Scope 3 Market Instruments and a Temporary Model for Accounting and Reporting (October 13, 2025)

Scope 3 Market Instruments and a Temporary Model for Accounting and Reporting

Introduction

In recent years, sustainability reporting has gained traction among many businesses, investors, and regulators worldwide. This interest is often driven by a recognition of the role that sustainable practices can play in environmental stewardship. As a result of this interest, the landscape of sustainability reporting is rapidly evolving. To drive transparency and accountability in corporate sustainability efforts, new regulations and standards on topics such as the measurement and disclosure of greenhouse gas (GHG) emissions are regularly being developed.

Since the 1998 launch of the multistakeholder partnership known as the GHG Protocol, the standards and related guidance developed by that partnership (hereinafter collectively referred to as the “GHG Protocol Standards”) have emerged as the dominant framework for GHG emission accounting and reporting, with widespread adoption by both voluntary reporting initiatives and regulated markets. Under the GHG Protocol Corporate Standard,1 emissions are categorized into three scopes as follows:

Scope 1 — Direct GHG emissions from operations that are owned or controlled by the reporting company.
Scope 2 — Indirect GHG emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company.
Scope 3 — All other indirect GHG emissions (not included in Scope 2) that occur in a company’s value chain, comprising both upstream and downstream GHG emissions. There are 15 categories of Scope 3 emissions.

According to World Resources Institute, Scope 3 emissions represent 75 percent of a company’s total GHG emissions on average, most of which come from the upstream supply chain. Consequently, Scope 3 emissions present a significant opportunity to influence GHG reductions and achieve a variety of GHG-related business objectives. These objectives may be readily achieved through the application of Scope 3 market instruments.

This publication discusses trends in the use of Scope 3 market instruments and considerations related to the accounting for and reporting of such instruments. Note, however, that as of the date of this publication, the GHG Protocol does not specifically address Scope 3 market instruments.

What Are Scope 3 Market Instruments?

Although Scope 3 market instruments are not consistently defined in the marketplace, we would generally consider a Scope 3 market instrument to be a mechanism for financing a value chain intervention2 that results in a verifiable and transferable financial instrument with legal property rights (often associated with environmental attribute certificates [EACs]3) and allows companies to demonstrate their direct or indirect contributions to reducing their value chain (Scope 3) emissions.

In light of the relatively new and evolving nature of Scope 3 market instruments, it is important for a company to understand the underlying systems used to underpin their credibility and functionality (often referred to as a chain-of-custody model) so that it can grasp the nuances of Scope 3 market instruments. The ISEAL Alliance has defined a chain-of-custody model as “the approach taken to control inputs and outputs, and transfer specified characteristics within the [chain-of-custody] system.”4 The chain-of-custody model used can affect the ability of the reporting company to trace certified volumes in its supply chain, ultimately connecting buyers and sellers to decarbonize their value chains together. There are various chain-of-custody models, as defined by the ISEAL Alliance’s guidance, that are used in practice, including the following:

Identity preservation (IP) model — According to the ISEAL Alliance, “the identity preservation [chain-of-custody] model is used to ensure that material originating from a single certified source is kept separate from certified material originating from other sources, and separate from non-certified material through each stage of the supply chain. It is the only model that provides assurance that materials within a particular product originate from a single known certified source or origin.”5 For example, organic coffee beans from a specific farm are kept separate from other coffee beans throughout processing, packaging, and distribution.
Segregation model — As described by the ISEAL Alliance, a segregation model is “used to ensure that product originating from certified sources is kept separate from non-certified sources through each stage of the supply chain, providing assurance that relevant materials within a particular product originates from certified sources. Segregation [chain-of-custody] models are used to ensure there is no cross-contamination with non-certified material.”6 For example, certified sustainable palm oil from various plantations is mixed together but kept separate from noncertified palm oil.
Controlled blending model — The ISEAL Alliance describes a controlled blending model as “[a chain-of-custody] model in which certified input materials are mixed according to certain criteria with non-certified materials or product, resulting in a known proportion of certified materials in the final output . . . . Controlled blending is suitable when feedstock from multiple sources (certified and non-certified) are required for a manufacturing process, or when there is insufficient certified materials (at the right time, place, quality) to fulfil an order. It requires a high-level of internal traceability and control within supply chain entities to accurately track the percentage content and maintain unique identification of final outputs.”7 An example is certified sustainable cotton and conventional cotton being mixed together, yielding a known percentage of certified sustainable cotton in the final textile (e.g., the final textile is 50 percent certified sustainable cotton).

