The Carbon Border Adjustment Mechanism (CBAM)
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In this article we’ll explore what the CBAM is, why it’s been created, and what importers need to know ahead of its introduction.
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Understanding a Product Carbon Footprint (PCF)
Level
Consumers and regulators alike are putting businesses under increasing pressure to reduce their environmental impact - but where do you even start?
Understanding the carbon footprint of a product, from raw materials to disposal, is a crucial first step. That’s where Product Carbon Footprints (PCFs) come in. By measuring the emissions linked to every stage of a product’s lifecycle, PCFs give businesses the data they need to make informed decisions about sustainability. But how do they work, and why are they quickly becoming essential in today’s market?
In this article, we'll explore what a PCF is, its relevance in today's business environment, and the step-by-step process of conducting one.
What is a product carbon footprint (PCF)?
You've probably heard the term carbon footprint before (or corporate carbon footprint) - it's a measure of the amount of carbon dioxide (or carbon dioxide equivalent - CO2e) released into the atmosphere as a result of an individual, or company's activities. But you might not have heard the term used in the context of a product - so what exactly is a product carbon footprint (PCF)?
“ A Product carbon footprint (PCF) is the total greenhouse gas (GHG) emissions created by a product over the entirety of its life cycle. This encompasses GHG emissions created from the extraction of raw materials used to make the product, right through to emissions associated with the product's end of life (and every stage in between). ”
💡 It's worth noting that a PCF is different from a life cycle assessment (LCA). An LCA considers the environmental impacts of a product or service, whereas a PCF is solely focused on the climate impact - ie. the total greenhouse gas emissions associated with a product.
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Why are Product Carbon Footprints important?
“ A product carbon footprint (PCF) helps companies quantify the GHG emissions produced or consumed during the life cycle of a product. This allows them to frame an action plan to mitigate carbon emissions and deliver efficiency savings. ”
Why is this important? Climate change is the defining issue of our time. Centuries of unabated use of fossil fuels have disrupted the Earth's natural carbon cycle, resulting in a cascade of negative impacts. Global warming is not only upending weather patterns worldwide, it's also making extreme weather much more likely - heatwaves, droughts, flooding, and more intense and extreme storms are sadly becoming part of the norm.
The only way to prevent the situation from worsening further is to cut back on emissions generated. This is why calculating our carbon footprint is so important.
“ By calculating our carbon footprint we're better able to see what activities are resulting in emissions, thereby allowing us to take targeted and effective action to reduce these emissions. ”
The situation is no different when it comes to products. The products that we consume and buy all have their own carbon footprint, and it's only by calculating these emissions that companies are effectively able to reduce the environmental impact of their products - and ultimately create more sustainable goods and business models.
So what exactly is involved with a PCF? Let's find out…
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What does a Product Carbon Footprint involve?
Calculating a Product Carbon Footprint (PCF) is a structured process that helps businesses understand and reduce the environmental impact of their products. The following steps outline the key actions involved, from setting objectives to communicating results.
| Step | Action | Description |
|---|---|---|
| Step 1 | Establish the PCF objective | Define the goals and objectives of the PCF, considering company values, market demand, regulatory compliance, and efficiency gains. |
| Step 2 | Determine the scope | Determine whether the PCF follows a cradle-to-gate (B2B) or cradle-to-grave (B2C) approach. Select key products based on visibility, environmental impact, and data availability. |
| Step 3 | Create a product process map | Map the product life cycle, including raw materials, manufacturing, distribution, use, and end-of-life disposal. Identify data collection needs. |
| Step 4 | Source the data | Collect primary and secondary data from company records and external sources. Supplement missing data with industry averages and approximations. |
| Step 5 | PCF calculation | Multiply data by emission factors to calculate the product's total carbon footprint, expressed in CO2 equivalents. Consider using third-party experts for accuracy. |
| Step 6 | Analysis and action | Analyze results to identify carbon hotspots and implement reduction strategies such as switching to sustainable materials, improving efficiency, and reducing waste. |
| Step 7 | Communication | Communicate findings to stakeholders through sustainability reports and marketing efforts to enhance transparency and brand differentiation. |
Step 1: Establish the PCF objective
PCFs allow companies to better understand the climate impact of their products by calculating the emissions generated. Generally speaking, this enables organizations to:
- Analyse the different aspects of their production system and identify the biggest carbon hotspots
- Reduce greenhouse gas emissions and work towards climate goals
- Increase transparency around the climate impact of their products
However, companies will have their own specific business reasons for undertaking a PCF. Some of the most common motivations include:
Company values
A company may want to use PCF results to analyze and ultimately reduce its harmful impacts on the environment.
