Setting the standard for calculating indirect emissions

A group of chemical companies has developed guidance to help industry calculate the cradle-to-gate emissions of the chemical products it purchases. Together for Sustainability – which includes global players – said the ‘first of its kind’ guideline would harmonise product carbon footprint (PCF) calculation approaches across the industry, to provide quality footprint data that are straightforward to compare.

All the processes of raw materials extraction, manufacturing and transport are included in the calculation, although some activites are excluded – such as manufacturing of production equipment or research and development. It also specifies how to assess the use of grid electricity or renewable energy, and the use of biobased materials. Carbon offsets are excluded from footprint calculations.

We are all in the same boat. We all want to fulfil the Paris Climate Agreement and we need to work together

Purchased goods and services typically make up the bulk of a company’s scope 3 emissions – that’s all the indirect emissions in a company’s value chain. Scopes 1 and 2 cover emissions from manufacturing and energy requirements, that companies have direct control over – and one company’s scope 3 will be the scope 1 emissions of another.

In the chemicals sector, scope 3 accounts for over 75% of greenhouse gas emissions, according to non-profit carbon reporting organisation CDP. And companies are under pressure from their customers and investors to tackle these emissions. An analysis carried out last year, by consultant McKinsey, suggests that over $500 billion worth of spending on chemicals and materials is under the microscope. ‘We are all in the same boat. We all want to fulfil the Paris Climate Agreement and we need to work together. But we are also under pressure to show that we [are doing] something and that’s for us as well for our customer industries,’ says Peter Saling, director of sustainability methods at BASF, who led work on the guideline.

But the complexity of chemical supply chains has made obtaining the data for calculating scope 3 emissions very difficult. ‘Without the guideline things are super-complex. I know what a pound is, I know what a dollar is, I know what the Euro is, but the carbon footprint of a product will become as important and I don’t know exactly what it is,’ says Thomas Roemer, chief procurement officer at Covestro.

It took three years to develop the open-source guideline, which was initially intended for the chemical industry and its suppliers, but TfS says it can be used in any industry that purchases chemical products, such as the automotive sector.

A product carbon footprint tells you where the hotspots are in your supply chain, and then you can do something about it

‘The chemical industry is the spider in the web,’ says Roemer. ‘The PCF that the customer sees is built up of each and every production step. And because chemistry is in so many products it is super important that we not only have this harmonised guideline for ourselves and our chemical suppliers… but, ultimately, if our customer industries accept it and take it into their product carbon footprint calculations.’

‘There are some really good standards out there but [when] they apply to everything from tea bags to cars there’s no way you can cover every eventuality, and a lot is open to interpretation,’ says John Newton, chemical and pharmaceutical lead at the Carbon Trust. He describes the TfS guideline as a ‘very thorough initiative. And the fact that it taps into international best practice is really good.’ However, he points out the guideline only deals with measurement, not reduction opportunities.

‘A product carbon footprint tells you where all the hotspots are in your supply chain, or downstream emissions and then you can do something about it,’ he adds. ‘There’s big incentive to deal with those hotspots, because those hotspots also cost companies lots of money.’

BASF and Covestro have both tested the guideline with their suppliers. Roemer cites one example where the carbon footprint increased compared to the data Covestro had, which had been based on an industry average. ‘At first sight, I was a bit disappointed. But you know, at second sight, I’m quite happy, because now we know what we’re working with and what to work on.’ Covestro will not make the guideline mandatory, ‘but we will definitely make this the preferred way to deliver data to us at Covestro,’ he adds. Work will start with products with the biggest greenhouse gas impact.

Suppliers have a reporting file to complete, so purchasers can see the calculations. Later they will be able to get certified against a reporting standard. TfS is working with consultants Deloitte to develop a certification scheme. Guidance will also become available to help companies calculate their own scope 3 greenhouse gas inventories for purchased goods and services, as well as calculating the PCFs of their own products.

Having one recognised standard should make for efficiency gains amongst suppliers who won’t have to make several different calculations for different customers, and that is expected to build momentum. Next year, TfS will launch a market sharing platform for member companies so that suppliers can choose to share data with all customers of the same product.