Green activists frequently condemned air travel in the late noughties, issuing warnings about CO2 emissions from aircraft and criticising carbon offsets. Companies that wanted to be seen to be doing something about this reduced employee travel and invested in teleconferencing facilities. They were addressing what is known as scope 3, or indirect, emissions. These are the greenhouse gases not emitted on a company’s own premises, nor by its energy supplier, but by third parties like airlines carrying its employees (downstream emissions) or product suppliers (upstream emissions).
In the buildings sector, upstream emissions have become known as embedded (or alternatively, embodied) carbon. One cannot just call a brick a brick — no more, simply, solid oblongs lining a building’s foundations, whose cost is defined primarily by the price of the materials it contains. Increasingly, our notion of materials also embodies a relatively new sustainable management concept — the product life cycle.
But construction companies that have tried to measure embedded carbon often find it difficult, especially as it means extracting information not just from direct suppliers, but from those suppliers’ suppliers.
Or does it? Those addressing this problem have disagreed for years and produced emissions figures that suited them — so avoiding comparison with competitors. Mostly, they have avoided the problem — until two new standards came along.
“There’s not been much reporting of scope 3 emissions, or most people have been focusing on the easy things up until now, like business travel and employee commuting,” comments Cynthia Cummis, senior associate at environmental think-tank the World Resources Institute (WRI) in Washington, DC. The organisation has been leading the development of the standards along with the World Business Council for Sustainable Development (WBCSD).
Published in late 2011, the standards should put the preceding arguments to rest. Known as the GHG (greenhouse gas) Corporate Value Chain (scope 3) standard and the GHG Protocol Product Life Cycle Standard, they address the whole company’s scope 3 emissions (upstream and downstream) and an individual product footprint respectively. Both set out the limits of scope 3: what a company should measure and what it should leave out. Those limits have been thrashed out by hundreds of organisations, which have moulded the standard with WRI and WBCSD over the past few years.
One of the controversies eliminated is the type of supplier that should be included. Some previous efforts to measure the footprint excluded tier two suppliers — companies that supply their suppliers. However, these have now been included. “The bigger impacts could be in tier two rather than tier one [direct suppliers to the company],” points out Cummis.
Other attempts took broad estimates, for instance calculating emissions using a rule of thumb of 80 per cent of procurement spend. Instead, the whole value chain must be disclosed, defined using 15 categories, and any exclusion must be justified. “To calculate 80 per cent, you have to know 100 per cent,” remarks Cummis. Downstream activities are defined as investments, franchises, leased assets, end-of-life treatment of sold products, use and processing of sold products and transportation and distribution. Where a link in the chain is irrelevant to the industry, it is omitted (for instance, franchises are not relevant to all sectors).
Other creases were ironed out. For instance, there were questions on how to account for the GHG impact of capital goods. The final decision was to count the GHG impact of capital goods 100 per cent in the year purchased. The alternative was to use a depreciation approach, as in financial accounting. But the final view was that a depreciation approach for capital goods creates inconsistency with other cope 3 categories where life time emissions are reported in the year the scope 3 activity occurs.
A similar question came up that was particularly relevant to the construction sector: use-phase emissions — those that occur downstream. Building constructors and owners will have different scope 3 emissions, of course, as a construction company’s scope 3 emissions are a building occupier’s scope 1 and 2 emissions. “A developer has less control over use phase emissions, but accounts for it in scope 3 — and they’re a large proportion of emissions,” explains Cummis. The stakeholders involved in developing the standard opted for a similar approach as with capital goods — to estimate use-phase emissions in the year the building is completed.
“It’s more consistent with the rest of the standard and not practical to look at your building stock over each year of its life. A building can last 50 years. How do you calculate the use emissions each year when you have no real relationship with the owner any more?” she asks.
For individual product footprints, a company has to include attributable processes — emissions from energy flows directly linked to the product — while non-attributable processes are optional. These include research and development, sales and marketing and other activities less directly linked to a product.
The building-use aspect of scope 3 emissions is of more relevance to facilities managers than its construction, of course. FMs working for a building occupier that adopted the standards would notice a number of changes. They would need to be aware of, and perhaps engage in, assessment of the product footprint of new fixtures, fittings and retrofit — from new carpets to solar panels. They might also be involved with providing information to a customer that had adopted the standard. Procurement could be affected, for instance managing or investing in teleconferencing facilities could mean reducing some scope 3 emissions by shifting accountability to a company’s own facilities.
