If the COVID crisis has taught us anything, it’s the importance of business continuity planning.
Those who had prepared ahead of time for circumstances that might prevent staff from accessing their offices will have been easily able to pivot to working from home, adapting plans that had been written with quite different risks in mind. While we can’t necessarily be prepared for all eventualities, risk management is essential for resilience and organisations with robust plans are likely to fare better when the unexpected happens.
In this blog post we identify some key areas for climate risk management to consider if you have not done so before, followed by a simple three step approach to get your company engaged on the issue.
1. Climate Risks are closer to home than you think
The recent extreme weather in the UK has highlighted a number of the potential risks posed by climate change over a remarkably short period.
- During August 2020 an extended dry spell, extremely high temperatures followed by excessively heavy rain have all taken their toll, with different parts of the UK having suffered wildfires, floods and landslides. Sadly in Scotland a landslip led to loss of life through a train derailment; meanwhile Hammersmith Bridge in London had to be closed due to damage caused by extreme heat.
- With the shift to home working during the extreme temperatures many people struggled to stay productive working in non air-conditioned homes. Building stock in the UK is not designed for these longer periods of extremes and even artificially cooled workplaces can become uncomfortable when temperatures exceed design specifications.
These examples show just home productivity and business operations can be affected by the impact of climate change right now; and these risks are only expected to increase in the future.
2. Regulatory requirements
While Streamlined Energy and Carbon Reporting legislation already requires large companies to report on their carbon emissions, disclosure on climate risk exposure and mitigation won’t be mandatory until 2022. However, managing climate risk is not just a regulatory issue but a strategic one. Failure to take appropriate measures in a timely fashion could leave an organisation exposed to both direct and indirect business risks. Climate change can no longer be considered a long-term risk; it is directly relevant to today’s business decisions.
3. Breaking down climate risks
In its 2017 risk assessment, the UK’s Committee for Climate Change identified almost 60 individual risks and opportunities, with the focus primarily on physical risks. Physical risks are those directly relating to changing climate and weather patterns, such as flooding, other storm events, extremes of temperature and the impact of associated damage to infrastructure. These break down into acute physical risks, eg storms and heatwaves, and chronic risks, such as gradually rising sea levels caused by melting sea-ice or water stress due to changing weather patterns. During the writing of this piece, a report was published in Nature Climate Change in which scientists confirmed Greenland and Antarctica are melting at rates matching the IPCC’s “worst-case scenario” predictions.
From a commercial perspective it is also important to consider transition risks: changes to policy or trading environment in response to climate change, for example the introduction of new carbon taxes, altered customer behaviours or disruptive technologies. The CCC is now in the process of updating the UK Climate Change Risk Assessment, with a new report due to be published in summer 2021. Its findings, together with the policy developments needed to deliver on the UK government’s commitment to net zero emissions by 2050, are bound to lead to increased regulatory measures on decarbonisation.
Materiality is fundamental to understanding and managing climate risks, since individual risks can have very different impacts on different types of organisation and in different locations. The standard methodology for assessing materiality is to plot the probability of each risk occurring against the severity of its impact, viewed from the perspective of the organisation and its stakeholders. This exercise requires scenario planning to model the potential severity of different climate change impacts since we cannot be certain about the frequency of extreme weather events or the rate at which chronic physical risks will manifest; equally uncertain is the pace at which policymakers will apply the necessary policy levers to decarbonise the economy which create transition risks.
Recently introduced FCA guidance for financial institutions recommends that they consider environmental, social and governance factors before deciding whether to insure, invest in or lend to a corporate customer. Therefore, organisations that manage these risks better will encounter fewer obstacles to growth. Furthermore, there is evidence of growing customer preference for companies that can articulate how they are adapting their strategy and business model in response to climate change. Therefore, having a coherent climate risk strategy can not only improve resilience, it has the potential to become a genuine source of competitive advantage.
