The journey towards the decarbonisation of supply chains requires harmonised and reliable information on emissions as well as industry collaborations by not-for-profit organisations operating safe and trustworthy data-sharing initiatives.
Decarbonisation of supply chains: why data sharing is vital
As the decarbonisation of supply chains is becoming imperative, companies need standards for calculating and reporting the greenhouse gas (GHG) emissions of their product. Over time, suppliers along complete supply chains will share their calculations with their clients and other stakeholders. Fortunately, emissions can be quantified as carbon-emission equivalents, simplifying the measurement process – hence the term carbon footprint. However, today, we are far from having access to harmonised, detailed and reliable information on emissions. While some generic guidelines such as the Greenhouse Gas Protocol exist, consistent industry approaches at product level are lacking. Achieving this will require collaboration along supply chains in the years to come; undertaking this collaborative effort is vital for several reasons. First, consistency and comparability are key to understanding the relative footprint of different raw materials, components, or products. Having estimates at the company level is not enough to decarbonise our supply chains. Second, solid data foundations help understand emission drivers and initiate incremental and radical improvement projects. In a nutshell, to find alternative raw materials and design more circular supply chains, companies need data they can trust. Finally, product carbon footprint transparency is important for stakeholders and policymakers who expect companies to fulfil their climate commitments and targets.
In the future, achieving climate change ambitions will require even more data sharing between companies and digital solutions that span entire supply chains. Beyond the sharing of product-specific greenhouse gas (GHG) emissions, EU regulations are pushing companies to share information that facilitate the adoption and scaling of circular economic models. One EU initiative focuses on batteries. With the rise of vehicle electrification, demand for battery raw materials will increase rapidly. To achieve a sustainable transition, a circular approach is necessary to ensure sustainable material sourcing, efficient battery production, and effective end-of-life processing that maximise the reuse of materials. By doing this, the whole industry will reduce emissions and reduce its dependencies on certain raw material sources.
In this context, EU Regulation will soon require data-digital product passports from companies along the battery supply chains – these passports will contain information about the battery’s composition, environmental impacts, and end-of-life procedures. This data-sharing scheme is designed to provide transparency and accountability throughout the battery’s life cycle, from production to disposal. Companies such as BASF, Umicore and BMW have taken the lead in creating such a passport.
In this context, no company will be able to make information exchange on emissions and other sustainability factors happen on its own. We will need industry collaborations orchestrated by not-for-profit organisations that operate safe and trustworthy data-sharing initiatives. In this regard, Together for Sustainability (TfS) is a role model in the chemical sector that can inspire leaders across industries. In the present article, we review the history of TfS, describe its current product carbon footprint initiative, and discuss how its model could be mainstreamed across different industries.
Together for Sustainability
TfS is a global sustainability initiative for the chemical industry. It was founded in 2011 by six leading chemical companies: BASF, Bayer, Evonik, Henkel, Lanxess, and Solvay. TfS aims to improve sustainability practices in the chemical industry supply chain through data-sharing initiatives. It also provides training and support to suppliers so they can improve their sustainability practices. Today TfS has 47 members whose aggregated revenue exceeds $800 billion; this not-for-profit foundation brings together more than 14,000 suppliers along a common improvement path.
How TfS started
Back in 2011, supply chain due diligence had emerged as a critical issue for businesses. The idea for TfS emerged in 2011 when six Chief Procurement Officers (CPOs) from the chemical industry came together to address a common problem. They realised that approaching suppliers separately with different standards and questions would prevent these suppliers from concentrating their efforts on progress. To solve this problem, they decided to create a standard that would reflect the needs of the industry. Their motto was simple: ‘‘An audit for one is an audit for all.’’
A virtuous change cycle fuelled by trust.
Over the years, TfS has evolved into a professional not-for-profit organisation that orchestrates a virtuous change cycle. As TfS onboards new members, a broader pool of suppliers and data is created. As the pool of data broadens, more members see the benefit of joining TfS. Such a virtuous change cycle was possible because TfS created the conditions for industrywide trust for TfS members and for their suppliers.
