The accounting gap: what environmental standards omit, and the risk it carries
A method to measure the gap between what environmental accounting standards count and what an activity actually does, split into omissions and method uncertainty, and to read that gap as regulatory and stranded-asset risk.
Project facts
| Programme | Measuring transitions |
|---|---|
| Status | Concept What the status labels mean |
| Methods | Environmental accounting and LCA · Uncertainty analysis |
| Scale | Product |
| Geography | Sector-agnostic; first application to cement and concrete |
The question
How large is the gap between what environmental accounting standards count and what an activity actually does? How much of it is omission (impacts not counted) and how much is method uncertainty (the spread between defensible methods)? And how does that gap translate into regulatory and stranded-asset risk?
What the figures leave out
Standards produce one figure per activity. Impacts outside the boundary count as zero, conventions decide the rest, and the choice between defensible methods is hidden. An asset that looks low-carbon under today's rules may not be under tomorrow's.
Approach
The method sorts what a standard leaves out into four kinds of omission (boundary, convention, systemic, leakage) and four sources of uncertainty (choice, parameter, model, variability). It spans the defensible methods instead of choosing one, and uses consequential life-cycle assessment to follow effects through markets. Protocols are drafted independently in parallel and evidence is graded.
Where it stands
Concept. A working paper is in draft. The method is intended to underpin an independent rating initiative for assets and standards. No assessment has been produced yet.
The decision it informs
Capital allocation and due diligence: which assets presented as green are exposed to future rule changes. The integrity of standards and regulatory frameworks themselves.
INSTRUMENTS · Gap assessments of assets and of standards.
What the work required
- A typology of omissions and of uncertainty in environmental accounting
- Critique of how standards are set and governed
- Translating scientific gaps into financial risk
How it connects
Allocating capital or assessing an environmental standard?
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