5. Recommended approach
If you haven’t yet considered climate risk in your risk management approach, it is not wise to wait until something happens before adding it to your risk register. As climate risk is an evolving issue, the register needs to be reassessed and updated at least annually. You can start right now with these three steps:
- Use the Committee for Climate Change’s Synthesis Report to identify the climate risks that might impact your organisation
- Conduct a materiality assessment to determine which of risks are most significant for your business operations, by plotting likelihood of the risk occurring against its potential impact
- Prepare for the most material risks by putting in place contingency plans to mitigate against them.
Contact Acclaro to find out how we can support you to minimise the impact of climate risks on your business – email@example.com
Embracing Technology in the FM Sector
Technology is all around us and continues to encroach into our lives. Whether through the applications on various office appliances, voice-controlled tech at home, or the sensors used to measure and improve the space we live in. We have an enthused world where anything is possible with the use of technology. The role of technology and its disruptive influence is one of the three key themes that was identified in the RICS Responsible Business Forum. This article explores some of the challenges ahead with the impact of technology on the built environment. Is your business fully embracing technology?
Setting the Expectations
Data-enabled systems have become the standard operating approach for many. The potential opportunities to save costs and improve the workplace are widespread. But, cutting through the sales talk and communicating the benefits to your clients or your business is tougher.
The challenge with communicating the benefits is the balance between perception and what can be delivered today – which is very much about setting expectations. There is often a need to oversell the opportunities that can be achieved or underplay the integration costs. In part, this is led by misunderstandings by leaders on the role that technology can take, and a lack of experience on the ability to deliver and achieve results from data.
Simplifying what the technology is, how it is being used and the resulting data that can be utilised is fundamental for communicating the expectations. There are also lessons that older business leaders can learn from the younger generation in technology.
Getting Technology to do what we want it to do
So, what do we want the technology to do and how will it help us? We are all still the same people, but adding layers onto needs. Technology can help this and the interface is still important. In the built environment, we use technology to:
- optimise or reduce plant run times through AI,
- ensure space is optimised for user comfort,
- help teams to optimise condition-based maintenance programmes; and
- extend asset lifetimes.
Together this has significant benefits to the energy performance of the building, employee wellbeing and cost savings.
However, over-reliance on technology can mean we lose the ability to communicate with each other. People skills are vital in the FM sector, but with technology becoming the interface instead of the person, it promotes small changes in behaviour. For example, leaving a message instruction to another to close off an issue rather than seeing a problem through to the end. This encourages a loss of accountability for activities along with the loss of team working.
Rise of the Data Analyst in the Responsible Business
Technology can enable FM to be more customer-focused, but its advance requires new skills. For example, the ability to analyse the data that is being generated. Whilst AI tools are available, the dynamic approach of most organisations will require individuals who understand the data to translate it to a people/ business perspective.
Not only are employee skills sets changing, but the requirements on business is changing too. The level of data captured increasingly infringes on personal information. Therefore, disclosure and openness about what data is held is critical. Gaining confidence from workers on this subject will require communicating the reasons why data is held, and the benefits of holding the data. There will be kickback to this, and the use of opt-outs will help to provide a mechanism to act on this.
We are moving into a sphere where organisations are challenged about what they stand for. It is no longer about money, but increasingly about purpose, transparency and values. Those entering the workforce want to work for organisations that share their beliefs, which are becoming more altruistic. Commercials are good and an absolute necessity, but so too are the ethics – how do we get this mindset through to the FM sector?
Integrating Technology into FM
This provides a very different role for FM moving forwards. A role where technology is integrated into the service, and key skills revolve around customer service and data analytics. But being mindful of the disruptive influences that could be lurking on the horizon. Improvements in technology could easily lead to the ‘uberisation‘ of standard services – particularly maintenance and hospitality functions. Has the industry considered this though?
With new technology part and parcel of modern life, it is illogical for the FM sector not to embrace it. However, the integration of technology through the lens of a responsible business is necessary. Weighing the balance of environmental improvements with social and Governance costs is fundamental. Look out for the release of the RICS Responsible Business Leaders Forum Report at the end of the Summer 2019. We delve into these challenges further as we seek solutions for the sector.
