ICCA Overview
Integrated Corporate Carbon Accounting (ICCA) lets a company account for its carbon emissions with the same structure and rigor it applies to its financial transactions. Each activity, such as buying materials, running a plant, or selling a product, is recorded in a CO2 Ledger with double-entry bookkeeping. From this ledger, the company derives the carbon footprint of each product it sells and its corporate carbon footprint for the period.
Today’s practices are fragmented
Companies often assess product and corporate emissions separately, using different databases and average emission factors. Along a value chain, each company repeats the assessment for the inputs it buys.
Product and corporate emissions do not add up.
Auditors cannot verify actual emissions.
Companies get no credit for working with their suppliers to reduce emissions.
Separate processes per reporting need.
A Single CO2 Ledger
Under ICCA, a company records the tons of greenhouse gases each business activity emits or removes in CO2 equivalents in a single CO2 Ledger, capturing the source and destination of these tons.
| Date | Activity | tCO2e | Scope | Debit (Destination) | Credit (Source) |
|---|---|---|---|---|---|
| T1 | Machinery acquired | A | Scope 3.2 | Machinery & Equipment | Upstream Emissions |
| T2 | Raw materials purchased | B | Scope 3.1 | Materials | Upstream Emissions |
| T3 | Raw materials used in production | C | Work-in-Process Goods | Materials | |
| T4 | Fuel combusted in production | D | Scope 1 | Work-in-Process Goods | Direct Emissions |
| T5 | Depreciation of machinery | E | Scope 3.2 | Work-in-Process Goods | Machinery & Equipment |
| T6 | Production of goods finished | F | Finished Goods | Work-in-Process Goods | |
| T7 | Electricity consumed | G | Scope 2 | General & Admin. Emissions (Net CO2 Contribution) | Upstream Emissions |
| T8 | Direct removals obtained | H | Direct Removals (CO2 Balance Sheet) | Direct Removals (Net CO2 Contribution) | |
| T9 | Finished goods sold | I | Carbon Emissions in Goods Sold (Net CO2 Contribution) | Finished Goods | |
| T10 | Net CO2 Contribution closed out | J | Legacy Emissions | Net CO2 Contribution |
CO2 Statements: Corporate and Products
At the end of a reporting period, the CO2 Ledger yields three corporate CO2 statements and, for each product sold, a Product Carbon Footprint.
A CO2 Balance Sheet shows the carbon emissions the company has accumulated, by source on the right and by where it is still embodied in operating assets on the left.
A Net CO2 Contribution Statement shows the carbon emissions attributed to the goods and services sold in the reporting period, reflecting the current Corporate Carbon Footprint.
Supplemented with downstream emissions estimates of goods sold, the statement shows the life-cycle Net CO2 Contribution.
A Net CO2 Flow Statement shows the carbon emissions incurred during the reporting period, consistent with GHG Protocol and ISO standards.
A Product Carbon Footprint (PCF) shows the cradle-to-gate emissions incurred in the production of each product sold.
A partial PCF includes only carbon emissions directly linked to the product, while a full PCF also adds a share of the overhead emissions and removals.
Supplemented with estimates of downstream emissions, the statement shows a life-cycle PCF, consistent with GHG Protocol and ISO standards.
Rigorous Carbon Accounting
ICCA yields product and corporate emissions from one ledger and one set of accounting standards. Along a value chain, each company ideally assesses only its own emissions and adds these to the PCFs received from its suppliers.
Product and corporate emissions add up.
Product and corporate emissions come from the same ledger entries and the same accounting standards.
Alternative rules for allocating emissions to products even out at the corporate level.
Auditors can verify actual emissions.
The CO2 Ledger provides an audit trail for every ton of greenhouse gases as it was incurred by the company and flowed through its operations.
Double-entry bookkeeping yields accounting identities that serve as consistency checks.
Companies can take full credit for working with their suppliers to reduce emissions.
Along a value chain, each company passes the PCFs of its products to its customers, adding only its direct emissions.
One accounting system serves various reporting needs — internal and external.
Each ton of greenhouse gases is recorded and assured once, at the company that incurred it.
Tracking Carbon Performance
The CO2 statements provide decision-useful metrics of a company’s carbon position and performance.
In emission-intensive industries, effective decarbonization hinges on reducing annual Net Direct Emissions.
In other industries, changes in Net CO2 Contribution show the progress toward targets covering operational and supply chain emissions.
When firms have pledged cumulative emission budgets, as under the Science Based Targets initiative, the CO2 Balance Sheet directly shows compliance.
Metrics, such as Carbon Emissions in Goods Sold (CEGS) over Cost of Goods Sold (COGS), enable comparisons across periods and firms.
By decomposing changes in Net CO2 Contribution, analysts can attribute emission reductions to changes in production volume, technology, and operations.
With PCFs for the whole portfolio, analysts can assess what each product contributes to the corporate footprint and to profit.