Given that the IP, segregation, and controlled blending models apply a physical segregation approach and enable supply-chain traceability, such models can be consistent with current accounting requirements in relevant standards — specifically, the GHG Protocol Scope 3 Standard 8 and the Science Based Targets Initiative (SBTi) Corporate Net-Zero Standard.9 However, there are many instances in which the level of supply-chain traceability required by the IP, segregation, and controlled blending models does not exist. In such cases, reporting companies should look to other market-based models, such as the following:

Mass balance model — As explained in SBTi Research’s July 2024 Scope 3 discussion paper,10 “[m]ass balance is a model where certified and non-certified products can be physically mixed, which reduces the ability to trace the product back to its origins. Under this model, a certain volume of certified products enters the supply chain and an equivalent volume of product that leaves the operations can be sold as certified. The physical traceability of the certified product depends on the mass balance of operations.” This approach allows companies to track and attribute the carbon footprint of a product by monitoring the flow of renewable or recycled materials throughout the supply chain, even when these materials are mixed with traditional fossil-based inputs, thereby enabling the companies to claim reduced GHG emissions associated with the use of sustainable feedstocks without physically separating them throughout the production process. When the mass balance approach is used, companies typically buy a physical product along with a separate purchase of EACs from the supplier. In instances in which a company is not certain that it physically received the lower-carbon product or does not know how much of the product received is lower-carbon, the lack of physical traceability requires the company to report the emissions and emission reductions related to the EAC purchase separately from its Scope 3 inventory.

Example 1

Mass Balance Model — Application of the Attributed Proportional Certification Method

A manufacturer of aluminum cans mixes 50 percent recycled aluminum and 50 percent raw materials aluminum in can production. The company ensures that the amount of recycled cans sold matches the amount of recycled aluminum that enters the production process. Under the attributed proportional certification method, the cans could each be labeled “Produced from 50 percent recycled aluminum.” If the seller of the cans can demonstrate to the buyer that the cans include 50 percent recycled aluminum by using the mass balance model, (1) the emission factor associated with the recycled content can be included in a Scope 3 inventory and (2) no separate reporting of any emission reductions from the recycling of aluminum is needed.

Example 2

Mass Balance Model — Application of the Free Certification Method

A manufacturer of aluminum cans mixes 50 percent recycled aluminum and 50 percent raw materials aluminum in can production. The company ensures that the amount of recycled cans sold matches the amount of recycled aluminum that enters the production process. Under the free certification method, 50 percent of the cans produced are labeled “Produced from 100 percent recycled aluminum,” and 50 percent are sold noncertified. When this method is used, the purchaser of the 100 percent recycled cans cannot know whether it physically received cans with 100 percent recycled aluminum. Therefore, the purchaser of the cans should assume that the cans had 0 percent recycled content when accounting for the Scope 3 emissions and should account for these emissions in Scope 3, Category 1 (purchased goods and services). Any emission reductions associated with purchased EACs to finance the can recycling should be reported separately from the Scope 3 inventory.
Book-and-claim model — A book-and-claim model can be based on mass balance, but it is not constrained to a confined supply infrastructure or even national borders. Rather, as the Roundtable on Sustainable Biomaterials notes in its Book & Claim Manual,11 this model “is a Chain of Custody model in which the administrative record flow does not necessarily connect to the physical flow of a product throughout the supply chain.” The model allows product producers to “book” the emission savings of a good they have produced, and customers to purchase and “claim” the emission benefit from these goods for climate disclosures separately from the physical goods. Certificates are traded separately from the product in accordance with the amount of certified product fed into the supply. These certificates can be purchased and subsequently retired (i.e., removed from circulation) when the benefits are claimed by the purchaser; in some systems, they can be purchased and subsequently resold. Book-and-claim systems require a registry to track issuance, holding, transfer, and retirement of the certificates. A common example of a certificate used in a book-and-claim model is a sustainable aviation fuel (SAF) certificate, which is a type of EAC.

How Scope 3 Market Instruments Differ From Carbon Credits

In light of the use and recognition of carbon credits in both regulated and voluntary reporting markets, it is important to distinguish carbon credits from Scope 3 market instruments to understand their differing roles in GHG mitigation. Although both types of instruments aim to mitigate GHG emissions, Scope 3 market instruments are designed to address Scope 3 emissions in a company’s value chain, thereby helping contribute to emission reductions across the value chain and use a variety of GHG accounting approaches and financing instruments. Carbon credits, however, are discrete financial instruments used to reduce, avoid, or remove emissions through projects that are generally not associated with a company’s value chain (i.e., they are considered to be beyond value chain mitigation). The differences between Scope 3 market instruments and carbon credits are summarized in the table below.