For more information on the RICS Responsible Business Forum please visit the RICS website
Sunil Shah, Chair RICS Responsible Business Forum and Managing Director, Acclaro Advisory.
Through the ‘Making Policy Clear’ Series, Acclaro Advisory will inform clients of policy and regulatory changes around energy, environmental and social issues. We bring clarity to governance, compliance and targets so you can get on with regular business activities. We dismantle the complexities of new and amended legislation and standards in a way that will help you meet your requirements today and be ready for new ones tomorrow.
Part 4 of this series focuses on Article 8 of the EU Energy Efficiency Directive (EED) (2012/27/EU).
The EED contains a number of requirements and measures intended to increase the energy efficiency across the European Union. The Directive establishes a set of binding measures to help the EU reach its 20% energy efficiency target by 2020 and to support further energy efficiency improvements beyond 2020. All EU member states are required to transpose and implement Articles of EED into regulation suited to each country.
The origin of ESOS
The UK ESOS scheme was put in place as a response to the EED Article 8 – Energy Auditing. Article 8 requires the Member States to introduce a mandatory programme for large enterprises (non-SME) to conduct regular energy assessments and efficiency audits. This has been transposed in various forms across the EU member states with key elements remaining roughly similar for each country.
The EED (2012/27/EU) Article 8 requires the Member States to introduce a mandatory programme for large enterprises (non-SME* ) to conduct regular energy assessments and efficiency audits. This has been transposed in various forms across the EU member states with key elements remaining roughly similar for each country.
* Small-Medium Enterprise
How are the 28 EU countries implementing EED Article 8?
Navigating the compliance regime across Europe can be a difficult process, especially for multinational organisations.
The EED Article 8 compliance qualification criteria are generally built around the European Commission definition a non-SME:
- more than 250 people; AND
- those with an annual turnover exceeding €50 million; OR
- total assets exceeding €43 million.
However, this can vary based on regional level definitions of a large enterprise and other related laws. In addition, some Member States have included additional qualification and compliance criteria.
Some Member States follow the EU rule on the consolidation of at least 2 of the qualification criteria (financial and employee count) while others, such as the UK Energy Savings Opportunity Scheme Regulations 2014 (ESOS), requires only one of these criteria to be met.
Other examples of transposed variations include:
- The UK ESOS utilises a “one in, all in” methodology for the scheme qualification. Once one UK undertaking qualifies, all of the undertaking UK operations automatically qualify. 90% of the energy consumed must be audited for compliance and sampling* is accepted. However, this is not the case across EU Member States.
- In France, a company qualifying is identified by its SIREN number in addition to meeting one of the large entity criteria as with UK ESOS. At least 80% of the annual energy consumption must be audited and sampling* is accepted.
- In Bulgaria, compliance governed by the country definition of a non-SME with industrial sites having an annual compliance threshold to comply. Most of the transpose Article 8 is tied to other building legislation which means the owners can be responsible for ensuring that identified measures are put in place.
- In Sweden, companies qualify for mandatory energy assessment based on the EU Commission definition of a non-SME. Here linked and partner entities (local or overseas) should be considered. However, an energy threshold applies. Reporting is also allowed either in stages over the 4-year period or at one point in time during the 4 year period.
*Sampling rules apply
Acclaro Advisory provides comprehensive information in one location
Through us, you have access to knowledge and experience on the transposed regulation in the 28 EU countries. We can help you navigate the complex challenge of meeting all variations of requirements of the energy audit obligation.
Our team is up-to-date with the status of the directive across Europe and are equipped to support full compliance and carry out audits.
If you would like to understand these points further or would like advice or support with Article 8 of the EU Energy Efficiency Directive 2012/27/EU, please contact Erica Hall on +44 1183 273519
In the meantime, you can learn more about the Acclaro Energy Programme which helps you adapt and address responsibilities of energy efficiency as a business.
ESOS – Will you be compliant?
The 5th December 2019 ESOS date is fast approaching! Is your business ESOS Compliant?
