In a chemicals business that demands precision, one in which innovation and profitability hinge on closely managing every molecule, there is no room for blind spots. Which is why, amid a global push for greenhouse gas emission reductions and more responsible resource stewardship, there is much at stake for chemical manufacturers to improve how they manage the carbon footprint associated with their products.
Some of the industry’s largest global players already are taking decisive steps in that direction. One is BASF, which is seeking broad chemical and process industry buy-in for a digital methodology that it developed to calculate product carbon footprint (PCF) from cradle to gate. PCF measures the specific amount of greenhouse gas (GHG) emissions associated with a product throughout its lifecycle. BASF’s Strategic CO2 Transparency Tool, or SCOTT, is designed to determine PCFs at scale according to a consistent ISO-compliant methodology. The company is using SCOTT to calculate GHG emissions for some 45,000 of its products, and also has begun licensing the methodology out to third parties, including software developers, with the goal of getting other players in the chemicals business to use it.
Why seek a common PCF standard now? The primary driver is the chemical industry’s status as a major global GHG emitter and energy consumer. What is more, because chemical products impact the vast majority of industrial value chains, there is a growing recognition among chemical companies themselves — as well as government policymakers and regulators — that they can and should be catalysts to carbon-reduction, in their own operations as well as upstream, with their suppliers, and, of course, in downstream value chains. Not only are investors and customers along the value chain demanding that the companies that manufacture the chemicals in their products provide carbon footprint disclosures and make GHG-reduction commitments, regulators in markets around the world are imposing carbon policies like the European Union’s still-formative CBAM carbon tariff proposal.
And there is another incentive for chemical companies to carve out a catalyst’s role in carbon reduction: Doing so can be an important, marketable differentiator for a company and its brand.
Stepping into that role, and leveraging the potential competitive edge it provides, begins with strong carbon footprint measurement practices, developed by focusing on these three areas:
1. Ensuring full visibility into, and transparency of, carbon footprint across the value chain.
It has never been more important for companies to see the complete picture: the Scope 1, 2 and 3 emissions associated with each product, including their own emissions and energy consumption along with the resources that were consumed in making and transporting them. To get there, they must gain a clear line of sight not only into their own operations, but beyond company walls. That, in turn, will enable them to steer their product portfolios based on PCF, offering customers the kinds of products they need to lower their carbon footprints and meet decarbonization regulations and goals.
Improving visibility into the carbon footprint of the raw materials used in production and of logistics partners is vital to PCF calculation, so upstream energy producers and logistics providers should be integrally involved in the PCF effort to ensure that they, too, can provide trusted, reportable and auditable data. BASF is doing exactly that with its Supplier CO2 Management Program, which it says is designed to “create transparency on the PCFs of its raw materials.”
2. Evaluating and embracing a common, consistent standard in determining product carbon footprint.
While the outcome of efforts by BASF and others to establish a uniform, industry-wide framework for carbon accounting and PCF remains to be seen, one thing is certain: Having a transparent, widely accepted and compliant standard for quickly and accurately determining PCFs at scale is a must, and companies across the industry are open to using such a standard. However, reaching consensus on a standard will require chemical industry stakeholders to find common ground on some big fundamental questions. Is it most viable to measure PCF cradle-to-gate, or should it be cradle-to-cradle to accommodate the emergence of circular products? What syntax and semantics will the standard use for data exchange across a value chain? And what kind of technology — blockchain, for example — will be most practical for ensuring the secure exchange of data?
However the standardization effort unfolds, chemical companies will need the ability to collect, onboard and standardize data from distributed, non-standardized sources so that it is reliable, reportable and auditable.
Arriving at an industry-wide PCF standard is vital to the overall GHG reduction effort, because it will help companies:
- Shape their product portfolios with carbon-reduction as a top priority.
- Meet compliance requirements.
- Use positive PCF performance in their marketing claims.
- Account for PCF in evaluating supply chain partners.
- Lay the groundwork for engaging with other parts of the value chain to collaboratively explore and develop new, lower-carbon products and processes.
“Tangible, universally accepted metrics that quantify, validate and incentivize innovative approaches to carbon dioxide reduction and removal across the full product life cycle are essential to our ability as a society to protect our climate… [and] would support consistent policies across nations, markets and jurisdictions and incentivize companies and innovators to collect this value to further accelerate the investment in and deployment of new products and technologies to achieve net-zero emissions,” said Kevin Kolevar, vice president for global government affairs and public policy at Dow. The company is supporting a carbon accounting initiative launched last year by Columbia University’s Center on Global Energy Policy.
3. Modernizing processes and practices to support PCF standards and sustainability-related analytics, and integrating them across the business.
There are indications of a shift in the chemicals industry away from traditional life-cycle-analysis approaches to calculating carbon footprint, to a natural resource accounting approach that relies less on theoretical data from laboratory simulations and more on actual natural resource consumption data tied to specific activities, processes and products. Essentially what we are talking about here is adding a new dimension to enterprise resource planning (ERP), one that works much like conventional cost accounting, but uses CO2 equivalent as its unit of measure. This approach is highly promising for its ability to give companies a more exact read on the footprint associated with specific products.
To transition to this approach, chemical companies need an ERP system that is flexible and powerful enough to embed natural resource accounting, along with analytics geared to PCF metrics, across the business, so every aspect of the enterprise — from procurement to the lab to production to logistics — is working toward the same carbon-reduction goals.
Marko Lange is product manager for the SAP Chemical solution and has been working at SAP for more than 20 years in various functions, but always with reference to the chemical and pharmaceutical industry. His current focus is on Industry 4.0 and sustainability as well as the use of intelligent technologies in the chemical industry. He holds a degree in industrial engineering — technical chemistry and a doctorate in economics.