Last week, on October 27, Carbon Measures and the International Chamber of Commerce (ICC) announced the formation of an independent expert panel that will work to develop guidelines and implementation steps to establish a global carbon emissions accounting system based on activity-based costing principles from financial accounting.
It’s a concept developed by two academics, Professors Robert Kaplan from Harvard University and Karthik Ramanna who currently works at the University of Oxford, first published in the Nov/Dec 2021 issue of the Harvard Business Review, winning the journal’s 2022 McKinsey Prize for “groundbreaking management thinking.”
They also published a paper in Harvard Business Review on 12 April 2022: “We Need Better Carbon Accounting. Here’s How to Get There.”
“About 90 years ago, a small group of experts from business and academia gathered in the wider public interest to create GAAP for financial accounts. Their innovation allowed capital markets to scale like never before,” recently said Karthik Ramanna, Professor of Business and Public Policy and Director of the Transformational Leadership Fellowship at the University of Oxford.
“We are at a stage today where a similar set of rigorous, technologically agnostic, policy-neutral accounting principles are needed for supply-chain emissions. If done right, these principles can bring to bear the full power of capitalism to accelerate decarbonization while driving energy abundance.”
Who are the people and organisations behind Carbon Measures?
Karthik Ramanna will co-chair Carbon Measures’ new technical expert group alongside its CEO, Amy Brachio, the former Global Vice Chair of Sustainability at EY for nearly three decades.
Carbon Measures is a global coalition comprised of businesses across a range of industries and countries, including ADNOC, Air Liquide, Banco Santander, BASF, Bayer, CF Industries, EQT Corporation, ExxonMobil, EY, Global Infrastructure Partners (a part of BlackRock), Honeywell, Linde, Mitsubishi Heavy Industries, Mitsui.
Carbon Measures is also calling for new policy that “unlocks innovation, competition and market-based solutions to reduce emissions”.
The International Chamber of Commerce (ICC) is an institutional representative of more than 45 million companies in over 170 countries, promoting international trade, responsible business conduct and a global approach to regulation, in addition to providing market-leading dispute resolution services. Their members include many of the world’s leading companies, SMEs, business associations and local chambers of commerce.
S&P Global Commodity Insights, a division of S&P Global (NYSE: SPGI), is the independent knowledge partner for the initiative. S&P Global is the world’s foremost provider of credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets.
Carbon Measures will be present at COP30 with the backing of some of the world’s most influential companies and business groups.
It is listed as a sponsor of Brazil’s dedicated corporate platform, Sustainable Business COP. The platform’s CEO, Ricardo Mussa, told Reuters recently that it planned to put carbon accounting reform at the top of its agenda for the summit.
The ICC is the UN’s official business representative for COP30, so it will have significant opportunities to promote the project throughout the event.
What is a “ledger-based” carbon accounting approach?
The initiative aims to transform how we account for emissions by tracking the cradle-to-gate emissions embedded in products and services as they move through the economy, and reimagining carbon accounting as a “ledger-based” process focused on capturing product-level emissions.
Rather than LCA’s process-based approach, when an asset is transferred from one company to another, its carbon footprint goes with it. So, just as the asset moves from one financial ledger to another, the ‘E-liability’ moves from one ‘E-ledger’ to another.
Activity-based costing provides rigorous allocation methodologies for assigning shared overhead emissions to specific products, an area where LCA sometimes relies on simplified rules.
Chain-of-custody tracking creates audit trails similar to financial accounting, potentially enabling higher-quality assurance. Emphasis on supplier-specific data might address some GHG Protocol Scope 3 quality concerns.
E-Ledgers’ “mutually exclusive and collectively exhaustive” is designed to eliminate mathematical double counting by ensuring each ton of CO₂ is counted only once as it transfers through supply chains.
This, they argue, will eliminate problems around double counting: when more than one company takes responsibility for the same tonne of carbon because it qualifies as someone’s Scope 1 emissions and someone else’s Scope 3, for example.
The strength of the E-ledgers system is that it uses the knowledge developed by accountants over hundreds of years to guide its measurement approach.
It is a system that has been tried and tested with “dollars” and is readily convertible to a system that uses “emissions.”
The firm only needs to measure its own emissions, which means that these numbers can be easily verified by an external auditor.
The information on upstream emissions is all reported to the firm by its suppliers, which eliminates the need for estimates of these emissions by the firm, and increases reliability.
