Value-chain Carbon Accounting – Ford takes lead

Posted on January 18, 2011 by


Worldwide the motor vehicles emit 1 billion tonnes of CO2 annually, 15% of total global carbon emissions. In the United States, the emissions have increased by 28% from 1990 to 2008 –driven by the increased travel and sales mix favoring bigger cars. Rising awareness on climate change and its impacts on business coupled with pressure from investors have led to Ford creating concrete plans to reduce the GHG emissions from its cars. It has started working with its suppliers to take control of its supply chain carbon footprint as it creates internal plan for the GHG mitigation.

GHG mitigation spreads to supply chains as well

Ford plans to survey its top 35 global suppliers on their energy use and greenhouse gas emissions. This is a part of building an understanding of its supply chain’s carbon footprint. This data will be used to create a carbon-management approach for the company. The suppliers represent about 20 billion US dollars spend by Ford on its procurement.  The key to Ford’s actions is that of driving carbon footprint reduction and energy efficiency gains in energy constrained world. The efforts this time will be collaborative and information sharing driven as against individual, stand-alone efforts taken the suppliers. This is bound to put pressure on suppliers that score low on the energy efficiency to internalize and implement best practices from more energy-efficient counterparts. The suppliers in the initial list will include suppliers of energy intensive and therefore high carbon footprint components such as the seats, steering systems, tires and metal components.

Investors in the driving seat

The efforts are in line with Fords stated goal of reducing their greenhouse gas emissions by 30% by 2020 from 2006 baseline. This goal was set in response to the pressure from investors such as Interfaith Center for Corporate Responsibility (ICCR) and Investor Network on Climate Risk Network (INCR). The members of the ICCR include more than 300 religious institutional investors with more than 100 billion US dollars in investments. INCR is a network with members holding more than 5 trillion US dollars in investments.  INCR includes the Connecticut State Treasury office, a shareholder in Ford.

Ford has responded to the investor pressure by creating a fuel emission goal of 30% less emission by 2020 in line and towards the 60-80% reduction by 2050 that Ford intends to implement as a part of US Climate Action Partnership. This partnership includes Chrysler, General Motors and other US companies. Ford has been able to achieve a 39% reduction in GHG emissions from 2000 to 2007.  The difference from the earlier approaches is that of Fords goal this time is very action oriented step as against the earlier norm of agreeing to undertake enhanced reporting and general goal setting without a clear plan in place.

More than just Carbon – it is about costs

There are going to be direct gains for Ford in these efforts. Apart from meeting investor expectations on climate change disclosures, collaborating with suppliers on carbon, energy and therefore cost-saving measures will allow it to put pressure on suppliers for cost reductions as they gain efficiency in their operations, partly assisted by Ford.

Share and Learn

To make this practice more of a norm across the industry, Ford will share the feedback on the data collection process with World Resource Institute and World Business Council for Sustainable Development. Both institutes are leading a global collaboration of businesses, governments and non-governmental organizations to develop credible methods for measuring and reporting corporate greenhouse gas emissions. They are currently drafting a new standard to be used to measure indirect or Scope 3 emissions. In tandem, Ford is participating in the Carbon Disclosure Project Supply Chain Program.

Relevance to Indian Companies

The changes coming up are not a fashion statement, rather signs of the future to come. The pressures on companies and therefore the suppliers will come from carbon, energy and thus cost side.  Companies at all stages of value chain must be prepared for this future.  Having understood ones carbon footprint, components and drivers of it is the first step of preparedness. Even if the operations are not energy efficient at high standards, the organization is aware of the specific areas of interventions.

While building the understanding of its carbon footprint, the organization will get enabled to respond to investor-facing communications, get ready for future regulations that may arise and also find opportunities for reducing carbon emissions that can become carbon credit projects.  With carbon accounting and understanding becoming a market access requirement, there are significantly more long term benefits as against short term costs of carbon accounting and management enablement of an organization.

 

References

  1. www.greenpeace.org – Deep Green: Cars, Corporations and Society
  2. http://www.socialfunds.com/news/article.cgi/2497.html
  3. http://www.iccr.org/news/press_releases/2008/pr_ford04.09.08.htm
  4. http://www.automotive-fleet.com/News/Story/2010/06/Ford-Probes-GHG-Emissions-of-Supply-Chain.aspx?interstitial=1

 

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Posted in: Sustainability