A continuum of life cycle approaches - GHG Protocol
Accounting For GHG Emissions In Corporate and Product Supply Chains INTERNATIONAL WORKSHOP OF GHG PROTOCOL PROGRAMS World Resources Institute, Washington DC, March 22-23, 2010 1 Presentation Outline Growing Practice of GHG Management in the Supply Chain GHG Protocol and Supply Chain Initiative Overview Scope 3 Standard: Overview and Key Requirements Product Life Cycle Standard: Overview & Key Requirements Next Steps 2 The Growing Practice of GHG Management in the Supply Chain Corporate GHG management moving beyond companies own operations, toward full value chain Investors pushing for supply chain GHG disclosure and risk management
Governments programs and policies increasing public reporting of scope 3 and product-level GHG emissions Companies requesting product and supply chain information from suppliers 3 Emerging Initiatives Company-specific: Wal-Marts supply chain sustainability initiative; Tescos product carbon labeling initiative; etc. Sector-specific: Electronics industry; Beverage industry; Dairy industry; Utility industry; World Auto Steel; etc. Cross-sector: Carbon Disclosure Projects Supply Chain Initiative; WWF Climate Positive Initiative (under development) Methodologies: Carbon Trust/Defra product life cycle methodology 4 New Standards in Development Scope 3 (Corporate Value Chain) Accounting & Reporting Standard Quantify and report major GHG emissions in the value chain at the company/organization level (scope 3)
To understand, manage, and report GHG emissions across the entire value chain Product Life Cycle Accounting & Reporting Standard Quantify and report product-level emissions To understand, manage, and report the life cycle GHG emissions associated with individual products Build on existing life cycle assessment standards Build on GHG Protocol Corporate Standard 5 Process Structure WRI/WBCSD Secretariat Steering Committee (25 members) Product Technical Working Groups ( 100+ members)
Scope 3 Technical Working Groups ( 60+ members) Stakeholder Advisory Group (1,000+) Product Standard Scope 3 Standard 6 Setting Boundaries: Steering Committee Members What do you include in scope 3? Alcan Packaging Carbon Disclosure Project Carbon Trust Carnegie Mellon University Dow Chemical Company DNV Energy Research Institute, China Environmental Defense Fund ERM European Commission Joint
Research Centre General Electric Georgia Pacific Harvard School of Public Health Natura 7 Natural Resources Defense Council New Zealand Ministry of Agriculture and Forestry Product Carbon Footprint Pilot Project, Germany PricewaterhouseCoopers Shell Tsinghua University, China UNEP/SETAC Life Cycle Initiative Unilever UK Department for Environment, Food and Rural Affairs US Environmental Protection Agency ISO TC207 - US TAG Walmart 7 Process Timeline Date
Activity March/April 2010 April WRI/WBCSD: Analyze all written comments by chapter and type Make minor edits (i.e. spelling/grammar edits, rather than key issues and inconsistencies) Address all written comments to maintain transparency in the process Identify a number of options for addressing the key issues Calls to brief TWG and Steering Committee members on stakeholder comments and preliminary road testing feedback WRI/WBCSD conduct internal editing and develop revision options
Product and Scope 3 Road Testing Workshops Inventory and feedback reports due from Road Testers TWGs hold calls to review proposed options and develop work plan for the summer Steering Committee meeting (June 28-30) July/August WRI/WBCSD publish summary of road testing feedback TWG provide input on proposed revisions based on stakeholder comments, road test feedback, and steering committee feedback September Release of revised drafts for stakeholder comment 30 day public comment period on revised drafts October/November
WRI/WBCSD compile and analyze written stakeholder comments WRI/WBCSD revise standards with input from Steering Committee and TWG members as needed December 2010 Final texts of standards are completed May 18-21st June Scope 3 Accounting & Reporting Standard 9 Scope 3 Standard Contents Part 1: General Requirements & Guidance 1.
