As climate change continues intensifying with 11 of the 12 warmest years on record occurring since 2006 (see Figure 1 below), curbing emissions has become an urgent priority for policymakers. Recent agreements like the Paris Climate Accords have galvanized government action worldwide to limit global warming within 1.5°C threshold before catastrophic impacts ensue. Achieving these reduction goals requires decarbonizing every segment of the economy – with the onus increasingly falling on businesses to account for and optimize their carbon outputs.
Figure 1: Rising Annual Global Surface Temperatures
Source: Climate Levels
In this context, measuring product level emissions has become an essential first step for corporations to benchmark environmental footprints and identity decarbonization opportunities. Let‘s examine why understanding product carbon footprint (PCF) has assumed great urgency in 2024.
Tightening Regulations Around Carbon Reporting
Governments globally are enacting sweeping policies, mandates and standards aimed at accelerating emissions cuts – with major implications for business carbon accounting. For example, the EU‘s Corporate Sustainability Reporting Directive (CSRD) will require lifecycle carbon disclosures from over 50,000 EU firms exceeding 250 employees, €40M+ revenue or €20M+ assets starting 2023. Specifically, the EU CSRD calls for:
- Reporting on all material emissions across GHGP Protocol Scopes 1, 2 & 3
- Mandatory independent assurance of reported data
- Detailed discloure of Scope 3 supply chain impacts
Stringent carbon border taxes will also apply to imports into the EU based on product-level lifecycle emissions. Countries like the UK, Switzerland, Japan and others are enacting similar compulsory environmental disclosure and carbon labeling legislation as well.
Such sweeping regulations make assessing product carbon footprints unavoidable for businesses exporting/operating in these geographies. By quantifying total emissions early, companies can pre-empt compliance burdens, anticipate & adapt to market changes, avoid greenwashing fines and unlock first-mover advantages.
Surging Consumer Climate Consciousness
Today‘s consumers also increasingly demand climate accountability before making purchasing decisions. Recent surveys indicate 34% of shoppers now willing to pay premiums for sustainable offerings – an 85% increase from just 5 years back. Younger demographics like Millenials and Gen Z care especially deeply about ‘green‘ credentials.
To appeal to ecologically minded buyers, brands like Unilever, Oatly and H&M actively quantify and declare product carbon profiles via dedicated eco-labels (see Figure 2). Such verified impact figures help shoppers make informed, ethical choices while enabling brands to charge sustainability-driven premiums.
Figure 2: Product Carbon Footprint Labeling by Consumer Brands
_Source: Lovetoknow.com_
With customers increasingly ‘voting with their wallets‘ for organizational transparency around supply chain footprints, PCF quantification has become indispensable for capturing market share.
Surging Investor Preferences for Low Emission Offerings
In financial markets as well, environmental considerations today outweigh pure profit motives for capital allocation decisions. Investor groups managing over $120 trillion in assets have pledged support for standardized carbon accounting and science-based emissions cuts via initiatives like the Net Zero Asset Managers Initiative.
Asset managers like Blackrock are also developing proprietary models to steer portfolios toward net zero pathways – creating attractive tailwinds for low carbon brands. A Bank of America report finds that 90% of millenial investors in the US, UK, Japan have already purchased ESG investment funds, dwarfing participation from older cohorts.
With both present and future capital concentrated strongly preferring ethical and ecologically-conscious holdings, quantifying product emissions offers brands clearly observable upside in raising funding or optimizing valuations from investors focused on climate risk mitigation.
Top Sources of Product Carbon Emissions
To reorient business practices toward decarbonization, identifying the highest sources of product GHG outputs is essential. Research by global non-profit CDP in 2022 surveyed over 680 leading corporations representing over $3.5T in market capitalization to compile the below emissions hotspots tally across industries (see Figure 3):
Figure 3: Scope 3 Supply Chain Emissions Breakdown by Sector
| Industry | Top GHG Generator | Contribution |
|---|---|---|
| Technology | Purchased Goods & Services | 75% |
| Healthcare | Purchased Goods & Services | 28% |
| Financials | Investments | 49% |
| Materials | Processing/Manufacturing | 38% |
| Fossil Fuels | Use of Sold Products | 79% |
_Source: CDP Global Supply Chain Report 2022_
The above results highlight that upstream supply chain activities including parts/input materials production, manufacturing and distribution account for the lion‘s share of corporate carbon impacts across sectors. This Scope 3 footprint outside direct business operations often constitutes 5.5x more emissions than company facilities. Tracking PCF thus requires a total value chain approach spanning sourcing, logistics partners and other third parties.
Let us explore solutions enabling robust product-level carbon monitoring across complex multi-tier supply webs.
Enabling Technologies for Product Carbon Management
While collecting reliable emissions traces across proliferating upstream suppliers appears highly intricate, latest technologies like IoT sensors, blockchain verification and LCA automation software can seamlessly facilitate footprint data monitoring, analysis and control.
