Many SME´s are experiencing a rising demand from customers, investors, and other stakeholders to demonstrate their commitment to sustainability. Measuring the product carbon footprint (PCF) in your supply chain is important to build trust and meet these expectations, and at the same time get at competitive advantage. But what do you need to consider when you manage and calculate the PCF?
To meet customer and market demands, and act responsible on reducing CO2 emissions, you need to understand where the emissions are sourced in the first place, and establish a structured way to understand drivers, calculate and report the indirect and direct emission.
1. Estimate your upstream emissions
A company´s Scope 3 emission, refers to the indirect consequence of a company’s activities outside its direct control. Today 65–95% of most companies’ carbon impact can be referred to as purchased goods and services, transportation, and distribution along the supply chain. For SME:s it is therefore the most important area to manage in order to identify and reduce carbon footprint on its products.
To comply with regulations, mitigate risks, and identify opportunities for cost reduction and efficiency may be challenging. However, with a well-structured Scope 3 approach, in close cooperation with your suppliers, and with a digital traceability tool as enabler you can take better control.
By defining the scope of data collection, you can prioritize where to start your data collection and identify hotspots before you start collecting data from your suppliers. Verifying and validating your data set is important to ensure an accurate and reliable calculation of PCF, and to avoid the risk of green washing.
2. Estimate your contribution on product level and consolidate with upstream emissions to get a full PCF calculation
Next step is to assess your internal emission drivers for each product / product category. Identify and calculate the emission top down, starting on company level, processes, and finally the various products´ contribution.
In order to obtain a full PCF, you need to consolidate upstream emissions with your core emissions. This is preferably done by weighting the emissions for your subcomponents, and raw materials by utilizing the Bill of Material (BOM)and adding your core emissions on top. A digital traceability solution can help you collect, consolidate, and display the emission data, and in an efficient and secure way also distribute the information.
When you have managed to identify and measure the internal PCF contribution, you add the calculated indirect emissions. You can then follow a particular product's footprint, and decide on how to set your reduction targets, and establish an efficient and scalable reporting and follow-up process for relevant stakeholders, including your customers.
3. Customer reporting – a window of opportunity for your SME
To manage and calculate PCF is not just a rising customer demand. It is also a great opportunity to position your SME as a proactive, responsible, and future oriented company within the manufacturing industry where sustainability is an important competitive advantage.
With a structured process for managing and calculating products´ carbon footprint from your suppliers, purchased materials, and your own internal contribution to the emissions, you will be better prepared to provide a valid and applicable customer reporting. To reach, and exceed, customer expectations you also need to understand:
1. What information is important for your customers?
2. How to manage and distribute PCF in an efficient and scalable way?
3. With what frequencies?
Today many SME´s within manufacturing still only provide limited, if any, PCF reporting to their customers. This means an opportunity to take pole position in the competition, as the need for qualitative and regulated sustainability reporting is increasing. At the same time, you improve your ability to measure, analyze trends and understand what really drive emissions, which is of great value in your efforts to develop a more sustainable and future proof business.
The digital transformation is an important enabler for SME´s to trace, estimate, and calculate their PCF. At ChainTraced we work along the supply value chain within the metal industry and meet several companies globally that want to explore how they can improve their CO2 tracking, and digitally source, quantify and report the carbon footprint. One of them is voestalpine HPM. Read about how they use ChainTraced to gain better insights into their emission drivers.