Your Path to Market-Based Carbon Credits

According to the GHG Protocol, scope 3 emissions are indirect emissions that arise outside the direct control of a company. They originate from the entire value chain of a company and beyond, including the production of raw materials, the use of products by customers, and disposal at the end of the life cycle.

Scope 3 emissions often make up the largest part of a company’s total emissions and are therefore crucial for reducing the footprint in accordance with SBTi. In other words, you can switch to green electricity and restrict business travel – but as long as you are not actively working to reduce your scope 3 emissions, your impact on the climate will be very limited.

What is a Product Carbon Footprint?

The majority of the complexity when it comes to scope 3 offsetting has to do with indirect emissions. By their very nature, these are beyond the direct influence of the company and therefore appear difficult to determine at first glance.

The lack of data availability, complex global supply chains, and varying calculation methods pose challenges for companies, leading some to abstain from attempting a calculation altogether. (“I can't possibly know what happens at the beginning of my value chain in a foreign production facility!”) This is a mistake that has the most significant impact on the climate. It is now possible to determine, analyze and reduce scope 3 emissions, i.e. the product carbon footprint in a transparent and comprehensible manner.

The PCF is an important indicator for determining the ecological footprint of a product. It doesn’t only refer to carbon dioxide emissions within the product life cycle, as the name suggests, but also to other greenhouse gases such as methane (CH4), nitrous oxide (N2O), and nitrogen trifluoride (NF3).

As such, it is measured in CO2 equivalents (as is the company carbon footprint). To calculate CO2 equivalents, the emissions of various greenhouse gases must be converted into a single unit based on their relative global warming potential (the GWP value).

Calculating the Product Carbon Footprint

There is disagreement about which stages in the life of a product should be considered when calculating the PCF. While cradle-to-gate approaches incorporate emissions from raw material extraction to the factory gate, cradle-to-grave advocates go even further, taking the end of a product's life into account, sometimes right up to the point of complete recycling.

Let’s assume your company manufactures car batteries. In general, the following areas can play a role in the PCF of a car battery:

1. Extraction of raw materials (e.g. mining of ores)

2. Production (e.g. screwing together the electrode plates in the industrial plant)

3. Distribution (e.g. transportation to the car manufacturer)

4. Use (e.g. installation in a car, but also all charging processes of a battery by the end customer)

5. Disposal (e.g. recycling by a specialist)

To determine the PCF for carbon offsetting, accurate data (actually collected, derived, or estimated) from these calculation steps is required. In this regard, companies don't have to reinvent the wheel, as there are already tried and tested practices for calculating the PCF.

Read more about the PCF calculation method from thyssenkrupp Materials Services.

Why Should You Know the Product Carbon Footprint of Your Products?

If you know the product carbon footprint for each of your products, you will reap several benefits:

●      Greater transparency: You will have precise initial values for calculating your own emissions.

●      More targeted improvements: By analyzing the PCF, companies can identify which phases of the product life cycle generate the most emissions. They can also leverage previously untapped savings potential.

●      More climate-friendly products: Offer your customers products that do not harm the climate or at least do less harm than the standard. Demand for such products is growing steadily.

●      Better collaboration: Put an end to ineffective individual efforts on climate matters. Discussing the PCF is the beginning of a co-creative process with stakeholders, suppliers, and partners that demands a lot from all sides but is ultimately effective.

Reduce the Climate Impact of Your Products with Carbon Credits

To minimize their product carbon footprint and simultaneously tackle scope 3 emissions, companies are increasingly using voluntary carbon credits as an effective tool. Why is this an ideal solution for emissions that cannot be avoided or are difficult to reduce? Because you cannot yet avoid all product-related emissions!

Staying with the previous example: While you can calculate the greenhouse gas emissions generated by the foreign manufacturing process, you may not (yet) have a way of avoiding these emissions. Without these raw materials, you simply may not be able to manufacture your product.

Carbon credits, also known as CO2 certificates, allow you to offset those unavoidable emissions generated by your products by investing in projects that reduce or avoid the greenhouse gas emissions.

As such, it makes sense to incorporate carbon credits as a complement to your climate strategy. This not only benefits the climate; it also allows you to take advantage of a valuable opportunity to differentiate yourself on the market. With products and services that are more sustainable and environmentally friendly, you will capture the interest of consumers and investors alike.