Building a Strong Business Case for Emissions Accounting

Corporate executives often view GHG accounting as an expensive exercise, intended to address burdensome compliance requirements and manage reputational risks. It triggers budget conversations about what must be spent, not what could be gained. And it positions the sustainability team as the bearers of bad news rather than architects of competitive advantage.

They are not entirely wrong. Measuring GHG emissions is a difficult, often inaccurate process that requires extensive data collection within the company and its value chain. And measuring is only the start of the journey; the end goal is reducing emissions, which requires setting targets, improving data collection to get more accurate data, engaging suppliers, deploying capital, and implementing a multi-year process to achieve emission-reduction targets.

So how do we make the case?

This article is a practical guide for sustainability professionals who need to address these concerns and build support for emissions accounting, not only with the executive team but throughout the entire company. We cover the structural obstacles you need to acknowledge, the forces working in your favor, specific frameworks that help identify your context, and the language you can use to move executives from skepticism to action.

The Structural Challenges We Can’t Control But Need to Understand

Some of the challenges we face are systemic, the result of the current economic systems. Acknowledge them head-on and then explain how some of these are changing through regulations and market forces.

Externalities: the cost the market does not yet price

An externality is something that is not priced explicitly, and the cost is usually borne by society or players outside the company. Carbon dioxide and other GHG emissions are released into the atmosphere at no cost to the producer. The cost will be paid as the gases build up in the atmosphere, leading to global warming and climate change that leads to more intense and more frequent climate disaster events or chronic climate change events.

Tragedy of the Commons

Another economic challenge is often referred to as the “Tragedy of the Commons.” The atmosphere is a global shared resource; each company acting in its own interest can create issues for the whole world, affecting some locations more than others. Without binding regulations or a carbon price that levels the playing field, it can seem like early movers or companies that decarbonize are absorbing costs while laggards are free riders.

Time horizons and the Attribution Gap

The costs of climate inaction accrue over decades. The costs of emissions accounting and implementing reduction actions are now. Also, there is no direct connection between your emission actions and climate-related risks, a phenomenon often referred to as the “the attribution gap.” This challenge is further amplified when the company is facing urgent issues, and trade-offs are often made to address them over important ones.

Unfortunately, these challenges can only be addressed at a system or policy level. Some of this is already underway:

A global or regional carbon price. For example, the E U Carbon Border Adjustment Mechanism (CBAM) is a climate policy tool that places a carbon price on certain imported goods (steel, cement, aluminum, fertilizers, electricity, hydrogen). This internalizes the externality and creates direct financial incentives for emissions reductions.
The Paris Climate Accord and nationally determined contributions aim to address the “Tragedy of the Commons” by encouraging countries to set targets and reduce emissions, ensuring that all the players are doing their part.
Regulations that mandate emissions disclosures and reductions, creating informational transparency, so customers, investors, and other stakeholders can make informed choices, helping companies that are leaders to create brand reputation.

Forces working in your Favor

It’s not all bad news and challenges; there are also several factors working in favor of sustainability programs and decarbonization:

The Technology Cost Curve

The economics of renewable energy and battery storage have undergone one of the most dramatic cost declines in industrial history. In many markets, clean energy is now simply the cheapest energy. This makes the transition to green energy a cost-saving decision, not just a “climate-action” decision.

According to IRENA’s 2024 Renewable Power Generation Costs report, utility-scale solar now generates electricity at a global average LCOE of $0.043/kWh — a 90% decline from $0.417/kWh in 2010, and 41% below the cheapest fossil fuel alternative. In 2024, onshore wind was on average 53% cheaper than the lowest-cost fossil fuel alternatives.

EV batteries also reached a key milestone in 2024, when the average passenger-EV battery price crossed below $100/kWh for the first time — a threshold long cited as the point at which EVs reach price parity with gasoline-powered cars. The average pack price for stationary storage systems dropped to $70/kWh, 45% lower than in 2024.

The practical implication: switching to clean energy is increasingly a cost-saving decision, not a “climate action” decision. That reframe matters when you are speaking to a CFO.

Corporate targets are accelerating, not retreating

While the regulations’ scope and coverage may be sparse, many companies are setting voluntary targets aligned with the Science-Based Target Initiative and using their influence to pressure suppliers to set their own targets and take actions to reduce emissions.

The number of companies setting near-term science-based targets grew 97% in just 18 months between end-2023 and mid-2025, while the number setting both near-term and net-zero targets more than tripled (227% growth) over the same period. – Science Based Targets

over 22,100 companies disclosed environmental data through CDP in 2025. These companies represent more than half of global market capitalization including some of the world’s largest and most impactful companies. – CDP

Company-led initiatives like Walmart’s Project Gigaton also helped suppliers reduce 1 gigaton of GHG emissions by improving energy efficiency, redesigning packaging, reducing food waste, and optimizing trucking loads. In February 2024, Walmart announced that it had reached this goal six years ahead of the timeline.