It’s hard to believe that we are already halfway through 2019.
There have been a few changes this year with legislation and strengthened intentions around climate action at all levels of industry. For example, we’ve had councils make Climate Emergency declarations, the London Toxicity Charge (T-Charge) has been replaced by the upgraded Ultra Low Emission Zone (ULEZ) and organisations are looking towards Net Zero Carbon buildings and Carbon Neutrality by 2030.
At Acclaro we have been supporting our clients on their Environmental Sustainability and Energy Efficiency journeys. At present one of our main focus areas is ESOS. The UK’s opportunity for non-SMEs to recognise and act on energy efficiency improvements. Energy efficiency has been recognised as the premier cost-effective way to concurrently improve energy security, reduce energy costs, reduce carbon emissions, contribute to the overall energy and climate goals and enhance competitiveness.
5 months until the ESOS Phase 2 Deadline!
If you have not already made arrangements for compliance, it’s time to get in touch. Several organisations have started their compliance preparations and audits. But we already foresee a bottleneck as with 2015. So, don’t leave yours to last minute. Act now and make sure you are ESOS Compliant.
To get you started, here’s a list of what you need to do and how we can help.
1. Assess the total 12-month energy use across the organisation.
- Remember to include at least your energy consumption for December 2018. This ensures you meet one criterion of compliance.
- Assess all buildings, UK transport related to your business (company cars / expensed car travel etc), industrial processes.
2. Identify areas and sites of significant energy use.
- This should be your largest energy consuming assets from the above list.
3. Choose your route to compliance most suitable to business goals.
- What are your business goals/intentions?
- Are any changes on the horizon?
- Do you have specific targets or challenges?
4. Appoint your ESOS Lead Assessor, who is qualified to review your compliance route and reports.
5. Evidence opportunity for energy efficient measures in areas or sites of significant energy use and have the reports signed by the ESOS Lead Assessor and company Director.
6. Notify compliance to the administrator.
- These are different for England, Wales and Northern Ireland.
Our experienced team has supported several organisations during phase 1 and have already started phase 2 compliance for our clients. We provide all the support you need from start to finish and beyond compliance.
Examples of our team’s experience with project complexity include:
- Meeting compact schedules required during the intense phase 1 compliance deadline.
- Effective audit sampling strategies to meet compliance and business requirements.
- Successfully managing late compliance for organisations resulting in no financial penalties.
- Successfully supporting on the Environmental Agency’s post-ESOS phase 1 audit checks.
- Highlighting and implementing improved processes for phase 2 compliance.
- Conducting Office, Theatre, Shopping Centre and Research Laboratory audits.
What about my multinational organisation?
Through us, you have access to knowledge and experience on the transposed regulation in the 28 EU countries. We can help you navigate the complex challenge of meeting all variations of requirements of the energy audit obligation.
Our team is up-to-date with the status of the directive across Europe and are equipped to support full compliance and carry out audits.
If you would like to understand these points further or would like advice or support with Article 8 of the EU Energy Efficiency Directive 2012/27/EU, get in touch with us +44 1183 273519 or email
In the meantime, have a look at our Making Policy Clear – EED Article 8 article.
Acclaro Advisory provides Comprehensive information in One Location.
You can learn more about the Acclaro Energy Programme which helps you adapt and address responsibilities of energy efficiency as a business.
There is a new craze moving through sustainability teams. That craze is Social Value. It’s like the gold rush of the 19th Century. Ok, I admit, I greatly exaggerate. But observing the approach taken by procurers, corporate’s, service providers and NGOs is fascinating. Only instead of rushing for precious metals, there’s a rush for a perceived value that is generated from an elaborate spreadsheet.
A brief Catch-up
While Social Value came to notoriety in 2012 with the establishment of the Social Value Act, the regulation has made little impact. While generally well-intentioned, has lacked guidance, direction and proved somewhat confusing for all involved.
