Despite its limitations, the current scope 3 emissions framework provides valuable insight into the climate footprint associated with a company’s core business decisions. Initiatives such as Carbon Measures risk becoming another industry-led distraction from the urgent need to reduce emissions and transform emissions-intensive business models. Rather than becoming entangled in increasingly complex accounting debates, climate policy and standards should prioritise transition targets – indicators that reflect and drive real-world transitions required for decarbonisation.
In late October, companies from high-emitting sectors, including ExxonMobil, launched a new industry-backed accounting initiative, Carbon Measures. The initiatives claim to provide technical improvement to enhance transparency and accuracy in the existing emissions reporting system, which is largely centred on the Greenhouse Gas Protocol (GHG-P). Although details remain limited, early indications suggest that the initiative aims to transform how carbon emissions are tracked across global supply chains by passing liability along each step of the value chain. In practice, this could allow companies to shift responsibility for emissions to society. Emissions could simply be passed down to end consumers and no longer appear in corporate inventories, while companies delay structural changes to their emissions-intensive business models. Rather than proposing a fundamentally different framework from the GHG-P, which is currently undergoing revision, the focus should be on improving it while prioritising the introduction of transition targets for corporate target-setting.
In this blog, we examine why scope 3 emissions, as defined by the GHG-P, remain central to identifying emissions hotspots, how Carbon Measures risks distracting from structural decarbonisation and why accounting standards should shift their focus towards transition targets.
The role of scope 3 reporting in identifying heavy emitters
For more than a decade, the GHG-P has been the only widely established corporate GHG accounting framework for measuring and reporting GHG emissions for corporate GHG inventories. To date, most major companies and many national regulations are aligning with the framework. The GHG-P, developed by the World Resources Institute and the World Business Council for Sustainable Development (WBSCD), categorises emissions into scope 1 (direct emissions from owned or controlled sources), scope 2 (emissions from purchased electricity, steam, heat and cooling) and scope 3 (upstream and downstream emissions across a company’s value chain).
For most companies, scope 3 represents the largest source of emissions. Scope 3 emissions are often labelled as ‘indirect’, a label that feeds the misguided notion that they are beyond a company’s control. On the contrary, scope 3 emissions often reflect the main and most direct consequence of a company’s business model decisions. Ignoring a company’s responsibility to reduce its scope 3 emissions prevents investors, regulators and consumers from fully understanding and questioning emissions-intensive business models. Doing so, however, is the fundamental lever for addressing climate change.
Scope 3 includes emissions released during the use of products sold by a company. These emissions are the direct outcome of a company’s primary business decision: the products and services it produces. For instance, an automaker selling combustion engine vehicles will generate much higher downstream scope 3 emissions than one selling electric vehicles. Similarly, a chemical company that produces refrigerants with a high climate impact instead of cleaner options effectively locks in much higher emissions over the product’s lifetime. Emissions inventories following the GHG-P, even if not perfectly accurate, make these emissions associated with a company’s business activities transparent.
Scope 3 also includes emissions embedded in upstream supply chains, such as emissions related to steel production for an auto manufacturer. Companies have demonstrated a significant level of control over these emissions. During the pandemic, several companies swiftly diversified their supplier base to respond to shifting global demand. This shows that reducing their upstream scope 3 emissions – for instance by switching to lower-carbon suppliers – is within their direct control. The label ‘indirect emissions’ can therefore be misleading.
For fossil fuel companies like ExxonMobil, most emissions are a direct consequence of decisions to produce – and to continue expanding the production of – oil and fossil gas. Most of their emissions derive from the combustion of these products. For them, transitioning away from fossil fuel exploration and production is the only way to align with climate goals and future energy systems. Classifying their main emissions source and principal action lever as ‘indirect’ risks obscuring this reality for investors, policymakers and consumers.
Policymakers have increasingly recognised the relevance of scope 3 emissions. Under the EU Corporate Sustainability Reporting Directive (CSRD), for example, in-scope companies are required to report scope 3 emissions where climate impact is material. Scope 3 is also a major part of the current version of the Science Based Targets initiative’s (SBTi) Corporate Net Zero Standard from 2021 and the latest draft for its proposed revision of October 2025.
Endlessly debating GHG accounting risks delaying climate action needed now
Despite its limitations, the current GHG-P accounting system remains a valuable framework for mapping and understanding the key hotspots within a company’s emissions footprint. Rather than calling this system into question through industry-led proposals for fundamentally different frameworks, the focus should be on its continuous refinement and enhancement – an effort already underway through ongoing revisions.