Practical Implication: There is pressure from your competitors who are showing climate leadership and gaining customers at your expense.

Consumers and Market Pressures

Consumers’ purchasing decisions are a direct, measurable market mechanism that is a key driver for companies to develop sustainable products.

Amazon recently published sales data from its “Climate Pledge Friendly” badge program“, observing thousands of products across the U.S. and Europe before and after receiving the badge. Products in the Climate Pledge Friendly program soared over 8,000%, from 25,000 products in 2020 to more than 2 million in 2025, as more manufacturers achieved certifications and their products were added to the program. On average, products saw a 12% sales lift within the first year of joining the program.

Another source of market pressure is the rising cost of insurance for physical assets. The insurance market is addressing the challenge with attribution gaps. Insurers need to price the aggregate risk, and they are doing so by raising insurance costs and even exiting certain high-risk regions.

Litigation exposure is growing

In a landmark climate decision on July 23, 2025, the International Court of Justice (ICJ) issued a landmark, unanimous advisory opinion stating that nations have a binding legal duty under international law to curb greenhouse gas emissions and protect the climate. Spearheaded by Vanuatu and a coalition of small island states, this ruling establishes that countries can be held liable for climate change damage and may be required to pay reparations to vulnerable nations. The ICJ affirmed that climate change impacts human rights, which mandates that countries must take action to protect their citizens.

The Lliuya v. RWE case is a landmark climate lawsuit in Germany that connects corporate greenhouse gas emissions to specific environmental harm. On 28 May 2025, the German court presented a ruling that provides further insight into how courts could potentially approach complex causation in transnational climate claims and forms a potential turning point in the recognition of the complex causal link between GHG emissions on the one hand and specific climate damages on the other hand. The Lliuya v. RWE ruling could possibly set a procedural precedent that could influence future climate litigation involving companies

Greenwashing liability is also real. Specifically, for companies, EU courts have been cracking down on green claims in advertising. In March 2024, the District Court of Amsterdam ruled that KLM’s “Fly Responsibly” advertising campaign was misleading and unlawful under EU consumer law — the first court ruling worldwide to find an airline guilty of greenwashing.

How to Build the Business Case

Now that we have examined the structural obstacles and supporting developments at the macroeconomic level, let’s dive into the corporate context and examine the different ways to build a business case for emissions accounting and, more broadly, sustainability programs. The frameworks below are drawn from practitioners who have studied the links between the business case and sustainability programs.

Start with Your Company’s Archetype

Choosing the right lens for your business case might depend on your company’s culture. Steve Rochlin and Jeff Senne discuss the sustainability archetypes of corporations in their article: What kind of company is yours? 6 sustainability archetypes

Tensie Whelan and Carly Fink discuss the value of sustainability programs in six dimensions in The Comprehensive Business Case for Sustainability:

Driving competitive advantage through stakeholder engagement
Improving risk management
Fostering innovation
Improving Financial Performance
Building Customer Loyalty
Attracting and Engaging Employees

Depending on the archetype of your company, select the appropriate emphasis for your business case.

✨Impact and purpose focused ➡️ Driving competitive advantage through stakeholder engagement and Attracting and Engaging Employees
✨Box checker ➡️ Improving risk management
✨Risk reduction driven➡️ Improving risk management
✨Immediate returns driven ➡️ Improving Financial Performance
✨Brand and reputation driven ➡️Building Customer Loyalty
✨Innovation driven➡️Fostering innovation

If your company is a “Box Checker” or “Risk reduction driven”, the emissions accounting exercise will be viewed as a “cost exercise”. To get the true value from emissions accounting, we need the company to implement decarbonization programs that contribute to the bottom line, starting with improving financial performance or building customer loyalty, to generating profits from innovation and driving competitive advantage through stakeholder engagement.

In the next sections, we examine the levers available to shift the company culture towards the “Innovation Driven” and “Impact and Purpose Focused” archetypes.

As teams move beyond measuring corporate emissions and towards implementing emission-reduction actions, we need to identify the levers we can use to convince corporate executives of the value of taking action on climate change. Here are some frameworks we can rely on and some pitfalls we can avoid, as we navigate this complex topic in corporate sustainability programs.

Speak “Business Goals” not Emissions Accounting Jargon

As emissions accountants, it is easy to fall into terminology used in The GHG Protocol and discuss Scopes, Emission Factors, Boundary Methods, and Scope 3 Categories. Business executives need to understand how this connects to operational costs, customer acquisition rates, access to investment capital, and employee satisfaction. The burden is on sustainability professionals to make the translation: connecting emission-reduction goals to business goals. CFOs do not need to understand the GHG Protocol.

