Last week’s Rio+20 conference failed to yield strong sustainability commitments from corporations. As Manish Bapna, interim president of the World Resources Institute (WRI) stated earlier this week, companies in Rio didn’t “grasp the fundamental recognition that the planet is on an unsustainable course and the window for action is closing.” The gap between where we need to get to avoid climate change’s worst effects and the actions companies are willing to take to get us there have never been further apart. While governments have an important role to play in setting policies to reduce emissions, legislation on its own will never be enough to put us on a development trajectory that is sustainable. Leadership from business is urgently needed.
So the big question is: How do we get bolder climate change action from companies?
What Are Value Chain Emissions?
In this standard, “value chain” refers to all of the upstream and downstream activities associated with the operations of the reporting company, including the use of sold products by consumers and the end-of-life treatment of sold products after consumer use. For example, looking at a retailer’s value chain emissions associated with sold milk would include methane emissions from cows, producing and transporting the milk, as well as disposal.
To that end, Greenhouse Gas Protocol (GHG Protocol) recently published two new standards, the Corporate Value Chain (Scope 3) and the Product Life Cycle Standards, which both support companies in taking ambitious action on climate change. These accounting and reporting standards move companies to take a more holistic, full value chain approach to managing GHG emissions, assessing emissions' impacts all the way upstream and downstream of their operations.
Using New Standards to Measure Companies’ Value Chain GHG Emissions
At a WRI-hosted event in Rio last week, GHG Protocol released a new video about the benefits of the Scope 3 and Product Standards. In the film, executives from companies such as PepsiCo, BASF, and Tesco discuss the important role the standards play in revealing new opportunities for GHG reductions. The GHG Protocol’s new standards also help businesses identify innovative solutions, collaborate with suppliers and customers, and focus a company’s efforts in the right places to efficiently reduce emissions and drive business value.
Taking a Value Chain Approach
Due to their global and complex nature, it’s challenging to develop policies to address value chain emissions. However, there are many reasons why companies should take a full value chain approach to measuring, managing, and reducing emissions even without government mandates. The majority of many companies’ emissions occur outside their own operations. Looking at the inventory results from businesses who road tested the draft version of the Scope 3 Standard, on average, 79 percent of their emissions occurred in the value chain. If companies only address emissions within their own operations, they miss significant opportunities to reduce GHGs, address value chain risks, and position operations, products, and services to be more competitive in carbon- and resource-constrained markets of the future.
Now is the time to redefine corporate leadership on climate change—before it’s too late. Companies have the potential to be the source of the innovation that solves the climate challenge. Tools like the Scope 3 and Product standards can help them be more strategic in where they apply that innovation in order to achieve large-scale GHG emissions reductions.
Read the full versions of our Scope 3 Accounting and Reporting Standard and Product Life Cycle Accounting and Reporting Standard. More information about GHG Protocol's value chain work is available here and here.