For many industries, a large part of CO2 emissions - as high as 80% - in fact take place in their supply chains, and not in their core manufacturing process. A large company may have thousands of suppliers, mostly small, in dozens of countries. Most of these suppliers are part of other supply chains, providing goods and services to other buyers.
Industrial activities cumulatively contribute to about 35% of the total CO2 emissions worldwide. Eight global supply chains account for more than 50% of annual greenhouse gas emissions. Only a small proportion of these emissions are produced during final manufacturing. Most are embedded in the supply chain—in base materials, agriculture, and the freight transport needed to move goods around the world.
For industries such as food and textiles, large portions of their value chain emissions are in the upstream segment (farming, for instance) and mid-stream segments (fabric production, for instance). Having a more comprehensive intelligence on the sources of their CO2 emissions can help companies to take appropriate action with all relevant industry stakeholders to bring down the emissions within stated targets. In addition, today’s market and regulatory environments require that companies are able to provide their internal and external stakeholders a more holistic picture of their business and product carbon footprint.
Achieving net zero for emissions in Scope 1 (direct emissions from business operations) and Scope 2 (emissions from energy purchased for operations) categories itself is a formidable technical and economic challenge for many companies, especially those in energy- and resource-intensive sectors, such as heavy industry. Tackling Scope 3 (emissions from their supply chain or downstream user segments) presents an additional layer of complexity, including opaque carbon-accounting and tracking practices. The need to work collaboratively with customers, supply networks, and industry groups, and the difficulty of keeping stakeholders engaged in a complex, multiyear change effort pose significant challenges.
Of the 239 companies that signed up to the Science Based Targets Initiative in 2020, for example, about 95% included commitments to reductions in emissions at customers and suppliers - scope 3 emissions. That is a big commitment, and being able to meet it will require tremendous amounts of intelligence and initiatives.
These are possible only if corporates are able to implement systems and technologies that can capture disaggregated authentic data on carbon emissions from all points in the value chain, and are able to effectively analyse them to provide both intelligence and recommendations for action.
Industrial activities cumulatively contribute to about 35% of the total CO2 emissions worldwide.
Industrial CO2 emissions were about 16 billion tons in 2020. About 13 billion tons of these were energy related emissions (direct and indirect), about 3 billion tons were process related CO2 emissions.
But this broad picture does not reveal the intricate nature of these emissions, from a single corporate perspective.
Let’s consider the food distribution industry. It is one of eight industry supply chains that accounts for a majority of global industrial emissions, with the food sector alone accounting for approximately one-quarter of these emissions – the most of any supply chain in the world. But emissions in this sector happen all along the value chain - from food crop cultivation, transport/logistics, post harvest food grain wastage, energy used for processing in food production and wastage of food from end use points.
For any corporate operating in the food industry keen on reducing the final carbon footprint of their product, it is important to have a detailed understanding of the CO2 emissions both that are under their control (Scope 1), as well as those outside (Scope 2 & 3).
How easy is it to do the above? Not very easy, but with appropriate use of strategic approaches, technology and multi-stakeholder participation, medium and large corporate with long and complex value chains will be able to get insights into, and perhaps also influence reduction of, greenhouse gas emissions upstream and downstream in their business value chain. When this happens on scale, the potential for decarbonization is immense.
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