{"id":39242,"date":"2026-06-05T07:00:56","date_gmt":"2026-06-05T06:00:56","guid":{"rendered":"https:\/\/blog.frankfurt-school.de\/?p=39242"},"modified":"2026-06-03T15:04:11","modified_gmt":"2026-06-03T14:04:11","slug":"emissions-accounting-embracing-a-new-era-of-radical-simplicity","status":"publish","type":"post","link":"https:\/\/blog.frankfurt-school.de\/de\/emissions-accounting-embracing-a-new-era-of-radical-simplicity\/","title":{"rendered":"Emissions Accounting: Embracing a New Era of Radical Simplicity"},"content":{"rendered":"

„The fossil fuel industry is not the enemy \u2013 it is the emissions,“ declared Mia Mottley, Prime Minister of Barbados<\/a>.<\/p>\n

If that\u2019s the case, then every organisation must manage their emissions as relentlessly as cashflows. Yet emissions accounting is prohibitively complicated and expensive \u2013\u00a0only done by a handful of companies. It also lacks the rigour and auditability of financial accounting. The resulting approximations may help companies or governments know where start \u2013 but they\u2019re not enough to decarbonise our complex market economy.<\/p>\n

Consider a haulage company. They know that their biggest emissions are from their diesel burning trucks. The quick-win solution seems obvious \u2013\u00a0switch to a zero-emissions fleet.<\/p>\n

\"\"<\/p>\n

Image source (royalty free): https:\/\/pixabay.com\/illustrations\/truck-vehicle-transportation-road-8921536\/<\/a><\/h6>\n

 <\/p>\n

After deciding to go electric, the remaining biggest emissions are embodied in the vehicles, embedded deep in their supply chains. To make an informed decision about which trucks to buy, the company needs reliable product carbon footprint (PCF) data, presented alongside the price at the point of purchase.<\/p>\n

From corporate disclosures to product-level data<\/h2>\n

Globally, roughly 23,000 companies<\/a> disclose their emissions according to the Greenhouse Gas (GHG) Protocol \u2013\u00a0the de facto<\/em> standard. But that equates to merely 0.008% of the world’s 300 million businesses. It doesn\u2019t even get close to the potential data requirements. In Europe alone, there are over 150 billion<\/a> non-cash payments made every year. With every one of these, the buyer is aware of price \u2013 but rarely the emissions.<\/p>\n

The solution is (theoretically) simple \u2013 to include emissions data in financial accounting systems so that the PCF data can be displayed on price tags and invoices.<\/p>\n

This requires a paradigm shift in how we think about emissions data. It\u2019s already possible to price products in multiple currencies for sale in different countries \u2013 so it\u2019s not that hard to add another \u201ccurrency\u201d denominated in CO2<\/sub>e for the emissions cost.<\/p>\n

Counterintuitively, reframing the challenge around this need for granular data also makes it easier to solve the problem of corporate disclosure \u2013\u00a0after all, as I\u2019m reminded by Hilary Eastman<\/a>, corporate accounts are the summation of a company\u2019s granular transactions.<\/p>\n

When emissions data are in the financial accounting systems of companies, then they can also be submitted together with periodic tax returns, like VAT. Imagine, just \u201cone click\u201d for submitting both tax returns and emissions disclosure \u2013 radically simple and painless!<\/p>\n

Why are we not already doing this?<\/h2>\n

The reason is elegantly summarised by Dr Ulf von Kalckreuth, Principal Economist-Statistician at the Deutsche Bundesbank (German central bank). He explains<\/a> that the \u201cGHG Protocol Standards were developed around the turn of the millennium for a world in which only few and isolated companies decided to give an account of their carbon emissions \u2013 voluntarily. At the time, there was no use in pointing to the accounting work of others as a prime source of information.\u201d<\/p>\n

In that context, the GHG Protocol was right to implement a business management logic that amplifies emissions hotspots and highlights feedback loops, both upstream and downstream. What financial accountants and macroeconomic statisticians nowadays consider multiple counting, the GHG Protocol frames as an essential way of revealing which companies, industries, and supply chain configurations can have the biggest effect in reducing systemic emissions.<\/p>\n

But now we need a more rigorous data science approach to satisfy more demanding requirements. Regulations, like the EU\u2019s Carbon Border Adjustment Mechanism (CBAM), require robust data that can withstand the scrutiny of international trade litigation.<\/p>\n

