Sustainability Accounting for Greenhouse Gas Emissions Measurement using the GREET LCA Model: Practical Review of Automotive ESG Reporting

Abstract

The production and personal use of passenger vehicles contribute significantly to greenhouse gas (GHG) emissions, making personal transport a major contributor. In response to increasing pressure from regulators and consumers to lower emissions, original equipment manufacturers (OEMs) have introduced alternative powertrains, such as battery electric vehicles (BEVs). To assess the economic and environmental feasibility of BEVs, OEMs conduct various life cycle assessment (LCA) approaches as part of their internal management practices. However, the public presentation of their results is often ambiguous and of unverifiable quality. This study conducts a review of sustainability impact reporting using the GREET model, which is based on the total vehicle lifecycle. The paper provides a summary of the input data requirements for validating emissions from both the fuel and vehicle cycles as part of the proposed model. The availability of the model components was tested against actual public corporate environmental, social and governance (ESG) reporting disclosures of the largest global automotive OEMs, indicating a deficit in the public presentation of essential sustainability information. The implications of the research suggest that LCA models could benefit sustainability accounting by incorporating proper tagging during accounting practices and taking advantage of digital accounting and reporting practices such as the extensible business reporting language (XBRL). By further developing the model, sustainability reporting can benefit from its structure and workflow, thus ensuring improved information validity for stakeholders.

KNOWCON 2023. Knowledge on Economics and Management: Conference Proceedings

“…ESG reporting involves disclosing non-financial information concerning a company's environmental, social, and governance performance, allowing stakeholders to gain a better understanding and assess the organisation's sustainability initiatives (KPMG, 2020). Integrating LCA into ESG reporting, as suggested by Sroufe (2017), andMolnár et al (2023), presents a promising opportunity to enhance the rigour and credibility of sustainability disclosures. This integration can ultimately foster informed decision-making, drive improvements, and facilitate the creation of longterm value for both businesses and investors.…”

“…This integration can ultimately foster informed decision-making, drive improvements, and facilitate the creation of longterm value for both businesses and investors. By incorporating LCA into ESG reporting, organisations can provide a more comprehensive and accurate representation of their environmental performance (Molnár et al, 2023).…”

“…Despite the increasing significance of sustainability and ESG reporting, the incorporation of LCA methodologies in ESG disclosures has been limited. Studies have revealed that only a small percentage of companies utilise LCA in their sustainability reports, and the absence of widely accepted standards or guidelines for integrating LCA into ESG reporting can lead to inconsistent and incomparable disclosures (Jiang et al, 2022;Molnár et al, 2023).…”

“…LCA focuses on environmental impacts, while ESG reporting is broader. Adjusting frameworks for consistency is necessary but challenging, especially as evolving products and technologies require continuous updates to LCA data, demanding more time and resources (Molnár et al, 2023).…”