Scope 3 Market Instruments	Carbon Credits
A mechanism for financing a value chain intervention that results in a verifiable and transferable financial instrument with legal property rights and allows companies to demonstrate their direct or indirect contributions to reducing their Scope 3 emissions. There are a variety of Scope 3 market instruments that generate EACs, such as book-and-claim systems and offtake agreements through bilateral contracts. Market instruments include investments in activities or projects that are associated with a company’s value chain. These investments can support the scaling of early-stage technologies, products, or practices that may eventually become standard practice and lead to broader sectoral decarbonization. Benefits can be reported by multiple parties in the value chain (i.e., sellers of EACs can report reductions in their Scope 1 and Scope 2 emission inventory, and purchasers can report the benefits separately from their Scope 3 inventory).	Specific convertible and transferable financial instruments that are traded in well-established markets. These credits represent GHG claims for quantified GHG reduction, avoidance, or removal impacts of projects or interventions. Individual credits are purchased once and can only be claimed by a single party to meet both voluntary and regulatory targets. Benefits can only be reported by the purchaser separately from the GHG physical inventory.

Scope 3 Market Instruments

Carbon Credits

A mechanism for financing a value chain intervention that results in a verifiable and transferable financial instrument with legal property rights and allows companies to demonstrate their direct or indirect contributions to reducing their Scope 3 emissions. There are a variety of Scope 3 market instruments that generate EACs, such as book-and-claim systems and offtake agreements through bilateral contracts.
Market instruments include investments in activities or projects that are associated with a company’s value chain. These investments can support the scaling of early-stage technologies, products, or practices that may eventually become standard practice and lead to broader sectoral decarbonization.
Benefits can be reported by multiple parties in the value chain (i.e., sellers of EACs can report reductions in their Scope 1 and Scope 2 emission inventory, and purchasers can report the benefits separately from their Scope 3 inventory).

Specific convertible and transferable financial instruments that are traded in well-established markets. These credits represent GHG claims for quantified GHG reduction, avoidance, or removal impacts of projects or interventions.
Individual credits are purchased once and can only be claimed by a single party to meet both voluntary and regulatory targets.
Benefits can only be reported by the purchaser separately from the GHG physical inventory.

When exploring ways to lower emissions, companies could consider the emission mitigation hierarchy illustrated below, which establishes a sequence of steps for companies to take in their emission reduction approach. This hierarchy prioritizes companies’ reductions in direct and value chain emissions (e.g., through the use of Scope 3 market instruments) over actions or investments to mitigate emissions outside their value chains to achieve net-zero goals. As depicted below, investments in carbon credits typically represent mitigation mechanisms beyond the value chain that provide minimal direct GHG benefits to a company. By contrast, Scope 3 market instruments are tools to influence and invest in emission reductions in one’s value chain that can support sectoral decarbonization and may provide more direct business value.

Why Many Companies Invest in Scope 3 Market Instruments

Since Scope 3 emissions often represent the largest share of a company’s total GHG emissions, many companies with GHG emission targets include Scope 3 emissions in those targets.12 Therefore, many companies have established business objectives to reduce their Scope 3 emissions, but they often face multiple barriers to doing so. For example, a significant portion of a company’s Scope 3 emissions sources can be deep in the supply chain, coming from Tier 2 suppliers and beyond. Because of this, companies may not have (1) transparency to know the specific upstream suppliers from which their materials are sourced or (2) a direct relationship to enable influence over a supplier’s practices. In addition, investments in lower-carbon practices can be capital-intensive. Thus, a company with several suppliers that collectively provide only a small share of its total materials may not have an incentive to invest directly in the suppliers’ lower-carbon practices. Ultimately, the barriers that drive the need for investment in Scope 3 market instruments vary by sector.

In addition, Scope 3 market instruments may help finance (1) emission reduction activities that are currently not cost-effective or (2) capital investments with a long return on investment that can be considered too risky to attract bank financing. By reducing costs, de-risking investments, and scaling the decarbonization activities, such financing may help increase the adoption rates of low-carbon technologies and establish new standard practices and industry norms, aiding in sectoral decarbonization. The market for Scope 3 market instruments is in the early stages of development. Currently, the most common ways in which companies are investing in such instruments are through ex ante or ex post offtake agreements (i.e., bilateral contracts that convey EACs) and book-and-claim EACs. Companies may be waiting to engage further until there is clarity and certainty from the GHG reporting ecosystem, such as the GHG Protocol and SBTi frameworks, regarding the accounting for and reporting of emission benefits related to Scope 3 market instruments.

Current GHG Accounting and Reporting Standards

Currently, the GHG Protocol Standards, including the Scope 3 Standard, are silent on the accounting for and reporting of emission impacts related to Scope 3 market instruments, although the GHG Protocol Standards are currently undergoing an update process that will be addressing this topic (see the GHG Protocol Standard-Setting Developments section for more information). Such silence poses a challenge for many companies that are seeking to reduce their Scope 3 emissions under the GHG Protocol Standards, which, as previously mentioned, are the most widely accepted framework for GHG emission accounting and reporting.

