Principles and Content for Downstream Emissions Disclosures

In a previous paper, we proposed the E-liability carbon accounting algorithm for companies to measure and subsequently reduce their own and their suppliers’ emissions. Some investors and stakeholders, however, want companies to also be accountable for downstream emissions, those produced by their customers, their customers’ customers, and so on down a value chain. In this paper, we describe the misconception of attempting to have all companies measure and be accountable for downstream emissions. But we also propose how to handle the important exception, when end-use consumers are the culpable party producing the downstream emissions.

The paper uses several consumer-product examples to develop three principles for corporate disclosure of downstream emissions. Principle 1: Only companies whose products are directly used by end-consumers (B2C companies) should be required to disclose downstream emissions. Principle 2: Only B2C companies with products that require energy for consumer use, and for which a reasonable causal link exists between the product’s sourcing and design decisions and the emissions from consumer use, should be subject to downstream disclosure. Principle 3: Since companies have limited influence on consumers’ quantity of use of their products, a B2C company’s downstream disclosures should focus on emissions per unit of consumer use, not on total emissions. The paper concludes by explaining why reports of downstream emissions are “disclosures” not “accounting.”