IoT-based Emissions Tracking
In supply chain settings, internet-of-things (IoT) enabled sensors can provide 24/7 telemetry on material flows, ambient conditions and equipment efficiency for far-flung production sites. IoT integration allows capturing of real-time energy, water and waste usage metrics into cloud analytics platforms to calculate supplier carbon intensities. Unilever, Walmart and Amazon leverage similar sensor networks on scales that generate over 10 TB of daily emissions data that can rapidly highlight reduction opportunities anywhere across operations.
Blockchain-based Supply Chain Traceability
By registering key product attributes like origins, ingredients and transportation modes to encrypted, shared ledgers across all supply network partners, blockchain platforms deliver fully tamper-proof sustainability audit trails from end-to-end. This prevents greenwashing via false disclosures and gives assurances to stakeholders that carbon-labeling is wholly legitimate. Food CPG leaders like Nestle and apparel giants H&M have adopted blockchain-based product carbon tracking with resounding transparency improvements.
LCA Software for Automated Footprint Analysis
Specialized Lifecycle Assessment tools like SimaPro, OpenLCA and others integrate inputs like energy profiles, transport modes and technology usage to model ‘cradle-to-grave‘ emissions for products via customized algorithms. In-built databases containing accurate emissions factors for virtually any component or process allows easy computation of carbon inventories across thousands of stock keeping units. PepsiCo, L‘Oreal and others leverage LCA systems to maintain fully digital Product Environmental Profiles accessible enterprise-wide to optimize formulations, packaging etc..
Above solutions demonstrate that while product carbon mapping appears highly complex, latest tools can shift footprinting from theoretical ambition to practical reality for enterprises worldwide. Let us examine real-world case studies that epitomize this transformation.
Industry Examples of Product Carbon Management
Leading brands across sectors have piloted holistic product carbon measurement and mitigation strategies with remarkable emissions reductions and commercial upside.
Fashion: H&M Supply Chain Decarbonization
Sweden fast fashion giant H&M has committed to ambitious 50% supply chain emission decrease by 2030. Beyond its global retail footprint spanning 70+ markets, H&M relies on a sprawling upstream network of ~800 tier 1 factories and ~20,000 tier 2 textile suppliers that require emissions coordination. To this end, H&M has implemented a 4 step approach:
1) PCF Tracking: Deployed Higg Index surveys to capture self-reported emissions from all tier 1 and 2 partners
2) Supplier Incentives: Provided grants for efficiency equipment upgrades, renewable energy projects etc. to capacity build manufacturing units
3) Blockchain Traceability: Piloted using blockchain ledger based verification of sustainable fibers like recycled cotton, renewable viscose across procurement orders
4) Aggressive Internal Reductions: Increased proportion of renewable energy for own operations to 99% while optimizing material utilization, warehouse utilization etc. to lower Scope 1 & 2 impacts
Through above steps emphasizing partnerships, innovation and transparency, H&M has reduced supply chain intensity by ~20% while saving nearly 3 million tons of CO2eq emissions over the past 5 years.
Food & Beverages: Nestlé Product Water Footprinting
Nestlé‘s Product Environmental Footprinting (PEF) program quantifies GHG emissions, water usage and land impacts for all CPG offerings with insights applied to guide eco-design decisions. Expanding this initiative across Nestlé‘s 2000+ product portfolio has realized major resource conservation benefits:
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>60%: Products displaying improved water efficiency
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3.2 million: Metric tonnes of product CO2 emissions eliminated since 2015
A follow-on 2022 commitment extends PEF assessments to entire value chains to incentivize upstream agriculture producers, packaging vendors etc. to further lower supply side environmental loads.
Automotive – Volvo Carbon Neutral Car Production
Volvo Cars seeks realizing ‘cradle-to-grave’ carbon neutrality for next-gen vehicles by offsetting all material extraction, manufacturing, customer usage and eventual recycling burdens. Acknowledging the complexity of tracking multiple tier supply sources, Volvo has created easily deployable toolkits for vendors to self-assess impacts. Upstream partners enter activity data like parts weights, annual production volumes, energy sources etc. into Volvo‘s calculators that apply pre-loaded emissions factors to determine carbon loads. Such quantification forms the basis of reduction roadmaps that Volvo co-creates along with financial incentives offered to suppliers lowering their CO2 outputs year-on-year. Via this collaborative approach, Volvo has curbed manufacturing emissions intensity by ~25% while boosting supply chain visibility.
Above examples validate that robust product carbon accounting unlocks a multitude of value drivers for enterprises including lowered costs, future-proofed operations, investor appeal and positive brand equity with end consumers.
For any organization seeking to embark on decarbonization initiatives, measuring current product footprints constitutes the indispensable starting point. Partnering with expert consultants can further smooth and accelerate this transition for maximal commercial and environmental upside.