The GHG Protocol does provide some guidance on certain similar instruments. Of this guidance, that with the broadest scope is the discussion of GHG trades in the Corporate Standard, whose glossary defines such trades as “[a]ll purchases or sales of GHG emission allowances, offsets, and credits.” Specifically, Chapter 8 of the Corporate Standard states, in part, “It is important for companies to report their physical inventory emissions for their chosen inventory boundaries separately and independently of any GHG trades they undertake. GHG trades should be reported in [a company’s] public GHG report under optional information — either in relation to a target . . . or corporate inventory” (footnote omitted). In addition, the Scope 2 Guidance 13 details how to account for energy attribute certificates by using the market-based approach for Scope 2 emissions specifically; and the Scope 3 Standard explicitly states that “[c]ompanies should report internal emissions in separate accounts from offsets used to meet the target, rather than providing a net figure.”

Because the GHG Protocol has not yet specifically addressed Scope 3 market instruments in its standards and related guidance, practitioners cannot directly apply the GHG Protocol Standards to Scope 3 market instruments to demonstrate a reduction in Scope 3 emissions. Nevertheless, guidance on Scope 3 market instruments is available from other organizations. For example, in May 2021, Gold Standard issued guidance 14 that provides recommendations on how to quantify interventions, report them within a Scope 3 inventory, and make narrative claims regarding them. However, it is important to note that this guidance is not fully aligned with the GHG Protocol Standards since (1) the Scope 3 Standard explicitly prohibits accounting for GHG trades within the Scope 3 inventory boundary and (2) the concept of Scope 3 market instruments had not yet been developed when the Scope 3 Standard was published in 2011.

As a further example of how Scope 3 instruments are currently treated in voluntary GHG standards, the SBTi framework includes limited guidance 15 specific to the use of SAF in the aviation sector to meet SBTi Scope 3 targets. Such guidance permits the use of a book-and-claim approach if certain criteria are met until guidance is developed and finalized by the GHG Protocol. However, the SBTi is currently updating its Corporate Net-Zero Standard, as discussed in the Other Standard-Setting Developments section, and revisions to that standard could include new guidance applicable to the use of SAF. Further, while the SBTi framework is referred to in various regulatory standards (e.g., European Sustainability Reporting Standards [ESRS] and IFRS S2 16), those standards limit the use of the SBTi framework to the disclosure of GHG emission targets and do not authorize its use for GHG emission reporting.

Accounting and Reporting Practices

Because the GHG Protocol does not specifically address Scope 3 market instruments, existing marketplace practice for companies reporting under the GHG Protocol Standards is to not reflect purchased Scope 3 market instruments in a Scope 3 inventory. Rather, purchased Scope 3 market instruments and related environmental benefits are typically being accounted for and disclosed separately. This approach is largely consistent with the Corporate Standard’s treatment of GHG trades. However, there is no common practice for addressing how the emission reductions are reported and what supporting information is provided.

Accounting Practice Considerations

In the absence of clarity from the GHG Protocol on how to account for and disclose the environmental benefits from the purchases of Scope 3 market instruments, companies can consider providing an emission disclosure in a ledger separate from the Scope 3 emission inventory, as well as a narrative with additional information to make the purchases more transparent. Companies that are purchasing forward-looking instruments for EACs should not report any emissions or emission reductions from these contracts until the EACs have been delivered. In addition, companies should ensure that the volume of intervention associated with purchased EACs does not exceed the volume of the respective activity in the value chain when making any claim about the EACs related to the Scope 3 inventory.

The GHG Protocol and the Advanced and Indirect Mitigation (AIM) Platform are considering two approaches to accounting for Scope 3 market instruments in a separate ledger. Under the first approach, a company would report a product-level (cradle to gate) or intervention-level emission intensity factor (e.g., emissions per metric ton of concrete) and multiply it by the number of EACs purchased to enable a comparison with the physical Scope 3 emission inventory. This approach aims to mimic the current Scope 2 market-based accounting, but it adds accounting complexities and makes market-based accounting less useful when applied to Scope 3 for the following reasons:

