Environmental Leader

If your company sells products to Wal-Mart, you likely already know the importance of understanding and managing your Scope 3 greenhouse gas (GHG) emissions.

The responses to Wal-Mart’s Sustainable Product Index questionnaire were due in October. While the questions themselves were not overly complex, many companies were left scrambling for answers. Suppliers also see the direction in which Wal-Mart is headed: “no” is currently an acceptable answer to the question “Have you measured your corporate greenhouse gas emissions?” Clearly, a time will soon come when this will not be the case.

Further, Wal-Mart recognizes the importance of Scope 3 GHGs, the catch-all bucket for the emissions that don’t fall into Scope 1 (on-site and mobile fuel combustion) and Scope 2 (electricity and steam use). Suppliers who received the questionnaire represent Wal-Mart’s own Scope 3 emissions, and the company will almost certainly want these suppliers to understand their own Scope 3 emission sources in the not-too-distant future as Wal-Mart establishes “real transparency” in its supply chain.

In my last column I mentioned Dell’s ill-fated attempt at carbon-neutrality, which was scuppered by its failure to take into account Scope 3 emissions. If you compare the company’s actual Scopes 1, 2 and 3 emissions to the emissions it offset through renewable energy purchases, wind power certificates and a tree planting scheme, the contrast is stark: 5,490,085 tons emitted and only 537,308 tons offset, or 9.8 percent.

Add the 5 million tons of emissions produced by customers using the computers and servers, which some people refer to as Scope 4, and the percentage of emissions offset drops to 5.1 percent. I don’t believe that Dell maliciously misled customers — the company was taking first steps on its carbon footprint path and overstepped on a marketing claim. However, the example does illustrate the difficulty of understanding, never mind managing, Scope 3 emissions.

Consumer packaged goods companies are trying to understand supply chain GHG emissions because their major customer is asking for the information, and similar trends are also being seen in other industries, particularly in California. Webcor Builders, the largest construction company in California, has integrated carbon accounting into to its routine business practices. To understand its total GHG impact, it is looking at Scopes 1, 2, and the elusive Scope 3.

Rather unsurprisingly, Scopes 1 and 2 accounted for less than 1 percent of Webcor’s emissions. To paraphrase Bill Clinton’s campaign mantra: it’s in the buildings, stupid. Construction transforms around 3 billion tons of raw materials—about 40 percent of the total flow of these materials into the global economy—into buildings each year. Of course, the majority of emissions related to buildings occur in the use phase. Buildings consume some 20-40 percent of energy in developed countries. Still, construction activity itself is significant. A snapshot of GHG emissions intimates this idea. Using the Comprehensive Environmental Data Archive (CEDA) environmental input-output database, construction activity is shown to be the third-largest category of GHG emissions (see figure 1, below). (The percentages do not add up to 100 because industries purchase from each other and construction activity also uses electricity.)

The US Green Buildings Council is starting to get a handle on this. The LEED v3.0 for New Construction certification system now awards up to 25 percent of points to certify a green building for activities related to reducing impacts on climate change in both the construction and use phases of the building’s life. This is a sharp departure from the equal weighting that the climate change impact category had received under previous versions.

Most of the emissions from a building will occur during the use phase, but the construction phase is far from insignificant, representing roughly 15 percent of emissions in the United States. Webcor is taking the lead in the construction industry by going beyond Scopes 1 and 2 to take active measures to account for the entire carbon footprint of the construction phase of a building and not just their own fuel and electricity emissions.

Webcor has preemptively approached owners of several large public and private building projects in California and they readily agreed to assist in piloting this effort. Webcor and subcontractor/bidders will now provide a building carbon footprint along with financial proposals for several major upcoming projects.

Clearly, a construction company cannot do this if it only understands its own Scopes 1 and 2 emissions. Webcor realized this issue and used a top-down hybrid life cycle assessment to produce a drill-down carbon report of major materials in a building. This approach compared Webcor’s financial information with the BEA’s industry-average data to generate a complete overview of Webcor’s specific emissions It’s as if you were standing at the top of a mountain with a camera that could take a 360-degree picture of everything around you—you would be able to see other mountain peaks, but not the glaciers on them or the depth of the valleys between them.

Once you’re able to identify the peaks, though, you can gauge their relative size: the peaks labeled “Concrete,” “Steel,” and “Glass” are big; the ones called “Office Paper,” “Staples,” and “Lightbulbs” are not. Now that you know the structure of the building is important, you can go to your concrete supplier to find out how he or she works differently from an industry-average concrete supplier. Cement is the component of concrete that generates the most GHG emissions. One of Webcor’s concrete suppliers, US Concrete, is replacing significant amounts of cement with fly ash (supplemental cementitous material, a by-product of coal-fired power plants). This replacement saves approximately 0.7 tons of carbon dioxide equivalents per ton of fly ash used, and improves Webcor’s carbon footprint of the building in question.

Webcor also saves time and money by focusing on the suppliers identified as material to their carbon footprint, rather than sending a questionnaire to every single nut and bolt manufacturer, a painful task for a company with thousands of suppliers.

None of the projects in California have a requirement for what the carbon footprint number should be—yet. In some ways the situation is a lot like Wal-Mart’s in that the first round of questions only asks for a response. Nobody doubts that a future round will require the response to meet a certain standard, and that the companies who are using the interim period to start actively managing their carbon emissions all the way along the supply chain will have an advantage.

Jen Ace is Director of Client Engagement at Climate Earth, which uses Enterprise Carbon Accounting to help companies understand the carbon footprint of their entire business – including the supply chain.