Physical vs. Contractual vs. Impact Statements: The MAARG Approach Explained

Companies today are taking many more types of climate action than they were even a few years ago.

They’re reducing emissions in their own operations. They’re working with suppliers. They’re investing in mitigation beyond their value chains. In many cases, they’re doing all three at once.

But when it comes time to report on that work, things get messy—fast.

Most greenhouse gas reporting frameworks try to collapse all of that activity into a single view. But mixing together so many different kinds of action and impact makes it very difficult to understand what has actually taken place and how well companies are actually managing their climate impact.

Why a single statement is no longer enough

Traditional greenhouse gas reporting has been built around the inventory—Scopes 1, 2, and 3. That information is still essential. It’s how companies understand their emissions footprint, manage risk, and set targets. 

But inventories weren’t designed to do everything we’re now asking them to do.

They don’t transparently capture or reflect:

  • The full impact of mitigation actions—the total emissions a company has reduced, both inside their value chain and beyond

  • Changes that occur as a result of non-climate action related factors (such as changes in business strategy, labor strikes, acquisitions, economic downturns, etc.) 

  • The effect of market-based investments, e.g. carbon credits and other environmental commodities.

If you’ve ever tried to explain this distinction, and why it matters, you know how frustrating it can be to communicate these different kinds of information using the tools and frameworks that are widely used today.

This lack of a clear, comprehensive system for measuring and communicating all kinds of actions and impacts—that’s the gap TCAT is designed to close.

Enter MAARG’s multi-statement approach

At the core of TCAT’s Mitigation Action Accounting and Reporting Guidance (MAARG) is a simple idea:

Don’t force everything into one number. Let different types of information live in different statements, clearly contextualized so you know what you’re actually looking at.

Instead of one view, MAARG gives you five.

  • Physical Inventory Statement

  • Contractual Inventory Statement

  • Inventory Impact Mitigation Statement

  • Sector Impact Mitigation Statement

  • Global Impact Mitigation Statement

Yes, it looks like a lot at first.

In practice, it’s highly intuitive and useful. 

Start with what you already know: the Physical Inventory

The Physical Inventory Statement is the most familiar one.

It’s your Scope 1, 2, and 3 emissions — what you’d report using existing standards.

There’s nothing new here conceptually, and that’s intentional.

The physical inventory remains the foundation. It’s still the only required statement (the other four are optional). And it’s still where companies answer the most basic question: What is our emissions footprint?

Then layer in contractual choices: the Contractual Inventory

The Contractual Inventory Statement is where things start to shift.

This statement takes your physical inventory and adjusts it to reflect market-based instruments—things like renewable energy procurement or other contracted mitigation investments.

If you’re familiar with market-based Scope 2 accounting, this will feel like an extension of that idea. But the MAARG applies the concept more broadly: using the MAARG, companies can report their use of contracted mitigation instruments to address not just electricity emissions but emissions from all sources across Scopes 1, 2 and 3. 

This is exactly where companies have been running into challenges with the most common GHG reporting frameworks. Because you’re no longer just measuring emissions. You’re reflecting decisions—procurement choices, investment strategies, and contractual arrangements. Because this is a fundamentally different kind of information from a pure measurement of your base emissions, it’s where reporting can start to blur if everything lives in one place.

Making impact visible (instead of implied): The Inventory Impact Mitigation Statement

Here’s the part that’s missing from traditional frameworks: Both the physical and contractual inventory statements include the effects of mitigation—but they don’t isolate them.

So if your emissions go down, it’s not always clear whether it was because of 

  • An action that you took to reduce emissions

  • An adjustment that was made because of a contract you procured

  • A business change, such as a merger or divestiture

  • Better data or an updated emissions factor

The MAARG’s Inventory Impact Mitigation Statement is designed to pull apart these different types of changes, giving companies the ability to highlight the climate impacts for which they are uniquely responsible.

This statement quantifies the impact of the mitigation actions that are already “baked into” your inventory statements and makes that impact visible on its own.

If you’ve ever tried to answer the question…

“So what did we actually do to reduce emissions this year?”

… this is the statement that helps you answer it cleanly.

The next step: the Sector Impact Statement

Not every action a company takes fits neatly back into its own inventory. A lot of meaningful activity can sit just outside that boundary, but is still clearly related to the company’s emissions sources. That’s what the Sector Impact Mitigation Statement is designed to capture.

It includes mitigation outcomes that are:

  • Connected to the sector(s) where you have emissions

  • But not tightly enough linked to your specific emissions sources to show up in your inventory

And then… everything else: the Global Impact Mitigation Statement

Finally, there’s the Global Impact Mitigation Statement.

This is the broadest category. It includes mitigation actions that:

  • Aren’t tied to your inventory

  • Aren’t tied to your sector

  • But still deliver real, measurable climate impact

No geographic constraints. No value chain constraints. The core requirement for inclusion in this ledger is that the impact is credible—measurable, attributable, verifiable, and additional.

This is where companies can show how they’re contributing to global decarbonization, not just managing their own footprint. And they can do it in a way that doesn’t confuse their GHG inventory statement. It makes sense to distinguish this kind of impact because it’s a fundamentally different piece of information.

Why this structure actually helps in practice

On paper, five statements can sound like a lot of added complexity. But in practice, it can actually reduce confusion. With the MAARG’s five statements, you’re no longer trying to answer all of these questions at once:

  • What are our emissions?

  • How have our contractual choices changed our emissions?

  • What emissions impact have we actually had – and where – because of strategic actions that we’ve taken and climate investments that we’ve made?

Instead, each question is answered in a separate statement.

And, importantly, companies using TCAT are not forced to use all five. The physical inventory is required, but the others are optional depending on the company’s unique strategies, priorities and investments.

A clearer story about climate action

The MAARG is is separating two things that have been tangled together for years:

  • Inventory accounting (your emissions footprint)

  • Impact accounting (the result of your actions in the world)

Both matter. But they answer different questions. Trying to force them into a single number has led to a lot of confusion, and a lot of climate finance sitting on the sidelines.

TCAT’s multi-statement approach doesn’t eliminate complexity. The underlying activities are still complex. But it does make that complexity easier to explain—and, importantly, easier to assure.

What this means for companies

Expectations around climate disclosure are increasing. At the same time, the range of impactful actions companies are taking is expanding.

That combination is exactly why this kind of reporting structure is so important.

TCAT’s guidance gives companies a way to:

  • Be more precise about what they’re reporting

  • Be more transparent about the impact of their actions 

  • And avoid talking past stakeholders who are asking a more nuanced set of questions than traditional tools were designed to answer

TCAT gives companies a new way to ensure that their greenhouse gas disclosures reflect reality.