2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 10 Introduction Accounting and reporting principles Business goals and inventory design Mapping the value chain Setting the boundary Collecting data Calculating emissions Accounting for GHG reductions Performance tracking Setting a reduction target Managing inventory quality Assurance Reporting and communication
10 Scope 3 Standard Contents Part 2: Guidance for Specific Scope 3 Categories 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 11 Purchased Goods & Services Direct Supplier Emissions Purchased Goods & Services Cradle-to-Gate Emissions Energy-Related Activities Not Included in Scope 2 Capital Equipment Transportation & Distribution (Upstream / Inbound)
Business Travel Waste Generated in Operations Franchises (Not Included In Scope 1 and 2) Upstream Leased Assets (Not Included In Scope 1 and 2) Upstream Investments (Not Included In Scope 1 and 2) Franchises (Not Included In Scope 1 and 2) Downstream Leased Assets (Not Included In Scope 1 and 2) Downstream Transportation & Distribution (Downstream / Outbound) Use of Sold Products Disposal of Sold Products at the End of Life Employee Commuting 11 GHG Protocol Reporting Requirements Report in conformance with the GHG Protocol Corporate Standard Report in conformance with the GHG Protocol Corporate Standard and Scope 3 Standard Shall report all scope 1 and 2 emissions Shall report all scope 1 and 2 emissions
Should optionally report scope 3 emissions Shall report scope 3 emissions (following the requirements/guidance in this standard) 12 12 Scope 3: Steps in Accounting & Reporting Steps in Scope 3 Accounting and Reporting 13 13 Business Goals of Scope 3 Accounting & Reporting 14
A. GHG management, including identifying GHG reduction opportunities in the value chain; guiding investment and procurement decisions; and managing climate-related risk B. Performance tracking, including setting a baseline, setting GHG reduction goals, and tracking progress over time C. Engaging partners in the value chain to expand GHG accountability, transparency and management throughout the value chain D. Public reporting of GHG emissions to meet the decisionmaking needs of stakeholders (e.g., policy-makers, investors, purchasers, customers, suppliers, employees, NGOs, etc.), as well as participation in corporate-level GHG reporting programs and registries 14
Accounting & Reporting Principles Principle Definition Relevance Ensure the GHG inventory appropriately reflects the GHG emissions of the company and serves the decision-making needs of users both internal and external to the company. Completeness Account for and report on all GHG emission sources and activities within the chosen inventory boundary. Disclose and justify any specific exclusions. Consistency Use consistent methodologies to allow for meaningful comparisons of emissions over time. Transparently document any changes to the data, inventory boundary, methods, or any other relevant factors in the time series. Transparency Address all relevant issues in a factual and coherent manner, based on a clear audit trail. Disclose any relevant assumptions and make appropriate references to the accounting and calculation methodologies and data sources
used. Accuracy Ensure that the quantification of GHG emissions is systematically neither over nor under actual emissions, as far as can be judged, and that uncertainties are reduced as far as practicable. Achieve sufficient accuracy to enable users to make decisions with reasonable assurance as to the integrity of the reported information. 15 Emissions from the companys operations Cradle to Gate emissions of purchased products and services E U L VA
Purchase Gate to Grave emissions from sold products and services Sale Tier 1 Suppliers Raw Materials Reporting Company N Product Use Capital Equipment Product Disposal Grave Gate
Gate Transportation Scope 2 and 3 AI Product Distribution Energy Activities Cradle CH Scope 1 Scope 3 16 Category Upstream Scope 3 Emissions
from Purchased Products Downstream Scope 3 Emissions from Sold Products Other Scope 17 3 Emissions Source Description 1. Purchased Goods & Services: Direct Supplier Emissions Scope 1 and 2 emissions of a reporting companys direct (tier 1) suppliers, including outsourced activities, (e.g., contract manufacturing, data centers, outsourced services, etc.) 2. Purchased Goods & Services: Cradle-toGate Emissions Extraction and production of inputs (i.e., purchased or acquired goods, services, materials, or fuels) associated with all suppliers upstream
