Editor’s note: This is the fourth post in the five-part series, ‘Market instruments explained’, where we examine the prospects and risks of market instruments in corporate emissions accounting. In the series, we cover key debates around chain-of-custody models, commodity certificates, multi-statement GHG inventories and transition targets. By bringing together perspectives from standard-setters, companies and civil society, we aim to bring more clarity to this complex but increasingly central topic.

Key takeaways

• The proposed multi-statement GHG reporting structure represents a promising reform that could improve transparency by preserving the integrity of the physical emissions inventory while clarifying the role of market-based instruments (MBIs).
• However, without strong safeguards, it also introduces substantial risks. In particular, it could open the door to selective emphasis, duplication, confusion and misleading netted claims across different reporting statements.
• To address these risks, the GHG Protocol is right to establish a clear hierarchy across the statements. The physical emissions inventory (statement 1) should remain the primary reference point for the GHG inventory, while the market-based inventory (statements 2) and GHG impact statement (statement 3) should serve as complementary, not interchangeable, sources of information.
• Non-GHG transition indicators (statement 4) should be prioritised as a mandatory reporting element alongside the physical inventory, as they represent the most tangible and transparent tools for corporate climate accountability.

Under the current Greenhouse Gas (GHG) Protocol framework, companies report emissions through a single GHG inventory for scopes 1, 2 and 3, alongside  an optional market-based inventory for scope 2. For nearly two decades, this approach has played an important role in corporate climate accountability by creating a standardised way for companies to measure emissions, set targets and communicate progress. Its simplicity and consistency have helped establish a common language for emissions reporting across companies and sectors.

However, the limits of this model have become increasingly apparent. A single inventory cannot fully capture the breadth of corporate climate action. Companies lack clear mechanisms to report interventions in supply chains with limited traceability or interventions beyond their value chains. Long-standing questions also remain about how market-based instruments, beyond the existing use of renewable energy certificates in scope 2, should be reflected in corporate reporting.

To address these limitations, the GHG Protocol’s Actions and Market Instruments (AMI) white paper proposes a multi-statement reporting framework. Rather than relying on a single inventory, companies would report across four distinct statements: (1) a physical GHG inventory, which most closely resembles the single inventory of the current GHG Protocol framework, (2) a market-based inventory, (3) a GHG impact statement and (4) a set of non-GHG indicators. 

By disentangling these elements, the framework aims to increase transparency and better reflect the different roles of direct emissions reductions, contractual instruments and climate interventions both within and beyond the value chain. The proposal remains under development and is currently undergoing stakeholder consultation as part of the GHG Protocol’s AMI standard development process. 

This proposed shift has implications beyond corporate disclosure. Standards and frameworks for target-setting will draw on these statements in determining how companies set targets and how their progress is assessed. As a result, the way they are defined, prioritised and governed will shape not only how companies report emissions, but also how they are evaluated and incentivised to act.

In this blog post, we examine the proposed multi-statement reporting structure, the risks it could create without a clear hierarchy and robust safeguards and the key considerations for ensuring a high-integrity framework. 

Key considerations for ensuring a high-integrity reporting framework

The primacy of the physical inventory should be safeguarded

The physical GHG inventory (statement 1) should remain the authoritative measure of a company’s emissions footprint. This principle must guide the implementation of any multi-statement structure.

While separating market-based and impact-related information into different statements may improve transparency, it also creates risks. In particular, companies may selectively highlight market-based or impact metrics that appear more favourable, while giving the physical inventory less attention. There is also concern that changes to the framework could gradually weaken physical inventory requirements, undermining decades of progress towards standardised, comparable emissions reporting, which remains a critical metric for climate accountability.

To address this, we support the wording of the GHG Protocol’s AMI draft paper, which describes statements 2 and 3 as ‘additional statements [...] complementary to the physical GHG inventory’, which continues to serve as the ‘foundation of corporate GHG accounting.’ The GHG Protocol should operationalise this principle by introducing explicit requirements on the valid use of its reporting standard to ensure that the physical inventory is reported prominently and consistently. In any form of communications, statements 2 and 3 should only be valid when reported as complementary disclosures alongside the physical inventory, not as alternatives. 

This hierarchy is essential to prevent companies from cherry-picking the information they report. A multi-statement GHG report should offer recognition and incentives for further climate action, not facilitate selective reporting. 

Statement 3 poses risks, but could add value if limited to contributions beyond the value chain

The proposed GHG impact statement (statement 3) presents some of the most significant challenges within the multi-statement framework. This statement will be based on consequential accounting, which aims to estimate the emissions impact resulting from specific actions or measures using project-level accounting or consequential life cycle assessment. However, this method is associated with significant risk of inaccuracies due to the complexity of determining baselines, monitoring outcomes and assessing additionality and leakage. The negative consequences of inaccurate consequential accounting have been widely documented in carbon credit markets, despite decades of efforts to address these issues. 