Occasional reappearances and drives progressing the Act have been made, but the tide truly turned for the masses in 2018. David Liddington provided a clear steer with his speech in June: “it is right that we use the government’s purchasing power to benefit society”. With this, the jockeying for position ramped up.
The Government has now released its consultation on its new approach to Social Value – it’s certainly an improvement. There is direction, and clarity. Read Acclaro’s account of the consultation. The short version is, more defined social value guidance for Central Government contracts, and a minimum weighting of 10% on contracts….
10%! – This now makes social value a competitive bid winner in a tender.
Current position – Measure my Social Value Now!
How do we measure Social Value seems to be the big question. Can we provide £800k in Social Value, or £1 million? Is this value larger than our competitors? Which tools should we use to calculate how much value we create? At Acclaro and the SFMI, we hear these questions frequently. We see a massive fixation on the numbers, and this is understandable, but not progressive.
But for a company to fixate on measuring their Social Value output without a fundamental approach to support the numbers means that risk awaits the unprepared. It is a dangerous tight rope to walk.
The Problem – Where Is The Substance To The Value?
With many trying to pull numbers from the sky using one of a multitude of tools, we are on the cusp of the new social version of greenwash. Social-wash (seems to fit). Tools are often based on what a company can provide in a theoretical sense.
X numbers of apprentices = £x’s of social Value.
But when a company bids, do they have the necessary narrative to back up their claims? In the short-term, it probably won’t matter. Companies will bid with their perceived Social Value number, and the highest will gain the points on the tender process.
But… what happens when a company is held account to that number? Can they be held to account through a contract if claimed that they can contribute £x million of social value? Probably, Yes. If not then it can be forgotten. Mobilisation of a contract will no doubt result in the 15 claimed apprentices turning to 5, or even zero. Also, will those apprentices be targeted groups of people that generate real value for the needs of the community? That will depend on the ethics and culture of the business making promises. I predict that the short term will become a period of Social Value without accountability. But things will change, and it will be the responsible business leaders that prosper.
Enter the True Leaders
There are real leaders in this space in the FM industry. The SFMI assesses FM companies annually. For example, in our annual assessment, we can state clearly that Vinci Facilities and Engie are ahead of the game on Social Value. There are others who are making progress as well because they see the long term value.
So now is the time for leaders to shine. Those companies who have a solid strategic base of social value embedded into their company culture will be able to provide their numbers alongside the important narrative that validates their claim. They can give past performance to instil confidence, and they can give systems and strategies on the way that Social Value is generated with their clients.
It is for this reason, that Acclaro and the SFMI are measurement agnostic. We have developed the Acclaro Social Value Programme that is tailored to developing leadership in this space, and to give a meaningful substance to the numbers.
We are not about the numbers first. Numbers are the product at the end, but so many are seeing the numbers as the beginning and the endgame. We help a company to develop a structured approach to drive social value to truly benefit society based on the needs of the community. We follow a specified approach summarised below
Our approach is to base the numbers on a solid strategic foundation of generating Social Value at both the corporate and contractual level. If a bid contains a 15% weighting of social value, it is a natural progression to require validation of those numbers. Therefore in time, half of that 15% is the measured output number, and half will be the narrative, strategy and validation of those numbers.
This is where the Acclaro Social Value Programme is aimed at. In the Acclaro approach, we; assess, engage, define, execute and operate Social Value in a fit that is right for your company. You can be a company looking to create value for your clients, or you could be a client that is looking to generate social value from procurement. Our approach follows a similar approach with different detail. We build purpose driven leaders.
Acclaro helps you to plan for the long term and develop your approach to Social Value. We give you confidence in your numbers whether bidding for contracts, or procuring for services. Contact us to discuss further
Social Value – Where we were:
Almost 9 years since the Public Services (Social Value) Act was introduced it has become widely discussed, however, there are still issues in implementation. Despite a number of updates, the Act remained underutilised as procurement and procuring organisations were confused about its scope and application. Some viewed it as a replacement for CSR; some as additional.
The term “Social Value” steered many people away from its application in environmental improvements, though these too have social impacts. As industry and public bodies alike have been building knowledge bases on social value the understanding of its benefits has grown – along with knowledge of its complexity.
