Value chain carbon accouting auto sector


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Value chain carbon accouting auto sector

  1. 1. EcoLogic Consultancy Value Chain Carbon Accounting Auto Sector EcoLogic Insight Publication ©EcoLogic Consultancy 2010Value-chain Carbon Accounting – Ford takes lead Insights Series
  2. 2. EcoLogic ConsultancyValue-chain Carbon Accounting – Ford takes leadWorldwide the motor vehicles emit 1 billion tonnes of CO2 annually, 15% of total global carbonemissions. In the United States, the emissions have increased by 28% from 1990 to 2008 –driven by theincreased travel and sales mix favoring bigger cars. Rising awareness on climate change and itsimpacts on business coupled with pressure from investors have led to Ford creating concrete plans toreduce the GHG emissions from its cars. It has started working with its suppliers to take control of itssupply chain carbon footprint as it creates internal plan for the GHG mitigation.GHG mitigation spreads to supply chains as wellFord plans to survey its top 35 global suppliers on their energy use and greenhouse gas emissions.This is a part of building an understanding of its supply chain’s carbon footprint. This data will beused to create a carbon-management approach for the company. The suppliers represent about 20billion US dollars spend by Ford on its procurement. The key to Ford’s actions is that of drivingcarbon footprint reduction and energy efficiency gains in energy constrained world. The efforts thistime will be collaborative and information sharing driven as against individual, stand-alone effortstaken the suppliers. This is bound to put pressure on suppliers that score low on the energyefficiency to internalize and implement best practices from more energy-efficient counterparts. Thesuppliers in the initial list will include suppliers of energy intensive and therefore high carbonfootprint components such as the seats, steering systems, tires and metal components.Investors in the driving seatThe efforts are in line with Fords stated goal of reducing their greenhouse gas emissions by 30% by2020 from 2006 baseline. This goal was set in response to the pressure from investors such asInterfaith Center for Corporate Responsibility (ICCR) and Investor Network on Climate RiskNetwork (INCR). The members of the ICCR include more than 300 religious institutional investorswith more than 100 billion US dollars in investments. INCR is a network with members holdingmore than 5 trillion US dollars in investments. INCR includes the Connecticut State Treasury office,a shareholder in Ford.Ford has responded to the investor pressure by creating a fuel emission goal of 30% less emissionby 2020 in line and towards the 60-80% reduction by 2050 that Ford intends to implement as apart of US Climate Action Partnership. This partnership includes Chrysler, General Motors andother US companies. Ford has been able to achieve a 39% reduction in GHG emissions from 2000 to2007. The difference from the earlier approaches is that of Fords goal this time is very actionoriented step as against the earlier norm of agreeing to undertake enhanced reporting and generalgoal setting without a clear plan in place.Value-chain Carbon Accounting – Ford takes lead Insights Series
  3. 3. EcoLogic ConsultancyMore than just Carbon – it is about costsThere are going to be direct gains for Ford in these efforts. Apart from meeting investorexpectations on climate change disclosures, collaborating with suppliers on carbon, energy andtherefore cost-saving measures will allow it to put pressure on suppliers for cost reductions as theygain efficiency in their operations, partly assisted by Ford.Share and LearnTo make this practice more of a norm across the industry, Ford will share the feedback on the datacollection process with World Resource Institute and World Business Council for SustainableDevelopment. Both institutes are leading a global collaboration of businesses, governments andnon-governmental organizations to develop credible methods for measuring and reportingcorporate greenhouse gas emissions. They are currently drafting a new standard to be used tomeasure indirect or Scope 3 emissions. In tandem, Ford is participating in the Carbon DisclosureProject Supply Chain Program.Relevance to Indian CompaniesThe changes coming up are not a fashion statement, rather signs of the future to come. Thepressures on companies and therefore the suppliers will come from carbon, energy and thus costside. Companies at all stages of value chain must be prepared for this future. Having understoodones carbon footprint, components and drivers of it is the first step of preparedness. Even if theoperations are not energy efficient at high standards, the organization is aware of the specific areasof interventions.While building the understanding of its carbon footprint, the organization will get enabled torespond to investor-facing communications, get ready for future regulations that may arise and alsofind opportunities for reducing carbon emissions that can become carbon credit projects. Withcarbon accounting and understanding becoming a market access requirement, there aresignificantly more long term benefits as against short term costs of carbon accounting andmanagement enablement of an organization.References1. - Deep Green: Cars, Corporations and Society2. Supply-Chain.aspx?interstitial=1Value-chain Carbon Accounting – Ford takes lead Insights Series
  4. 4. EcoLogic ConsultancyAbout UsEcoLogic Consultancy came into existence with the purpose of “To help our clients inunderstanding, establishing sound Environment Management Systems, and pursuing sustainablebusiness solutions through our various services to abate direct and indirect impact on ecologicalbalance.”We have expertise in the areas of carbon accounting and management, energy managementsystems, voluntary/compliance carbon markets, environment management and sustainability andcarbon branding.To know more about EcoLogic, please visit http://www.ecologicconsultancy.inTo schedule a meeting or a discussion with us, do reach us onKedar - +91-9000772462 – kedar@ecologicconsultancy.inIndrajeet - +91-9028788430 – indrajeet@ecologicconsultancy.inValue-chain Carbon Accounting – Ford takes lead Insights Series