- Company strategy and ethos - the company's climate strategy may push for sustainability, and a PCF is an important part of this.
- Employee satisfaction - employees increasingly care about working for an ethical company. Carrying out a PCF showcases a company's commitment to sustainability and transparency.
- Internal communication - by communicating the results of a PCF, a company can motivate staff and inspire further sustainability projects.
Market demand
Consumers increasingly care about sustainability, which is why a PCF can be a useful marketing tool.
- Client requirements - it may be the case that retailers for example necessitate climate information from suppliers.
- Competitive advantage - studies consistently show that consumers are willing to pay more for sustainable products. Using a PCF to improve the sustainability of goods therefore acts as a brand differentiator, helping companies to stand out from the competition.
- Reputation - a PCF can identify potential reputational risks, thereby allowing companies to take action to mitigate these risks before they become a big problem.
Legislation
Regulatory requirements are increasing with every passing year when it comes to the climate impact of a company.
- Regulatory compliance - Even where a company isn't currently caught by any existing regulations, the likelihood is that this will change in the future. Product Carbon Footprints also allow companies to calculate their Scope 3 emissions, which often account for a large portion of a company's emissions.
Efficiency
Inflation is high and everything from the raw materials a company uses to the energy they consume is at an all-time high. PCFs can help companies to identify where efficiencies can be implemented and costs cut.
- Cost saving - high emissions are usually linked to high operational costs. By identifying where energy consumption is at its highest a company can implement actions to reduce this, thereby lowering costs (and benefiting the environment at the same time).
- Mitigating resource risks - PCFs can help to identify if any of a product's key materials hold potential supply chain risks.
It's important to set clear goals and boundaries for the PCF. Companies should take into account the business goals and aims, as well as the opinions of staff and stakeholders.
Step 2: Determine the scope
Once the goals of the product carbon footprint have been established, the next step is to determine the scope of the analysis. There are two different approaches for calculating the impact of a product: cradle-to-gate and cradle-to-grave.
Let's take a close look at how they differentiate from one another.
Cradle-to-gate
Cradle-to-gate is primarily used for B2B (business-to-business) products. It measures the greenhouse gas emissions stemming from the production of the good (including the extraction of raw materials) and any other emissions associated with the product until it reaches the factory gate.
Cradle-to-grave
Cradle-to-grave on the other hand is mainly used for B2C (business-to-consumer) goods. It measures the greenhouse gas emissions for the entirety of the product's life cycle - ie. all stages, including raw material production and distribution, product manufacturing, distribution and retail, product use, and even the disposal and recycling of the product.
“ Additional considerations include which product or products will be part of the PCF. Because performing a PCF can be time-consuming and use up valuable resources, a company may not be willing or able to include the entirety of its product portfolio. In this case, they may wish to select one or more products. ”
Useful criteria for selecting which product to include are considerations such as:
| Criteria | Description |
|---|---|
| Product visibility | Select key products with high sales numbers for which the company is best known. |
| Environmental impact | Identify products likely to have the biggest environmental impact and that would benefit most from a Product Carbon Footprint (PCF) and improvement measures. |
| Availability of data | Choose products based on the availability of appropriate data to accurately and effectively perform the PCF. |
Step 3: Create a product process map
Step 3 is the creation of a process map. A process map is a really useful tool as it enables a company to clearly define the different processes involved in a product's life cycle. It also helps to identify the different data that will need to be collected as part of the PCF.
A typical product process map will include the following considerations:
Raw materials
- What are the raw materials used in the manufacturing of the product?
- What is the weight of the raw materials and packaging?
- What waste is produced?
- Are there any waste management processes relating to raw materials and packaging?
- How is the raw material transported from the supplier? Ie. transport mode, distance, and packaging
Manufacturing
- What manufacturing processes form part of the product's production?
- What energy is used in these processes?
- What waste arises and are there any waste management processes in place?
Distribution
- Once the product is complete, how is it stored, and what are the characteristics of this storage (eg. warehouse, climate-controlled, lighting, etc)?