A company’s Scope 3 market-based inventory would include residual emission factors, if available, to replicate the current Scope 2 market-based accounting approach in places within the inventory in which the company is not using Scope 3 market-based mechanisms. In addition, to avoid double counting of emission reductions, companies that sell EACs should provide residual emission factors to their customers that are not purchasing EACs so that those customers can use the residual emission factors in their own market-based inventories. However, it is not yet an established practice to develop and make available these residual emission factors, and such a practice may be challenging to implement.
Developing a Scope 3 market-based inventory would require accounting approaches that may be more complicated than Scope 2 market-based accounting and may add room for uncertainty. For example, one accounting method for Scope 3 market-based accounting is the substitution approach, which the AIM Platform defines as involving “replacement of the emission profile of an inventory component or subcomponent in a company’s emission report with the emission profile of an intervention associated with that inventory component or subcomponent.”17 This method requires a company to unpack its physical Scope 3 inventory calculations, when cradle-to-gate sector average emission factors are used, so that it can replace one subcomponent of the emission factor with the emissions related to an EAC from the same subcomponent.
Transportation-related Scope 3 categories — specifically, Category 4 (upstream transportation and distribution), Category 6 (business travel), Category 7 (employee commuting), and Category 9 (downstream transportation and distribution) — currently have a required minimum inventory boundary under the GHG Protocol Standards that covers only the combustion emissions related to fuel use. As a result, there can be a mismatch between the inventory boundary and the accounting boundary of the intervention. For example, SAF certificates provide cradle-to-gate calculations since the emission reduction relative to emissions from the use of fossil fuels is generated in the production, not the use, of the SAF. In contrast, Scope 2 market-based inventories and Scope 2 location-based inventories both account for emissions only at the electricity generation stage, enabling an “apples-to-apples” comparison.

Because of these complexities, the second approach that the GHG Protocol and the AIM Platform are considering may currently be more practical. Under that approach, a company would account for the achieved emission reductions by using consequential accounting (also called impact accounting) to compare an intervention’s emission intensity with a counterfactual baseline. Application of project accounting or comparative cradle-to-gate product accounting, which both use the consequential accounting approach, could be considered. Since the consequential accounting approach is fundamentally different from the attributional accounting approach used in a corporate inventory, emission reductions accounted for in a Scope 3 market instruments ledger should be kept separate from a Scope 3 inventory (i.e., a net amount should not be provided). The GHG Protocol discourages the mixing of accounting approaches. Separate accounting may limit the claims that can be made about the emission reductions achieved, but it maintains the quality and integrity of the data and closely aligns with the GHG Protocol accounting principles. Since there are currently no widely accepted cross-sectoral accounting and reporting standards for Scope 3 market mechanisms, a company- or sector-specific approach may be used and reported transparently. See the Appendix for an example of Scope 3 market instrument reporting.

Companies incorporating impacts of Scope 3 market instruments into GHG emission inventory reporting should consider alignment with the principles of relevance, completeness, consistency, transparency, and accuracy prescribed by the GHG Protocol. They may also consider applying the following quality criteria when relevant:

Quality Criteria to Consider for Purchased Scope 3 Market Instruments (Adapted From Items 2 Through 5 of the Scope 2 Quality Criteria in the Scope 2 Guidance)
Scope 3 market instruments purchased should:
Be the only instruments that carry the benefits of the claim associated with the product Be tracked and redeemed, retired, or canceled specifically for the company	Be issued and redeemed as close as possible to the period of consumption of the product to which the instrument is related Be sourced from the same market in which the company’s operations that use the related good are located and to which the instrument is applied

Considerations for Purchasing Scope 3 Market Instruments

Numerous factors can influence the credibility of investments in Scope 3 market instruments. One important factor for a company to consider before purchasing (and subsequently accounting for) a Scope 3 market instrument is whether the instrument is associated with a relevant activity in the company’s Scope 3 inventory.

In December 2024, the AIM Platform issued a draft association test 18 for determining whether a contemplated intervention can be associated with a company’s value chain. Consideration of the test may be helpful to companies even though the test has not been finalized.

Reporting Practice Considerations

Companies that would like to disclose emission reductions and removal benefits resulting from the purchase of Scope 3 market instruments may consider disclosing such impacts separately from their Scope 3 inventory. One example of how separate reporting can be disclosed is provided in the Appendix.

Reporting a physical emission inventory separately from an impact inventory for Scope 3 market instruments is an important consideration for accurate and transparent GHG accounting and aligns with the Corporate Standard’s treatment of GHG trades. For example, within the Scope 3 section of the GHG emission report, the impact inventory for Scope 3 market instruments may be presented in tabular columns alongside those in which the physical emission inventory is presented. In addition, companies should consider reporting the emission reductions from Scope 3 interventions for each intervention and then group the interventions by Scope 3 category. Aggregated reporting by types of intervention (e.g., SAF, cement, steel) can be considered if intervention-level reporting would raise concerns about disclosing confidential business information. Separate reporting in the manner described supports transparency and consistency with current Scope 3 reporting requirements, which require the disclosure of emissions by Scope 3 category.

