Companies are increasingly cognisant of the need to understand carbon emissions throughout their entire value chain. Not only does it make them more attractive to an increasingly discerning consumer, it invariably creates a more efficient and cost-effective business model.
While calculating carbon emissions can be complicated, there are various tools available that make the process easier for companies with complex value chains. One of these is the Greenhouse Gas Protocol, which offers standardised frameworks by which organisations can measure and manage greenhouse gas emissions. Scope 1 includes all direct emissions from the activities of an organisation or under their control, while Scope 2 comprises indirect emissions from electricity purchased and used by the organisation.
Scope 3, for most companies, is more difficult to pin down. Covering all other indirect emissions related to the activities of an organisation but from sources that they do not own or control, these are usually the greatest share of the carbon footprint.
The buildings and construction sector accounted for 39 per cent of energy and process-related carbon dioxide (CO2) emissions in 2018. Wayne Metcalfe, Director of Quality, Safety and Sustainability at construction group Sisk, says their use of diesel in mechanical appliances and equipment as well as company fleets is "by far" the biggest problem area in terms of emissions. "This is a challenge shared by every other construction company," he notes.
Sisk begun formally accounting for their carbon emissions in 2017 – including scope 1, scope 2 and the parts of scope 3 that they have “immediate influence” over, Metcalfe explains, but as he further outlines, this only gets them so far.
“That’s all well and good but the next challenge for the industry is how do we consistently account for the rest of the scope 3 emissions? How do we do that in a coordinated fashion to make sure that it’s not accounted for by several individual organisations so that the message gets lost and gets messy? That’s one of the biggest difficulties we face over the next few years, to find an industry-wide approach to the more challenging elements of scope 3.”
Technology helps; Sisk has started to focus “more intently” on more efficient forms of equipment, going electric where they can. All this makes a difference but as Metcalfe explains, the plan to reduce emission by another 40 per cent in the next three years will require an even greater effort. “We have picked the low-hanging fruit so to speak, and it will get incrementally harder as each year passes to make those savings. We will get to a point where we have done as much as we can as an individual organisation, and the things that we will want to start targeting will need a more collective approach.”
Dr Hakan Karaosman, principal researcher at the Fashion’s Responsible Supply Chain Hub in the UCD College of Business says the fashion industry is a significant contributor to climate change.
...Fashion supply chains are complex, dispersed and fragmented as well as being "notoriously secretive"
“In terms of carbon emissions, the global fashion industry, which is valued at more than €1 trillion, generates more than 1.7 billion tonnes of CO2 annually, which accounts for roughly 10 per cent of global carbon emissions,” he says.
Addressing this is not straightforward – Karaosman points out that fashion supply chains are complex, dispersed and fragmented as well as being “notoriously secretive”. While the majority of carbon emissions is generated at the lower tier supply chain stages where raw materials are produced and processed, the fashion industry also has significant indirect emissions at upstream and downstream levels.
“It is, therefore, fundamental to set scientific targets and undertake transformative actions to reduce supply chain related emissions. Fashion brands should robustly map and analyse their supply landscape and then they should engage with their supply chain partners for radical actions toward decarbonisation,” he explains.
As an industry, fashion has been notoriously slow to address its poor environmental profile. Even with the broader shift towards sustainability in recent years, Karaosman says that “fashion fails to comprehend the dynamic and paradoxical nature of sustainability” and he criticises the lack of transparency among those that appear to be more sustainable than others. He also notes that Covid-19 has exacerbated the problems and inequalities in and across fashion value chains.
“This year has been a monumental reference because fashion’s dirty secrets have been exposed. Consumers are more concerned and aware than before, and that they are using their use and collective power to demand transparency and justice for everyone. We should separate companies that do marketing-driven lip-service from those that work with their supply chain partners to set targets, measure, reduce and disclose their performance. We absolutely need evidence to understand how some companies are walking the walk while some others are being only ‘less unsustainable’.”
According to Russell Smyth, partner with KPMG Sustainable Futures, a recent KPMG survey found that 56 per cent of the top 250 global companies now recognise and accept that climate change poses a financial risk to their business.
“With carbon being one of the key climate change metrics, and 46 per cent of the largest global companies having already committed to a net zero or similar target, having a detailed understanding of carbon emissions across the entire business is becoming business critical information,” he explains.
Closer to home, the Irish government has communicated a clear carbon price trajectory of €100 per tonne by 2030. This means Irish businesses need to understand and start mitigating their exposure now, Smyth warns. It also makes good business sense, he adds.
“Suppliers’ carbon management performance is increasingly included as part of tenders/contracts evaluations, while corporate customers are undertaking audits of supplier reporting on carbon emissions. Those suppliers unable to demonstrate alignment with a customer’s carbon trajectory risk losing business.”
KPMG are walking the walk on this – it was the first professional services firm in Ireland to achieve carbon neutral status in January 2007, and since 2009 it has reduced its Scope 1 and Scope 2 emissions by 42 per cent. In November, it announced its intention to achieve net zero globally by 2030, including the use of 100 per cent renewable electricity by 2030. Smyth adds: “We will also be offsetting any remaining greenhouse gas emissions through externally accredited voluntary carbon offsets to mitigate the remainder we cannot remove from our operations and supply chain.”