(tiers 1, 2, 3, 4, etc.) Manufacturing/construction of tier 1, 2, 3, 4 suppliers capital equipment Disposal/treatment of waste generated in the production of inputs (i.e., purchased or acquired goods, services, materials or fuels) Transportation and distribution of inputs associated with suppliers further upstream (tier 2, 3, 4., etc.) 3. Energy-Related Activities Not Included in Scope 2 Extraction, production, and transportation of fuels consumed in the generation of electricity, steam, heating and cooling (either purchased or own generated by the reporting company) Generation of electricity, steam, heating, and cooling that is consumed in a T&D system (reported by end user) Purchase of electricity, steam, heating, and cooling that is sold to an end user (reported by utility company) 4. Capital Equipment Manufacturing/construction of capital equipment owned or controlled by the reporting company 5. Transportation & Distribution Transportation and distribution of inputs (i.e., purchased or acquired goods, services, materials or fuels), including intermediate (inter-facility) transport & distribution, warehousing & storage, warehousing and storage, associated with direct suppliers Transportation of waste generated in operations 6. Business Travel
Employee business travel 7. Waste Generated in Operations Disposal/treatment of waste generated in operations 8. Franchises Operations of franchisor (reported by franchisee) 9. Leased Assets Manufacturing/construction and operation of leased assets not included in lessees scope 1 (reported by lessee) 10. Investments GHG emissions associated with investments, including fixed asset investments and equity investments not included in scope 1 and 2 11. Franchises Manufacturing/construction and operation of franchise not included in franchisors scope 1 (reported by franchisor) 12. Leased Assets Manufacturing/construction and operation of leased assets not included in lessors scope 1 (reported by lessor)
13. Transportation & Distribution Transportation and distribution of sold products, including warehousing and retail 14. Use of Sold Products Use of sold products and services 15. Waste Disposal of sold products at the end of their life 16. Employee Commuting Employees commuting to and from work 17 Setting the Boundary: Boundary Requirements After mapping the value chain, companies shall account for and report:
The largest scope 3 sources that collectively account for at least 80%* of total anticipated scope 3 emissions (excluding use phase); The use phase emissions of select product types; and All scope 1 and scope 2 emissions, as required by the GHG Protocol Corporate Standard * The selection of an 80% threshold is tentative pending road testing 18 18 Setting the Boundary To determine which scope 3 activities are most significant in size, companies should follow these steps: 1. Use screening methods to individually estimate the emissions from all scope 3 activities (examples provided in Part 2 of the standard for
each category) 2. Express each individual scope 3 activitys estimated emissions as a fraction of total anticipated scope 3 emissions 3. Rank all scope 3 activities from largest to smallest to determine which activities are most significant 19 19 Use of Sold Products: Required Product Types Product Type Examples Consumes energy (fuels or electricity) in the use phase Automobiles, aircraft, engines, motors, buildings, appliances, electronics, lighting
Fuels Petroleum products, natural gas, coal, biofuels Contains GHGs that are emitted during use Aerosols, refrigerants, industrial gases, SF6, HFCs, PFCs, fire extinguishers 20 Guidance: Prioritizing Relevant Emissions Based on Other Criteria Additional scope 3 activities (below the threshold) should be considered relevant if they meet any of the following criteria: Criteria Description Influence
There are potential emissions reductions that could be undertaken or influenced by the company Risk They contribute to the companys risk exposure Stakeholders They are deemed critical by key stakeholders (e.g. customers, suppliers, investors or civil society) Outsourcing Other They are outsourced activities typically insourced by other companies in the reporting companys sector They meet additional criteria developed by the company or industry sector 21 Collecting Data Four-step process for collecting and evaluating data: 1 2
Prioritize activities 3 Assess data sources 4 Collect data Evaluate collected data 22 Collecting Data: Data Types Data Type Description Examples Primary Data Observed data collected from specific facilities owned or
