Publications
Publications
- Harvard Business Review Digital Articles
We Need Better Carbon Accounting. Here's How to Get There.
By: Robert S. Kaplan and Karthik Ramanna
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).