- How is the item distributed - is it a third party provider, how are the items stored during transportation (eg. refrigerated), how is it transported, and over what distance?
- Does any waste occur during storage and distribution?
Use
- Is the item sold directly or does it supply another company?
- What additional materials or energy is needed to use the product - eg. electricity, water, heat, etc?
End of life
- How is the product disposed of? Are there any specific requirements, for example, recycling?
Step 4: Source the data
“ This step is usually the most complex and time-consuming. Depending on the scope of the PCF, a large variety of different data may need to be collected. And given that a PCF involves the entire supply chain of a product, this often means obtaining data from multiple third-party sources. ”
Data can essentially be split into primary and secondary sources:
Primary sources:
Primary refers to data from within the company - which is the easiest to obtain.
Secondary sources:
Secondary sources are those that lie outside the company - which can often be more challenging to get a hold of. Where a company is unable to get a hold of certain information it may be necessary to supplement data with industry averages and approximations.
Accounting and records vs physical data:
Another key distinction is that data can either be based on accounting and records, or physical information gathered. Data based on accounting and records is the easiest information to obtain as a company will be able to consult its own financial records, utility bills, or procurement specifications to obtain this information. Data based on physical information on the other hand can be much trickier as it involves things such as distances travelled, weight of materials, etc.
Step 5: PCF calculation
The carbon footprint calculation can be a complex process. This is because it often involves a whole host of different data sources, each of which will need to be multiplied by specific emissions factors allowing for the calculation of the quantity of greenhouse gas emissions for each activity. The results are summed up to provide a total figure, which is expressed in equivalent units of carbon dioxide, representing the product's overall carbon footprint.
Sounds complicated? Well, that's because it is. The whole process of conducting a PCF is time-consuming and complex. And in order to do it properly, companies need to dedicate time and personnel to the task. This is why many companies choose to employ a third-party expert.
“ As a carbon accounting company, Greenly specializes in helping businesses navigate these complex processes. We don't just offer a service; we provide expertise in conducting detailed and accurate product life cycle assessments, making the whole process as pain-free as possible. If you're interested in finding out more about how Greenly can help you, head over to our website. ”
There are various standards that have been created to help quantify the CO2 balance of products and services. The most widely recognized and respected standards include:
- PSA 2050: Publicly Available Specification (PAS)
- GHG Protocol: Product Life Cycle Accounting and Reporting Standard
- ISO 14067
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Step 6: Analysis and action
Once a company has calculated a product's carbon footprint, the next step is to analyze the results and implement actions that will help the company meet its goals and objectives established in Step 1.
“ PCFs are highly effective in identifying emissions hotspots relating to the product's life cycle. These will, generally speaking, be the activities that the company will target in an effort to reduce emissions, improve efficiency, and minimize operational costs. ”
There are many different emissions reduction actions that a company can take following a PCF to improve the sustainability of a certain product.
The list below is non-exhaustive but should give you a bit of an idea as to what these might be:
- Substituting raw materials for more sustainable alternatives
- Replacing machinery and production equipment with more efficient models to reduce energy consumption
- Switching energy supplier or tariff to one that includes more renewable electricity sources
- Investing in a fleet of electric vehicles (EVs) for product distribution
- Implementing waste reduction practices and recycling processes to minimize manufacturing waste
- Redesigning the product or packaging to make it more sustainable
Step 7: Communication
After all this hard work, it's likely that a company will want to communicate its emissions reductions efforts with stakeholders - this includes employees, customers, clients, suppliers, investors, etc.
Communication of a PCF, the results, and resulting sustainability action help to drive deeper engagement with stakeholders and foster an environment of transparency.
From a marketing perspective, it can also be a highly effective means for increasing a company's customer base, attracting investors, and differentiating the company brand from that of competitors.
The results of the PCF can also be used by a company as part of their sustainability reporting.
Round up
“ In the face of mounting climate challenges, understanding a Product Carbon Footprint (PCF) is not just a choice but a necessity for forward-thinking companies. Beyond the immediate aim of enhancing sustainability, a well-calculated PCF opens the door to a multitude of benefits. It positions companies for cost savings by pinpointing inefficiencies, provides a competitive advantage in a market that increasingly values eco-responsibility, and ensures alignment with evolving climate-related regulations. ”
However, navigating the intricate process of PCF can be daunting. This is where specialists like Greenly step in, offering expertise to streamline the journey, transforming a complex task into a strategic advantage.
