Objectively, any carbon risk or burden placed on resource companies upstream will necessarily have a compound effect on companies further downstream. Therefore, ultimately carbon liabilities have to flow downstream, which means that the current carbon accounting methodology, which places the burden on upstream resource companies without passing those downstream, is likely underestimating the carbon exposure of the downstream companies.
This theory is supported by the current political realities given that twice, first with Kyoto and now with the Paris Agreement, political expediency has given China and India a pass on emissions reporting and mitigating obligations. This necessarily means that the supply chain emissions liabilities of mass retailers like WalMart, Target and Home Depot that source primarily from China, or Financial and Tech companies that outsource heavily to India and Food and Fast Moving Consumer Goods companies like Unilever and Nestle that are major consumers of high impact agricultural goods like palm oil from Indonesia, are all being grossly underreported, with upstream liabilities unlikely to be accurately reported or mitigated in the foreseeable future.
While this is primarily an academic argument for the moment, we believe that this also creates latent risk on the public facing downstream consumer brand companies. When properly measuring where along the value chain the most carbon exposure lies, it seems clear that publicly traded global consumer brand companies are at far greater risk for brand value losses than privately held upstream suppliers in jurisdictions that are exempt from public scrutiny and/or from the Paris Accord until 2025 at a minimum.