To be more transparent about their Scope 3 market instruments and make stakeholders more confident about the reported emission reductions, a company should consider supplementing its disclosures with information such as the following:

The type of lower-carbon product or project associated with the purchased EACs, and how it was determined that this product or project is associated with the company’s value chain.
The chain-of-custody model used for each market instrument purchased.
Detailed information about emission reduction and removal accounting methods provided by the EAC supplier, including the baseline assumptions, assessment boundary and allocation and attribution approaches used, data sources, and calculation methods.
Results of any uncertainty analysis performed.
The product or project standard or guidance used to assess the GHG emission reduction, and information about any certification or assurance received.
Information related to the instrument, including a specific identifier in metric tons of carbon dioxide equivalent (tCO2e) for the (1) volume or mass of product associated with the generation of the EACs and (2) emission reductions, emission removals, or both.
The location and name of the facility or operations that generated the emission reductions, emission removals, and associated EACs, and the date on which the EACs were generated.
A report from a third-party assurance provider regarding what information was subjected to assurance.
A description of the systems used to track emission intensity units and emission reductions.
The total tCO2e emission reductions and removals achieved through Scope 3 market instruments across all Scope 3 categories, which can be used to communicate the total contribution the company has made toward decarbonizing its value chain in the inventory year.

To assist with the collection of this information and establish consistent calculation approaches, companies may consider adding specific language to contracts for EACs to require the provision of the necessary GHG accounting–related supplier data. They may also establish formal supplier due diligence policies to understand underlying accounting assumptions and decisions.

Given the continued evolution of the use of Scope 3 market instruments and the related accounting and reporting, companies may consider proactively engaging with environmental groups and standard setters to (1) collect input on purchasing models and accounting and reporting practices and (2) monitor evolving guidance. As part of this, companies may consider creating an external advisory group to review their disclosures so that they can identify potential risks before issuing a report containing the disclosures.

In addition, companies should consider whether they must disclose information related to purchases of Scope 3 market instruments to comply with regulatory requirements. For example, companies within the scope of the European Union’s Corporate Sustainability Reporting Directive should consider whether (1) purchases of Scope 3 market instruments have an impact on their double materiality assessment (e.g., identification of an additional financial opportunity, positive impact, or both) and (2) such purchases should be included in the disclosure related to the company’s transition plan that is currently required under the ESRS. Other regulatory provisions under which disclosure may be relevant include those in California’s SB-253 19 and SB-261 20. As regulatory requirements continue to evolve, companies should continue to monitor future developments to assess whether further disclosure regarding Scope 3 market instruments is required.

Assurance Considerations

Since there are currently no established standards on accounting for and reporting purchases of Scope 3 market instruments, companies exploring the possibility of obtaining assurance over the reporting of impacts of purchased Scope 3 market instruments will need to develop management-specified criteria that are suitable and available as required by assurance standards. In developing the management-specified criteria, including disclosure of a dedicated ledger system, companies should consider the GHG Protocol principles of relevance, completeness, consistency, transparency, and accuracy. These principles should also be considered for incorporation into the companies’ own internal review and evidence retention processes. In addition, in developing the management-specified criteria, companies should consider the following:

The criteria need to be suitable (i.e., relevant, objective, measurable, complete, and understandable) and transparently disclosed in the report.
The criteria should make clear to users of the report the components of the calculations and methods used in the presentation of specified subject matter.
Judgments and assumptions should be made clear to the users of the report.

See Deloitte’s July 29, 2025, Sustainability Spotlight for guidance on designing criteria for company-specific sustainability metrics and information that are suitable for independent assurance.

Companies should also develop business processes and controls to enable complete and accurate reporting. Preparers should use relevant and reliable sources of information to aggregate the data to be reported, use consistent methods, establish procedures to ensure completeness, and maintain a clear audit trail supporting the underlying assumptions and amounts to be reported. Appendix C, “Data Management Plan,” of the Scope 3 Standard provides comprehensive guidance on developing a process to maintain quality data and retain clear documentation.

Looking Ahead

As Scope 3 market instruments continue to become more prevalent, the need for guidance on accounting for and reporting the emission impacts of such instruments is growing. In response to this need, various standard-setting developments are under way, as discussed below.

GHG Protocol Standard-Setting Developments

The GHG Protocol Standards are currently being updated. As part of the update process, the GHG Protocol established the Actions and Market Instruments Technical Working Group (TWG) to develop a new standard on how to account for and report on market instruments in GHG reporting. The TWG’s process is informed, in part, by the GHG Protocol’s Market-Based Accounting Approaches Survey, in which the GHG Protocol’s secretariat collected stakeholder input from November 2022 through March 2023.

