What are chain of custody models? Chain of custody refers to the custodial sequence of all organisations (supply chain) that take ownership or control of a product during production, processing, shipping and retail (physically and/or administratively). According to the International Organization for Standardization (ISO) definition in ISO 22095, chain of custody models create transparency in the value chain on ‘the origin of inputs material, product components, product outputs and the conditions under which they are produced.’ⁱⁱⁱ Chain of custody models are used to link sustainability practices at a certain stage in the value chain with a claim at the end of the chain about a product, process, business or service.^iv There are four notable chain of custody models that companies engage with: identity preservation, physical segregation, mass balance and book and claim. This toolkit focuses on mass balance and book and claim. These two models offer a flexibility that can support companies in facilitating green purchases and meaningfully investing in low-carbon products and decarbonisation solutions across the value chain. These approaches have typically arisen in cases where companies purchase products or commodities from common pools or distribution systems and where direct contracting with suppliers or traceability to individual points of origin is not feasible.  ‍

​What are book and claim and mass balance models? ​A mass balance system matches input and output flows as they move through an interconnected system or supply chain over a specified timeframe.^v It allows for the physical mixing of materials or products with a set of specified characteristics with materials or products without that set of characteristics. This is relevant for materials and fuels where physical segregation is too complex, administratively burdensome or not possible. For example, this approach allows for the co-feeding of bio-based, recycled and virgin feedstock into a network of chemical production plants over a specified timeframe. This is a cost-efficient solution that allows suppliers to scale the use of low-carbon feedstocks and leverage existing infrastructure, rather than setting up a segregated production system. Mass balance also incentivises investment from buyers, as they have greater confidence that the added value of these low-emissions chemical products will be recognised.  

​Under a book and claim chain of custody system, physical mixing of materials or products with a set of specified characteristics with materials or products without that set of characteristics is also allowed. Unlike in a mass balance system, in a book and claim system, the amount of materials or products with different characteristics do not need to be tracked and documented at each point in a distribution network. Instead, a book-and-claim system decouples environmental attributes from the physical product and converts them into tradable certificates or ‘book-and-claim units’, managed and transferred through a central registry to ensure integrity. This allows producers of low-carbon products to ‘book’ the carbon emissions reduction of a good manufactured in one place and corporate buyers to ‘claim’ the reductions for climate disclosures in a different place.^vi For example, buyers can purchase the environmental attributes of SAF without physically tracing the product through their operations. This creates a market for SAF that is better placed to absorb the cost premium, while unlocking demand in geographies with limited production.    

​These models can enable investment in lower carbon inputs, particularly in the early stages of new commodities coming to market when investment hurdles are high and distribution systems are low.

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​The clear and consistent communication of both mechanisms is critical to avoiding misrepresented claims with stakeholders, especially customers, consumers and regulators. Companies often view these models as interim solutions, while the ultimate goal remains fully traceable, segregated sustainable supply chains. Some have criticised these mechanisms as likely only supporting incremental emissions reductions, and therefore delaying the adoption of more stringent fully segregated supply chains with deeper decarbonisation.

​Book-and-claim:

​Standardisation and certification: It is critical that book-and-claim systems be centralised and standardised by sector, with clear criteria and safeguards and/or certified by a third party. Accurate accounting improves the integrity of the mechanism to ensure companies have the incentive to invest in supply chain decarbonisation. This entails clearly defining the system boundaries, including the participants allowed to trade and the units that relate to voluntary emissions reductions.

​Consumer trust: Some stakeholders have concerns that the use of a book-and-claim approach by companies could decrease rather than increase decarbonisation by obscuring emissions, making it more difficult to identify mitigation opportunities, or by decreasing ambition for decarbonisation without a corresponding decrease in emissions. The development of the scheme must aim to mitigate double counting risks to ensure that emissions reductions claimed by a company correspond to a reduction in emissions to the atmosphere.  

​Market dependence: A fracturing of different programmes with varying objectives may also threaten the effectiveness of book-and-claim schemes.^vii

​Mass balance:

​Standardisation and certification: Accurate accounting and reporting is fundamental to the integrity of mass balance market mechanisms. Volumes are tracked through the supply chain to ensure that quantities of materials or products purchased (that have a set of specified characteristics) match the quantities produced. This requires a robust, transparent and standardised system of certification and auditing, especially across international borders.  

​Consumer trust: Mass balance is subject to debate due to its complex nature, which makes it difficult to socialise. Value chains still require further alignment on allocation rules to ensure they address all actors’ needs to ensure transparency and a common understanding of the subsequent claims made through mass balance accounting.

​Market dependence: A mass balance system provides economic efficiency advantages. There is a need for alignment in how both book-and-claim and mass-balance mechanisms can be leveraged for corporate accounting and target-setting. Work is currently underway by the Greenhouse Gas Protocol to provide new guidance on accounting and reporting for the impact of corporate actions and market instruments.  

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