Tips for addressing the issue of connecting the sustainability strategy to the business strategy are discussed in the “Principles of Doing the Impossible”, from TheNowWork. Instead of thinking or planning a “25% emission reduction goal”, focus on what business goals can lead to that operation. Use questions like, “How does this make us more competitive”, “How does this build resilient supply chains”, or “How does this improve our products”. The emission reductions, should then be a result of operations or product improvements.

Going beyond “The Green Premium” costs and quantifying “Value Creation”

Once the right language is being used and the sustainability goals are translated into business goals, the next step is to quantify the value being generated by the sustainability actions.

Sustainable products and technology are assumed to have a “Green Premium”, additional costs over those that are currently in use or not sustainable. Nik Baumann provides a simple tool for examining the “carbon” and “cost” of operations and activities. Activities in the “Green Discount Zone” win on both fronts and strengthen the business case for sustainability.

Daniel Aronson, in his book, The Value of Values, provides additional tools to address activities in the “Green Premium Zone”. He asks practitioners to look more holistically at the cost accounting methodology being used, accounting for what he refers to as the “submerged value.” For example, the cost of the good may go up because you make it more sustainable; but think about all the other costs that might go down, the acquisition of customer costs, the lifetime revenues from a customer, the loyalty of the customer, the referrals from the customer, and cost of acquisition of other customers because of the the loyalty and vocality of the customer. It might be that neither you nor your customer pays for the “premium” – your competitor will pay for it by losing customers to you. Capturing the submerged value, helps understand the true “ROI” of the sustainable activity moving it into the “Green Discount Zone”

Image by Nik Baumann from “Alignment Zones and Where to Find Them“

To speak the business language and to understand the value that sustainability actions bring to the business, the onus is on the sustainability teams to understand the business. They need to understand what the business is trying to achieve and the challenges each team faces within the corporation. This can help to make sustainability actions more relevant.

Leading with Opportunity – The Innovation Driven Archetype

To truly realize the benefits of sustainability programs, you need to lead with opportunities, not with compliance or risk reduction. Leading with opportunity will help create momentum for sustainability programs by driving innovation and new revenue opportunities through new products. This also provides a way to embed sustainability into core business drivers and make it a core part of business culture.

Here are a couple of examples of what this can look like in practice:

Trane Technologies is a great example of a corporation that has used “The Gigaton Challenge” to build and drive the sales of high-performance HVAC systems and electric heat pumps. In 2024 alone, the company delivered 12% organic revenue growth and launched 190 new products focused on reducing customer carbon emissions. It has reduced 237 million metric tons of customers’ emissions toward its one-gigaton goal.

Another example is Prologis, which has successfully used sustainability as a value-add to its core product. Adding rooftop solar, LED lighting, EV charging stations, Prologis now provides a sustainable logistics infrastructure to its customers. The company positions its solar and EV offerings as a differentiator in a competitive leasing market, appealing to customers with their own emissions-reduction goals who need sites with flexible, clean power capacity.

The shift to “What business opportunities does sustainability make possible?” can change the sustainability conversation within the corporation from a cost activity to a revenue driver.

Three Key Takeaways

The business case for emissions accounting is hard because it requires corporations to do something genuinely difficult: to price a risk that markets have not yet fully priced, on a time horizon that exceeds normal planning cycles, in the absence of perfect attribution, against the headwind of a structural collective action problem.

But the implications of inaction for society are immense, and sustainability teams have to use every argument, tool, and data point available to persuade corporations to accelerate climate action.

Leading with opportunity, quantifying value creation, providing evidence to back sustainability programs, and speaking the language of the business are critical to convincing executives that implementing sustainability will position the corporation to lead and be prepared for climate change.

For sustainability teams working to get internal buy-in and build momentum, consider the following:

Find the business goal first, then connect the emissions outcome. Instead of proposing a “25% emissions reduction target,” ask: “How does reducing energy intensity in our manufacturing process improve our margin per unit?” The emissions reduction is the result; the business outcome is the argument.

Quantify the value, including “the submerged value.” Look beyond the direct value and costs, and quantify the holistic value to the company.

Lead with opportunities: identify where your customers’ sustainability goals create an opening. Trane’s customers needed to decarbonize their buildings. Prologis’s customers needed clean power for their fleets. Your customers have sustainability pressures of their own — and the supplier who helps them meet those pressures earns preferred status and longer contracts.

References

Need Help Building Your Business Case for Emissions Reduction?

Building a Strong Business Case for Emissions Accounting

The Structural Challenges We Can’t Control But Need to Understand