ISO 14064-3 Verification Methodology Explained

What ISO 14064-3 Covers

ISO 14064-3:2019, titled "Greenhouse gases — Part 3: Specification with guidance for the verification and validation of greenhouse gas statements," provides the principles, requirements, and guidance for conducting verification and validation of GHG assertions. It is the methodological backbone of GHG assurance, defining how an independent verifier systematically examines a GHG statement to form a conclusion on its reliability.

The standard applies to GHG statements prepared under ISO 14064-1 (organisational inventories), ISO 14064-2 (project-level quantifications), or other recognised GHG reporting frameworks. Its scope includes:

• Verification of GHG inventories: Assessing whether a reported organisational GHG inventory is complete, accurate, and consistent with the declared criteria
• Validation of GHG projects: Evaluating whether the projected GHG reductions or removals from a planned project are reasonable and based on sound methodologies
• Combined engagements: Some engagements involve both verification (of historical baseline data) and validation (of projected reductions) within a single scope of work

ISO 14064-3:2019 was substantially revised from the 2006 edition to improve alignment with ISO 14065:2020, ISO/IEC 17029:2019, and evolving practices in sustainability assurance. The 2019 edition provides clearer process requirements, enhanced guidance on risk-based verification, and improved alignment with the International Standard on Assurance Engagements (ISAE) 3410 used by financial auditors.

Verification vs Validation

ISO 14064-3 is unique among verification standards in that it covers both verification and validation within a single document. Understanding the distinction is essential for organisations engaging with the standard.

This guide focuses primarily on verification of organisational GHG inventories (ISO 14064-1 assertions), as this represents the most common engagement type for organisations seeking third-party assurance of their carbon footprint data.

Materiality and Assurance Levels

Two interrelated concepts govern the depth and rigour of a verification engagement: materiality and the level of assurance. Together, they determine the nature, timing, and extent of verification procedures the verifier must perform.

Materiality

Materiality in GHG verification is the quantitative threshold above which an error, omission, or misstatement in the GHG assertion could influence the decisions of intended users. The verifier sets materiality at the planning stage based on professional judgement, the needs of intended users, and any scheme-specific requirements.

Common materiality thresholds:

• 5% of total reported emissions: Standard threshold for reasonable assurance engagements and most regulatory schemes
• 5-10% of total reported emissions: Typical range for limited assurance engagements and voluntary reporting
• Scheme-specific: Some schemes (e.g., EU ETS) prescribe specific materiality thresholds that override general practice

Materiality is not a safe harbour for errors. The verifier uses it as a planning tool to focus verification effort on the most significant emissions sources and areas of highest risk. Even immaterial errors must be communicated to the responsible party if identified.

Reasonable Assurance vs Limited Assurance

The level of assurance determines the degree of confidence the verifier provides in their conclusion. ISO 14064-3 recognises two levels:

Reasonable Assurance provides a high (but not absolute) level of confidence. The verifier performs extensive procedures including detailed data testing, recalculation, site visits, and corroboration of evidence. The conclusion is expressed positively: "In our opinion, the GHG statement is fairly stated in all material respects."

Limited Assurance provides a moderate level of confidence. The verifier performs fewer procedures, relying more heavily on inquiry, analytical review, and high-level data checks. The conclusion is expressed negatively: "Based on our procedures, nothing has come to our attention that causes us to believe the GHG statement is not fairly stated in all material respects."

Stage 1: Engagement Planning

Every verification engagement begins with structured planning. This stage establishes the terms, scope, and logistics of the engagement and is formalised in an engagement agreement or terms of reference.

