With the G7 committed to net zero carbon emissions by 2050 at the latest, and with ambitious emission reduction targets expected in many leading nations in the 2020s, a carbon reduction plan is fast becoming obligatory for every organisation. However, many are planning in a data vacuum – without a true sense of their entire emissions baseline. The greatest single area of carbon emissions for most organisations – the supply chain – is the least well understood, because of the inherent data challenges and complexities.
There are many brilliant initiatives joining up suppliers and customers to share data about carbon footprints more effectively - these projects are driving more data sharing between organisations. At NTT DATA we are also embracing the challenge inside the organisation - working with clients to bring a holistic view of carbon from across what is often a messy data landscape. Because it’s a climate emergency, we’re starting with the highest impact area first.
New terminology for the data world
When I began working in data and intelligence more than 20 years ago, the single view of the customer was one of the key client challenges. Since then, the terminology has changed – in NTT we talk about the Digital Twin of the Customer – but some of the underlying data integration challenges remain. We’ve helped dozens of client organisations put the customer at the centre of their data landscape but I believe we’re about to see the emergence of a new slogan in the data world: the Single View of Carbon. Let me explain why.
Drivers of carbon footprint measurement
For the uninitiated, the realm of carbon footprint calculation can seem daunting, but it’s one we’re going to become more familiar with over the next few years. There are many factors driving organisations to measure their carbon footprint including regulation (Google TCFD for example), investor pressure ($9 trillion of investment assets are focused on companies with a Net Zero target) and the self-fuelling demands of customers along the supply chain for better carbon insights. The personal convictions of organisational leaders, embarrassment by competitors and the environmental lobby also play a part.
The tricky data challenge
At a high level, carbon emissions measurement divides into three “scopes” – described in more detail here. “Scope 1” and “Scope 2” are the obvious emissions that would come to mind: how much fossil fuel a company burns and how much non-renewable electricity is consumed in operations. This data is not trivial to find but typically there are a few places to look. Moreover, in the UK at least, these declarations are mandatory so firms are getting more familiar with the process (although I worked with a FTSE 250 company recently where I discovered every figure in the Greenhouse Gas Emissions section of their annual report was incorrect).
“Scope 3” is less obvious: it’s the emissions created before your operations start and after they finish. Business travel is the easy one to start with because expense systems centralise this information. Unfortunately, many service firms simply stop there, put off by difficulties that emerge in going further. This is compounded by the conventional wisdom that since travel (especially flying) is known to be so carbon intensive, the biggest part of the problem is probably covered. But business travel is one of 15 categories of scope 3 emissions - and is not the largest for most organisations. In fact, to get a true picture of carbon impact requires interfacing to:
- Order processing platforms and product usage (e.g. from sensors) for downstream product lifecycle
- ERP platforms for procurement data accounting for upstream carbon impacts
- Expense systems and HR for employee travel and commuting
- Intelligent facilities management for fine-grained accounting of electricity fuels and waste
- External data for investment decisions (there is a huge amount of interest here), logistics, end of life product treatment etc.
In addition, there are a growing number of ecosystems where sustainability data is shared between buyers and sellers for mutual advantage. There are also continuously changing reference datasets and calculation complexities.
The underlying challenge is the survival of our ecosystem but the data integration challenge in getting to a calculation is considerable. It is no longer enough to piece something together once a year for the annual report. It is exactly this ad-hoc approach which caused the errors in the annual report that I mentioned above. But this is about more than just getting the numbers right: as more organisations (and increasing numbers of cities and sovereign states) make Net Zero commitments, it is vital that the measurement is regular.
The cynic might think that a Net Zero date of – say – 2035 is easy enough to set now, as incumbent executives will be happily retired by then. Unfortunately for those trying to postpone action on the issue, increasing scrutiny and clearer standards mean that greenwashing isn’t a viable approach any longer.
So, organisations need to show progress on their declared objectives – and that progress needs to go beyond carbon offsetting strategies to be a Net Zero plan (offsetting just gets you as far as ‘carbon neutrality’). Expecting to hit carbon reduction targets without measuring your carbon footprint regularly is as ludicrous as expecting to hit sales targets by doing sums at the end of the year.
Getting on the front foot
At NTT DATA, we already have solutions for scope 1 and scope 2 calculations, and for business travel, through our Umbiombu reporting platform. While that’s a good start, it’s critical to tackle the supply chain. By supply chain, we’re focused on two categories within scope 3: (1) Purchased Goods and Services and (2) Capital Goods. These categories are also the most important overall, representing over 40%* of all emissions for the average organisation, but they are also arguably the most complex.
We’re familiar with complex data challenges and so we’re looking at the data integration challenges inside the organisation to start to assemble the Single View of Carbon. The importance of the climate emergency has encouraged many players into the market, including data brokers, specialist consultants and ecosystems which bring together those in the supply chain to exchange data on the carbon footprint of products and materials.
There are also distributed ledger solutions that allow for fine-grain carbon tracking across the supply chain – perhaps the killer use case that my colleagues in our Blockchain Centre of Excellence have been waiting for. Bringing the data from the complex data landscapes we see inside our clients to the point where it can be used by an ecosystem – or a distributed ledger for that matter - is non-trivial.
The holistic view
In addition to data integration for the supply chain, there’s a challenge of missing detail needed to make the calculations. If a firm is reliant on its suppliers to provide accurate carbon information for products and materials, then the whole process is going to take a long time to produce results. Fortunately, the lifecycle analysis that needs this data per product is not wholly dependent on suppliers having their story straight, but it is nevertheless a slow process to gain the necessary level of accuracy. And for service industries, it’s more complex still.
What is needed to fill the gap is a ‘top down’ estimate. Our recent partnership with Normative makes this possible. Normative offers an end-to-end carbon footprint calculation platform and – while there are a few competitors – it has unique capabilities in the top-down approach. Normative use a combination of techniques including natural language processing to match purchase information to standard factors, to produce a carbon estimate based on level of spend (known in the Greenhouse Gas Protocol guide as the ‘average spend’ method). They also have their own supplier database, which is easily updated based on the published overall emissions of each supplier.
Clearly the trade-off here is coverage for accuracy, however our solution substitutes detailed product datasheets, lifecycle information and blockchain entries where possible, meaning that accuracy improves all the time. In this way it becomes possible to get a handle on the ‘tricky 40%’ of emissions, which NTT DATA and Normative can complement with more straightforward solutions to cover some of the other categories and scopes. Carbon emissions can then be tracked like any other business KPI, with no nasty surprises at year end. We may yet see an evolution of the balanced scorecard to include Net Zero tracking.
Facts then action
There may be obvious emissions reduction projects to be started – NTT DATA can help here in a wide array of areas including energy reduction plans, smart metering or greener offices. However, if we believe in data-driven decision-making, then using measurement to direct the priority of different initiatives is the same approach whether we’re talking about customers or carbon. Personally, I’d say it’s even more important.
We call our solution the Single View of Carbon; if you would like to discuss how it can help your organisation tackle the tricky 40%, please get in touch.
* Extrapolated from the Carbon Disclosure Project’s Supply Chain Report 2018/19