The main objectives from the survey discussed in the TWG’s December 4, 2024, meeting include (1) enhancing emission accounting to incentivize low-carbon investments, (2) establishing that GHG inventories are exclusive to physical accounting of emissions and removals, and (3) enabling comparability across reporting through the use of the GHG Protocol and alignment with existing market compliance systems. During this meeting, certain topics from the GHG Protocol’s draft Land Sector and Removals Guidance 21 were cited as further inputs to the TWG’s workstream.

During the TWG’s May 21, 2025, meeting, calculation examples from three proposed frameworks were discussed. Under these frameworks, companies would use either (1) a market-based inventory approach similar to Scope 2 market-based accounting (under which instrument-related emissions are reported separately from the physical inventory) or (2) project-based accounting, also known as consequential or intervention accounting (under which instrument-related emission impacts are reported separately from the physical inventory).22

The GHG Protocol is expected to engage in targeted public consultation on certain key issues related to actions and market instruments by the end of 2025 to inform standard development. Issuance of the draft standard and related guidance on impacts of actions and market instruments is projected for 2027, and issuance of the final standard and related guidance is expected in late 2028.

Other Standard-Setting Developments

Other relevant standard-setting developments include the following:

AIM Platform — In May 2024, the AIM Platform issued draft criteria 23 that would apply to both project-based accounting and inventory accounting for value chain interventions. As stated in the proposal, the criteria would “detail what needs to be in place to determine that an intervention can be considered as sufficiently associated with an organization’s value chain as well as what other conditions must be present to ensure sound GHG accounting, environmental integrity, and appropriate claiming of impacts towards a climate target.”

In addition, the AIM Platform published a draft standard 24 with accounting and reporting requirements and guidance in September 2025 for pilot testing and a public comment process. Comments on the draft standard are due by November 21, 2025.
SBTi — The SBTi is in the process of substantively revising its Corporate Net-Zero Standard. In March 2025, it published an initial consultation draft 25 of the substantively updated standard. The proposed update would include guidance on the use of value chain interventions to address the impact of indirect GHG emissions and substantiate progress toward reducing them. The SBTi solicited feedback through public consultation and invited companies to participate in a pilot of the draft standard. The public consultation period ran from March 18, 2025, through June 1, 2025, and Phase 1 of the pilot was conducted from June 16, 2025, through August 15, 2025. Phase 2 of the pilot is expected to run from November 3, 2025, through December 1, 2025.
The SBTi's initial consultation draft specifically introduces the concepts of direct mitigation and indirect mitigation and discusses them as follows:
- Direct mitigation “refers to actions and interventions that can be linked to specific emissions sources in the company’s value chain through a robust chain of custody model.” When traceability to an emission source in the value chain for a direct mitigation activity cannot be established, companies can use “emissions data and interventions at the ‘activity pool’ level to assess performance and substantiate progress against targets. The activity pool represents a set of emissions sources that may physically serve the reporting entity but lack specific traceability to individual sources.”
- Indirect mitigation represents “[m]itigation actions that contribute to net-zero-aligned transformation relevant to the company’s value chain but that cannot be traced back to activities or emissions sources within the company’s value chain.” The draft cites the procurement of SAF under a book-and-claim approach as an example of indirect mitigation.
International Organization for Standardization (ISO) — ISO is in the process of developing its own international standard on net-zero GHG emissions.

Companies should keep monitoring developments that may affect how Scope 3 market instruments are accounted for and reported under GHG accounting frameworks and standards.

Appendix — Scope 3 Market Instrument Reporting Example

The example below illustrates how a reporting company may disclose emission reduction and removal benefits resulting from the purchase of Scope 3 market instruments separately from the company’s Scope 3 emission inventory.

Background

Company A, a global technology company, invests in several Scope 3 market instruments to contribute to emission reductions in its value chain. Specifically, its relevant Scope 3 market instruments are (1) cement and steel EACs through offtake agreements and (2) SAF certificates.

Scope 3 Market Instrument Statement

In the Scope 3 section of its GHG emission report, A presents the emission reductions and removals related to the purchased EACs separately from its Scope 3 emission inventory by using the table below, which displays the impact inventory for the Scope 3 market instruments in columns alongside those in which the physical inventory is shown.

In addition to the tabular disclosure above, A provides narrative disclosure for each Scope 3 market instrument, including the following information:

The type of lower-carbon product or project associated with the purchased EACs, and how it was determined that this product or project is associated with the company’s value chain.
The chain-of-custody model used for each market mechanism purchased.
Detailed information about emission reduction and removal accounting methods provided by the EAC supplier, including the baseline assumptions, assessment boundary and allocation and attribution approaches used, data sources, and calculation methods.
Results of any uncertainty analysis performed.
The product or project standard or guidance used to assess the GHG emission reduction, and information about any certification or assurance received.
Information related to the instrument, including a specific identifier in tCO2e for the (1) volume or mass of product associated with the generation of the EACs and (2) emission reductions, emission removals, or both.
The location and name of the facility or operations that generated the emission reductions, emission removals, and associated EACs, and the date on which the EACs were generated.
A report from a third-party assurance provider regarding what information was subjected to assurance.
A description of the systems used to track emission intensity units and emission reductions.
The total tCO2e emission reductions and removals achieved through Scope 3 market instruments across all Scope 3 categories, which can be used to communicate the total contribution the company has made toward decarbonizing its value chain in the inventory year.

