Two allocation methods, and why they disagree

A worked example

Why the reconciliation constraint is the whole point

What this looks like in a certificate-based system

Almost every agricultural commodity leaves the farm and immediately splits into multiple products. Co-product allocation — the accounting discipline for dividing a shared footprint among them — is one of the least-understood and most consequential steps in supply-chain carbon accounting.

The GHG Protocol’s guidance on co-products is blunt about the problem: when one process yields multiple outputs, the standard’s preferred approach is to avoid allocation entirely by subdividing the process or expanding the system boundary — and only to allocate, by physical or economic relationship, when neither is feasible. In practice, for most agricultural processing, allocation is unavoidable. A slaughter or crush operation does not yield a single product; it yields several, sold into different markets, at different volumes and different prices.

That creates a genuine accounting question with no universally agreed answer: if a herd or a harvest carries a verified carbon intensity, how much of that footprint travels with each resulting product? Get the allocation wrong and you either understate the footprint of the byproduct or overstate the credit claimed for the primary product — the same error, pointed in different directions.

Life-cycle assessment practice generally recognizes two defensible bases for splitting a shared footprint: physical allocation , which divides by mass, volume, or energy content, and economic allocation , which divides by relative market value. They routinely produce different answers for the same process. A low-value, high-mass byproduct — tallow relative to primary beef cuts, for instance — receives a larger share of the footprint under physical allocation than under economic allocation, because mass and value diverge sharply for co-products of very different price points.

ISO 14044 and the GHG Protocol both permit either method depending on context, but they are explicit that the chosen basis has to be applied consistently and disclosed — an allocation method quietly switched between reporting periods, or between a byproduct’s buyer and the primary product’s buyer, is a documented source of double-counting risk in supply-chain accounting.