Error Check: Correcting basic misconceptions in Bob Eccles’ Forbes column on E-ledgers and the GHG Protocol
October 12, 2025
Media
by Karthik Ramanna and Robert S. Kaplan
We were pleased to read Bob Eccles’ recent Forbes column, which identified how E-ledgers carbon accounting can overcome the limitations of the GHG Protocol. His article reflects the preferences of many others for major changes to the GHGP and its ecosystem. We do not address that policy issue here; rather, we simply address some erroneous claims Eccles makes about challenges with implementing the E-ledgers system.
First, we agree with Eccles’ critique of the GHGP’s multiple counting of emissions, a flaw that, at least until recently, some GHGP advocates celebrated as “a feature, not a bug.” But he then proceeds to argue that E-ledgers, while conceptually sound and grounded in fundamental accounting principles, cannot work in practice without “universal adoption.” Eccles incorrectly states that the practical feasibility of the E-ledger system “depends on the participation of virtually every company, supplier, and intermediary within a value chain, no matter how large or small, or geographically dispersed.”
The E-ledgers framework is, indeed, a systems solution that becomes more accurate and verifiable as more entities across the global economy adopt the approach. But the approach does not require all entities to adopt it all at once. Rather, adoption can be staggered within entities (e.g., start with an entity’s more significant products), across entities (e.g., start with entities producing the largest direct emissions), and across jurisdictions. In that sense, the approach is “recursive” in nature. That simply means breaking a large, complex problem – such as accurately calculating the embedded emissions of all products that transact in the economy – into smaller, manageable iterations, so that each iteration builds on the previous one, progressively improving outcomes.
Each time a product’s emissions are calculated using the E-ledgers method, the accuracy of emissions calculations for all other products that use it in their supply chains also improves. This is a key difference between the E-ledgers method and emissions reporting under the GHGP, which generally offers no opportunity or incentive for feedback or learning. While both methods start from the current state of inaccurate data in emissions reporting, E-ledgers build on inventory-accounting principles to transmit emissions data forward through the value chain. Given the circularity of value chains, even if the initial data is of poor quality, the progressive adoption of the E-ledgers method means the data gets better over time. A pilot study we conducted with Hitachi Energy and various layers of its supply chain illustrates this powerful point in practice.
Further, in the E-liability Proto-standard, we have proposed that policymakers turbocharge the recursive process by introducing a penalty, increasing over time (say, five years), for companies that continue to use secondary data – i.e., estimates from regional- or industry-average databases – instead of primary data for their own material direct emissions. Over just a few reporting cycles, this process can dramatically improve the quality of product-level emissions data across the economy, making it reliable enough to inform competitive decarbonization decision-making.
Eccles’ column also fails to recognize the benefits from E-ledgers’ “distributed auditing” approach. Eccles hypothesizes about auditing problems when some companies in a supply chain do not use E-ledgers accounting: “Auditors cannot opine on incomplete chains. Without comprehensive participation across the entire value chain, independent verification becomes impossible, eliminating one of E-Ledgers’ key advantages over current approaches.”
The E-ledgers system does not recommend or require auditors to opine on incomplete, or even complete, value chains. An entity’s auditor need only provide reasonable assurance that (i) the direct emissions of the entity are faithfully represented on that entity’s E-ledger and (ii) those direct emissions, together with the emissions in the products purchased from direct suppliers, are faithfully allocated to the entity’s outputs using rules of causal logic. In cases where an entity’s direct suppliers do not provide audited emissions for products sold, the increasing penalty described earlier applies, creating a strong incentive for supply-chain compliance over just a few accounting cycles.
Under this distributed auditing approach, which is a key feature of the E-ledger system’s decentralized, bottom-up method for carbon accounting, emissions and allocations are audited to the highest standard once and only once, where they occur. Asking an entity’s emissions auditor to routinely unpack data recorded deep in supply chains, whether complete or incomplete, would be prohibitively costly and is not required for implementation of the E-ledger system. Each auditor benefits from the work of its predecessor auditors in the supply chain, where applicable, and the work of all auditors is subject to regulatory and legal oversight, as is the case in financial reporting.
Finally, Eccles expresses concern that less sophisticated “suppliers or distributors often lack digital infrastructure or incentives to comply, creating systematic gaps.” Our experience with numerous pilot studies has substantially mitigated this concern. First, given that the E-ledgers approach is based on widely understood principles and practices from financial accounting, we have found implementation, even in smaller companies, to be less complex than initially projected. Second, the interest of a major downstream customer (such as Hitachi) in the E-ledgers approach often motivates its smaller suppliers to get on board. Third, some of those major customers are even willing to build their smaller suppliers’ capabilities to do direct emissions calculations, as we learned from a recent BMW pilot study. Additionally, we have observed effective E-ledgers participation from companies in many geographies, beyond simply OECD countries, including in India, Indonesia, and even Afghanistan.
We and the E-ledgers Institute look forward to continued engagement with companies, regulators, and other stakeholders to accelerate E-ledgers implementation in practice. As Eccles notes, we are a nonprofit learning organization with a mission to drive improvements to emissions data worldwide. The better data under E-ledgers brings better decision-making and more effective policy.