Key Planning Activities

• Understand the organisation: Sector, size, operations, GHG-relevant activities, and reporting history
• Define the scope: Which emission categories (Scopes), sites, and reporting period are covered
• Agree on criteria: The GHG reporting standard used (ISO 14064-1, GHG Protocol, or scheme-specific)
• Set materiality: Quantitative threshold and performance materiality for testing purposes
• Determine assurance level: Reasonable or limited, based on intended use and requirements
• Assess team competence: Ensure the verification team has the required sector knowledge, technical skills, and independence
• Establish timeline: Key milestones including document submission, site visits, draft findings, and statement issuance

Independence and Impartiality Assessment

Before accepting the engagement, the verification body must assess and document that there are no conflicts of interest. ISO 14065 requires that the verification body, its staff, and subcontractors are free from commercial, financial, or other pressures that could compromise the integrity of the verification conclusion. This includes ensuring that the verification body has not provided consultancy services to the organisation on the same GHG inventory.

Stage 2: Risk Assessment

Risk assessment is a critical stage that directs the verifier's attention and effort to the areas most likely to contain material misstatement. The verifier assesses inherent risk and control risk for each significant emission source.

Inherent Risk

Inherent risk is the susceptibility of a GHG assertion to material misstatement before considering the organisation's internal controls. Factors that increase inherent risk include:

• Estimation complexity: Sources that require complex calculations, models, or proxies (e.g., Scope 3 categories, fugitive emissions)
• Data availability: Sources where primary activity data is limited, requiring secondary data or estimates
• Organisational change: Mergers, acquisitions, site closures, or significant operational changes during the reporting period
• New sources: Emission sources included in the inventory for the first time
• High magnitude: Sources that represent a large proportion of total emissions (significance by volume)

Control Risk

Control risk is the risk that the organisation's internal controls will not prevent or detect a material misstatement. Factors increasing control risk include:

• Lack of formal data collection procedures or documented methodologies
• No internal review or quality assurance process for GHG data
• Manual data entry and spreadsheet-based calculations without controls
• Unclear responsibilities for GHG data management
• No reconciliation between GHG data and financial or operational records

The combined assessment of inherent and control risk determines the detection risk the verifier is willing to accept, which in turn drives the extent and depth of verification procedures. Higher assessed risk leads to more extensive testing, larger sample sizes, and potentially additional site visits.

Stage 3: Strategic Analysis

Strategic analysis involves the verifier developing a high-level understanding of the organisation's GHG profile to identify areas that warrant detailed examination. This stage bridges risk assessment and evidence gathering.

Activities in Strategic Analysis

• Profile the GHG inventory: Understand the relative contribution of each emission source and category to total emissions
• Identify material emission sources: Determine which sources could individually or collectively contain material misstatement
• Analytical review: Compare current period data to prior periods, industry benchmarks, or expected values to identify anomalies
• Assess boundary completeness: Verify that all relevant entities, sites, and emission sources are included within the declared boundaries
• Evaluate methodology appropriateness: Assess whether the quantification methodologies and emission factors used are appropriate for each source

The output of strategic analysis is a verification plan that specifies which emission sources will be tested, what type of evidence will be sought, which sites (if any) will be visited, and the sampling approach for data testing.

Stage 4: Evidence Gathering

Evidence gathering is the most intensive stage of the verification process. The verifier collects sufficient appropriate evidence to support the verification conclusion. The nature and extent of evidence gathering depends on the assessed risk, materiality, and level of assurance.

Types of Verification Evidence

Site Visits

Site visits allow the verifier to observe operations, inspect data collection processes, verify physical assets (e.g., fuel storage, metering equipment), and interview operational staff. The decision on whether to conduct site visits depends on:

• The number and geographic spread of sites
• The materiality of site-level emissions
• The assessed risk level
• The level of assurance required
• Whether remote verification is feasible given the available evidence

For reasonable assurance engagements, site visits are typically expected for material sites. Limited assurance engagements may rely more heavily on remote evidence review, though site visits may still be conducted for high-risk locations.

