Ivor John argues that transparent whole life-cycle carbon accounting is how countries and individual organisations can come to terms with their carbon footprint
Despite the overwhelming evidence that dangerous climate change is a reality and that the cause is partly anthropogenic, surveys across the world show that large numbers of people are still sceptical.
The failure of politicians to reach a meaningful conclusion at the 2009 UN climate conference in Copenhagen has served to pour fuel on the sceptics’ fire. Instead of seeking ways to resolve climate change, discussions have focused on who is to blame and who should bear the cost.
Fairness is one of the stumbling blocks that continues to plague international negotiations. As the developed nations commit to reductions, what can we expect from the developing nations as their economies and standards of living catch up?
This article examines the role of “fairness” from a supply chain perspective. It will explore the role of carbon accounting from the perspective of nations, looking closely at how globalisation has moved emissions down the supply chain to producers and manufacturers.
In many respects, the developed world turns a blind eye to this, but there must be greater transparency. We need to take a hard look at how this contentious issue feeds in to the development of nations’ emission reduction responsibilities.
To date, the International Panel on Climate Change rules for carbon accounting have focused on direct emissions in the countries where they occur. But as the leakage of emissions from the developed to developing countries continues to grow, the time has come for countries and large organisations to accept responsibility for their entire supply chain so that pointless debate can end and effective action begin.
Emissions measurement
Greenhouse gas emissions are sub-divided into three groups, commonly referred to as scope 1, 2 and 3. Scope 1 GHG emissions are those which occur directly from sources that are owned or controlled by an organisation, including: stationary combustion of fossil fuels; mobile combustion of fossil fuels; and fugitive emissions.
Scope 2 emissions are indirect emissions generated upstream during the production of electricity consumed by the organisation.
Both scope 1 and 2 emissions are clearly defined and relatively simple to measure. However, scope 3 emissions are all the other indirect emissions that are a consequence of the activities of the organisation, but occur from sources not owned or controlled by the institution.
These activities may be upstream or downstream. One of the best examples of scope 3 emissions is the transportation of materials and goods by third parties.
An increasing number of organisations around the world are routinely measuring their scope 1 and 2 emissions either voluntarily or for regulatory reasons. However, few organisations measure their scope 3 emissions.
This is partly because it would be difficult and costly to do so and no one is yet demanding that they do this. Another complaint is that one organisation’s scope 3 emissions are another’s scope 1 emissions, and that leads to double counting.
Inevitably, failure to account for scope 3 emissions results in a loss of responsibility for emissions once they are “exported” through outsourcing, and in many cases may mean that the best opportunities for emissions reduction are overlooked.
The old saying goes: “what gets measured gets managed”. So it follows that scope 3 emissions are less likely to be managed effectively by the consumers that are ultimately responsible for them.
Value chain accounting and reporting
In January 2010, the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) launched a new draft standard as part of the Greenhouse Gas Protocol initiative.
When finalised, this new scope 3 standard will enable organisations to evaluate upstream and downstream emissions from their supply chains using a consistent and comparable method. The scope 3 inventory will include outsourced activities, supplier manufacturing, and the use and disposal of the products they sell.
Sixty organisations from 17 countries and more than 20 industry sectors are currently road testing the new scope 3 standard and a new companion standard on product lifecycle accounting.
In the UK, a publicly available specification (PAS) has already been developed and used in response to the need for a consistent method for assessing the life cycle GHG emissions of goods and services. Like the new WRI/WBCSD product standard, PAS 2050 provides a uniform methodology to generate consistent and reproducible results.
These supply chain methodologies enable organisations to identify hot spots – areas of wastage or excessive energy use – in their manufacturing processes and along the supply chain.
In a recent Lloyd’s Register Quality Assurance verified PAS 2050 assessment, a plastic returnable transit packaging (RTP) tray, manufactured by LINPAC Allibert, was tested to enable comparison with other forms of packaging.
Based on each tray performing 92 return trips, of 20 days each, over five years, the carbon footprint of the tray was determined at 26 kgCO2e in total, or 0.0082 kgCO2e per litre per trip, which is significantly lower than several other forms of packaging.
This example demonstrates the importance of complete life cycle analysis in order to create an accurate picture of environmental performance.
Economic drivers
Some organisations employ corporate responsibility because it is the right thing to do. However, logic dictates that environmental initiatives are most likely to occur when clear economic justification exists.
For example, organisations will generally take steps to improve their environmental performance when the costs of inaction outweigh the costs of action, or better yet, when there is a net positive economic benefit associated with being proactive. Regulation is an obvious driver, but if actions are taken for economic reasons (for example, for brand and marketing reasons) then they become more compelling and sustainable.
The recent worldwide recession following on the back of rapid fluctuations in energy prices has focused attention on energy as a cost. This has encouraged organisations to seek opportunities to lower energy consumption and reduce waste, not just within their own operations, but also within those of their suppliers.