Firms Fail to Tackle Supply Chain Carbon
Multinationals are not yet demonstrating significant emissions reductions in their supply chains, according to research published by the Carbon Disclosure Project (CDP). The report on 49 CDP member companies, including L’Oréal, Philips and Walmart, and more than 1,800 of their suppliers revealed that while 43% of responding companies had achieved year-on-year emissions reductions, only 28% of suppliers has done so.
A report, A new era: supplier management in the low-carbon economy, is CDP’s fourth annual global study of the preparedness of company supply chains for climate change impacts. The gulf between company emissions and those of their suppliers exists despite the fact that 39% of responding companies have realised monetary savings from their own emissions reductions activities and over a third (34.5%) of responding companies have benefited from new revenue streams or financial savings as a result of their suppliers’ carbon reduction activities. For more , visit tinyurl.com/cdp-suppliers
If the supply chain emissions measurement and management procedure seems complex, that is not always the claim of the managers that have tested it. “It’s not really rocket science to get scope 3 reported for direct suppliers. If you go further down, it gets complicated — then I’d foresee it’s quite a challenge. We often get the feedback that other companies do not really have that kind of data. Verification is also an issue,” observes Thomas Schaefer, sustainability manager for furniture retailer Ikea, which has 1000 suppliers. Ikea has not as yet decided to adopt the scope 3 GHG Protocol standards, perhaps for a simple reason — it already has its own code of conduct, called Iway, which relates only to direct suppliers.
British Land has also carried out a good deal of work on the issue, finding that the embodied carbon footprint of the company’s property portfolio for 2011/12 will be 190,800 tonnes of C02e — greater than the annual emissions from all the energy sources measured across the portfolio.
Having conducted a similar assessment of one of its buildings, Ropemaker Place in London EC1, it found the embodied carbon amounted to 82,263 C02e, with raw materials representing the main carbon impact (51 per cent) followed by maintenance (39 per cent). “Embodied carbon is 40-50 per cent of a building’s 60 year life,” points out Sarah Cary, sustainable developments executive at British Land.
If building performance improves, that ratio may change, and the embodied carbon may proportionally increase. Chris Erickson, president and chief executive of consulting and research company Climate Earth, worked with a US property developer, Webcor, to analyse a year’s worth of building projects as part of the pilot study run by the WRI to develop the GHG Protocol standard.
Some of their findings surprised them, in particular the assumption that the energy used and greenhouse gas emitted during a building’s 50-year life are greater than those embedded in its fabric. They concluded instead that, as regulations drive greater energy efficiency during a building’s use, the embedded carbon rises as a proportion of its total emissions.
As a result of this phenomenon, they found the proportion changed: “greenhouse gas emitted to construct buildings becomes a higher proportion of total emissions. It was 12-15 per cent 20 years ago because [operational] energy consumption was so high. Now in the first 20 years of a building’s life, the number rises to the order of 50 per cent,” remarks Chris Erickson. This has prompted the two companies to increase their focus on scope 3 emissions.
Since one company’s indirect emissions is another company’s direct emissions, it seems fair to ask why one should not simply ensure everyone measures their own direct emissions. One answer to that could be the increased resulting awareness of the environmental life cycle, which helps promote sustainable practice particularly in industries with long, global supply chains. Another could be that collaboration on this issue may itself push change.
According to Sarah Cary, British Land places particular demands on its building occupiers. “From a facilities manager’s perspective, big companies like us are trying to look at things responsibly. All facilities managers we work with know we have a stringent set of actions and policies,” she states. British Land, she says, wants to adopt the GHG Protocol scope 3 standard. “It’s not that far off, and it’s something we’d like to do.”
Webcor takes a similar view, and believes adopting the standard will influence one of its glass suppliers.
The GHG Protocol scope 3 standards might not be the only ones of its kind to emerge and are perhaps best viewed as umbrella standards as they cover a range of sectors. However, the WRI says it may be developing sector specific guidelines for the complex and energy intensive buildings sector.
There are reasons to take note of the standard — the organisations involved (WRI and WBCSD) have already influenced carbon disclosure in large companies. WRI data indicates that over 85 per cent of respondents to a 2010 survey of 2487 companies participating in the Carbon Disclosure Project (CDP — a major blue chip disclosure campaign) either directly used GHG Protocol scope 1 and 2 standards or used them through their participation in a climate change programme that used GHG Protocol. In other words, they have made people sit up and listen.