operated by the reporting company or a company in its supply chain The reporting company surveys its suppliers and collects product-level data or scope 1 and 2 emissions data from specific facilities in its supply chain. Generic or industry average data from published sources that are representative of a companys operations, activities, or products Data from life cycle inventory databases, literature studies, environmentally-extended input-output models; default IPCC emission factors; industry associations; etc. Secondary Data
23 Collecting Data: Methods to Fill Data Gaps Estimation Method Extrapolated Data Description Data related to a similar (but not representative) input, process or activity to the one in the inventory Customized to a new situation to make more representative Proxy Data Data related to a similar (but not representative) input, process, or activity to the one in the inventory Not customized to a new situation to make more representative Examples There is secondary data available for electricity in Ukraine but not for
electricity in Moldova. The company customizes the data for electricity in Ukraine to make it more representative of electricity in Moldova (e.g., by modifying the electricity generation mix). There is secondary data available for electricity in Ukraine but not for electricity in Moldova. The company uses the data for electricity from Ukraine without modification as a proxy for electricity in Moldova. 24 Collecting Data As a general rule, companies should apply the following hierarchy in collecting data: 1. 2. 3. 4. Primary data Secondary data Extrapolated data
Proxy data 25 Collecting Primary Data from Value Chain Partners When collecting primary data from value chain partners, companies should obtain the most product-specific data available, according to the following hierarchy: 1. 2. 3. 4. 5. Product-level data Process-level data Facility-level data Business unit-level data Corporate-level data 26 Data Quality Criteria Criteria Technological representativeness
Description Degree to which the data set reflects the actual technology(ies) used Degree to which the data set reflects the actual time (e.g., year) or age of the activity or whether an appropriate time period is used (e.g., annual/seasonal averages may be appropriate to smooth out data variability due to factors such as weather conditions) Degree to which the data set reflects actual geographic location of the activity, e.g., country or site The degree to which the data represents the relevant activity The percentage of locations for which site specific or generic data are available and used out of the total number that relate to a specific activity. Generally, a percent target is identified for the number of sites from which data is collected for each activity
Measure of the variability of the data points used to derive the GHG emissions from an activity (e.g., low variance = high precision). Relates mostly to where direct measurements have been used. Temporal representativeness Geographical representativeness Completeness Precision 27 Illustrative GHG Reporting Form Primary Secondary Total Uncertainty
Scope 1: Direct Emissions from Owned/Controlled Operations Scope 2: Indirect Emissions from the Use of Purchased Electricity, Steam, Heating and Cooling Scope 3: Other Indirect Emissions a. Indirect Emissions from Purchased Products (Upstream) 1. Purchased Goods & Services (Cradle-to-Gate Emissions) (Not Otherwise Included in Categories 2-10) 2. Energy-Related Emissions (Not Included in Scope 2) 3. Capital Equipment 4. Transportation & Distribution 5. Waste Generated in Operations 6. Business Travel 7. Franchises (Not Included in Scope 1 or 2) 8. Leased Assets (Not Included in Scope 1 or 2) 9. Investments (Not Included in Scope 1 or 2) 10. Other b. Indirect Emissions from Sold Products (Downstream) 1. Franchises (Not Included in Scope 1 or 2 2. Leased Assets (Not Included in Scope 1 or 2 3. Distribution of Sold Products 4. Use of Sold Products 5. Disposal of Sold Products at the End of Life 6. Other c. Other Indirect Emissions
1. Employee Commuting 2. Other Direct (Tier 1) Supplier Emissions N/A % of suppliers accounted for (as a % of total spend) CO2 from Biomass Combustion 28 Questions? 29 29 Product Life Cycle Accounting & Reporting Standard 30 Current Product Standard Content
Goal and Scope of the Product Standard Principles of GHG Accounting Steps to Performing a GHG Inventory Establishing the Methodology Defining the Functional Unit Boundary Setting Data Collection & Data Quality Allocation Calculating GHG Emissions Assurance Reporting a Product GHG Inventory 31 Goaland & Scope Goal Scope The primary goal of the standard is public disclosure of product level GHG emissions
