And more reasons to start calculating Product Carbon Footprints.
Up until now, the focus of regulatory incentives has been on measuring Scope 1 and Scope 2 emissions. However, the scale and complexity of Scope 3 emissions can create various risks for companies that ignore them, especially as regulations become more stringent and more transparency on carbon and supply chains is sought, such as in the EU.
This article provides 5 good reasons why companies should start calculating their Scope 3 emissions and shows how the Product Carbon Footprint provides a useful tool to kickstart emission measurement for producing companies.
Scope 3 emissions are the largest source of emissions for a company in most sectors and often account for several times more than Scope 1 and 2 emissions. For example, Scope 3 emissions represent 97% of total greenhouse gas emissions for capital goods. The 2018 Global Supply Chain Report additionally highlights that approximately 40% of global GHG emissions from companies are caused or impacted by their purchases and the products they sell.
Scope 3 emissions are all indirect emissions (not included in Scope 2) that occur in the value chain of the reporting company, including upstream and downstream emissions. In addition to emissions caused by employee travel and waste management, the upstream supply chain plays a major role, as do emissions from product use, transport and logistics.
There are several reasons why companies should have to measure their scope 3 emissions. First and foremost, the more businesses do so, the more transparent becomes their supply chain, which facilitates the emission reporting of the other actors in that same supply chain. This leading by example, favours a productive environment for improvement. The benefits are manifold, for businesses and for society, as it creates a positive spillover effect and increases the standard. On a more general level, it also enables the economic sphere to address the urgency of climate change by collectively tackling indirect carbon emissions. On the company level, it enables:
➝ Better understanding of a company's climate impact.
➝ A collaborative supply chain improves transparency.
➝ Potential cost savings (e.g., energy & material efficiency).
➝ Improved reputation and stakeholder engagement.
➝ Mitigation of future carbon-related risks and costs.
The Product Carbon Footprint (PCF) is a subset of a company's scope 3 emissions, as it represents the emissions associated with the life cycle of one specific product. Thus, companies who wish to measure their Scope 3 emissions need a PCF from their supplier.
While calculating a product's carbon footprint (PCF) and Scope 3 emissions are not necessarily mutually exclusive (PCF being a subset of scope 3 emission calculation), there are several reasons why companies may choose to start by calculating the carbon footprint of their product:
Better understanding of a product's climate impact: Calculating a product's carbon footprint provides a more specific and tangible understanding of its environmental impact than a general value. This can help companies identify areas for improvement that are directly related to the product and help them make more informed decisions during the product design, procurement and marketing phases.
Innovation: Identifying opportunities to optimize emissions is a source of innovative ideas at the product level. There are many examples of how companies have innovated their products to reduce emissions. This can only happen if emissions are measured at the product level beforehand.
Market differentiation: Communicating a product's carbon footprint to stakeholders can differentiate it from competing products and attract environmentally conscious consumers and investors.
Regulatory compliance: Many current and future regulations, voluntary standards, and financial incentives require or encourage companies to disclose the carbon footprint of their products, such as the EU Digital Product Passport.
Risk avoidance: policy changes, climate change impacts, and the potential damage a newly discovered emissions hotspot can have on a company's reputation are risks that can be anticipated if a company measures and optimizes its product's emissions in a timely and efficient manner.
Overall, regulations are and will be demanding more transparency at the product and corporate level. To be well prepared, product and corporate reporting must complement each other inside the company. This means that all decision makers should be able to measure, optimize and manage the CO2 footprint in their own department. While scope 3 emissions in the supply chain are primarily the responsibility of the procurement department, the product team is responsible for reducing the product's carbon footprint at an earlier stage: right from the product design phase. This requires an integrated approach to CO2 management and is currently a challenge due to the absence of CO2 data and supply chain information.
For this reason, sustamize developed a dynamic and validated set of CO2 databases, called the Product Footprint Engine (PFE), which can be integrated into business processes to support PCF and supply chain calculations.
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