Include every single product in the carbon footprint? | Requirements and methods

|  July 31, 2024

🕓 Reading time 8 minutes

Table of contents

1. Introduction to the problem

2. Methods for classifying goods into commodity groups

3. Efficient emissions accounting through the Pareto principle

1. Introduction to the problem

Companies worldwide are under increasing pressure to make their climate impacts transparent, particularly when reporting on Scope 3 emissions, which includes all indirect emissions that do not arise directly from the company's own operational activities. Scope 3-Emissions also include Emissions from purchased products, as well as from further processing, use and disposal of sold products. These categories are often the most extensive and diverse, making collection and reporting complex.

Many companies are therefore faced with the question: “Do I as a company really have to every single product on my balance sheet?" Given the variety and quantity of products, this can be an overwhelming task.

This article provides guidance on how companies can simplify this process through efficient strategies and the use of the Pareto principle to better utilize resources while increasing transparency to stakeholders.

2. Methods for classifying goods into commodity groups

Common practice of grouping

Grouping individual goods into commodity groups is a key step in reducing the complexity of emissions accounting and enabling efficient data analysis and reporting. By grouping similar products or materials, companies can gain significant insights and better target their emissions reduction strategies.

The methods for grouping goods by material type, country of origin or area of application are supported by standards such as ISO 14001, the Greenhouse Gas Protocol (GHG Protocol), the Global Reporting Initiative (GRI) Standards and Life Cycle Assessment (LCA) methodologies.

For purchased goods as well as for goods sold There are different options:

💎 Classification by material type

A common method for grouping purchased goods is the classification according to the type of material used.

This is particularly useful in industries where material properties are crucial for environmental impact. For example, metals can be divided into groups such as "steel," "aluminum," and "copper." Within these categories, further differentiation can be made, for example, between "hot-rolled steel" and "cold-rolled steel." This distinction is relevant because energy requirements and associated emissions can vary between manufacturing processes.

Example

• Steel
  • Hot-rolled steel
  • Cold-rolled steel

🌍 Breakdown by country of origin

The origin of products plays a key role in the assessment of environmental impacts, particularly due to different environmental standards and transport routes. By grouping purchased products By country of origin, companies can better estimate which supply chains cause higher emissions. This is especially important for globally operating companies that have a large number of suppliers from different countries.

A breakdown by country of origin can be particularly useful for the following products, such as textiles, electronic components or food.

It is also often useful to further break down goods classified by material type by country of origin.

Example

• Steel
  • Hot-rolled steel
    • Hot-rolled steel from India
    • Hot-rolled steel from China
  • Cold-rolled steel
    • Cold-rolled steel from India
    • Cold-rolled steel from China

🛠️ Classification by area of application

Another useful classification method is to group goods according to their application. This can be particularly useful for goods sold be informative, as products used in similar contexts often have comparable processing and use processes and environmental impacts.

Examples

Batteries

• Electromobility: These batteries are used in electric cars and have high energy density, a long service life, and are often more difficult to recycle because they use specialized lithium-ion technologies. The production and subsequent disposal of these batteries are emissions-intensive, primarily due to the mining of lithium and cobalt and the energy-intensive manufacturing processes.
• Batteries for consumer electronics: For example, they are used in smartphones and laptops. These batteries are smaller, have a shorter lifespan, and are replaced more frequently. 

Plastics

• Packaging plastics: Often used once, they generate large amounts of post-consumer waste that is either landfilled or incinerated, resulting in high emissions. Recycling rates are often low, further increasing environmental impact.
• Construction plastics: For example, PVC in window frames or piping, which has a very long lifespan and is replaced less frequently, is difficult to recycle. At the end of their useful life, recycling these materials is complex because they are often combined with other materials, increasing emissions during waste processing.

textiles

• Fast fashion textiles: Characterized by rapid production cycles and a short service life, this leads to high waste volumes. Disposal by incineration or landfilling often results in high emissions.
• Technical textiles: For example, they are used in geotextiles or filter materials. These products have specific, long-lasting applications that are replaced less frequently. Their production can also be resource-intensive, but their overall impact on emissions over their lifetime is often lower compared to fast-fashion products.

3. Efficient emissions accounting through the Pareto principle

Prioritization instead of perfection

When calculating emissions, it is often sufficient to have a Overview of the main emission sources without recording every detail. The main sources can then be accounted for in more detail in subsequent years. Focusing on the most significant emission sources enables efficient use of resources and simplifies data management. This helps companies achieve significant reductions with minimal effort.

The application of the Pareto principle

The Pareto principle, also known as 80/20 rule known, states that often 80% of the effects are caused by 20% of the causes. In practice, this means that often a relatively small proportion of products or processes the majority of emissions By applying this principle, companies can focus their analysis on the most significant emission sources, enabling more efficient use of resources and reducing the complexity of data management. This method helps companies focus on the largest levers for emission reduction without getting lost in the depth of detail that would be associated with recording every single small emission source.

Integration of the Pareto principle in accordance with the GHG Protocol

The Greenhouse Gas Protocol (GHG Protocol) provides a global standard for greenhouse gas accounting. While encouraging detailed reporting, the GHG Protocol recognizes the challenges of data collection, particularly for Scope 3emissions. Here, the application of the Pareto principle proves to be effective and strategically sensible, to effectively manage complex requirements.

Pareto for the CSRD

The Corporate Sustainability Reporting Directive (CSRD) requires detailed reporting on sustainability practices starting in 2024. Here, too, the Pareto principle can play a valuable role by enabling companies to prioritize their reporting and focus on those aspects that have the greatest impact on their greenhouse gas footprint. Applying the Pareto principle can thus help efficiently meet the CSRD requirements by highlighting the most significant emission sources and activities and implementing targeted measures to improve environmental performance.