However, the incentive to report scope 3 carbon emissions remains low because such work may reveal an inconvenient truth – that emissions have effectively been outsourced, often to another country.
Scope 3 strategy
Nevertheless, those organisations with a genuine desire to reduce overall emissions in a transparent manner are starting to measure and report scope 3. It seems likely that others will follow as the new protocols become more accepted.
In May 2010, Webcor Builders, based in California, delivered its complete supply chain emissions data to the WRI including scopes 1, 2 and 3 emissions.
“The current lack of data regarding the carbon footprint of the construction supply chain – such as steel, glass, carpet, concrete and other materials – presents a significant opportunity for the building design and construction industry to better understand construction activities and design choices,” says Phil Williams, Webcor’s vice-president of technical systems and sustainability.
The results from identifying impacts across the construction materials in all of its projects reveal that 99.6% of its carbon footprint comes from the construction materials supply chain. Just 0.4% were operational emissions.
The company has used the findings to identify opportunities in its supply chain to reduce emissions. For example, in a recent project, emissions related to structural concrete were reduced by over 49%, according to ClimateBiz.com.
Similarly, in February 2010, Wal-Mart announced a goal to eliminate 20m tonnes of GHG emissions from its global supply chain by the end of 2015. This represents one and a half times the company’s estimated global carbon footprint growth over the next five years and is the equivalent of taking more than 3.8m cars off the road for a year.
And in June 2010, California’s largest utility, PG&E started auditing its supply chain emissions in an effort to identify opportunities to reduce emissions. The project will survey 50 of PG&E’s suppliers, with three to five eventually being selected for case study profiles to look at ways to reduce GHG emissions.
Outsourced emissions
Lower labour costs and the availability of raw materials have forced manufacturing activities to move from the industrialised areas of the northern hemisphere to developing countries such as India and China. As a result, China’s direct carbon emissions are now higher than those of the United States.
Scientists at the Carnegie Institution in Washington DC recently analysed world trade data from 2004. They found that over a third of carbon dioxide emissions associated with the consumption of goods and services in many developed countries were actually emitted outside their borders.
The research found that in many European countries, over a third of the carbon dioxide emissions, linked to the consumption of goods and services, actually occurred elsewhere. In Switzerland and several other small countries, more than half of their carbon dioxide emissions were outsourced, primarily to developing countries.
The US is both a major importer and a major exporter of emissions embodied in trade. The net result is that the US outsources about 11% of total consumption-based emissions, primarily to the developing world.
Climate change strategy
It is difficult to envisage global agreement on a strategy to fight climate change until a “fair” approach is adopted – one which assigns ownership of emissions irrespective of where they occur. This is undoubtedly one of the reasons for the disappointments of the Copenhagen climate conference.
Countries cannot be expected to agree to emissions reductions if there is no global agreement on how those emissions should be measured and fairly attributed. But this is a highly contentious issue and there is great reluctance to even acknowledge this reality at the negotiating table.
Clearly, regional climate policy needs to take into account the emissions embodied in trade and not just domestic emissions. However, it is also important to recognise that the growth in emissions from developing countries is a symptom of economic growth.
Climate policy should be tempered by the need to protect the advances that are being made in the fight against poverty, particularly since it is generally the world’s poorest nations that are most at risk from climate change.
What now for Cancun?
The inability of the Copenhagen summit to reach agreement on binding targets was inevitable for a number of reasons.
High levels of climate change scepticism around the world and a weakening economy have diminished the enthusiasm of politicians for agreements that would be unpopular amongst voters.
However, national governments have a responsibility to consider the inadvertent shifting of emissions that has occurred and establish a reliable way to obtain clear, unbiased information on the facts that pertain to the climate change decisions they need to make.
Expectations for the next UN climate conference – COP 16 – in Cancun this December are understandably low. Binding agreement between 193 countries can only be achieved when countries take ownership of their entire life-cycle emissions and when such agreements are based on data that attributes emissions fairly.
National inventories of this nature could be generated by adopting measurement tools that follow the principles established by existing methodologies that operate at a corporate and product level. Once this has been achieved, binding international agreement is significantly more likely.
The objective of COP16 should be to agree a methodology for the fair allocation of emissions. Once this has been achieved, a realistic objective for COP 17 in South Africa in 2012 could be to agree significant, fair and binding targets for emissions reduction.
Dr Ivor John is vice-president of climate change services at RMA, a Lloyd’s Register company. He has PhD in atmospheric physics and with 25 years of experience working on issues relating to greenhouse gas assessments in California.
Useful links:
www.greenbiz.com/blog/2009/04/14/webcor-and-climate-earth-team-measure-carbon-building-materials
http://walmartstores.com/pressroom/news/9668.aspx
www.next100.com/2010/06/pge-takes-aim-at-supplychain-e.php
Steven J. Davis and Ken Caldeira. Consumption-based accounting of CO2 emissions. PNAS, March 8, 2010 DOI: 10.1073/pnas.0906974107