A product is any good or service Implementing the standard may support additional business goals including: Identification of GHG reduction opportunities in a supply chain, performance tracking, supply chain engagement, and product differentiation The standard is sufficiently flexible to support GHG quantification and reporting for many product types 32 Goaland & Scope Goal Scope This standard does not fully support product comparison Valid product comparison, comparative assertion, and labeling requires a greater degree of prescriptiveness than is provided in this standard. The standard will include guidance on how programs, sector specific guidance developers and organizations can specify additional constraints so that valid product comparisons and claims can be made
33 Establishing the Methodology The overarching method for accounting for product GHG emissions is a life cycle approach Including all stages of the life cycle, from cradle to grave: 34 Establishing the Methodology Companies shall follow the process life cycle accounting approach Companies shall use an attributional approach to assign life cycle GHG emissions to an individual product system for the purpose of public reporting Companies shall define the unit of analysis as the functional unit of the product 35 Setting theSetting Boundary Key Requirements: the Boundary Processes that are attributable to the function of the product shall be included in the boundary of the product
system Capital equipment shall be included in the product system if deemed significant for the studied product or product sector Significance can be proven using a qualitative or quantitative test. Companies shall conduct a cradle-to-grave assessment for all final products Companies may conduct a cradle-to-gate assessment for intermediate products when the eventual fate of a product is unknown 36 Setting the Boundary Life Cycle Stages 37 Collecting Collecting Data Key Requirements: Data Primary data shall be collected for all processes under the control of the company undertaking the product inventory For all other processes, primary or secondary data of the highest practical
quality shall be collected Data gaps shall be filled using extrapolation or proxy data 38 Data Quality Assessment Key Requirements: Data Quality Assessment A data quality assessment shall be undertaken for all GHG emissions sources that cumulatively sum to 75% of total product emissions For all processes quantified using any primary data, a qualitative data quality assessment shall be undertaken based on technological, temporal and geographical representativeness, completeness, and precision For processes that only use secondary data, the data quality assessment shall be undertaken based on technological, temporal and geographical representativeness 39 Performing Assurance Key Requirements: Assurance The product GHG Inventory
shall be assured The following types of assurance are permissible: First Party (Self or Internal) assurance Third Party (External) process assurance The assurance opinion shall be expressed in the form of either reasonable (high) assurance or limited (moderate) assurance 40 Reporting Reporting Key Requirements: A company shall publicly disclose a GHG inventory report This report is divided into a summary and detailed report to address the needs of different audiences: The summary and detailed reports shall be disclosed together 41
Reporting Key Requirements: Summary Report The summary report shall include: Introduction Process map Results Assurance and data quality information A statement on the use of results e.g., a company will use the results to reduce GHG emissions along the product life cycle 42 Reporting Key Requirements: Detailed Report The detailed report shall include more information on: Sector or product specific data sources used Assumptions and justifications Cradle to Gate Inventories
Temporal Boundary Exclusion of Capital Goods Allocation (performed on data collected under the ownership of the company) Recycling 43 Next Steps 44 Road Testing More than 70 companies currently road testing one or both of the standards Wide range of sizes, sectors, and geographical locations Kick-off meeting: January 21st 2010 Process continues through the end of June Each company will provide detailed feedback and a case study on their experience with the standard 45 Scope 3 Standard Road Testing Companies 3M Company Abengoa
Acer Inc Airbus S.A.S AkzoNobel Alcan Packaging Autodesk, Inc. Baoshan Iron & Steel CO. LTD BASF SE Coca-Cola Erfrischungsgetrnke AG Deutsche Post DHL Deutsche Telekom AG Eclipse Networks (Pty) Ltd. Ford Motor Company US GSA Federal Acquisition Service Hasbro Inc. Hydro Tasmania IBM IKEA Italcementi Group Kraft Foods Levi Strauss & Co. National Grid Natura Cosmticos New Belgium Brewing PE International Pfizer Pinchin Environmental Ltd.
