Tuesday, September 1, 2009

Importance of understanding carbon "hot spots" grows

Importance of understanding carbon "hot spots" grows

Carbon emissions from operations (e.g. facilities and company-owned fleet) is usually dwarfed by carbon emission from products (e.g., materials, supply chain logistics and product use). Life cycle assessment (LCA) is a methodology and approach to quantify environmental impacts of a product through its entire life cycle.

While traditionally used by highly technical product specialists and consultants, LCA is becoming more critical as management teams need to understand the key drivers of carbon emissions across all aspects of their organization and to prioritize investments. Sony estimates that 95% of its corporate footprint is from its products post sale and is working to redesign products to use less energy. After a LCA analysis, Pepsi worked with a key supplier to redesign packaging for 2-liter bottles, generating savings for both Pepsi and the supplier. Stonyfield Farm is actively pursuing changes in cow feed after realizing milk production is the dominate part (70-80%) of its carbon footprint. Seventh Generation reported that 90% of its carbon emissions come from materials, ingredients and packaging. Surprisingly, most organizations do not yet know the largest drivers of carbon emissions for their products.

LCA studies, however, are not a panacea and can become expensive. The use of a large number of assumptions and competing methodologies make comparing carbon content of products level across companies problematic.

We are particular fans of "quick estimate" LCAs to educate senior management. Such an analysis is a cost effective way for a firm to identify the major drivers of carbon emissions. Are product raw materials a larger component of carbon emissions than product transportation or facility energy use?

Used prudently, a LCA analysis is a very powerful tool to educate and to help prioritize investments for product and management teams.

New LCA software products emerge

New software products are being introduced which supplement traditional LCA offerings. Traditional vendors have been PE International with its Gabi tool, Pre with SimaPro, and Umberto. New vendors include Climate Earth, Planet Metrics and Sustainable Minds. Other vendors like SAP Impact (formerly Clear Standards) are adding basic LCA capabilities to their products. All these Enterprise Carbon Accounting (ECA) software products help firms quantify carbon emissions. Importantly, efforts are emerging to open up the "black box" of traditional LCA work (Earthster is one effort and WRI's scope 3/supply chain working group is an important initiative to monitor).

No comments: