Carbon footprints in the supply chain: the next step for business?

Popular Articles

Tom Delay, Chief Executive, Carbon Trust

To mitigate the effect of climate change, business needs to develop innovative strategies which challenge the way in which consumer needs are satisfied and which move beyond incremental improvements in process efficiency. By undertaking a carbon investigation of their supply chains, businesses can calculate and manage the carbon footprint of their products and unlock significant emissions reductions.

As climate change has emerged as the greatest environmental challenge we face, so reducing carbon emissions, the main cause of climate change, has become a central issue for business. As we move to a more carbon constrained world, business will have to make fundamental changes to deliver products and services to the consumer in a way that generates fewer carbon emissions.

Many companies are already focussing their attention on reducing direct emissions, with measures ranging from heating and lighting upgrades and staff awareness programmes, to developing low carbon energy sources such as onsite generation.

FOCUSING ON THE SUPPLY CHAIN

Displaying the carbon contents of products, and the
commitmentto reduce, will empower consumers to make
informed choicesand drive company behaviour to lower
the carbon of their products.

To mitigate the effect of climate change, business needs to develop innovative strategies that challenge the way in which consumer needs are satisfied and that move beyond incremental improvements in process efficiency. The important next stage is to tackle indirect emissions and manage the carbon footprint of products across the supply chain. It is the logical next step after traditional carbon management initiatives which analyse the operations of single companies or even single sites.

The carbon footprint, that is the carbon dioxide and other greenhouse gases emitted across the supply chain for a single unit of a product, is calculated by considering all of the raw materials and processes required to get a product to market. For example, the carbon footprint of cola is the total net amount of carbon dioxide emitted to produce, use and dispose of a single can of cola. The total carbon emissions are not just those due to the manufacturing processes or those due to ‘food miles’ but are based on all the steps in the supply chain to produce, use and dispose of or recycle the can of cola. This information can then be used to identify opportunities to make significant cuts in emissions and energy costs across the lifecycle of the product.

BENEFITS OF THE HOLISTIC VIEW

This approach, often called carbon life cycle assessment, offers a holistic view which can help business understand the reasons why emissions are generated across the economy. Processes, and their emissions, do not occur in isolation but are always part of the supply chains for different products or services. At the individual product level, this supply chain approach has the potential to find significant emissions reduction opportunities and large financial benefits by reducing the carbon footprint of a product.

It can help companies to understand the carbon emissions across their supply chains and allow them to prioritise areas where further reductions in emissions can be achieved. The approach can ultimately help all companies make better informed decisions in product manufacturing, purchasing, distribution and product development by considering the costs and liabilities that exist whenever carbon emissions are generated. As consumer attitudes change, supply chain analysis will also allow forward thinking companies to develop low carbon products to capture new markets and generate higher profits over time.

Consumers are becoming more empowered to take carbon into account when making a purchase, and businesses need to respond to that customer demand by taking carbon out of their supply chain and delivering lower carbon products. In the UK, about half of all personal carbon footprints are related to the ‘embodied’ carbon in the products that we buy and the amenities we enjoy: from groceries to clothes, from offices to motorways, pretty much everything creates a carbon footprint as it moves from raw material to the point of purchase or use.

Knowing the level of embodied carbon in a product is a reminder that everything we buy or use has a carbon impact and shows us which types of product and amenity have a particularly low or high impact. As consumers become more familiar with carbon as a currency, they’ll be able to compare products on the basis of their carbon impact and consumer power could be mobilised as a force for good. This is good for business as well. Many ways to reduce embodied carbon involve energy efficiency that actually reduces costs. So a low carbon product will often be cheaper than the regular version.

ECONOMY-WIDE APPROACH

Managing carbon footprints across the supply chain offers an economy wide approach to tackling carbon emissions. Central to this approach is the view that all emissions across the economy are generated to meet the needs of the end consumer. This turns the traditional view of business carbon emissions on its head and gives a powerful insight into how the daily decisions by individual consumers drive economy wide emissions. So, iron ore is not made into steel because steel bars themselves are useful but because they, in turn, can be made into components for the televisions we all watch and the buildings we all live in. To fully understand the carbon emissions associated with our television sets, we need to consider not only the electricity used to run them but also the energy used to make and deliver all the parts, and the energy to dismantle, dispose and recycle them afterwards.

THE DETAILED METHODOLOGY

To calculate the carbon footprint of a product, the Carbon Trust, the UK Government Department for Environment, Food & Rural Affairs (DEFRA), and the British Standards Institute (BSI), is developing a draft Publicly Available Specification (PAS) standard by which the carbon content of all products and services can be measured. The final PAS standard, which will be made publicly available, will enable businesses of all sizes to identify and analyse the greenhouse gas (GHG) emissions associated with the products and services they provide.

The PAS standard draws heavily on well established life cycle assessment techniques (LCA). The United Nations Environment Programme (UNEP) highlights the key aspects of LCA as “identifying and quantifying the environmental loads involved – the energy and raw materials used and the emissions and wastes consequently released; assessing and evaluating the potential environmental impacts of these loads; and assessing the opportunities available to bring about environmental improvements”. These key aspects and other aspects of LCA best practice have been built into the draft PAS standard, making sure it strikes the right balance between being analytically rigorous but simple and practical for business to apply.

In October 2007, Tesco, the world’s third largest grocery retailer, partnered with the Carbon Trust to measure the carbon footprint of 30 of its own brand products, from tomatoes to light bulbs, using the
draft standard. Nine other companies, including Cadbury Schweppes and Coca-Cola, have also announced that they will be working to test it too.

CARBON REDUCTION LABEL

We have also launched a trial carbon reduction label which not only shows the carbon footprint of a product but also shows the company’s commitment to reduce the carbon emissions of the product within two years. The label is being trialled by a number of UK companies including Walkers, UK’s largest snack foods manufacturer, Boots The Chemists, the UK’s leading Health and Beauty retailer, and Innocent Drinks, the leading fruit smoothie brand.

UK research has indicated that 66 per cent of consumers want to know the carbon footprint of the products they buy, and climate change is increasingly becoming an issue that will impact upon the corporate reputation of business. The Carbon Trust envisages that the label will eventually act as a bridge between carbon conscious companies and their consumers, and not only provide a carbon measure, but also demonstrate a corporate commitment to manage and reduce the carbon emissions of the product. Displaying the carbon contents of products, and the commitment to reduce, will empower consumers to make informed choices and drive company behaviour to lower the carbon content of their products.

SUPPLY CHAIN SUCCESS

Boots The Chemists is the UK’s leading Health and Beauty retailer, with approximately 1,500 stores in the UK and the Irish Republic. The company employs over 2,300 people in its factories and around 3,400 people in the group’s distribution centres. The company is a member of Alliance Boots, which was created as Europe’s leading pharmacy-led health and beauty group through the merger of Alliance UniChem Plc and Boots Group Plc.

For Boots, carbon management activities were aligned with corporate objectives for corporate social responsibility (CSR), energy and transport. Site surveys were used to identify a list of specific carbon abatement projects. From this, Boots developed a five year carbon management strategy to improve its carbon footprint, with initiatives falling into two categories: technical solutions and changing people’s behaviours. Boots reported cost saving opportunities worth between £1 and £2 million and carbon emission reductions of over 10,000 tonnes.

The supply chain is one area where Boots has discovered new opportunities. As part of this work, Boots looked at a range of shampoos to compare processes and raw materials and can now identify the carbon footprints of a range of its shampoos. Unique to Boots is its Product Journey – a vertically integrated supply chain, with experts at all stages of the journey. This enables Boots to make positive changes that drive efficiency improvements across the entire supply chain.

Boots is currently working with the Carbon Trust on the initial phase of the carbon reduction labelling scheme. As a company displaying the label, Boots has signed up to a ‘reduce it or lose it’ clause whereby if they fail to reduce the carbon footprint of the product over a two year period they will have the label withdrawn. The Botanics range of shampoos is the first Boots products to carry the label.

Andrew Jenkins, Sustainable Development Manager, Boots the Chemists, said: “Working with the Carbon Trust has enabled Boots to measure and subsequently reduce the carbon footprint of everyday products such as shampoo by as much as 20 per cent. With Boots as the most trusted brand in the UK, providing this information and advice to consumers on reducing personal carbon footprints will raise public awareness about the part we can all play in combating climate change and protecting the environment.”

Boots is also committed to developing new products based on sustainable development principles. As well as focusing on reducing its carbon footprint, Boots is engaged in a number of other initiatives focused on the product journey of products, from recycling to responsible packaging. An example is that Boots is designing their packaging to reduce environmental impact and waste. This includes research projects with designers to develop new sustainable packaging formats, and 80 per cent of its goods are now supplied to stores without transit packaging.

WHAT NEXT FOR BUSINESSES?

The supply chain approach has the potential to unlock significant emissions reductions and large financial benefits by reducing the carbon footprint at an individual product level. It can help individual companies to understand the carbon emissions across the supply chains in which they operate and allow them to prioritise areas where further reductions in emissions can be achieved. The benefits extend beyond business. Organisations can engage with their consumers about the carbon impact of their products, enabling them to make more informed buying decisions.

It can also help all of business to make better informed decisions in product manufacturing, purchasing, distribution and product development by considering the costs and liabilities that exist whenever carbon emissions are generated. This is the next step in the evolution of efforts to reduce carbon emissions and mitigate climate change.

Author

Tom Delay was appointed as the first Chief Executive of the Carbon Trust in 2001. A chartered engineer with extensive experience of the energy sector, Tom worked for Shell for 16 years in a variety of commercial and operations roles including four years as General Manager of Pizo Shell – a Shell subsidiary in Gabon, Africa. He moved into management consultancy with McKinsey and Co and then as a Principal with the Global Energy Practice of A T Kearney before joining the Carbon Trust. Tom gained a first class honours degree in mechanical engineering from the University of Southampton in 1981 and completed an MBA at INSEAD, Paris in 1988.

Organisation

The Carbon Trust is a private company set up by the UK Government in response to the threat of climate change. The Carbon Trust works with UK business and the public sector to accelerate the move to a low carbon economy by developing commercial low carbon technologies and helping organisations reduce their carbon emissions. This is delivered through its five complimentary business areas; insights, solutions, innovations, enterprises and investments. Together these help to explain, deliver, develop, create and finance low carbon enterprise.

Enquiries

E-mail:

Climate Action - Assisting business towards carbon neutrality