How Greenly can help your company
Sustainability is now a requirement for companies across all industries. With rising global expectations to minimize environmental impact and push toward a sustainable future, having the right resources to measure and cut down carbon emissions has become essential.
Greenly provides a suite of sustainability services designed to help businesses take purposeful action towards achieving their environmental goals.
Sustainability Management with Greenly
Greenly equips businesses with both expertise and a robust platform to effectively manage their sustainability efforts. From emissions monitoring to strategy development, Greenly guides companies through every stage of their sustainability journey.
Monitoring and Reducing Carbon Footprint
Through Greenly’s platform, businesses can monitor their Scope 1, 2, and 3 emissions, gaining an understanding of their environmental footprint and allowing them to identify hotspots. This data serves as a foundation for crafting focused strategies to reduce emissions, align with science-based targets, and meet regulatory obligations.
Customized Sustainability Strategies
In addition to emissions tracking, Greenly partners with companies to create sustainability strategies. Our specialists help pinpoint key areas for improvement and provide guidance on actionable plans to reach sustainability objectives.
Supply Chain Emissions Solutions
Reducing Scope 3-related emissions (ie. emissions related to supply chains) poses unique challenges. Greenly’s platform assists companies in identifying and addressing high-emission areas in their supply chains, working collaboratively with suppliers to drive effective and sustainable changes.
User-Friendly Platform for Sustainability Management
Greenly’s intuitive platform streamlines sustainability management, enabling businesses to track emissions, assess progress, and incorporate sustainability into daily operations.
Whether your business is beginning its sustainability efforts or building on current initiatives, Greenly can support you in efficiently managing and reducing your environmental impact.
Ready to move forward sustainably? Let Greenly support your company in taking the next step toward a greener future.
Sources:
- Greenly, Electric cars: are they really ecological?, https://greenly.earth/en-gb/blog/ecology-news/electric-cars-are-they-really-ecological
- Greenly, What is renewable energy and why is it beneficial?, https://greenly.earth/en-gb/blog/company-guide/what-is-renewable-energy-and-why-is-it-beneficial
- ISO, ISO 14067:2018,https://www.iso.org/standard/71206.html
- GHG Protocol, https://ghgprotocol.org/
- Carbon Trust, Product carbon footprint label, https://www.carbontrust.com/what-we-do/product-carbon-footprint-labelling/product-carbon-footprint-label#:~:text=A%20life%20cycle%20product%20carbon,equivalents%20(CO2e).
- Greenly, What are Scope 3 emissions?, https://greenly.earth/en-gb/blog/company-guide/what-are-the-scope-3-emissions
- McKinsey & Company, Consumers care about sustainability—and back it up with their wallets, https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/consumers-care-about-sustainability-and-back-it-up-with-their-wallets
- Greenly, Does transparency benefit or harm your company?, https://greenly.earth/en-gb/blog/company-guide/does-transparency-benefit-or-harm-your-company
- Greenly, How the flood damage bill will increase with climate change, https://greenly.earth/en-gb/blog/ecology-news/how-the-flood-damage-bill-will-increase-with-climate-change
- Greenly, Why is drought such a problem for the economy? https://greenly.earth/en-gb/blog/ecology-news/why-is-drought-such-a-problem-for-the-economy
- Greenly, Heatwave UK: what should people and companies do?, https://greenly.earth/en-gb/blog/company-guide/heatwave-uk-what-should-people-and-companies-do
- Greenly, Carbon cycle definition, principles, and importance, https://greenly.earth/en-gb/blog/ecology-news/carbon-cycle-definition-principles-and-importance
- Greenly, Climate change in 2022: where do we stand, https://greenly.earth/en-gb/blog/ecology-news/climate-change-in-2022-where-do-we-stand
- Greenly, How to conduct a useful lifecycle assessment, https://greenly.earth/en-gb/blog/company-guide/how-to-conduct-a-useful-life-cycle-assessment
- Greenly, Carbon emissions: what you need to know, https://greenly.earth/en-gb/blog/ecology-news/carbon-emissions-what-you-need-to-know
- Greenly, Carbon footprint: calculate, reduce and offset your impact https://greenly.earth/en-gb/blog/company-guide/carbon-footprint-calculate-reduce-and-offset-your-impact
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