Published: May 2011
Driven by increasing concern and awareness of climate change, regulators, procurers and consumers of goods and services now expect businesses and suppliers to demonstrably and transparently reduce and communicate the greenhouse gas (GHG) impacts of their operations and products.
In recognition of these trends, this study into carbon measurement by businesses was commissioned by intertradeireland to assess the risks and opportunities for businesses in Ireland and Northern Ireland arising from increasing stakeholder and market requirements for business-related GHG information. Invest Northern Ireland and Enterprise Ireland provided their expertise on the steering group.
The study was undertaken through direct engagement with businesses in Ireland and Northern Ireland, underpinned by a comprehensive and international review of methodological and market developments in carbon measurement.
The outcomes of the study show that some businesses – particularly larger business in Ireland and Northern Ireland - are responding to market pressure to measure and report organisational carbon footprint. However, there are significant gaps in the application and understanding of product carbon measurement amongst all businesses.
Small businesses are unique in that they face challenges both with organisational and product carbon measurement.
Notably, many companies that are under direct market pressure to measure their carbon impacts do not currently do so.
This puts these companies at risk of noncompliance with the requirements of their supply chain partners and customers.
Generally, small enterprises are least equipped to measure and report their carbon impacts, and are therefore at greatest risk of non-compliance. The majority of these companies indicated that the lack of internal skills and resources combined with a lack of systems to collect the requisite data presented challenges and barriers to carbon measurement.
The rates of application and understanding of product carbon measurement methodologies were low amongst businesses of all sizes and from all sectors. Participating companies indicated they face challenges arising from inadequate internal capacity and skills and inadequate systems for collecting life cycle data. Only a minority of respondents cited the lack of accessible and easy to use guidance as a barrier, which is likely to be due to the fact that many companies were unaware that product carbon measurement is done on a life cycle basis and is therefore more complex than organisational carbon measurement.
Methodological and market trends in carbon measurement
The measurement of greenhouse gas emissions, commonly referred to as ‘carbon footprinting’, can be undertaken both at the organisational level - to assess emissions associated with management, business and operational activities; and at the product level - to assess greenhouse gas emissions over the life cycle of a product or service.
Organisational carbon footprinting is relatively well established methodologically and in practice.
This is largely due to the pioneering work of the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), who published the Greenhouse Gas Protocol (Corporate) standard in 2001.
The maturity of organisational carbon measurement is also reflected in the fact that an international standard for corporate carbon measurement - ISO 14064-1,was published in 2006. ISO 14064-1 is fundamentally based on the GHG protocol corporate standard, but is more stringent in its requirements.
The methodologies for product carbon measurement, on the other hand, have only been recently developed and indeed, are still being refined.
PAS 2050, developed in 2008 by BSI British Standards and co-sponsored by the Carbon Trust and the UK Department for the Environment, Food and Rural Affairs (DEFRA), was the first (and is still the only) fully developed methodology for measuring and reporting greenhouse emissions over the life cycle of a product or service.
Building on PAS 2050, two standards for measuring product emissions are currently in development. The GHG Protocol (Product) Standard, which is being developed by WRI and WBCSD, is due for publication in December 2010. ISO 14067, which is being developed by the International Organisation for Standardisation, is due for publication in March 2011.
Also associated with product carbon measurement is the growing interest in product carbon labelling. A carbon label depicts the life cycle GHG impacts of a product or service, which a customer can then consider in making a purchasing decision.
Some retailers, e.g., Tesco, Groupe Casino, Walmart and Migros, and other providers
of goods and services have made varying public commitments to adopting product carbon labels.
Also worthy of note is the fact that with passage of the ‘Grenelle 2’ act in June 2010, France became the first country to introduce legislation mandating the carbon labelling of both domestic and imported products.
Carbon measurement activities amongst businesses in Ireland and Northern Ireland
The response of businesses in Ireland and Northern Ireland to the growing requirements for business-related GHG information has been varied. Many (although not all) larger business are measuring their organisational carbon footprint.
