A consistent input–output formulation of shared producer and consumer responsibility

Abstract

Growing interest in environmental and socio-economic accounting at the sub-regional and organisational level requires a consistent and comprehensive method for computing and reporting responsibility for impacts of industrial production such as water use, pollution, or employment. This work presents a formulation for allocating responsibility for production impacts consistently amongst all agents such as consumers, producers, workers, and investors throughout demand and supply chains, in a way that reflects their contribution to the production process. Generalised input–output theory is used to re-trace the flow of past inter-industrial transactions, and examine ex-post how, for example, inputs of resources or outputs of pollution were associated with these transactions. Introducing the concept of a responsibility share we enable the division of responsibility into mutually exclusive and collectively exhaustive portions that are assigned to the different economic sectors, and that become consistently smaller as we move away from the location of the impact within the supply or demand chain system.