Contacts

	Doug Rand Audit & Assurance Partner Deloitte & Touche LLP +1 202 220 2754 dorand@deloitte.com		Cynthia Cummis Audit & Assurance Sustainability and Climate Specialist Leader Deloitte & Touche LLP +1 703 251 1755 ccummis@deloitte.com
	Lauren Horner Audit & Assurance Senior Manager Deloitte & Touche LLP +1 415 531 4828 lahorner@deloitte.com		Megan Konzek Audit & Assurance Senior Manager Deloitte & Touche LLP +1 206 716 6712 mkonzek@deloitte.com
	Kylie Winthrop Audit & Assurance Senior Manager Deloitte & Touche LLP +1 714 436 7164 kwinthrop@deloitte.com		Cody Yettaw Audit & Assurance Senior Manager Deloitte & Touche LLP +1 313 394 5505 cyettaw@deloitte.com

Footnotes

The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition.

Value Chain (Scope 3) Interventions — Greenhouse Gas Accounting & Reporting Guidance, Version 1.1, issued by Gold Standard, states, in part, that a value chain intervention is “any action that introduces a change to a Scope 3 [a]ctivity. . . . This could include a new technology, practice or supply change . . . to reduce or remove emissions. An [i]ntervention may include changes to several [a]ctivities that reduce or sequester emissions in different ways.”

The Science Based Targets Initiative’s September 2023 Call for Evidence on the Effectiveness of the Use of Environmental Attribute Certificates in Corporate Climate Targets states, in part, that EACs are “instruments used to quantify, verify and track the environmental benefits associated with climate mitigation activities or projects. [EACs] can include:

[EACs] for electricity
Other energy carrier certificates, e.g. green hydrogen, green gas, Sustainable Aviation Fuel Certificates . . .
Emission reduction credits
Certified commodities conveying a specific emission factor, e.g. green steel.”

ISEAL Alliance, Chain of Custody Models and Definitions: A Reference Document for Sustainability System Stakeholders, Version 2.0.

See footnote 4.

Corporate Value Chain (Scope 3) Accounting and Reporting Standard: Supplement to the GHG Protocol Corporate Accounting and Reporting Standard.

SBTi Corporate Net-Zero Standard, Version 1.3.

SBTi Research Scope 3 Discussion Paper, Aligning Corporate Value Chains to Global Climate Goals.

Roundtable on Sustainable Biomaterials (RSB) Book & Claim Manual: RSB Chain of Custody Procedure for Book and Claim, RSB Reference Code RSB-PRO-20-001-001 (Version 4.1).

The July 2024 SBTi Research Scope 3 discussion paper notes that of the companies other than small- and medium-sized enterprises and financial institutions that reported their GHG emission targets to the SBTi, roughly 97 percent included Scope 3 emissions in their targets.

GHG Protocol Scope 2 Guidance: An Amendment to the GHG Protocol Corporate Standard.

Value Chain (Scope 3) Interventions — Greenhouse Gas Accounting & Reporting Guidance, Version 1.1.

Science-Based Target Setting for the Aviation Sector, Version 1.0.

IFRS S2, Climate-Related Disclosures.

Quoted from the AIM Platform’s draft standard, which is discussed in the Other Standard-Setting Developments section.

Advanced and Indirect Mitigation Platform Association Test: Standard and Guidance, Version: For Pilot Testing.

SB-253, Climate Corporate Data Accountability Act.

SB-261, Greenhouse Gases: Climate-Related Financial Risk.

Land Sector and Removals Guidance, Part 1: Accounting and Reporting Requirements and Guidance — Draft for Pilot Testing and Review. Issued in September 2022, the draft Land Sector and Removals Guidance is intended to address accounting for and reporting of land-based activities and technological carbon dioxide removal activities. The final guidance is projected to be issued in the fourth quarter of 2025.

Discussion materials and meeting minutes related to the TWG can be found in the GHG Protocol’s Standards Development and Governance Repository.

AIM Platform Criteria: Draft for Stakeholder Comment.

Advanced and Indirect Mitigation Platform Intervention Quality, Accounting, and Reporting: Standard and Guidance, Version: For Public Consultation.

SBTi Corporate Net-Zero Standard: Version 2.0: Initial Consultation Draft With Narrative.

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