Sampling

Verifiers use sampling to manage the volume of data testing. Sampling approaches include:

• Statistical sampling: Random selection of a mathematically determined sample size to draw conclusions about the population
• Judgemental sampling: Selection based on verifier professional judgement, targeting high-risk or high-value items
• Key item testing: Testing all items above a certain threshold (typically items that individually exceed materiality or performance materiality)

Stage 5: Evaluating Evidence

Once evidence gathering is complete, the verifier evaluates the totality of evidence to form a conclusion. This stage involves aggregating findings, assessing their significance against materiality, and determining whether a conclusion can be reached.

Aggregation of Findings

The verifier aggregates all identified errors, omissions, and misstatements—both individually and in combination—to assess whether they exceed materiality. Findings are typically categorised as:

• Factual misstatements: Definite errors identified through testing (e.g., incorrect emission factor, double-counted data)
• Judgemental misstatements: Differences arising from verifier judgement on methodology or assumptions
• Projected misstatements: Estimated misstatements extrapolated from sample testing to the population

Materiality Assessment

The verifier compares the aggregated misstatements (factual + projected + judgemental) against the materiality threshold. There are three possible outcomes:

1. Below materiality: Aggregated misstatements are below the threshold. The verifier can issue an unqualified (clean) conclusion
2. Near or at materiality: The verifier may request that the responsible party correct identified errors, or may increase sample sizes to reduce projected misstatements
3. Above materiality: If misstatements cannot be resolved, the verifier must issue a qualified or adverse conclusion

Forming the Verification Opinion

Based on the evaluation, the verifier forms one of the following opinions:

• Unqualified (clean): The GHG statement is fairly stated in all material respects
• Qualified: Except for specific identified issues, the GHG statement is fairly stated
• Adverse: The GHG statement is materially misstated and should not be relied upon
• Disclaimer: The verifier is unable to obtain sufficient evidence to form a conclusion

Stage 6: Verification Statement

The verification statement is the formal output of the engagement. It communicates the verifier's conclusion to intended users and must contain specific elements as required by ISO 14064-3.

Required Elements of a Verification Statement

• Title identifying it as a verification statement
• Addressee (the responsible party and/or intended users)
• Identification of the GHG assertion verified (document, period, scope)
• The criteria against which the assertion was verified (e.g., ISO 14064-1:2018)
• Description of the verification body's responsibilities
• Description of the responsible party's responsibilities
• The level of assurance provided (reasonable or limited)
• The materiality threshold applied
• Summary of the verification approach and procedures performed
• The verification conclusion (opinion)
• Any qualifications, emphasis of matter, or limitations
• Date and place of issue
• Signature and credentials of the lead verifier
• Reference to the accreditation of the verification body

Management Report

In addition to the verification statement, verifiers typically issue a management report (sometimes called a verification report) that provides more detailed information about the engagement. This report is confidential to the responsible party and typically includes:

• Detailed description of the verification approach and procedures
• Specific findings, including corrected and uncorrected misstatements
• Observations on data quality and internal controls
• Recommendations for improving GHG data management and reporting
• Areas of concern or improvement for future reporting periods

Verifier Competence and Roles

The quality of a GHG verification engagement depends critically on the competence and independence of the verification team. ISO 14064-3, together with ISO 14065 and ISO/IEC 17029, establishes detailed requirements for verifier qualifications and roles.

Verification Team Roles

Competence Requirements

ISO 14065 requires verifiers to demonstrate competence across several domains:

• GHG quantification: Understanding of emission factor methods, direct measurement, mass balance, and uncertainty assessment
• Verification methodology: Risk assessment, sampling, evidence evaluation, and professional judgement
• Sector knowledge: Understanding of the specific industry, its processes, and typical emission sources
• Regulatory awareness: Knowledge of applicable GHG reporting requirements and scheme-specific rules
• Communication: Ability to communicate findings clearly to the responsible party and in the verification statement

Verification bodies must maintain records of verifier competence, including qualifications, training, supervised engagements, and continuing professional development. Competence is subject to ongoing assessment and periodic review.