If all firms in a value chain used E-ledgers, they would all use the same measurement approach and reporting emissions on a product-level basis, which increases comparability.
The weakness of the E-ledgers system is that it requires application across all entities engaging with the business in order to be accurate at the “reasonable assurance” threshold.
Businesses need to be willing to cooperate with each other and provide the necessary information about emissions to the next entity along the supply chain.
E-ledgers also requires allocations of emissions both over time and across products, which can lead to accounting questions and concerns.
E-liabilities (emissions) and E-assets (removals) explained by the E-Ledgers Institute
The E-ledgers Institute is a “not-for-profit learning organization advancing rigorous emissions-accounting practices to drive innovation in energy efficiency worldwide”, by developing an open-source and free-to-use set of emissions-accounting principles.
It announced the release of a draft Proto-Standard for product-level emissions accounting and auditing using the E-liability method in September 2024.
E-liability is an accounting algorithm that allows organizations to calculate the greenhouse gas emissions embedded in any product or service in as close to real-time as practical, in a manner that is auditable to the highest standards used in financial accounting.
The E-liability approach produces, for every product and service in the economy, an accurate and auditable measure of its total “cradle-to-gate” emissions.
“This allows purchasers – whether a company acquiring a batch of cement, a consumer buying a movie on their tablet, or an investor looking for their next project – to see the total emissions impact of creating that specific product or delivering that specific service.”
Just as E-liabilities refer to units of GHG emissions (into the atmosphere) that can be attributed to a given entity or product, E-assets refer to units of GHG removals (from the atmosphere) that can be attributed to a given entity or product.
E-Ledger’s E-asset framework establishes the conditions under which an act of removing GHG from the atmosphere can be recognized as a tradeable asset on an E-ledger and when such an asset can be used to “net” against E-liabilities (to help establish, for instance, an entity or product’s claim to be “net zero”).
Together, E-liabilities and E-assets provide the two sides of the E-ledgers framework, a comprehensive system for managing emissions and instruments that counteract those emissions.
“The duality of E-ledgers ensures that organizations are incentivized and accountable for both emissions and removal actions.”
What’s the main difference between the E-Ledger approach and GHG Protocol?
The GHG Protocol measurement approach aims at helping the firm understand its sources of emissions and focuses on disclosure, whereas E-ledgers aims at creating a worldwide platform that tracks emissions over borders and across entities at the product level and focuses on accountability.
The GHG Protocol takes a “top-down” view and focuses on responsibility: a business measures emissions created throughout its value chain (in short, emissions created by the supplier side, the firm itself, and in the customer line).
It is introspective in the sense that its focus is on helping the business understand how much emissions are created from its activities. The idea is to “take stock” of the carbon emissions, and from there develop strategies to reduce them over time.
In contrast, E-ledgers takes a “bottom-up” approach and focuses on control: a business measures emissions embedded in the products or services it owns and sells (cradle-togate emissions).
With the E-ledgers approach buyers are held liable for emissions, but not so much the sellers.
This is probably why the oil & gas industry is interested. Unlike traditional GHG Protocol Scope 3 accounting, the E-ledgers approach doesn’t require companies to take responsibility for emissions produced by their sold products.
Exxon, one of the initial members of the Carbon Measure, has made its feelings about the GHG Protocol very clear already, describing it as a “flawed reporting standard” in a lawsuit filed last week against California’s climate disclosure requirements.
The oil major doesn’t want to be forced by regulators to adopt parts of the framework it doesn’t approve of, it explained, “such as the requirement to publish base-year emissions recalculations and the requirement to report the full range of Scope 3 emissions”.
But others argue that the GHG Protocol measurement approach allows for investors to understand inherent risk across the entire value chain of a company and to create “collective accountability for a collective problem”.
However, reliability is a concern. The numbers rely on public emissions factors that may not be appropriate to the firm’s situation; and the numbers are estimates made by the management team and can contain significant estimation error (because it can be impossible for the firm to obtain actual data on the emissions such as for customer use of their products).
Verifiability is also a concern. The estimates made can be audited but the audit will tend to be limited in nature and focus on checking the management’s calculations, not necessarily on checking whether the emissions information is accurate.
These challenges mean that from an external stakeholders’ point of view, it could be difficult to trust the information provided, and there could be concerns with selective disclosure.