PricewaterhouseCoopers Public Service Enterprise Group, Inc. SAP AG SC Johnson and Son Siemens Suzano Pulp and Paper Swire Beverages UK Highways Agency Veolia Water VT Group Webcor Builders Product Standard Road Testing Companies 3M Company Acer Inc AkzoNobel Alcan Packaging Alcoa Anvil Knitwear, Inc. Baoshan Iron & Steel CO. LTD BASF SE Belkin Belron International Bloomberg LP BT plc CA, Inc. Colors Fruit SA (Pty) Ltd
Deutsche Post DHL Deutsche Telekom AG DuPont Eclipse Networks (Pty) Ltd. Ecolab General Electric Goldn Plump Poultry, LLC US GSA Federal Acquisition Service Italcementi Group JohnsonDiversey Lenovo Levi Strauss & Co. Mitsubishi Chemical Corporation Natura Cosmticos New Belgium Brewing Ningbo Youngor Sunrise Textile Dyeing & Finishing Co., ltd. PepsiCo, Inc. Procter & Gamble Eurocor Rogers Communications Shanghai Zidan Food Packaging and Printing Co., Ltd. Shell International Petroleum Company Ltd Siemens AG Suzano Pulp and Paper Swire Beverages TAL Apparel Limited Tech-Front (Shanghai) Computer Co., Ltd.
/ Quanta Shanghai Manufacturing City Tennant Company Verso Paper Corp. Weyerhaeuser WorldAutoSteel 47 List of Products (to date) 2.5 MW Wind Turbine Food Packaging Product Advanced High Strength Steels Forged Aluminum Wheel AnvilSustainable Transitional Cotton Tee Home insurance Bloomberg Flat Panel Hot rolled coil Bresso Packaged Cream Cheese
Industrial Chemical Calcestruzzo (concrete) Just BARE chicken Chemicals for a T-Shirt Production Magazine Citrus Fruit Exports from South Africa to the UK Men's Levi Jeans Coated Freesheet Paper MPLS (Multi-Protocol Label Switching) network product Coca-Cola Branded Products Non-iron shirt Conserve Smart AV Notebook Computer Cosmetics and soap products
Restaurant Meals Cotton bleached fabric Scotchkote Spray in Place Pipe 269 Coating Desktop Computer SIPROTEC 4 (Universal Differential Protection Relay for Two Line Ends) Detergent T3 with ec-H2O, floor scrubber with chemical free cleaning technology Deutsche Post PLUSPCKCHEN; DHL Express TDI Vehicle windscreen replacement/repair European Disposable Diaper Size 4 Videoconferencing system Fat Tire Amber Ale
Wood Product 48 Finalizing Draft Standards In 2010, WRI and WBCSD, in collaboration with the Steering Committee and Technical Working Groups, will: Revise draft standards based on feedback received during 5 stakeholder workshops and the stakeholder comment period (November 11 December 21, 2009) Revise draft standards based on feedback received during road testing Circulate second drafts for public comment in September 2010 Revise second drafts based on feedback received Finalize text in December 2010 49 GHG Protocol Standards & Publications For copies of any GHG Protocol Publication,
please see: www.ghgprotocol.org For copies of the draft Scope 3 and Product Standards, please see: www.ghgprotocol.org/standards/product-and-sup ply-chain-standard For updates on the standard development process, please join the stakeholder advisory group 50 Thank You Cynthia Cummis [email protected] www.ghgprotocol.org 51 51 Discussion Questions Are any existing programs considering the incorporation of the scope 3 and/or product standard? What are the anticipated challenges to incorporate these standards into your programs? Do you anticipate any new programs or policies being developed once these standards are finalized?
What role can WRI play in the design and implementation of programs/policies based on these new standards? 52
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