Making the paradigm shift<\/h2>\n

We can learn lessons from photography, when it transitioned from chemical film to digital processing.<\/p>\n

\"\"<\/p>\n

Image source: Author (Richter, KH). (2024). Making carbon accounting count (Lecture materials). Frankfurt School of Finance and Management.<\/h6>\n

 <\/p>\n

The fundamental principles of photography did not change with the advent of digital technologies, neither is climate science changing \u2013\u00a0but operationally, the way to do emissions accounting is changing (and must change). Fortunately \u2013 like with all truly disruptive innovations \u2013 the data science approach makes emissions accounting easier, faster, cheaper, and more accurate.<\/p>\n

This longer technical article explains how: The False Conflict Holding Back Emissions Accounting \u2013 And the Need for Harmony of Standards and Collegiate Collaboration<\/a><\/p>\n

What next?<\/h2>\n

Paradoxically, the lingua franca<\/em> of the GHG Protocol is subconsciously blocking the change.<\/p>\n

The terms \u201cscope 1\u201d, \u201cscope 2\u201d, and \u201cscope 3\u201d trap people in a mental model that hinders a data science way of thinking. The problem is that the \u201cscopes\u201d essentially differentiate emissions based on the convenience of obtaining data, they are not classifications based on fundamental data characteristics.<\/p>\n

This matters because it\u2019s suppressing the era of radical simplicity.<\/p>\n

Just like John Elkington did a \u201cproduct recall<\/a>\u201d when the triple bottom line concept he founded was no longer fit for purpose, the GHG Protocol ought to recall the \u201cscopes\u201d.<\/p>\n

\"\"<\/p>\n

Image source: GHG Protocol (Blog). (2019). You, too, can master value chain emissions. https:\/\/ghgprotocol.org\/blog\/you-too-can-master-value-chain-emissions<\/a><\/h6>\n

 <\/p>\n

Even in the totemic image (above) from the GHG Protocol, the labels beneath the \u201cscopes\u201d delineate the three fundamental data categories:<\/p>\n

    \n
  • direct<\/u> emissions<\/strong> \u2013 from fuels you (the reporting company) burn or gases you release into the atmosphere, like refrigerants<\/li>\n
  • indirect upstream<\/u> emissions<\/strong> \u2013 your supply chain emissions embedded in raw materials, services, and energy purchased<\/li>\n
  • indirect downstream<\/u> emissions<\/strong> \u2013 forecast emissions when products are used over their lifespan and ultimately disposed of<\/li>\n<\/ul>\n

    If these three classifications appear self-evident and more intuitive than \u201cscopes\u201d, then you already think like a data scientist.<\/p>\n","protected":false},"excerpt":{"rendered":"

    „The fossil fuel industry is not the enemy \u2013 it is the emissions,“ declared Mia Mottley, Prime Minister of Barbados. If that\u2019s the case, then every organisation must manage their emissions as relentlessly as cashflows. Yet emissions accounting is prohibitively complicated and expensive \u2013\u00a0only done by a handful of companies. It also lacks the rigour […]<\/p>\n","protected":false},"author":1466,"featured_media":39250,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[51],"tags":[2603,2605,2604],"class_list":["post-39242","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-executive-education","tag-emissions-accounting","tag-ghg-protocol","tag-regulations"],"acf":[],"_links":{"self":[{"href":"https:\/\/blog.frankfurt-school.de\/de\/wp-json\/wp\/v2\/posts\/39242","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.frankfurt-school.de\/de\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.frankfurt-school.de\/de\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.frankfurt-school.de\/de\/wp-json\/wp\/v2\/users\/1466"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.frankfurt-school.de\/de\/wp-json\/wp\/v2\/comments?post=39242"}],"version-history":[{"count":5,"href":"https:\/\/blog.frankfurt-school.de\/de\/wp-json\/wp\/v2\/posts\/39242\/revisions"}],"predecessor-version":[{"id":39251,"href":"https:\/\/blog.frankfurt-school.de\/de\/wp-json\/wp\/v2\/posts\/39242\/revisions\/39251"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.frankfurt-school.de\/de\/wp-json\/wp\/v2\/media\/39250"}],"wp:attachment":[{"href":"https:\/\/blog.frankfurt-school.de\/de\/wp-json\/wp\/v2\/media?parent=39242"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.frankfurt-school.de\/de\/wp-json\/wp\/v2\/categories?post=39242"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.frankfurt-school.de\/de\/wp-json\/wp\/v2\/tags?post=39242"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}