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Carbon Management in the Supply Network: Measurement and Reporting

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Business Value and Sustainability

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Abstract

As we discuss in this book, business sustainability requires firms to develop and to adopt an integrated supply network which is committed to sustainability in order to mitigate risks and to create business value. In particular, environmental sustainability becomes a critical factor in management of the supply chain and the supply network because of the environmental impacts created along its network. While climate change now seems inevitable, there are increasingly high levels of uncertainty about the magnitude of its impacts. One thing is very clear: climate change will have a multiplier effect on supply chain risks. For example, in the autumn of 2011, an unusually intense monsoon season in Thailand caused floods which inundated more than 1,000 factories in the central region of the country. This flood severely disrupted the global supply of computer hard drives due to the concentration of assembly plants in the region. The global computer manufacturers who are the major buyers of hard drives (for example, Acer, Hewlett Packard, and Lenovo) were forced to cut their fourth-quarter sales between 5% and 10% due to delayed delivery, assembly, production and increased prices.

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Notes

  1. 1.

    Source: Financial Times, October 28 2011.

  2. 2.

    Source: https://www.cdp.net/en-US/Pages/About-Us.aspx.

  3. 3.

    See the full report Schaltegger et al. (2013) International corporate sustainability barometer: a comparative study of 11 countries, Centre for Sustainability Management, Luneburg, Germany. Available at http://www2.leuphana.de/csm/InternationalCorporateSustainabilityBarometer.pdf.

  4. 4.

    See Lee, K-H (2012) ‘Carbon accounting for supply chain management in the automobile industry’, Journal of Cleaner Production, Vol.36, pp.83–93.

  5. 5.

    For more details, see Peace, Crawford, M. and Seidel, S. (2013) Weathering the storm: Building business resilience to Climate Change, Center for Climate and Energy Solutions, Arlington, VA.

  6. 6.

    Source: Nestle response to the Carbon Disclosure Project 2012 Investor Survey.

  7. 7.

    Lee et al. (2014) introduced green bullwhip effect focusing on environmental requirements. We acknowledge that the ‘carbon-related bullwhip effects’ are developed from the green bullwhip effects.

  8. 8.

    Carbon Disclosure Project (2014) Carbon Disclosure Project 2014: Global 500 report, London, UK: Carbon Disclosure Project (www.cdp.net)

  9. 9.

    Source: www.ft.com/cms/s/0/1156f0d2-c8cc-11e4-8617-00144feab7de.htm (16 March 2015)

  10. 10.

    Lee and Cheong (2011, ibid).

  11. 11.

    Kielstra, P. (2010) After Copenhagen: Business and Climate Change. The Economist Intelligence Unit, London.

  12. 12.

    According to Huang et al. (2009) Scope 1 carbon emissions from an industry are only 14% of the total upstream supply chain, and the sum of carbon emissions from Scope 1 and Scope 2, on average, only 26% of total upstream supply chain.

  13. 13.

    Wittneben, B. and Liyar, D. (2009) Climate change basics for managers, Management Decision, Vol.47, pp.1122–1132. Lee, K-H. (2011) Integrating carbon footprint into supply chain management: the case of Hyundai Motor Company (HMC) in the automobile industry, Journal of Cleaner Production, Vol.19, pp.1216–1223.

  14. 14.

    Arguably, the GHG Protocol has an ‘all or nothing’ approach. That is, the equity approach avoids the notion of operational control, which is of great importance for implementing emissions measures. Also environmental performance data characterize the output of corporate/industrial processes, whereas financial information describes economic performance based on specific recognition and measurement policies.

  15. 15.

    Examples are reproduced from Carbon Value Chain (Scope 3) Accounting and Reporting Standard, WRI/WBCSD, 2011.

  16. 16.

    Based on CDP 2014 survey outcomes from each company (DP DHL, FedEx, and UPS).

  17. 17.

    AIAG was founded in 1982 by Ford, Chrysler, and GM to provide a forum for OEMs, suppliers, and other industry representatives to collaboratively develop solutions to promote the prosperity of the automotive industry.

  18. 18.

    The term, ‘verification’ is often used interchangeably with the term assurance. 2013 Global Reporting Initiative (GRI)’s external assurance of sustainability reports defines that verification is an independent evaluation process to provide expert third party assessment of information.

  19. 19.

    The latest 34 verification standards accepted by CDP are accessed 20 July 2015.

  20. 20.

    The Carbon Disclosure Project (CDP) is a not-for-profit organization, founded in 2000 and headquartered in London, United Kingdom, which works with shareholders and corporations to disclose the greenhouse gas emissions (GHGs) of major corporations. As disclosure of emission-related data is CDP’s primary activity, CDP collects comprehensive GHGs data. Since 2008, it has published the emissions data for 1550 of the world’s largest corporations, accounting for 26% of global anthropogenic emissions.

  21. 21.

    Members of European Automotive Working Group on Supply Chain Sustainability include BMW, Daimler, Ford, Jaguar, Land Rover, PSA Peugeot Citroën, Scania, Toyota, Volkswagen, and Volvo.

  22. 22.

    Source: www.ucsusa.org.

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Author information

Authors and Affiliations

  1. Griffith Business School, Griffith University, Brisbane, Australia

    Ki-Hoon Lee

  2. Ivey Business School, Western University, London, Ontario, Canada

    Stephan Vachon

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  1. Ki-Hoon Lee
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Appendices

Key Terms and Glossary

Carbon constraints :

Carbon constraints are any challenges and limitations which corporations face regarding the established utilization patterns of the carbon emissions that impact business conditions. These challenges and limitations pertain to direct physical effects, as well as to indirect human-induced effects.

Carbon footprint :

The carbon footprint is a measurement of the total amount of CO2 emissions that is directly and indirectly caused by an activity, or is accumulated over the life stages of a product.

Scopes of GHG emissions :

According to the WRI and WBCSD’s (2011) Greenhouse Gas Protocol, there are three scopes by which to measure a firm’s GHG emissions. Scope 1 comprises all direct emissions, while Scope 2 accounts for all emissions that are related to the firm’s energy purchases. From a full life cycle perspective, Scope 3 includes all further emissions that can be ascribed to a firm’s business value chain as well as its supply chain.

Supply chain life cycle assessment :

Since sustainability in supply chains seeks not only financial and operational benefits, but also environmental and social benefits through effective management, it is necessary to consider the entire life cycle of the products that are managed by companies within a supply chain. Taking a system view, life cycle assessment (LCA) assesses inputs, outputs, material waste and energy flows at each stage of production. Supply chain LCA expands the assessment to the entire supply chain in order to visualize the operational outcomes of sustainability performance.

Supply network disruptions :

An unplanned or unanticipated event that disrupts the normal flow of goods and materials in a supply network, and which is viewed as a major source of a firm’s operational and financial risks. Supply network disruptions are considered as the propensity of risk sources and risk drivers to outweigh risk mitigating strategies, thus causing adverse supply network consequences.

List of Companies

BMW

Cisco Systems

Daimler

DHL

FedEx

Ford

Honda Motors

Nissan Motors

Peugeot

UPS

Volkswagen

Volvo

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Lee, KH., Vachon, S. (2016). Carbon Management in the Supply Network: Measurement and Reporting. In: Business Value and Sustainability. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-43576-7_5

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