Why should companies be considering their carbon footprint?
Industrial companies generate a substantial amount of global carbon emissions - as high as around two thirds of total carbon emissions in some countries.
Industries including cement, ceramics, chemicals, food and drink, glass, iron and steel, oil refining, pulp and paper and many others generate emissions in a number of ways, including:
- the fuel and resources used in their processes;
- their buildings and operations;
- the way in which their supplied parts are manufactured; and
- transport and logistics.
Many governments around the world have committed to the aims of the 2015 Paris Agreement to limit global warming to 1.5%, and many have implemented targets to achieve net-zero carbon dioxide emissions by 2050. It is clear that reaching these targets will require governments to incentivise the industrial sector to decarbonise, and that doing so will require disrupting the typical models and processes that these sectors have relied on for many years.
Initially, the global focus tended to be on a company's direct emissions of greenhouse gases (GHGs) ('scope 1'); along with indirect emissions from generation of purchased energy ('scope 2'). However, there is now increasing pressure and focus on the need to incentivise companies to reduce the GHG emissions generated within their supply chain in producing their products, and in the use of their products by consumers and others ('scope 3').
These incentives may take the form of carbon taxes; loans or subsidies for early adopters of new approaches; reduced subsidies for high carbon fuels and processes; planning and building control restrictions; certain fuels and approaches being restricted or phased out through legislation; or requiring public disclosure of each company's carbon 'footprint'.
It is also increasingly apparent that stakeholders, investors, regulators and even the general public are pressuring companies to show a strong, verifiable commitment to carbon reduction strategies in respect of scope 1, scope 2 and scope 3 emissions. As a result, many major household name companies have already announced their own carbon reduction plans.
Case study: decarbonising the automotive supply chain
The global transport sector is often a particular area of focus when considering how to reduce carbon emissions, with road transport often cited as being responsible for around 15% of global carbon emissions. In that respect, many countries are forcing a move away from petrol and diesel vehicles - including the UK, which recently announced that its planned ban on the sale of new petrol and diesel cars and vans would be brought forward to 2030.
However, the carbon generated by the automotive industry is much broader than that emitted by vehicles on the road with fuel and resources; buildings and operations; manufacturing processes and transport and logistics of parts and finished vehicles all having a part to play. Decarbonisation of the automotive sector will therefore require more than just moving away from producing petrol and diesel vehicles.
It is generally accepted that the emissions from vehicles sold by the automotive industry, and those created in the supply chain to make those vehicles, will be scope 3 emissions. A combination of the incentives listed above, tailored for the automotive industry and with a particular focus on scope 3 emissions, will be required.
Over recent months the industry has recognised the importance of addressing, and being seen to be addressing, decarbonisation. As a result, many major automotive companies have already announced their own carbon reduction plans - including Bentley, Ford, Volvo and Nissan.
Announcing the targets is one thing, but achieving them can be a complex endeavour, particularly for companies with a global supply chain. A typical automotive supply chain will involve supply, manufacturing and distribution across many businesses of different sizes and capabilities, and involve multiple geographies. For this reason, many different approaches will be likely needed to tackle the decarbonisation of all aspects of the supply chain.
How should companies tackle decarbonisation of their supply chains?
The first step on a decarbonisation journey is to fully understand your company's 'carbon footprint'. This assessment should include all aspects of the production cycle in respect of the products or processes that you sell.