Marc Wouters

2026

This master paper provides students with prior knowledge of financial accounting a comprehensive introduction to corporate carbon accounting, covering its regulatory motivations, current best-practice methodologies, and emerging approaches that aim to overcome the limitations of existing frameworks. The paper first examines the drivers behind carbon accounting, including mandatory disclosure requirements such as the European Sustainability Reporting Standards (ESRS) and the International Sustainability Standards Board (ISSB) standards, as well as voluntary frameworks, net-zero strategies, and financial mechanisms including emissions trading systems, carbon border adjustment mechanisms, and carbon taxes. It then presents the dominant calculation methodologies for corporate and product carbon footprints, the GHG Protocol and ISO 14067, along with the underlying data collection and calculation methods, while critically assessing their conceptual weaknesses, particularly regarding duplicative Scope 3 counting, reliance on secondary data, and limited auditability. Building on these critiques, the paper introduces three emerging carbon accounting approaches: the E-Liability method, which eliminates double counting by passing emissions along the value chain as transaction-based liabilities; Double-Entry Carbon Accounting, which establishes auditable carbon balance sheets and flow statements mirroring financial accounting; and Inherent Carbon Accounting, which enables physical verification of reported emissions through the tracking of carbon embedded in materials. The paper further addresses carbon offsetting and greenwashing as critical challenges to the credibility of corporate climate claims, and derives management implications across procurement, capital budgeting, operations, target-setting, and governance. A fictional running example, AutoParts GmbH, illustrates the practical application of all discussed concepts throughout. The paper concludes that while conceptual tools now exist to make carbon accounting as rigorous as financial accounting, the institutional infrastructure required to implement them at scale remains a work in progress.