Do you have control over your value chain?
For many years, the primary focus of initiatives that aimed to reduce the environmental impact were targeted at the “owned” production processes – scope 1 and 2 emissions.
More recently, organizations have started taking responsibility and accountability for the impact of their entire value chain. Although they are not directly caused by a company, they can absolutely be influences by business decisions related to e.g. material and design choices.
Scope 1 emissions are direct emissions that you own and control.
Scope 2 emissions are indirect emissions from purchased energy.
Scope 3 emissions are emissions that occur along your value chain, both upstream and downstream.
On average, Scope 3 emissions account for more than 3/4 of the total emissions of a company. That means that the biggest potential to reduce the overall impact lies there.
To achieve a fully circular economy, companies need to be accountable for their entire value chain.
Greenhouse gas emissions, or other environmental impacts are categorized into three groups or “scopes” by the most widely-used international accounting tool, the Greenhouse Gas (GHG) Protocol.
Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in a company’s value chain. www.wbcsd.com
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How do you implement circularity throughout your value chain? In this whitepaper, we provide you with the in-depth knowledge you need to implement circularity today.
What are the risks of neglecting my scope 3 emissions?
Managing environmental impact from corporate activities is increasingly becoming a mainstream management issue.
Potential liabilities from GHG exposure (and other environmental impacts) arise from
- unstable resource and energy costs
- future resource scarcity
- environmental regulations
- changing consumer preferences
- scrutiny from investors and shareholders
- reputational risk from other stakeholders.
Hence companies have become increasingly transparent about their value chain environmental impacts. This materialized in the disclosure of scope 3 GHG emissions as well as other disclosures such as the ‘EP&L’ (environmental profit & loss) account which was disclosed by more and more organizations. More recently companies have also started to set targets on their value chain environmental impacts.
Circular economy: Your biggest business chance
In recent years, much attention was devoted to the circular economy (CE) by McKinsey. The key question being how industries can increase their profitability while reducing their dependence on natural resources? The research has shown that the circular economy—using and reusing natural capital as efficiently as possible and finding value throughout the life cycles of finished products—is at least part of the answer: such an approach could boost Europe’s resource productivity by 3 percent by 2030, generating cost savings of €600 billion a year and €1.8 trillion more in other economic benefits.
However, this scenario requires transformation of many value chains. And to do so, societies need to adopt various ‘R’ scenarios (e.g. refuse, re-use, re-think, re-manufacture etc.) which go far beyond just recycling alone. The main challenge being that companies need to collaborate more closely with supplier as well as customers and other stakeholders.
Your way to circularity: Value chain intelligence
Two examples of reporting value chain environmental impact. DSM reports its value chain GHG’s according the GHG scope 3 protocol. Philips reports its value chain impact by means of an ‘environmental profit & loss’ statement including also other environmental impacts. Despite the completely different nature of the companies, in both cases the majority of value chain impacts are ‘indirect impacts.’ Source: www.dsm.com and www.philips.com
Ecochain's supplier dashboard
To get insight into an organizations upstream environmental impact, Ecochain created a supplier dashboard.
This dashboard shows the environmental impact of all suppliers of products and services of a small catering company.
This catering company has around 375 suppliers with different total carbon footprints. In the dashboard you can zoom in into the most important suppliers. In this way a company can conclude which suppliers are responsible for most of the upstream impact.
What are the challenges?
Measuring the impact of an entire value chain is an emerging discipline. A number of barriers exist that make capturing and evaluating an organization’s value chain impact challenging due to a number of issues:
How Environmental Intelligence can help you
Scope 1, 2 & 3
Measure your company-wide emissions for scope 1, 2 and 3
Your direct, indirect and supply chain emissions are key metrics for your sustainability strategy. Report accurately and find ways to reduce efficiently.
Generate impact flows and find hotspots, visually
With our visual impact flows, you can identify key components to reduce the impact throughout your value chain.
Compare the emissions of your entire product portfolio
With Ecochain, you can compare the footprint of all your products all at once. Identify the biggest leverage to reduce the emissions of your company, efficiently. We call this approach Activity-based Footprinting.
Compliant to ISO and EU Standards
Following standards and regulations to future-proof your business
Ecochain facilitates the performance of LCA studies according to ISO 14040/ISO14044, ISO 14025 and EN15804.
Ecochain is a member of the Technical Advisory Board of the PEF/OEF initiative of the European Commission, and as a fully result up-to-speed with these developments. Criteria for “PEF ready” LCA software are currently under discussion, and as soon as they become available we will implement them in our software.