Supply Chain Carbon Emissions
How much carbon is emitted not by yourselves, but by the people you buy goods and services from?
It’s a big topic, there are some shortcuts and there are some quick ways of calculating supply chain carbon emissions. So, what is it? How do you work it out? Let’s give it a pop.
There are different ways of doing it, you can do it broadly or more accurately. If you want to do it broadly, you can do a cost base analysis, you just need to analyse what you buy and how much you spend with each supplier. This is relatively fast to do and gives you a pretty good result. However, if you want to analyse it accurately, you will need to do it activity-based. This is harder and it takes a bit more work.
How can I analyse my Supply Chain Carbon Emissions?
Here’s an example of a cost base supplier analysis.
Let’s take British Airways as our example. In 2019, British Airways generated 18.38 million tons of CO2 and the turnover was 13 billion. So what you can say for British Airways is that for every pound that you spend with them, they generated 1.38 kg of CO2. Therefore, if you have got £1.37 million of expenditure with British Airways in 2019, your footprint for that spin with British Airways was 1.831 tons of CO2. So that’s how a supply chain cost-based carbon analysis works. You will need to break it down into suppliers. So basically what you will be doing is saying: “We took this much of there, we provided this much of their revenue and therefore we get allocated this much of their carbon emissions.”
How can I calculate the carbon emissions?
If you are wondering where did I get those metrics from? How much CO2 was generated per pound? The answer is carbon intensity also known as EEIOs, so extended economic input-output factors. You can get databases of them or you can just look them up individually. You can look them up in three different ways.
- Using a general figure for the sector. Those averages have been produced by a couple of governments worldwide.
- Using a figure for a specific supplier. So in our case, for example, we will be looking up for British Airways figure.
- Using a figure for a specific product. You can look up the carbon footprint of your typical chair or laptops, etcetera. You can find this information at the International Carbon Register (ICR).
Real-life Example
So let’s take a look then at a real-life sort of supply chain analysis. And this is a Plato, this is our test account is the good old-fashioned We Care PLC, which is my test account. Which you would have seen on many of these videos. And this module here is looking at the supply chain.
To watch how a real-life Supply Chain analysis is done, watch the video.
When doing Supply Chain analysis we recommend you divide the workload over time, otherwise, it might be too complicated and time-consuming. So what you can do is you can analyse your Tier one suppliers’ emissions during year one. What we mean by Tier one supplier, or as I said, we just check the top 25 by spend, that’s perfectly fine. So, what you might say is within year one, we’re going to do the top 25 by expenditure. In year two, we’re going to do the top 50 byexpenditure. Year three we’re going to do the top 100, whether it’s going to be by expenditure. Or you could do it by materiality. You might say a sheet, you know, we know that we buy steel or by cement, and both of those are notably high carbon content materials. But there’s no hard and fast definition, of what a tier one and tier two supplier is. To start with strongly recommend, analysing your top 25 suppliers.
This is just a summary for you of supply chain carbon emissions. I hope that was useful. We published the video with a real-life example and some more information. If you get any questions is a big topic, certainly a very big topic, but if you get any questions, let me know. And I will do my best to sort of work through them. And if they think they’re suitable for a video, we will do a video on it. If the questions are good, we will do a video on it as well. Okay, so there you go. Hope you like that.
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If you need professional help to analyse your Supply Chain carbon emissions, Enistic offers you a safe pair of hands. Contact us and let us sort it out for you today.
