Supply chains, logistics and materials handling: Carbon accountability

Posted on 6 Feb 2012

An increasing number of products are being assessed for their supply chain carbon emissions but what are the implications and opportunities for UK manufacturers to work more collaboratively with supply chain partners for mutual benefits? Matthew Brander, senior analyst and Gary Davis operations director at Ecometrica, a specialist in green house gas accounting and ecosystem services, explains.

Understanding supply chain carbon accountability starts with understanding the drivers behind it, with the main motivation currently centred on end-customer demand.

Marketeers and retailers are increasingly interested in achieving product differentiation through reporting and reducing emissions, which has seen a growing need for supply chain measurement and accountability.

One organisation that has demonstrated a clear commitment to this strategy is James Jones and Sons, which has invested in the development of a detailed assessment of supply chain emissions for their engineered timber JJI-Joists. The company is using the findings to engage with their clients, including many of the UK’s largest house building firms, and demonstrate how the use of JJI-Joists could lower the ‘embodied carbon’ of the final construction.

At a consumer demand level the demand driver is further evidenced by the prevalence of carbon labelling schemes, with the Carbon Trust estimating that consumers are spending over £2 billion a year on products bearing their Carbon Reduction Label alone.

But a secondary driver for carbon accountability is to manage supply chain risk. The number of regulatory controls and carbon taxes has increased every year for the last five years and, therefore, a supply chain with high carbon emissions may mean exposure to higher costs as these pieces of legislation begin to bite. Measuring and identifying highly carbon intensive parts of a supply chain is a way of identifying potential cost increases and managing the associated risk.

Diagram depicting the growing scope of carbon tracing in products
Diagram depicting the growing scope of carbon tracing in products

There are often unexpected benefits too. When carrying out studies to manage supply chain carbon risks, the majority of companies also find a number of reduction opportunities, most of which will equate to cost as well as carbon savings. By understanding supply chain carbon emissions it is possible to manage risks, identify reduction and cost saving opportunities, and then use the information in marketing and communication campaigns.

Making it work for everyone

Having established that there could be benefits to a company in carrying out a programme of supply chain carbon accounting studies, what are the key steps to make this knowledge work – not only for green credentials, but to boost capability and relationship strength across supply partnerships?

Measuring supply chain emissions is a form of life cycle assessment: it involves quantifying the emissions from every stage in the production process, from the extraction of raw materials through to either the factory gate, so called ‘cradle-to-gate’ assessments, or through to the end consumer, referred to as ‘cradle-to-customer’ assessments. The most common way of quantifying emissions is to collect activity data, for example the amount of fossil fuel combusted at each stage in the supply chain, and apply an appropriate emission factor to convert the activity data into emissions.

For some companies, the most significant barrier to completing accurate supply chain carbon accounts can be persuading its suppliers to provide the data needed. This is particularly true if the company initiating the supply chain mapping exercise is relatively small, with a large number of individual suppliers, with the result that communication could become time-consuming and expensive.

Companies that have overcome these hurdles find that in many cases the data collection process can further strengthen the customer-supplier relationship.

Having quantified emissions, a further step is to identify the parts of the supply chain that create the most emissions, so called ‘hot spots’, and investigate ways of reducing such emissions.

Standard setting

While a new discipline for many organisations, the process of measuring and identifying supply chain emissions is governed by a number of standards and guidance documents. The two major standards are the Publicly Available Specification (PAS) 2050 and the World Business Council for Sustainable Development (WBCSD) & World Resources Institute’s (WRI) Product Life Cycle Accounting and Reporting Standard. The International Organisation for Standardisation is also currently developing its own carbon product standard, ISO 14067.

In the case of James Jones and Sons, the company used the PAS 2050:2011 Product Accounting Standard in their JJI-Joist assessment. Stephen Craig, the company’s group environment manager, explains: “We wanted to get the greatest value from the carbon assessment of JJIJoists and so having a robust standard to work to has helped us achieve independent assurance. Ecometrica has given us the confidence to use our results in our marketing and we are currently considering a number of carbon labelling options to further promote this initiative”.

These standards focus on measuring supply chain emissions at the product-level. An alternative approach is to identify emissions at the corporate-level and allocate emissions to particular supply chains, based on revenue or a proportion of total output. The standard for this approach is the WBCSD/WRI Corporate Value Chain (Scope 3) Accounting and Reporting Standard. This standard is relatively new, having been released just last year and, as a result, not as widely applied as product level carbon accounting standards.

“we are able to quantify our supply chain emissions, including the amount of carbon stored in our products. This has been invaluable for building relationships with new and existing customers” – Tom Bruce Jones, managing director of James Jones & Sons

There are other methods available; however, these often represent a less accurate approach to calculating supply Ochain emissions. For example, an ‘environmentally extended inputoutput analysis’ would collect financial, rather than activity, data and apply emission factors per unit of expenditure for different sectors of the economy. While this can be a useful technique for an initial snapshot of emissions and the identification of hot spots in the supply chain, it is not accurate enough for use in marketing campaigns or other external activity. In practice, the results would not stand up to scrutiny and could even result in accusations of ‘greenwash’.

Interestingly, it is likely that UK-based manufacturers will tend to have an advantage over Chinese or other Asian competitors, where the carbon intensity of energy supply is often higher, due to the dominance of highemitting coal in the electric grids. This embedded advantage could allow many UK manufacturers to show their products are less carbon intensive than those of their international competitors.

The growing importance of accurately identifying and measuring supply chain carbon emissions is undisputed. Reflecting on the JJI-Joist carbon assessment James Jones & Sons joint managing director, Tom Bruce Jones, says: “Having completed this initial phase of carbon accounting, we are able to quantify our supply chain emissions, including the amount of carbon stored in our products. This has been invaluable for building relationships with new and existing customers who want to see and use this information within their own carbon accounting and CSR initiatives. Our clients increasingly expect to utilise this information and we will be expanding, with Ecometrica, the work we have completed on JJI-Joists to all other timber products manufactured by our group, across all divisions”.

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To speak with this article’s contributors contact: Matthew, Gary or Stephen