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  • Harvard Business Review Digital Articles

We Need Better Carbon Accounting. Here's How to Get There.

By: Robert S. Kaplan and Karthik Ramanna
  • Format:Electronic
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Abstract

Any effective system of greenhouse gas (GHG) accounting needs to measure each company’s supply-chain carbon impacts accurately. Such information would provide visibility and incentives for the company to make more climate-friendly product-specification and purchasing decisions. The current dominant system for carbon accounting, the GHG Protocol, misses this critical point by allowing companies to guestimate upstream and downstream emissions. To address this shortcoming, we "introduced" an E-liability accounting system, based on well-established practices from inventory and cost accounting, for accurately measuring GHG emissions across corporate supply chains. In this follow-up piece, we describe the basic flaw inherent in the GHG Protocol, explain why it has persisted, and offer a way forward for robust carbon accounting that does not involve rescinding the Protocol, which is already widely used in many global climate agreements. We conclude by identifying which companies stand to gain most from accurate GHG accounting and could be early adopters of the E-liability system.

Keywords

Accounting; Greenhouse Gas Emissions; GHG; Carbon Accounting; Environmental Accounting; Environmental Management; Governing Rules, Regulations, and Reforms; Supply Chain

Citation

Kaplan, Robert S., and Karthik Ramanna. "We Need Better Carbon Accounting. Here's How to Get There." Harvard Business Review Digital Articles (April 12, 2022).
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About The Author

Robert S. Kaplan

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  • Dell Med: Transforming Care Delivery & Payment By: Robert S. Kaplan, David N. Bernstein and Mary L. Witkowski
  • Innovations in Evaluating Ambulatory Costs of Cystic Fibrosis Care: A Comparative Study Across Multidisciplinary Care Centers in Ireland and the United States By: Emma Brady, Ryan C. Perkins, Kate Cullen, Gregory S. Sawicki, Robert S. Kaplan and Gerardine Doyle
  • A Better Way to Measure Social Impact By: Robert S. Kaplan and Constance Spitzer
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