As currently conceived, statement 3 includes reporting on emissions reductions, avoided emissions and removals from actions both inside and outside a company’s value chain. However, coverage of interventions within organisational boundaries and value chains overlaps with activities that can already be captured in the physical and market-based inventories. The key distinction between statements 2 and 3 lies in the accounting method rather than the underlying interventions, which could be reported in either statement. This raises questions about whether including these activities in statement 3 adds meaningful value. 

The overlap between statements 2 and 3 in covering market-based interventions within a company’s value chain creates significant risk of confusion and misleading netted claims. As both statements apply different accounting methods to the same underlying activities, there is a risk that interventions reported in statement 3 are likely to be conflated with communications around market-based emissions in statement 2, whether intentionally or unintentionally.  If this occurs, there is also a risk that other impacts reported in statement 3, including contributions beyond the value chain and avoided emissions from products, could also be inappropriately netted against value chain GHG inventories.

These risks are not merely theoretical. They reflect weaknesses in existing reporting practices, which the AMI process aims to address rather than exacerbate. To reduce these risks, market-based interventions within the value chain should be accounted for only through attributional accounting in the market-based inventory (statement 2).

Despite these concerns, statement 3 could still add value if its scope is clearly limited. Specifically, to avoid overlap with statements 1 and 2, statement 3 should be restricted to reporting contributions beyond the companies’ value chain, including the third and fourth of the currently proposed sub-categories of this statement: sector-associated impacts and beyond-sector and value chain impacts. 

Crucially, such a statement of contributions should never be used to meet or offset targets derived from the physical or market-based inventories. Maintaining this separation is essential to preserve the credibility of corporate claims.

Non-GHG transition indicators should play a central role in the framework

The multi-statement framework presents an opportunity to strengthen the role of non-GHG transition indicators within a wider shift toward robust corporate transition planning. As we move into the latter half of this critical decade for climate action, there is increasing emphasis on credible transition plans that link targets to real change. Frameworks such as the Transition Plan Taskforce (TPT) have already advanced the definition of transition indicators at a sectoral level, highlighting their importance for tracking progress across key systems.

Non-GHG transition indicators provide a more direct and tangible link between corporate actions and the sectoral transitions required for a net-zero economy. Rather than relying solely on inherently inaccurate and non-tangible emissions metrics, transition indicators focus on measurable changes in real-world activities, such as procuring a defined share of zero-emissions materials or using market-based instruments to match consumption with low-carbon production in relevant activity pools.

Such indicators are already widely used in reporting templates and target-setting frameworks for renewable electricity procurement, where they serve as a more accurate and actionable guide for implementation. The GHG Protocol should build on this experience and extend it to other major commodities, products and services. In this context, non-GHG transition indicators (statement 4) should play a central role in the multi-statement framework, with reporting on critical indicators made mandatory alongside the physical GHG inventory. Market instruments should be integrated into these indicators where appropriate.

Arguments that non-GHG indicators lie outside the GHG Protocol’s scope reflect a narrow and outdated view of its purpose. Given the limitations of traditional GHG inventories in capturing the full climate impact of corporate actions, expanding the framework to include transition indicators represents a necessary evolution to fulfil its purpose rather than a departure.

While transition indicators are inherently sector-specific, the GHG Protocol has a critical role to play in supporting their consistent application. Their use raises methodological challenges around identifying indicators and defining benchmarks such as ‘zero-emission steel’ or ‘low-carbon energy’. To address this, the GHG Protocol could:

• Define standardised indicators for key cross-sector commodities (e.g. electricity, major industrial materials).
• Establish criteria for identifying and reporting sector-specific indicators, including thresholds for when companies must disclose them.
• Provide guidance on the appropriate use of market instruments within these indicators. Where market instruments are reflected in both statements 2 and 4, this should be seen as complementary rather than duplicative, as each statement captures different dimensions of the same intervention for distinct information purposes.

Through this role, the GHG Protocol could help ensure consistency and comparability while allowing for necessary sectoral differentiation.

Prioritising clarity, credibility and hierarchy

The proposed multi-statement GHG reporting framework has the potential to improve corporate climate transparency, but only if implemented with clear hierarchy and clarity. 

First, the physical GHG inventory must remain the dominant and authoritative metric of GHG inventory, alongside mandatory reporting of non-GHG indicators to reflect progress on key sectoral transitions more transparently.

Second, overlapping and duplicative accounting approaches must be minimised to avoid confusion and misleading netted claims.

Third, non-GHG transition indicators need to be a central part of the multi-statement framework to ensure that the GHG Protocol remains relevant and useful for investors, regulators and other stakeholders seeking tangible, transparent and comparable indicators of companies’ climate risk exposure and decarbonisation progress. 

The AMI process must not only introduce new layers of reporting but also strengthen the integrity of the system as a whole. Achieving this will require careful balancing: while additional layers can provide useful flexibility and nuance, without clear boundaries and hierarchy they risk creating a fragmented reporting landscape that ultimately undermines transparency and credibility.

The final post in this series will bring together our recommendations, identify priority questions for standard-setting initiatives such as the GHG Protocol and highlight research gaps that need to be addressed to support a credible pathway forward.