The partnership between GHG Protocol and ISO (14067)
Things are moving fast in the carbon accounting world. On 9 September 2025 ISO and GHG Protocol also announced that they will harmonize their GHG standards and co-develop new standards for GHG emissions measurement and reporting.
It is a major step towards a more common global language for emissions accounting – implicitly acknowledging existing hurdles to today’s approach.
The GHG Protocol Corporate Standard has been developed over 25 years and adopted by 97% of S&P 500 companies with a global reach. It’s currently integrated in the ISSB/IFRS-S and EU ESRS sustainability standards.
The protocol’s fundamental strength lies in comprehensive accountability.
By requiring companies to report direct (Scope 1), purchased energy (Scope 2), and value chain (Scope 3) emissions, it ensures businesses take responsibility for emissions they influence but don’t directly control.
However, although encouraging use of primary data, Scope 3 reporting often relies on industry averages and estimation methods limiting precision and audit-ability.
The GHT Protocol also faces legitimate challenges around product-level granularity and Scope 3 data quality. While the GHG Protocol Product Standard exists, it hasn’t achieved widespread implementation.
The ISO standard (14067), based on Life Cycle Assessment (LCA) principles, with a product carbon footprint methodology, provides a systematic framework for assessing environmental impacts across a product’s life cycle – from raw material extraction through production, use, and disposal.
The partnership between GHG Protocol and ISO aims to harmonize both approaches while developing enhanced product carbon footprint standards, resulting in a more common global language for emissions measurement and reporting.
Will Carbon Measures replace or collaborate?
In an article publishes on 8 October 2025, Robert G. Eccles argues that the partnership between GHG Protocol and ISO creates infrastructure for precise product-level data that carbon pricing mechanisms increasingly require, from border carbon adjustments to carbon-differentiated procurement to internal carbon pricing systems.
Eccles also argue that E-Ledgers’ product-level precision could enable more sophisticated mechanisms for carbon pricing, but that the theoretical appeal of E-Ledgers “rests upon a seamless, unbroken chain of emissions tracking from raw materials to end-user”, which is “near to impossible”.
He argues that “modern supply chains are inherently complex and fragmented, spanning thousands of actors across national borders, divergent regulatory jurisdictions, and varying technological capabilities”.
This would lead to a partial adoption creating critical failure modes: Chain-of-custody breakage, Interoperability gaps, and Assurance infeasibility since auditors cannot opine on incomplete chains.
He concludes that “the need for near-universal buy-in for E-Ledgers to work remains a substantial—perhaps insurmountable—barrier to practical implementation”.
And that “in the interest of users, the only realistic approach is a collaborative one. E-Ledgers’ activity-based costing principles could strengthen how LCA allocates shared resources and overhead emissions to specific products, improving precision without replacing the underlying framework.
For downstream emissions, producers would continue reporting estimated use-phase impacts as disclosure requirements under GHG Protocol frameworks, maintaining accountability for product design choices even though product-level tracking shows transfers to customers. This preserves comprehensive climate accountability while improving upstream data precision.”
In Eccles opinion, “if E-Ledgers competes with the GHG Protocol/ISO partnership rather than contributing to it, the consequences for carbon pricing (and corporate decarbonization) would be severe.
It would create incompatible methodologies and additional confusion. Companies would face impossible choices, regulators couldn’t design consistent policies, and carbon pricing mechanisms would lack standardized data. Parallel development of technology platforms, assurance procedures, professional training, and regulatory frameworks would divert scarce resources from climate action to methodological competition.”
Conclusion
The launch of Carbon Measures, basing carbon accounting on financial accounting principles, can be regarded as a Big Bang in the carbon accounting world, in a time when sustainability accountability is facing strong political headwinds.
Given the current ESG trends, the powerful actors behind the Carbon Measures initiative, the cost and complexity of GHG Protocol Scope 3 carbon accounting, and the fact that the GHG Protocol method will be disputed in court, the Carbon Measures’ discourse to enable the “full power of capitalism to accelerate decarbonization while driving energy abundance”, seems to be in the spirit of the times.
I would not be surprised if the “perhaps insurmountable barrier to practical implementation” turns out to be not so insurmountable after all.
Leila Hellgren
CEO & Co-founder at Cleerit
Sources:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5441754
https://hbr.org/2022/04/we-need-better-carbon-accounting-heres-how-to-get-there
#CSRD, #ESRS, #CarbonAccounting, #CarbonMeasures, #E-Ledgers, #GHGProtocol
