12 January 2009 00:00 [Source: ICB]
The chemical industry is just starting to wake up to the idea that it can find ways to measure its impact on the environment by measuring its carbon balance
FINANCIAL CRISES and market uncertainty notwithstanding, the impact of industry on the environment remains firmly embedded in both government regulation and customer awareness, and is likely to increase as a factor in business decision-making.
Quite apart from a genuine desire to reduce their carbon footprint, businesses which can demonstrate genuine action in improving the sustainability of their products and processes will have a massive competitive advantage in the future. They will, however, have to be able convince an increasingly knowledgeable and potentially skeptical customer base through comprehensible metrics and proven performance against measurable and challenging targets.
Basic principles in theory are simple - a business wanting to be seen to take action on climate change must understand the impact of its activities on the environment by measuring its carbon footprint. Complication sets in almost immediately, however, as there are a number of ways that a carbon footprint can be calculated, using different tools and methodologies.
One company might include in its calculations those things for which it is directly responsible, such as energy use during manufacture and greenhouse gas emissions caused by logistics and distribution, while another may decide to consider the impact of indirect emissions - sourcing raw materials, transport, or waste disposal. This not only makes it difficult for individual firms to benchmark their performance, it can also lead to inaccurate comparisons between businesses, even within the same sector.
In the absence of a standardized approach, companies wanting to be seen to be green have come up with their own initiatives. German chemical giant BASF has long been perceived by the green lobby as an opponent of much of the legislation affecting the chemical sector, campaigning vigorously during the period leading up to implementation of the EU's Registration, Evaluation, Authorisation and Restriction of Chemicals (Reach) legistlation.
TRUST - BUT VERIFY
In terms of carbon emissions, however, the company has been keen to showcase its eco-friendliness. In early 2008 an extensive end-to-end review of its 2006 operations led to the claim, checked and largely substantiated by Freiburg, Germany-based independent green think-tank Oko-Institut, that favorable environmental impact stemming from the use of BASF products offset the company's hefty 87m tonnes of CO2 equivalent emissions by a factor of three.
Oko-Institut praised the scope of BASF's methodology, which examined the impact of the complete product life cycle from the sourcing of raw materials to end-of-life product disposal. The institute recommended that other companies should consider adopting BASF's approach.
Peter Cartwright, Dow Corning's executive director, environment, health and safety, has examined BASF's carbon balance, and agrees.
"I think their methodology is very sound, and quite conservative." Cartwright says. When BASF's carbon balance was released, Dow Corning was already beginning to consider a full life-cycle analysis for its own products.
"We have our own environmental improvement goals internally, but our products contribute to solving [emissions] problems as well." Cartwright sees the development of comprehensive life cycle analyses as the way forward, allowing companies with a portfolio of energy-saving products to send out the message that not only are they working to cut carbon emissions, but that the world would be a poorer place without BASF's insulation, or Dow Corning's silicon. Cartwright says that at least 35% of projects in Dow's pipeline will deliver direct environmental improvement, with $1bn investment planned for the company's solar silicon technology alone.
Dow Corning's approach, which concentrates on reducing waste, energy and greenhouse gas emissions as an inherent part of its processes rather than a series of "initiatives" has won the company an award from UK consultants Frost and Sullivan. It also gained a place on the Dow Jones Sustainability Index - the first global index tracking the financial performance of leading sustainability-driven companies.
While acknowledging the kudos, and proud of the progress the company has made, Cartwright is well aware of the importance of continuing to be able to demonstrate sustainability to Dow's customer base. "80% of current and potential customers cite sustainability as a key factor," he says, "and for 30% it's an absolutely critical factor in choosing a supplier."
Cartwright would welcome standardized metrics, for the benefit of both customers and businesses themselves. "We need a level playing field. At the moment customers ask about a company's carbon footprint, and the response is "based on which protocol?" We're very aware that we have to be able to absolutely substantiate the data we put out."
And breadth of scope and integrity of data come at a price. BASF's carbon balance won the company the European Responsible Care Award from the European chemical association, CEFIC, and was even given a guarded welcome by nongovernmental organizations (NGOs), but involved detailed analysis of the entire life cycle of 90 products and took over a year to complete. The company intends to keep the analysis up to date, but it will not become an annual report.
The need to "go it alone" not only places a heavy cost and resource burden on individual businesses, it also creates the risk of non-compliance and misreporting, unintentional or otherwise. Without support and clear guidelines, the complexity of the process can be a disincentive for companies to embrace voluntary initiatives, particularly in times when budgets are under pressure.
Despite sustainability's prominent position in many companies' business plans, robust and coherent methodologies for carbon footprinting are still in the early stages, and not yet fully driven by regulation - after all, the implementation of the binding phase of the Kyoto Protocol has only just begun. Mechanisms for monitoring and coordination are still lacking, and the debate continues about whether the scope of such mechanisms should be global, regional or domestic.
The World Resources Institute (WRI) - a US-based independent environmental thinktank - and the World Business Council for Sustainable Development (WBCSD) - a CEO-led knowledge sharing association of some 200 companies worldwide - are continuing to work within the ISO 14064 greenhouse gas protocol on a standard methodology for Scope 3 calculations. ISO 14064 provides tools to government and industry for programmes aimed at cutting greenhouse gas emissions, as well as emissions trading. Scope 3 includes both direct and indirect company emissions - and it's likely that the WBCSD will invite governments to cooperate and assist with funding for further case studies. At this point, though, there is still a lack of data and experience in applying the methodology, particularly when it comes to the impact of product use.
Despite the progress the company has made, when it comes to the viability of a system that is global in scope, BASF's senior corporate relations manager Ingrid Nienaber is doubtful. "Global metrics are possible for production, transportation and disposal,", she says. "The challenge is to calculate emissions over the entire product life cycle. That requires large amounts of data and know-how that is not available in the market. In view of the huge amount of data needed to calculate these balances, the goal of achieving one global standard for all metrics seems unrealistic."
STANDARDIZATION IS KEY
Businesses, their customers, governments and NGOs alike see the need for standardized green metrics. The basic machinery is available, though its uptake would appear to be slowed by a combination of the time and costs involved, and the massive complexity of the data feeds needed to assess accurately the end-to-end operation of a large company.
While the chemical sector is eager to take part, and is beginning to come up with the initiatives to prove it, there's still a long way to go. Despite its positive messages at the 2008 Green Supply Chain Summit in London, UK, last June, Peter Cartwright's presentation concluded with a quotation from Sir Winston Churchill. "This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."
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