Executive summary
Accounting methodology and case study for embedded emissions
The Climate Source partnered with Idaho Milk Products (IMP) to pilot a cradle-to-facility gate carbon accounting methodology designed to improve data-sharing mechanisms and incentivize GHG reductions across the value chain. Our goal was to demonstrate the feasibility of embedding material, transport, and processing energy emissions into product-level inventories. In doing so, we aimed to prove that our BoundDairy Accounting tool enables cooperatives and processors to attribute emissions to customers, while avoiding double counting, free ridership, and inaccurate inventories that results from the inherent complexities of varying baseline and boundary assumptions.
The physical allocation model establishes clear economic boundaries while dynamically allocating emissions from supplier farms, transportation routes, and processing facilities into product carbon footprints. The methodology:
- Improves accuracy and comparability through supplier-specific data and allocation logic
- Reduces redundancies in reporting to both customers and regulatory systems
- Credibly diļ¬erentiates low-carbon ingredients linked to on-farm practices
- Lowers the risk of double counting and inconsistent attribution
- Increases customer retention through transparent and verified emission reductions
This study evaluates how activity-based data sources and allocation methodology streamlines reporting, improves data accuracy, and drives sustainability investments. By following the proportion of raw milk distributed to dairy ingredients, processing flows, and product relationships, the model ensures that mitigation efforts at the farm level are accurately reflected in a product carbon footprint (PCF). Data quality standards and allocation mapping provide guidance for designing an accounting system for reliable carbon crediting and reporting to downstream customers.
We performed sensitivity and uncertainty analyses in order to determine that the model responds to on-farm changes to butterfat and protein components in the PCF outcomes. The additional functionality and higher data and calculation requirements, coupled with physical allocation, deliver differentiated PCF values and overcome the risks of double counting, free ridership, and inaccurate inventories.
Data collection and component traceability can be improved, and cooperatives and processors are best positioned to drive those changes. Advancements in project-inventory integration, supply chain emissions transfer methodology, and verification standards will enhance the business case for all dairy stakeholders.