What is Microsoft & RMI’s New Approach to Carbon Reporting?

A pioneering methodology for measuring embodied carbon emissions in building construction has been unveiled in a collaborative report, released by RMI and Microsoft.

The ‘Impact Accounting Methodology for Building Construction’ report, published in February 2025, addresses a significant challenge in corporate emissions reporting by proposing a hybrid approach that combines process-based and spend-based accounting methods.

Current spend-based accounting systems present a perverse incentive: companies that invest more money in low-carbon building materials appear to generate higher emissions in their reporting.

"Spend-based accounting perversely results in companies reporting higher emissions rather than lower when they willingly make investments to reduce embodied carbon from their building projects," states the report.

A hybrid solution

The new impact accounting methodology divides construction projects into two parts: Part A includes high-emission materials with available Environmental Product Declarations (EPDs) such as concrete, steel and glass while Part B covers all other project costs using traditional spend-based accounting.

Chris Magwood, Victor Olgyay of RMI and Katie Ross of Microsoft co-authored the report after extensive research with Building Transparency and the University of Washington.

“This report serves as both a roadmap for immediate application and a call to action for industry collaboration, accelerating the shift to better project designs and material procurement for buildings that are good for both business and the climate,” says Katie Ross, Director of Carbon Reduction Strategy & Market Development at Microsoft.

The methodology specifically targets upstream Scope 3 emissions in Category 2 (capital goods) which can represent a substantial portion of a company's overall carbon footprint.

According to the report's case studies, using process-based data for material emissions calculations could reduce reported project emissions by 17% to 23% compared to purely spend-based methods.

Implementation and benefits

The impact accounting approach enables companies to immediately implement more precise emissions tracking without waiting for complete datasets across all construction materials.

"The intent of calculating and reporting Scope 3 emissions is to accelerate efforts to reduce anthropogenic GHG emissions," the authors note.

The methodology provides detailed guidance on which construction materials qualify for Part A calculations, including concrete, structural steel, mass timber, glazing, thermal insulation and flooring materials.

For each material category, companies must track quantities, costs and appropriate emissions factors from verified EPDs to calculate accurate carbon impacts.

Practical applications

Implementation requires early collaboration with designers and contractors to ensure proper tracking of material quantities and costs throughout the project lifecycle.

The report recommends performing calculations at multiple project stages—schematic design, design development and construction documents—to maximize emissions reductions through informed decision-making.

This approach aligns with growing industry trends toward process-based estimations for material-related emissions which provide clearer guidance for design and procurement decisions.

Future directions

The authors acknowledge that while the methodology isn't perfect, it represents a significant improvement over purely spend-based accounting and enables companies to identify and pursue meaningful carbon reductions in their construction projects.

"In the spirit of the GHG Protocol, the proposed impact accounting method is intended to bring additional clarity to the industry and motivate major emissions reductions in the high-impact construction sector," the report concludes.

The authors have identified several areas for further research including addressing comparability issues between Parts A and B, expanding the list of materials eligible for process-based accounting and conducting interviews with companies currently using spend-based accounting methods.

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