The Act so far has been adopted both in the public and private sectors. The UK Government has put out to consultation a new model for Social Value in Procurement. Although focused on government procurement, this model, as the initial Act, could be utilised across industries to inform social value approaches.
Acclaro’s opinion on the consultation:
The consultation out now proposes a “light touch” approach using a new model. It also provides high level and detailed guidance and links to relevant policy information that can support social value efforts. The model is split out into 5 high-level themes, 2 relating specifically to supply chains (Diverse Supply Chains; Safe Supply Chains), 2 involving staff (Skills and Employment; Inclusion, Mental Health and Well-being) and 1 on environmental sustainability. There are suggestions for each theme, in varying detail, of award criteria and measurement metrics to guide increased reporting. This would have a significant positive impact, encouraging accountability and long-term monitoring.
The additional detail will go a long way to expanding uptake of social value beyond large public sector projects as the concept becomes easier to understand, implement and report on. With the concept and practical application of social value still a maze to many the direction from government to other specific policy documents (including: Post-16 Skills Strategy; Integrated Communities Green Paper; Greening Government Commitments) and external guidance (e.g. Business in the Community’s Race at Work Charter) will prove a welcome new structure.
What’s still missing:
The mandatory 10% social value weighting in contract tenders is good – though not a new or ambitious strategy. Other larger weightings for social value have already been implemented within some tenders. Issues with current social value measurement systems – their inconsistency, lack of accountability, and corruptibility – mean this would need to include both numbers and discussion for credibility. However, this takes time that many public sector teams do not have. Thus over-reliance on untrustworthy figures alone is likely to continue.
Though environmental improvements are explicitly mentioned and categorised in the model they are limited compared with others. Some of the additional detail will be effective, however, the policy outcome of “environmental impacts are reduced” is unlikely to provide much guidance to those looking to implement. They will need to rely heavily on the 25 Year Environmental Plan – which does not use the terms “social value” or “social impact” once. The connection between environmental and social value remains undefined in this guidance.
Although under consultation and therefore liable to change, this document provides a major improvement in structure and guidance for everyone implementing social value. It will be important to keep monitoring and improving on the process as it is implemented and continue to update the system as the landscape changes.
We welcome discussion
We will be writing to necessary consortiums and bodies to provide our opinion and discuss further. If you are interested in discussing the consultation with us, please do get in contacts. Cara.firstname.lastname@example.org
It is a year since the collapse of Carillion and we have accepted that the facilities management side of their business was not the result of the failure. Important lessons have been learnt from the downfall and progress made by both the Government and the industry towards rectifying problems. This article looks at a number of these areas from the perspective of supplier activities and gives an insight into how the Sustainable Facilities Management Index (SFMI) can help you to manage these activities.
SUPPLY CHAIN RISKS
One area of real change has been the management of suppliers. In the past, suppliers were used as an extension of the balance sheet to delay or avoid payments should cash flow get into difficulty. As a result, many suppliers have gone into administration, and many more livelihoods have been impacted. Suppliers have recognised the high risks of relying on a single client and vice versa.
The Government is asking suppliers to draw up ‘living wills’ to protect against supply chain risk. The Sustainable Facilities Management Index (SFMI) looks to incorporate these changes into the relevant sections of the assessment to understand how they are being delivered with an ongoing low margin model. The SFMI continues to drive best practice across all aspects of sustainability to the industry and sees these issues as a method to improve the reputation of outsourcing tarnished by bad practices.
Greater responsibility is being mandated to clients through regulation such as Modern Slavery Act and the Social Value Act. This is driving a different conversation for both clients and suppliers. In particular, the role of social value has significantly increased as we look for different metrics to the simple financial ones to base decisions on.
Clients need to understand which social and environmental improvements are necessary and which suppliers can be engaged to help deliver them. This will require a mapping exercise to understand the local community needs. These needs can be aligned with the values of the organisation to develop a longer-term programme.
