). They're already on the Olympics [committee] to say, What's going to be the emissions of the Olympics?
utiliVisor: California has new climate disclosure laws coming into effect this year for reporting in 2026. What do you wish companies knew about these laws?
Hileman: Many people regard the California laws as massive, new, onerous requirements. They lament that California has (once again) created something new, unique, and burdensome. In fact, California cut companies a break in that they followed precedents that are already widely adopted.
The California laws apply to entities (public and private) “doing business in California”; the definition comes from state tax law and is lower than many people expect. Furthermore, the disclosure requirements are on the company’s consolidated basis – everywhere they operate, not just operations in California. This seems burdensome at first blush.
However, if companies are using TCFD, they are doing this already. The GHG Protocol provisions for dual reporting will accelerate the need for companies to obtain market-based emissions factors. This has been notoriously difficult to obtain from many electricity providers. AND you’ll need accurate data on the electricity consumed.
There are still some matters with the California laws that need to be resolved, such as where and when disclosures are made. To be fair, these matters could cause confusion. But the underlying requirements of what companies must do remain the same.
utiliVisor: What effect do you think the California climate laws will have nationally?
Hileman: If your company does business in California, then you are required to make these disclosures for your company on a consolidated basis. You will now have to do the submittal reporting of your carbon emissions for all of your locations at the consolidated level (i.e., for the whole company). Other states have introduced similar laws, with New York and Illinois in the lead. The regulated community should be relieved to know that they are taking cues from the California law, to avoid a patchwork of (up to) 50 different laws requiring information on the same thing.
utiliVisor: What does emissions reporting look like?
Hileman: The content falls into two categories, if you will. There is the narrative category: which is “describe your policy, describe your procedures, describe your governance process, what is the committee set up in place to do QC.” Who is responsible for it? What committee where? How did you decide what to include and what not to include? Who decided all that?Then there's the quantitative category: what is the data, what is the basis, and how were the calculations done?Something people may not think about is timing. Some of the new legal requirements apply for the calendar year (CY) 2025. That’s now. It is unwise to defer effort until 2026. On the narrative side, for example, if you don’t have a policy statement, you can’t (or shouldn’t!) report that you did. It’s not good practice to backdate a policy statement. Same thing for a governance committee, technical review process, etc.Similarly, if you start to collect 2025 data this time next year, and you find yourself awash in estimates that are lousy, you can't go back and re-create measurements you didn't take. So now is a really good time to get started if you know you're going to have to compile this data. Look at where you get the biggest bang for your buck on real supportable data and start collecting that now.
utiliVisor: How do you respond to people who say, “Why isn't the data I’m using now good enough?” Why won’t estimating emissions data continue to work?
Hileman: The trend in emissions reporting is for more granularity and more accuracy and for more comparability over time at your company and greater comparability between your company and other companies. Estimates are one factor that contributes to inaccurate data or uncertainties. Estimates are a fact of life. There are places in financial reporting where you have to make estimates because you just don't know. Estimates are often used to predict costs or liabilities for things that are to occur in the future. Let’s say, for example, our company owns and is responsible for five contaminated sites, and we're going to have to clean them. A company may not know how much it's going to cost: how effective will the remediation be; what additional contaminants could be discovered; will the clean-up levels change, etc. So, companies must consider what they know and prepare an estimate. It shouldn’t be completely arbitrary; there should be a process and a sound basis for the estimate. The company has to put that on the balance sheet as what’s called a contingent liability.
But by and large, the trend is for greater accuracy for anything that's an estimate over time, so that you can run your business more effectively. This is also so people who are interested in your business, let's say the capital markets, have confidence that you understand your business and they know what they're investing in. In the world of investment, you can look at a lot of different factors when assessing risk.
But climate – climate affects everybody. With the trend towards accuracy and the need to make investment decisions about reducing emissions over time, you'll be able to make more effective decisions if those decisions are based on data rather than on estimates. What does it take to run a business effectively? It takes data.
Why You Need a Process, Even if You Have to Estimate
Companies often “muscle through” their first iteration, with manual processes done by different people at different times, without a clear objective. There isn't a clear process, or transparency on how they calculated the number. The basis for estimates isn’t documented; indeed, people may not realize that they have been making estimates. They may be so focused on calculating “the number” that they miss other, fundamental components that are necessary for reporting. For example, there are three options [financial control, operational control, equity share] for organizational boundaries for the reporting. Selection of the organizational boundary affects the operational inputs and the end result.
utiliVisor: Big question before we end: How are you feeling about carbon and sustainability issues, given what we know about the Trump administration's energy policies?
Hileman: Some of the trends are pretty clear. Everything at the federal level is going to be killed or ruled back. There will be no SEC climate disclosure rule. Much of what the Federal government has pushed utilities, automakers, and consumers to do will be dialed back or eliminated. But that won’t be the end of this topic.
The California climate law will stand. U.S. actions won’t derail the EU disclosure standards. There's the global accounting rule that IFRS has put out via the International Sustainability Standards Board. The voluntary disclosure of carbon emissions has been [going] 20 years now. And the demand for more complete and accurate data has only increased over that time. The TCFD (the Task Force on Climate-Related Disclosures) framework came out in 2017 and was quickly adopted and became embedded in all the other standards and frameworks. All the financial analysts - EcoVadis, Bloombergs, Standard & Poors, Moody's and others - now are plugged into the disclosure platforms to automatically pull out the data on carbon emissions and that's an input to their analysis models for climate resilience and how much climate may affect the financial performance of investments. That will stand.
If people put pencils down on carbon because the SEC isn't going to act, they're simply kicking the can down the road. It may only be a year or two before they start getting requests from EU-based customers. “How come you're not doing your carbon reporting?”
I've seen situations where companies get that kind of request from a customer. The customer may also have an initiative to rationalize our supply chain, and reduce the number of vendors. There's a little hint there that if you don't submit to CDP (the Carbon Disclosure Project), you could be at risk of losing this customer. This isn’t public, high-profile - but it’s happening.
The scramble to do everything at the last minute is no fun. And it’s expensive.
Quick Takeaways
For more of Hileman's insights on reporting standards, check out the full version of our discussion on utiliVisor's website.