E-Accountability Offers Advantages For Companies

In an article for Harvard Business Review, Prof. Reichelstein, together with Robert S. Kaplan (Harvard Business School) and Prof. Karthik Ramanna (University of Oxford’s Blavatnik School of Government), explains how “e-liability accounting” can help companies calculate more accurate information on the CO2 emissions of their products.

In E-liability accounting, each company requires emissions data only from its immediate suppliers and from its own operations to assign carbon intensity to its outputs of sales products. The the embedded product carbon information of the products produced is then shared with the company's immediate customers, who perform the same calculations for their purchased inputs and their own operations.

In contrast to the hierarchical top-down calculations that have been predominantly used to date, the company itself does not seek to estimate the emissions of all the other companies in its supply chain, but rather each company within the supply chain contributes the required data itself, thereby addressing the current shortfalls in measuring and reducing carbon emissions in complex supply chains.

Using the example of two companies (Singapore-based Giti Tire Group, one of the world’s largest tire companies and Germany’s Heidelberg Materials, one of the world’s leading cement producers), the article shows how global companies that were early adopters have obtained and leveraged carbon information from suppliers and their own operations to improve their own carbon footprints and offer customers the opportunities to improve theirs.

The full article can be found here.