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  • Strategic Finance

Sustainable Strategies and Net-Zero Goals

By: Mark L. Frigo, Robert S. Kaplan and Karthik Ramanna
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Abstract

In a recent Harvard Business Review article, Kaplan and Ramanna describe a rigorous approach, the E-liability method, for companies’ ESG reporting, especially as it pertains to GHG emissions measurements. They argue that the current standards for measuring emissions from its upstream (supply chain) and downstream operations (customers and end-use consumers) have fatal flaws that introduce high-measurement errors and opportunities for bias and manipulation. A new accounting system solves these problems using two basic steps: (1) Calculate the net E-liabilities the company creates and eliminates each period plus those it acquires from suppliers; and (2) allocate the net E-liabilities, produced and acquired, to the units of output it produced during the reporting period. This process captures all the upstream and scope 1 emissions of a company, assigns them to the company’s outputs, and transfers the acquired and produced E-liabilities to its immediate customers that purchase the company’s products and services. The interview covers key elements of this approach: its benefits, the pathway forward to implementation, and the role of CFOs and management accountants in the process.

Keywords

Measurement; Sustainability; Net-zero Emissions; Environmental Sustainability; Integrated Corporate Reporting; Measurement and Metrics; Strategy

Citation

Frigo, Mark L., Robert S. Kaplan, and Karthik Ramanna. "Sustainable Strategies and Net-Zero Goals." Special Issue on Sustainability. Strategic Finance 103, no. 10 (April 2022): 42–49.
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About The Author

Robert S. Kaplan

Accounting and Management
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More from the Authors
  • Health System Perspective on Cost for Delivering a Decision Aid for Prostate Cancer Using Time-Driven Activity-Based Costing By: David R. Ho, Robert S. Kaplan, Jonathan Bergman, David F. Penson, Benjamin Waterman, Kristin C. Williams, Jefersson Villatoro, Lorna Kwan and Christopher S. Saigal
  • Update on E-liability Accounting By: Robert Kaplan, Karthik Ramanna and Piyush Jha
  • Prospective Evaluation of the Cost of Performing Breast Imaging Examinations Using Time-Driven Activity-Based Costing Method: A Single Center Study By: Aamir Ali, Jordana Phillips, Damir Ljuboja, Syed S. Shehab, Etta D. Pisano, Robert S. Kaplan and Ammar Sarwar
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