MarketEye: How Big is Your Carbon Footprint?

02.15.2010 // Posted by: Ken Stanvick // Posted in: Articles, Supply Chain

Statements of fact and or opinions expressed in MarketEye by its contributors are the responsibility of the authors alone and do not imply an opinion of the officers or the representatives of TTI, Inc.

Many NGOs, Governments, OEMs and consumers today are asking about carbon emissions, otherwise know as Greenhouse Gas (GHG) emissions, from you corporate operations. Companies reporting emissions look to the internationally recognized GHG Protocol Corporate Standard for guidance and tools to report emissions.

The standard requires the mandatory reporting of Scope 1 and Scope 2 emissions and provides guidance for the optional reporting of Scope 3 emissions.

• Scope 1, Direct Emissions, are defined as “emissions that occur from sources that are owned or controlled by the company, for example, emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc.; emissions from chemical production in owned or controlled process equipment”.
• Scope 2, Indirect Emissions, are defined as “GHG emissions from the generation of purchased electricity consumed by the company”. “Purchased electricity is defined as electricity that is purchased or otherwise brought into the organizational boundary of the company”. Scope 2 emissions physically occur at the facility where electricity is generated.
• Optional reporting of Scope 3, Other Indirect GHG Emissions, cover “emissions that are a consequence of the activities of the company, but occur from sources not owned or controlled by the company”. Some examples of Scope 3 activities are extraction and production of purchased materials; transportation of purchased fuels; and use of sold products and services.

Many companies have determined that reporting Scope 1 and Scope 2 emissions do not adequately account for the majority of their “Carbon Footprint” and are seeking additional guidance regarding what would be reasonable to include in Scope 3 emissions.

There is general agreement that a large number of industry segments would not account for a significant amount of GHG emissions by reporting only Scope 1 and Scope 2 emissions. The electronic products segment is one of many examples where the absence of Scope 3 emissions would grossly understate the total GHG emissions for a given product. The inclusion of Scope 3 emissions affords companies the opportunity to identify significant reduction opportunities that exist “upstream” and “downstream” of their immediate operations. This article will focus on some of the resources and work that is currently underway to help your company answer the question “How Big is Your Carbon Footprint?”

A key question is what may be considered for inclusion in Scope 3? The GHG Protocol Corporate Standard provides guidance to identify a limited number of elements for consideration. The issue of what to include is not straightforward, some items such as disposal of waste generated in company-owned operations are directly under the control of a company while others such as transportation of purchased materials would be an example of an element that could be influenced. but the company may not have direct control over it.

The GHG Protocol identifies the following elements that may be relevant to accounting for Scope 3 emissions; for a complete list of items refer to the GHG Protocol Corporate Standard website.

• Extraction and production of purchased materials and fuels
• Transportation of purchased materials or goods
• Transportation of purchased fuels
• Employee business travel
• Employees commuting to and from work
• Transportation of sold products
• Transportation of waste
• Disposal of sold products at end of their life
• Outsourced activities

Data extracted from the Carbon Disclosure Project 2008 Report Global 500 concluded that there is a

…need for more guidance on Scope 3 – those that did provide Scope 3 data often limited this to easy-to-calculate impacts such as business travel, rather than addressing more complex issues such as supply chain or product usage. Although a number of leading companies are starting to explore supply chain emissions, others appear reluctant to claim ownership of emissions which they cannot directly control. Companies need more guidance on how to define organizational boundaries and carbon accountability, and to better understand and use their carbon influence.

The Carbon Disclosure Project Supply Chain Report 2009 found that there are four key elements to effectively managing carbon and climate change in the supply chain including:

• Improving suppliers’ emissions management, reporting and accuracy of data;
• Influencing and supporting decreases in suppliers’ actual emissions and impacts;
• Reducing own emissions by considering ‘carbon costs’ in procurement decisions;
• Managing supply risks related to future climate change impacts.

The CDP Supply Chain Report 2009 also acknowledged that very few companies have an understanding of the carbon emissions resulting from their supply chains and are looking for information and guidance.

The World Resources Institute and the World Business Council for Sustainable Development under the direction of the Greenhouse Gas Protocol Initiative have started a two year process to produce two new GHG Protocol publications that are expected to become international standards for product lifecycle reporting standards and corporate value chain accounting guidelines.

Accounting for and reducing upstream and downstream corporate GHG Emissions has resulted in significant cost savings to companies that have identified carbon hot spots across their supply chains. Product manufacturers must work in partnership with their suppliers and service providers to account for GHG emissions and to develop products and services that are eco-friendly and result in cost savings. The simple unavoidable facts are that “what gets measured gets managed” and that energy consumption = GHG Emissions = Money. If you know how Big your Carbon Footprint is then you will able to identify opportunities for cost savings and reduced GHG emissions.

If you have not started identifying your company’s Scope 3 emissions you may want to consider the following areas that can yield reductions in emissions and save money:

• Employees Business Travel
• Are you using web-based tools to reduce on site customer presentations and meetings?
• Employee Travel
• Are you encouraging your employees to use public transportation?
• Are you employees encouraged to work from home?
• Optimization of inbound and outbound logistics
• Are you reducing your dependence on air shipments?
• Design efficiency
• • Are your products designed to reduce energy consumption?
  • Are your products being designed with materials that require less energy to produce / recycle?

If your company has not yet been asked “How Big is Your Carbon Footprint” you soon will be. If you are struggling to provide answers, the information provided and links to resources will be helpful.

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