There are however, significant gaps in product carbon measurement amongst all businesses. Small enterprises are unique in that they face particular challenges and barriers in measuring both organisational and product carbon footprint.
Organisational carbon measurement activity amongst participating businesses
32% of all companies that participated in the study indicated that they currently measure the carbon footprint of their organisations. The vast majority of these companies, i.e., 85%, were medium sized and large enterprises. Indeed, 58% of medium sized and large enterprises that participated in the study currently measure their organisational carbon footprint; compared to only 15% of small and micro enterprises.
The current lack of organisational carbon measurement activity amongst smaller businesses presents some risks. In particular, 27% of small and micro enterprises that participated in the study indicated that they are coming under direct pressure from their customers and supply chain partners to measure and report organisational carbon footprint. Therefore, at least 12% of these companies are not currently meeting the requirements of their customers and supply chain partners.
Product carbon measurement activity amongst participating businesses
Whilst aware of the existence of product carbon footprinting as a business practice, many businesses were unaware that product carbon measurement considers life cycle
As such, 13% of all respondents initially indicated that they measure the carbon footprint of products and services.
Of these, 12% stated that they use no formal methods at all to measure their product carbon footprint. A further 48% indicated that they use ‘other’ approaches. However, none of the ‘other’ approaches listed were recognised as being published or formal approaches for the measurement of product life cycle GHG emissions.
Given the complexity of product carbon footprinting and the importance of robustness for benchmarking products’ carbon performance, the lack of an underpinning methodology is a serious shortcoming.
In follow-up engagement, many of these respondents indicated that they had responded positively to the question about product carbon measurement because they measure the emissions arising from on-site production processes. In fact, the additional engagement revealed that those respondents who indicated that they measure product carbon footprint, but did not use any formal methods or used ‘other’ methods, had not considered product life cycle emissions.
When these companies are excluded from the proportion of participants that measure product carbon emissions, the percentage (as a proportion of all respondents) falls from 13% to 4%.
notably, 34% of all respondents indicated that they are facing market pressure from retailers, supply chain partners and customers to provide product carbon metrics. At the moment therefore, 30% of the participating companies are at risk of noncompliance with the requirements of their key stakeholders.
Challenges and barriers to carbon measurement
As the rate of corporate carbon measurement is significantly lower amongst small enterprises, the specific challenges and barriers that they face are of particular concern.
The majority of these enterprises indicated that they face challenges in measuring their organisational carbon impacts due to a lack of internal capacity and skills to undertake organisational carbon footprinting (31%) and the lack of internal systems to collect the requisite data (24%).
A further 8% cited the lack of easily accessible guidance, whilst 11% indicated that they do not measure organisational carbon footprint because they believe that the cost of doing so would be too high.
Product carbon measurement, on the other hand, presents challenges to companies of all sizes and from all sectors. The majority of companies, i.e. 24%, highlighted the lack of internal capacity and skills as a barrier to product carbon footprinting. Similarly, 21% of those respondents who do not currently measure product carbon footprint highlighted a lack of systems for collecting life cycle data as a barrier to doing so.
Interestingly, only 10% of respondents identified the lack of accessible and easy to use guidance as a barrier. Given the relative methodological complexity in measuring life cycle GHG emissions, the low proportion of respondents requiring guidance is likely to have resulted from an inadequate understanding amongst respondents of the life cycle dimension to product carbon measurement.
Whilst product carbon footprinting presents challenges to all companies of all sizes, small enterprises are likely to have more difficulties in overcoming them due to a lack of capacity, resources and skills.
The research has identified a series of potential actions which can be grouped to reflect differing timeframes and methods of implementation.
The quick wins, to be implemented quickly and using existing resources, include the development of easy-to-use guidance and carbon measurement tools. The intermediate
actions, which could be developed through agency collaboration across the island, include provision of training, mentoring and other carbon measurement supports to smaller businesses. The initiatives for exploration, which present resourcing challenges and the need for further discussion over implementation, will include the potential development of online databases of life cycle carbon data and a cross-border demonstrator pilot to show best practice in carbon measurement.
Click here to download the full report: Business and Carbon Measurement on the Island of Ireland