RESPONSIBLE BUSINESS APPROACH
Developing a deeper relationship with suppliers is necessary to enable two-way dialogue, transfer of knowledge and the understanding of what true value and innovation can be achieved. The SFMI has supported several supplier workshop programmes to help critical suppliers understand the main environmental and social impacts and to foster a dialogue to deliver shared services.
These themes play a fundamental role in a responsible business approach. The SFMI is driving this approach in FM – there is a long way to go, but there are some real cases of best practice out there to learn from. You can read the latest reports and Research from the SFMI here.
If you are an FM service provider, being part of the SFMI in 2019 will give your company the pathway it needs to be managing and implementing key issues that a responsible business needs to address.
Clients that procure FM services can also benefit from the SFMI. Look out for our tools that you can use to quickly assess if your FM is providing real long-term value by managing environmental and social issues responsibly for you.
Leading companies are now targeting their supply chain carbon emissions. Change within operational control is considered basic, but ambition requires looking beyond these boundaries. Consumption-based accounting, an economic model to calculate supply chain carbon emissions, is one way to do this.
Every industry has some form of a supply chain, but these can vary in size and complexity. For example, the supply chain of the manufacturing industry is usually simple. Here ‘simple’ refers to how many ‘tiers’ and ‘pathways’ make up a supply chain. Whereas service industries are far more ‘complicated’ in terms of the number and variety of these ‘pathways’.
A ‘tier’ is a layer of a supplier. For example, Company A purchases catering through Company B, creating one supply chain ‘tier’. Company B buys ingredients for catering from Company C, creating another supply chain tier. However, Company B also buys drinks for from Company D. This does not add another tier, but another ‘pathway’ to the 2nd tier. The possible connections are endless and complex. This makes them very difficult to understand.
The different types of supply chain can host different opportunities if they are understood and managed well.
The environmental impact of extraction industries is clearer than any other industrial category. Despite fairly simple supply chain structures, there are limits to how well we can understand their GHG burdens. This is especially true when you consider the impacts of land use change, an area recently raised for development of a standard by GHG Protocol.
Consumption-based carbon accounting surpasses these limits. Understanding 100% of the carbon footprint gives companies a better chance to make real change.
Construction, fashion and food products industries have had historic supply chain controversies (horsemeat in ready meals, labour violations in construction sites, and animal fur on ‘faux fur’ clothing). Their supply chains also share similar GHG emissions patterns. This provides an opportunity to improve the public view of these industries, and a transparent view of the supply chain will play a key role in this.
Supply chains in manufacturing are critically important. Consumption-based carbon accounting gives insight into the industries companies rely on and the associated carbon emissions. Diversity and improved sustainability in supply chains can protect companies from supply chain risks.
The complexities of Distribution industries are added to by the greatly increased demand for transport compared to other industries. Burning fossil fuels in lorries, ships and planes is one of the most significant GHG emissions sources at every scale. Distribution sectors will have significant transport burdens across supply chain tiers. New connections between tiers will have heavier burdens too.
With such important environmental impacts, consumption-based carbon accounting can bring a clearer focus to carbon emissions reduction efforts in Distribution industries.
Some of the most complex supply chains are within service industries. Examples of these industries include financial, legal and educational services. It is impossible under current methods, within a reasonable time and cost constraints, to measure the entire supply chain carbon emissions of such companies. However, the supply chain can hold 95% of the burden of service companies. The easiest way to map supply chains is through financial spend.
Using consumption-based carbon accounting, the GHG emissions of all supply chain paths can be included in one model. This also increases transparency in the supply chain, environmentally and financially.
WHAT THIS MEANS
Though discussed individually, the critical complexity is that all industries are linked through supply chains. For example, the Distribution industries that supply the Manufacturers, or the Service industries that support Extraction. Understanding these relationships and how they relate to supply chain carbon emissions helps target reduction actions.
More detailed understanding of these relationships through the consumption-based accounting model can accurately identify hot spots of spend and carbon to help you effectively target your emission-reducing initiatives
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