Designing for comparability: A foundational principle of analysis missing in carbon reporting systems

Market participants require comparability to make decisions, and policies aimed at using market mechanisms to address climate change relies on this ability. However, this paper shows that the commonly used GHG emission metrics are suitable for trend analysis, continuous improvement, and target setting, but not fit-for-purpose in making comparative assertions between multiple entities. Therefore, relying on contemporary greenhouse gas (GHG) emission metrics could limit policymaker’s efficacy in using market forces in climate change interventions. We propose three conditions for a metric system to make comparative assertions taken from three fields, accounting, engineering, and social science. As the scientific community continues to develop additional metric systems for biodiversity, nature, water, land use, and other environmental indicators, policy makers, regulators, and standard setters can use these necessary conditions to ensure that the new metric systems are fit-for-purpose for the financial sector.