As the GHG-P’s accounting system clearly identifies heavy emitters, it faces resistance, especially from emissions-intensive industries. For instance, the E-ledger Institute supports a ledger-based carbon accounting framework similar to the approach discussed under Carbon Measures. Such an approach would allow companies to transfer value chain emissions to their customers, rather than assuming shared responsibility across the value chain. Heavy emitters, including BMW, Tata Steel, Giti Tire and Heidelberg Materials, claim to have piloted the E-ledger Institute’s approach. Other case studies reportedly involve heavy emitters from oil and fossil gas (ExxonMobil, ADNOC, EQT) and companies from the chemicals and industrial gases sector (including BASF, Air Liquide, Linde, Bayer). However, as no fully fledged methodology or concept is publicly available for application for now, it remains unclear how the companies have piloted and assessed this framework. Using ledger-based carbon accounting as an alternative approach to the GHG-P’s inventories could allow companies to shed responsibility for the vast majority of their emissions.
Following significant pushback, Carbon Measures has claimed in recent weeks that it does not intend to replace the current accounting system but rather to provide a complementary accounting framework that serves different purposes. However, we perceive this claim to be somewhat misaligned with the public positions of some key figures and member companies in the initiative. For example, ExxonMobil has publicly criticised the ‘flaws of the GHG Protocol’, stating: ‘We do not set Scope 3 targets. Using the GHG Protocol to measure and manage company or sector-wide emissions is flawed and counterproductive’. By this logic, we interpret this as an attempt by ExxonMobil to distance itself from its shared responsibility for emissions from the combustion of the oil and fossil gas it sells and to avoid transparent reporting on the aggregate emissions associated with its fossil-based business model.
Questioning the fundamental basics of the established GHG accounting system in 2026 risks delaying necessary changes to companies’ business models. If companies and initiatives such as the E‑ledgers Institute and Carbon Measures are given the space to challenge widely accepted approaches for identifying emissions responsibility, discussions on concrete measures to reduce emissions may be pushed further down the line.
The timeline for action is clear: only four years remain to halve global emissions compared to 2019 levels and limit the most severe impacts of climate change. By 2030, global production of oil and fossil gas needs to decrease by around 30 per cent compared to 2020 levels, which means business models in this sector should already be shifting. According to the International Institute for Sustainable Development, global capacity additions of wind and solar also need to be more than twice as high as current forecasts by 2030. This means that companies across all sectors should already be taking concrete steps to change business models aligned with a 1.5°C pathway. Given this urgency, revisiting the fundamentals of GHG accounting and GHG inventory-based target-setting risks distracting from the structural transformations required.
Moving beyond GHG emissions accounting: the need for transition targets
For most sectors, there is already clarity on the measures needed to prevent the worst impacts of climate change. Given the urgency, companies should focus directly on implementing those measures rather than debating GHG accounting metrics. This requires setting indicators for those measures as the basis for climate targets. While a greenhouse gas inventory serves as a solid basis for identifying emissions hotspots, it may not be the most effective basis for setting emissions reduction targets.
Transition targets are better suited for establishing clear, actionable objectives in each sector and systematically evaluating progress. Rather than simply measuring tonnes of GHG emissions, sector-specific transition targets assess whether a company’s actions, such as scaling low-carbon technologies, phasing out high-emission products or increasing the lifespan of sold products, are consistent with the pace and direction of change needed to achieve global net zero. For example, an automotive manufacturer should not only reduce emissions from its own factories but, first and foremost, commit to phasing out the production of internal combustion engines. The approach of transition targets ensures that climate targets drive structural transformation rather than incremental improvements in carbon intensity.
Using the GHG inventory as the only basis for target-setting has limitations. Changes in a company’s structure and size, as well as global disruptions such as the pandemic, make it hard to assess a company’s long-term GHG emissions trajectory. GHG inventories are also subject to numerous accounting difficulties and potential loopholes (for more information, see CCRM 2025 and Evolution of corporate climate targets). These challenges put transparent, sector‑leading companies at a disadvantage, whereas laggards can exploit loopholes and inconsistent accounting practices, appearing similar on paper. Therefore, it is not realistic to rely solely on GHG emissions accounting to understand and assess a company’s climate performance.
The GHG-P and other standards, such as SBTi and ISO, as well as national regulators, could proactively address these limitations by defining a more modest and realistic use case for GHG inventories, alongside an accountability system that tracks companies’ progress on key sectoral transitions more directly through transition-specific indicators.
