2023-02-16
Decarbonization
Using the product carbon footprint for the decarbonization of Scope 3
The Product Carbon Footprint (PCF for short) records the total greenhouse gas emissions caused by a product in the various phases of its life cycle. Procurement departments in particular need to receive PCF data from their suppliers in order to identify and address CO2 hotspots in their supply chain. However, due to the high complexity of global value chains, harmonizing calculation approaches and comparing results remains a major challenge.
What guidelines offer help here and what can companies do if their suppliers do not provide a PCF? We found out at CHOICE Event #51 from Thomas Heine, Co-Chair and Ambassador of the Sustainable Procurement Pledge (SPP) Germany, and Yasha Tarani, Co-Founder and CEO of THE CLIMATE CHOICE. We have summarized the most important insights from their joint presentation for you.
What is the product carbon footprint?
In view of the impending climate catastrophe, the greenhouse gas footprint of products and services is being increasingly scrutinized. The Product Carbon Footprint (PCF) offers a good opportunity to record the impact of a product on the global climate in a standardized way. The PCF comprises the sum of all greenhouse gases defined in the Kyoto Protocol along the entire value chain of a product. The value chain always begins with the extraction of raw materials, followed by production and distribution through to use and subsequent recovery (recycling).
Depending on the standard, various balance limits can be applied to the product life cycle. The following should be taken into account
Raw materials and prefabrication
transportation routes
production
Distribution and sales
Utilization phase
Recycling, recovery and disposal
The PCF calculation offers companies numerous advantages. They can use it to identify sustainable optimization potential for their products and initiate product innovations. They also gain a comprehensive insight into the value chain of their products and can precisely quantify and manage the impact on global warming.
Measuring the product carbon footprint
The measurement standards for the PCF are defined by internationally applicable ISO standards (ISO 14067) and the GHG Protocol (“Greenhouse Gas Protocol”). The latter is the globally recognized standard for the measurement, management and reduction of greenhouse gas emissions along global value chains. However, their complexity and lack of transparency often make it difficult to compare results and harmonize calculation approaches.
For this reason, more and more initiatives are coming together to develop sector-specific standards for calculating the PCF. One example of this is the PCF guideline of the Together for Sustainability Initiative (TfS) for the chemical industry. On the other hand, the German Engineering Federation (VDMA) has already published a guideline for calculating the PCF in mechanical and plant engineering. This trend will continue and lead to further cross-industry harmonization in the coming years.
Additional or alternative climate data
Companies that request PCF data from their suppliers in order to identify CO2 hotspots in their supply chain quickly face two problems. Firstly, not all suppliers are able to calculate and provide a PCF, and secondly, a holistic Scope 3 decarbonization strategy requires significantly more information on the climate maturity of suppliers. What is this information and how can companies obtain it?
First of all, it is important to understand the difference between lagging KPIs and leading KPIs. Lagging KPIs are historical data such as the carbon footprint of the company and its products. They merely indicate what has happened in the past year. Leading KPIs, on the other hand, are forward-looking metrics on a company's future climate performance. In other words, they provide information on whether and to what extent a company's climate transformation is already being implemented. This includes checking whether suppliers are seriously pursuing their climate targets and whether these are compatible with their own targets. It is also important to check which governance processes are in place within the company, whether the company is managing climate-related risks and opportunities and what data is already being disclosed to prove this.
Finding a way through the data jungle
How can companies make sense of all these data points to assess the climate maturity of their suppliers? This is no easy task, as there is so much information to track down in the jungle of framework conditions and legal requirements.
It's best to just get started! There's no need to reinvent the wheel. In order to record all the important key figures and track the suppliers' climate strategy, it is advisable to use already established and internationally recognized reporting frameworks. These primarily include the Task Force on Climate-related Financial Disclosures (TCFD) for risk management, governance, climate strategy and transition plans, the Science Based Targets Initiative for reduction targets, the Global Reporting Initiative for disclosure activities and the Greenhouse Gas Protocol for emissions calculations.
These frameworks enable companies to measure and compare the climate performance of their suppliers in line with existing and future standards.
A digital infrastructure for climate data in the supply chain
Specialized software tools are already available for the efficient and scalable collection of this data, which guarantee both questionnaires aligned with international standards and a secure IT infrastructure for uncomplicated climate data management along the supply chain. One such tool is the Climate Intelligence Platform. From data collection to monitoring and engagement, it offers companies everything they need to manage and successfully implement their climate targets in the supply chain. Using the software platform, they can access a wide range of externally auditable corporate risk and emissions data and support their suppliers on the path to decarbonization.
We would like to thank Thomas Heine and Yasha Tarani for their insights into the product carbon footprint and climate-related data collection along the supply chain.
