Supply chains and procurement
In 1980, exports and imports made up 44% of the world’s total output. By 2005, they made up 58%, exceeding US$26 trillion.
It’s clear that the world is becoming an ever more global marketplace. This raises a big question: who is responsible for the emissions caused by these exports – the exporter or the importer?
Success Stories
• Tesco
• Timberland
Evidence suggests that exports could be a main cause for the rise in China’s CO2 emissions, which have nearly doubled within five years. A recent report by the Center for International Climate and Environmental Research found that in 2005, around one-third of Chinese emissions were due to production of exports. A similar study in 2007 by the Tyndall Centre for Climate Change Research poses the question ‘Who owns China’s carbon emissions?’. Their briefing note asks whether ‘countries [should] be responsible for emissions due to the production of goods and services they consume’ (in this case, the developed countries buying products made in China). The sheer volume of ‘exported carbon’ means that focusing on emissions within national borders may miss the point.
The same goes for international companies. By cutting emissions right across their global supply chains, they can play a vital role in shifting the world towards a low carbon economy. At the moment, however, this doesn’t seem to be happening. A 2007 survey by McKinsey showed that fewer than 25% of global companies always or frequently take climate change into consideration in purchasing and supply chain management.
What can be done by governments?
Develop a standard for measuring emissions
Government needs to develop a standard, robust and verifiable process that companies can use to measure and assess the emissions from their supply chain. This means talking to business and other stakeholders to make sure that the standards are feasible and appropriate. In some places things are already happening. In the UK, the Government and The Carbon Trust have asked the BSI British Standards to create a standard called PAS 2050. This will provide a framework that companies can use to measure and reduce the direct and indirect greenhouse gas emissions from their products and services and then communicate what they’ve done to their customers. Find out more about PAS 2050.
Set an example on green procurement
The spending power of governments is enormous. In fact, the US government is the country’s largest consumer, representing 20% of the gross national product. According to GPP, an organisation that promotes green government spending, this purchasing power could be an enormously effective tool. Not only could it save taxpayers’ money and expand the marketplace for green technologies, it could also set the standard for private industry to follow.
Set regulations and guidelines
Governments can also encourage green procurement both through regulation. For example, legislation could force companies who supply environmentally damaging goods to replace them with lower-carbon alternatives. Similarly, government guidelines could help buyers know how to choose greener products. This is already happening in some places, with 20 EU member states already drafting Green Public Procurement National Action Plans.
Tackle direct emissions first
Before tackling emissions from your supply chain, it’s essential to address the emissions related to your own on-site operations – often called scope 1 and scope 2 emissions
. (For more on this, see Management strategies.)
Set the boundaries of your carbon footprint
Deciding where to draw the boundaries around your organisation’s carbon footprint is difficult.
Figure 3 is an example of an organisational activity and sphere of influence. Taking decisions on who is responsible and how to collect reliable data for areas where no clear standards exist are required. The Greenhouse Gas Protocol Initiative provides useful guidance on this part of the process.
Do a full lifecycle analysis
A full lifecycle analysis for your products or brands will help you analyse their carbon footprint right through from creation to disposal. It will also provide you with information about your carbon footprint that you can tell your customers – something Tesco and Timberland have been doing to great effect. (For more information, see Customers.)
A full lifecycle analysis is particularly important as the biggest sources of indirect emissions are often not what you’d expect. Take Walkers – a potato crisp company in the UK. After calculating the carbon footprint of its cheese and onion crisps, Walkers found that by making a simple change in the purchasing metric of the potatoes, it was able to make significant carbon reduction and cost savings.
Focus on the big wins first
Focus first on the largest sources of indirect greenhouse gas emissions. For companies in consumer goods sectors this is likely to be outsourced product manufacturing. Ways to cut emissions from this part of the supply chain include better management of distribution logistics and collaboration with suppliers to help them become more energy efficient.
Look at green procurement
This means sourcing items which will help your company shrink its carbon footprint. Choosing less carbon-intensive products is a good first step. Working with suppliers is even better. Involving them in decisions around a product or process will encourage them to develop environmental management systems and standards.
Key data
What does a supply chain carbon
footprint look like?
The supply chain includes every process and material used to get a product to the consumer. For example, the carbon footprint of a cola’s supply chain would include the following areas:
- Growing and processing raw materials like aluminium and sugar
- Manufacturing, including producing and packaging the cola
- Distribution and retail, covering transport, chilled storage and retail
- Use, including refrigeration before it’s consumed
- Disposal, covering can collection and recycling
Links and key initiatives
• Managing Carbon in China’s Supply Chains – China Climate Change Training Initiative (CCCTI). We have partnered with Business for Social Responsibility to provide knowledge and practical skills in supply-chain management to senior business executives and operational managers.
• GHG Protocol – New standards for product and supply chain greenhouse gas accounting and reporting
• Carbon Disclosure Project Supply Chain Leadership Collaboration (SCLC)