Executive Briefings

Measuring the Supply Chain Carbon Footprint

A new Corporate Value Chain Standard from the Greenhouse Gas Protocol Initiative aims to help companies look strategically at greenhouse gas emissions across their entire value chain, showing them where to focus limited resources to have the biggest impacts, says Robert H. Kuhn, president of Kuhn Associates Management Advisors.

To date, companies have measured carbon in their own operations, but this new standard will force companies to consider CO2 emissions upstream and downstream, he says. Kuhn was on one of the technical advisory groups that developed the standard.

"The Corporate Value Chain Standard is intended to give companies some guidance in terms of gaining visibility into the greenhouse gas emissions of all their value chain activities," Kuhn says. These include such things as what a company buys, how it transports, how it produces goods, what happens when its goods are used and what happens to the product at the end of its useful life.

"Since most of these activities don't have a greenhouse gas meter attached, getting the data is a real challenge," Kuhn says. Most companies will have to use estimates, based on research over the past 10 to 15 years, that equates dollars spent in various categories with greenhouse gas emissions. "We are essentially trying to get around the issue of not having exact data by taking data that is captured, such as dollar expenditures, and equating that to what we know about greenhouse gas generation," says Kuhn.

This approach is not without problems. "A company that buys $1m worth of goods from a supplier might think that this expenditure represents 'x' tons on greenhouse gas emissions," he says. "But the supplier says that 60 percent of that $1m went to administrative overhead. Or, a company might pay an ocean liner to transport its stuff across the ocean on a ship that burns 1,000 tons of fuel, but that ship also carried the goods of many other companies, so what portion is its responsibility? These are real challenges."

Nonetheless, measuring greenhouse gas emissions for all aspects of the value chain will become a reality, either because it is forced by government regulation, as in the European Union, or because companies realize that reducing this metric will also ultimately reduce costs, Kuhn says. "And many companies want to do the right thing," he adds. "They see climate change as a serious threat to their business down the road, they know it needs to be addressed and are willing to take the plunge."

To view video in its entirety, click here

A new Corporate Value Chain Standard from the Greenhouse Gas Protocol Initiative aims to help companies look strategically at greenhouse gas emissions across their entire value chain, showing them where to focus limited resources to have the biggest impacts, says Robert H. Kuhn, president of Kuhn Associates Management Advisors.

To date, companies have measured carbon in their own operations, but this new standard will force companies to consider CO2 emissions upstream and downstream, he says. Kuhn was on one of the technical advisory groups that developed the standard.

"The Corporate Value Chain Standard is intended to give companies some guidance in terms of gaining visibility into the greenhouse gas emissions of all their value chain activities," Kuhn says. These include such things as what a company buys, how it transports, how it produces goods, what happens when its goods are used and what happens to the product at the end of its useful life.

"Since most of these activities don't have a greenhouse gas meter attached, getting the data is a real challenge," Kuhn says. Most companies will have to use estimates, based on research over the past 10 to 15 years, that equates dollars spent in various categories with greenhouse gas emissions. "We are essentially trying to get around the issue of not having exact data by taking data that is captured, such as dollar expenditures, and equating that to what we know about greenhouse gas generation," says Kuhn.

This approach is not without problems. "A company that buys $1m worth of goods from a supplier might think that this expenditure represents 'x' tons on greenhouse gas emissions," he says. "But the supplier says that 60 percent of that $1m went to administrative overhead. Or, a company might pay an ocean liner to transport its stuff across the ocean on a ship that burns 1,000 tons of fuel, but that ship also carried the goods of many other companies, so what portion is its responsibility? These are real challenges."

Nonetheless, measuring greenhouse gas emissions for all aspects of the value chain will become a reality, either because it is forced by government regulation, as in the European Union, or because companies realize that reducing this metric will also ultimately reduce costs, Kuhn says. "And many companies want to do the right thing," he adds. "They see climate change as a serious threat to their business down the road, they know it needs to be addressed and are willing to take the plunge."

To view video in its entirety, click here