The Product Carbon Footprint Guidelines
In an era where environmental sustainability is at the forefront of global concerns, the chemical industry, responsible for approximately 8% of global industrial greenhouse gas ("GHG") emissions, faces significant challenges in reducing its carbon footprint. A closer examination reveals that less than a third of the industry's emissions originate from the manufacturing process itself (Scope 1 and Scope 2 emissions), spotlighting the critical need for the industry to address Scope 3 emissions, which are responsible for the majority of the chemicals industry's emissions. These emissions, which encompass the upstream part of the value chain, including the procurement of raw materials, present a complex hurdle due to the intricate and international nature of the industry's supply chains.
The introduction of the Guidelines marks a pivotal step towards achieving a more sustainable chemical industry. These Guidelines propose a harmonised and consistent methodology for calculating the PCF, aligning with CRSD. This alignment is crucial, as CSRD reporting impacts not only large businesses based in the EU but also those with significant sales or activities within the EU. By standardising the calculation of PCFs, the Guidelines aim to facilitate better comparisons between chemical companies, thereby benefiting the companies, their suppliers, and stakeholders at large.
The Guidelines are designed to serve a dual purpose:
i. to aid chemical companies and their suppliers in identifying, tracking, and ultimately reducing GHG emissions; and
ii. to establish a reliable and audit-proof approach.
The Guidelines seek to provide a clear pathway for companies to enhance their environmental accountability. The focus on activity data, including the quantities of procured raw materials and expenditures on services or technical goods, underscores the importance of transparency and accuracy in reporting emissions.
Why Does This Matter?
The significance of these Guidelines extends beyond mere regulatory compliance. By promoting a harmonised approach to calculating and reporting emissions, the Guidelines enable the chemicals industry to pinpoint where emissions are most concentrated and devise targeted strategies to mitigate them. This not only enhances the efficiency of the value chain within the industry but also contributes to a substantial reduction in GHG emissions.
Furthermore, by facilitating the selection of suppliers with lower emissions (or working with existing suppliers to lower their emissions) and ensuring stricter compliance with environmental obligations, the Guidelines support the industry in navigating the increasing regulatory pressures and societal expectations surrounding ESG commitments.
Disputes relating to ESG contractual commitments are increasing as there is greater focus on compliance with these obligations – in part from increased regulatory pressure, and also in recognition of greater activism within this sphere – and it is important for companies within the chemicals industry to understand where their potential weaknesses are (if any!) and where to address the need for improvement.
In conclusion, the Guidelines represent a welcome tool in the chemicals industry's transition towards sustainability. By fostering greater transparency, accountability, and cooperation across the value chain, these Guidelines not only aid in reducing the industry's environmental impact but also in strengthening its resilience and competitiveness in a rapidly evolving global landscape.
