New emissions accounting rules win backing from companies and nonprofits

Plans for a major expansion of how companies report emissions have won widespread support from the public and private sector.

Existing rules from the Greenhouse Gas (GHG) Protocol, which maintains the most widely used standards in the space, require companies to focus on emissions that can be attributed to their operations and broader value chain. Businesses have for several years asked for more flexibility in how they can account for efforts to reduce emissions, requests that the organization addressed in a white paper on Actions and Market Instruments released in March. 

The GHG Protocol has since received more than 430 responses to those proposals, it announced last week. Here are the key points from that feedback.

Yes to new ledgers

At the core of the proposed expansion is the creation of three additional emissions ledgers that would sit alongside existing company inventories for Scope 1, 2 and 3 emissions. These would cover:

• Market-based instruments used to reduce emissions. This would include credits from schemes that extend the logic of renewable energy certificates to other products, such as steel and cement.
• The impact of other actions taken by the company, including investments in low-carbon technologies and the sale of low-carbon products. (In the jargon of the field, this would use “consequential” rather than “attributional” accounting.)
• Climate action that is measured in metrics other than greenhouse gas emissions, such as the percentage of procured products classified as low-emissions.

The multi-statement approach received a clear thumbs-up, with 84 percent of respondents saying they agreed or strongly agreed with its introduction. Support was also consistent among less well-represented groups, including those working in smaller businesses, the Global South and nonprofits. Respondents said they liked the framework because of the clarity and accountability it will bring to the use of the different forms of climate action.

Of the three proposed new statements, only the one for non-GHG metrics raised substantial concerns, with just a third of respondents saying it should be included. Forty-four percent said they were neutral on the topic, and 22 percent were opposed. A desire for the GHG Protocol to remain focused on emissions accounting was one reason given.

Statement synergy

Exactly how the different statements should work together is not yet clear. The GHG Protocol heard from many people who said the statements should remain separate and not be netted against each other — it’s important to keep the statements distinct, goes the argument, because they count different things and follow different accounting rules.

That could prove a point of contention when it comes to the statement for environmental attribute certificates and other market-based instruments, which some companies are investing in precisely so they can reduce their overall footprint. Advocates for the approach say corporate demand to use the instruments in this way can be a powerful decarbonization tool in hard-to-abate sectors. Yet the GHG Protocol noted that some respondents felt that “market-based reporting should not obscure the physical emissions profile.”

Keep it simple

“I can see a future in which we have six different climate targets and four different ledgers,” said David Spitzley, a director on the global sustainability team at Starbucks, during a recent event on market-based instruments. That could, he added, lead to things getting “complex really fast.”

Respondents shared his concerns, raising questions about the “time, resources, data systems, verification costs and technical capacity needed to implement a full multi-statement framework,” according to the GHG Protocol’s summary of the feedback.

To limit the workload that additional ledgers would bring, respondents said that it’s critical the organization ensures the new rules are interoperable with other key standards, including the European Union’s Corporate Sustainability Reporting Directive and net-zero guideline from the International Organization for Standardization and the Science Based Targets initiative.

What happens next

The comments will now be considered by the technical experts working on the Actions and Market Instruments proposals, who highlighted the need for interoperability and for clarity about the relationship between the statements as questions they will address. A draft of the proposed standard is due for consultation in the second quarter of next year.