Faithful Accounting for Corporate Carbon Emissions

Abstract

Companies are increasingly viewed as crucial contributors to a timely transition toward a decarbonized economy. Flaws in the current approach for determining corporate greenhouse gas emissions, however, obscure the progress companies report to have made. This paper introduces a framework that enables firms to faithfully account for corporate carbon emissions. The framework builds upon the widespread Greenhouse Gas Protocol and current financial accounting standards to derive procedures for accounting and reporting a firm's emission phenomena. Specifically, the procedures ensure the verifiable, neutral, and complete depiction of the actual changes in atmospheric greenhouse gases the reporting firm controls as a result of its economic activity. Performance measures introduced as part of the framework allow the specification and monitoring of corporate decarbonization targets and efforts.