Documentation Requirements

ISO 14064-3 requires the verifier to maintain a documented verification trail that records the evidence gathered, the reasoning applied, and the basis for the conclusion. This documentation serves several purposes:

• Quality assurance: Enables independent review of the verification engagement
• Accreditation compliance: Demonstrates that the verification was conducted in accordance with ISO 14064-3 and ISO 14065
• Defence of the conclusion: Provides the basis for the verifier to explain and defend the conclusion if challenged
• Continuity: Enables subsequent verification teams to understand prior engagement history

Key Documentation Elements

• Engagement agreement and terms of reference
• Risk assessment working papers
• Verification plan and sampling strategy
• Evidence gathered (copies, cross-references, test results)
• Findings log with categorisation and resolution
• Materiality assessment and aggregation schedule
• Independent review notes
• Final verification statement and management report

Relationship to ISO 14065 and ISO/IEC 17029

ISO 14064-3 does not operate in isolation. It forms part of a broader framework of standards governing GHG verification and the bodies that perform it.

ISO 14065: Requirements for GHG Verification Bodies

ISO 14065 specifies requirements for bodies that undertake verification and validation of GHG assertions. It addresses the verification body's management system, impartiality, competence, resources, and quality controls. Accreditation against ISO 14065 by a recognised accreditation body (e.g., UKAS, ANAB) provides assurance that the verification body meets internationally recognised standards of practice.

ISO/IEC 17029: General Requirements for V&V Bodies

ISO/IEC 17029 is a cross-sector standard that provides general requirements for bodies performing verification and validation activities. ISO 14065 builds on ISO/IEC 17029 by adding GHG-specific requirements. Together, they create a layered framework where ISO/IEC 17029 provides the general V&V body requirements and ISO 14065 provides the sector-specific overlay for greenhouse gases.

Understanding the interplay between ISO 14064-3, ISO 14065, and ISO/IEC 17029 is important when selecting a verification body. Accreditation under ISO 14065 provides the highest level of confidence that the verification will be conducted competently, impartially, and in accordance with internationally recognised methodology.

Frequently Asked Questions

What is the difference between GHG verification and validation?

Verification provides assurance on historical GHG data—confirming that a reported GHG inventory is materially correct for a past reporting period. Validation provides assurance on forward-looking GHG statements—assessing whether projected emission reductions from a planned project are reasonable and achievable. ISO 14064-3 covers both activities but they serve fundamentally different purposes.

What is materiality in GHG verification?

Materiality is the threshold above which errors, omissions, or misstatements in a GHG assertion could influence the decisions of intended users. It is typically expressed as a percentage of total reported emissions—commonly 5% for reasonable assurance and 5-10% for limited assurance. The verifier sets materiality at the engagement planning stage and uses it to determine the nature and extent of verification procedures.

What qualifications does a GHG verifier need?

ISO 14064-3 and ISO 14065 require verifiers to demonstrate competence in GHG quantification methodologies, sector-specific knowledge, verification techniques, and relevant regulatory requirements. Verifiers working within accredited verification bodies must meet ongoing competence requirements including technical training, supervised engagements, and continuing professional development. Many also hold qualifications such as GHG Lead Verifier certificates.

How is the level of assurance determined?

The level of assurance—reasonable or limited—is determined based on the intended use of the verification statement, regulatory or scheme requirements, the maturity of the organisation's GHG reporting, and stakeholder expectations. Reasonable assurance requires more extensive evidence gathering and testing, while limited assurance relies primarily on inquiry and analytical procedures. The level is agreed between the verifier and the responsible party before the engagement begins.

What does a GHG verification statement contain?

A GHG verification statement includes: identification of the GHG assertion verified, the reporting period, the criteria used (e.g., ISO 14064-1), the level of assurance provided, a description of the verification procedures performed, the materiality threshold applied, the verifier's conclusion (opinion), any qualifications or adverse findings, and the date and signature of the lead verifier. It may be accompanied by a management report detailing observations and recommendations.