If you ever wondered why the chemical industry is often referred to as a hidden champion in the global effort to transform to a sustainable economy, simply ask yourself: What do industry sectors like discrete manufacturing, life sciences, construction, or consumer products have in common? They are all dependant on the chemicals industry, to produce their products. The impact of this is immense, with some reports estimating that over 95% of all manufactured goods rely on some form of industrial chemical products.
Now combine this initial situation with the rise of legislation on carbon emissions worldwide, like the European Commission’s European Climate Law that sets a legally binding target of net zero greenhouse gas emissions by 2050. Moreover, the EU Corporate Sustainability Reporting Directive (CSRD) will require companies with over 250 employees to report GHG emissions including value chain emissions (Scope 3). This increase in regulations will go hand in hand with increased audit and assurance requirements that typically do not lend themselves well to homegrown tools or simplified calculators. Having this in mind, it is critical that chemical companies are not only able to measure and improve the carbon footprints of their products, but also to report and share them along the downstream value chain.
Current Challenges of Carbon Accounting
To reach this target state, two prerequisites need to be fulfilled: data quality and data access. Regarding quality data, companies currently largely rely on averages and secondary data instead of using primary data from their operations and suppliers when assessing carbon footprints. This hinders them to truly understand where their own emission hotspots are and how they can improve them. There is also a challenge referring to how the data itself is being accounted. Currently, there are standards and protocols (with GHG Protocol Corporate Accounting and Reporting Standard most widely used) as well as sector guidelines (e.g., the various Environmental Product Declaration) that companies can voluntarily adopt. Initiatives like the Partnership for Carbon Transparency (PACT) at World Business Council for Sustainable Development (WBCSD) criticize that the inconsistent use of such methodologies results in insufficient accounting, reporting and exchange of emissions data. SAP