On the member side, trust was established through three means: responsibility, exemplarity, and compliance with antitrust laws. First, companies that join TfS must be represented by their CPO.
With this decision-making power, each member dedicates the resources needed to support the TfS workstreams. Furthermore, no members can get a free ride, all of them commit every year, to bring their share of suppliers into the pool. TfS has a dashboard that outlines the number of suppliers involved, the aggregated scores of suppliers, and the number of corrective actions closed across the industry. This creates a sense of responsibility and instils emulation. Second, over the years TfS has focused on quality over quantity. To become a member, a company needs to score high against TfS’s own criterion so they can lead by example. By doing so, members also have a clear understanding of the stakes and efforts required to spearhead sustainability improvement. Third, the TfS initiative is antitrust compliant: companies share data without knowing with whom a supplier works. This is an important foundation that requires a professional organisation and solid governance, so everyone is confident.
On the supplier side, suppliers also gain benefits beyond the elimination of paperwork. TfS helps them save time but also gain access to resources that help them improve. While members benefit from experience and best-practice sharing, TfS also offers capability-building initiatives to suppliers who gain help from members. This allows them to develop their capabilities, image, and reputation. As suppliers own their assessment and audit results, they can use them to gain credibility in the market and to support their commercial efforts. Finally, TfS has established partnerships with diverse industry associations and has developed active connections across the world, creating an expanding and supportive ecosystem.
Democratising carbon footprint data
As members of Together for Sustainability started to commit to reducing their greenhouse gas emissions, they realised the importance of calculating the carbon footprint of their products in a consistent way. TfS consequently launched its Product Carbon Footprint (PCF) Guideline in September 2022. The guideline is open source, available in five languages, and accessible to everyone. The guideline provides a standard for calculating the carbon footprint of chemical materials. TfS is now piloting a digital solution that enables corporations and suppliers to share upstream product carbon footprints and manage their emissions of purchased goods and services. In a nutshell, TfS promotes the democratisation of product carbon footprint measure, and it offers a safe digital space to share such information.
With the TfS guideline and the associated digital platform, the data used by R&D, sales and procurement across the chemical industry can progressively be unified, making the development of competing methods of calculations for the carbon footprint of chemicals superfluous. As this occurs, providing information on product carbon footprint to clients will soon be regarded as a basic service and sharing such information on a broader scale needs to rapidly become one of the foundations for more systemic changes that will help fight climate change.
Measurement is a necessity, but it will not reduce emissions by itself, companies will need to turn measurement into priorities and priorities into results. No company should wait for perfection in measurement and reporting to start acting! But sound and rapid progress can only be achieved if we reduce the time it takes to have a common and recognised standard.
To help visualise this trust and measurement challenge, Table 1 can help decision makers assess the maturity of a company’s approach on measuring scope 3 emissions. This table is not part of the TfS guideline, it applies to any situation where a company depends on suppliers to measure its scope 3 emissions. Thanks to the TfS Product Carbon Footprint Guideline, we can rapidly progress from level 0 to level 2, so emissions are calculated and shared by suppliers based on sound industry guidelines and methods. Then, we will need to progress to level 4 where comparable, detailed, and reliable information on emissions exists across industries and along the supply chains. Some large companies already have the capabilities needed to reach level 4 while others are earlier on in their journey. Through TfS they can share their expertise and practices so everyone in the industry can reach level 4.
Gaining trust in the emission shared across companies cannot be achieved without widely accepted standards and guidelines. No company should spend time re-inventing the wheel on its own. Competing initiatives should not flourish. With sound collective efforts within an industry, we can reach level 4 in five years, with fragmentation and competing standards, it will likely take 15 years to get there.
Other industries should adopt the TfS model!
Over time, it is important to democratise access to data on GHG emissions to ensure everyone understands the impact of their actions on the environment. This data should be used to inform policy decisions, create awareness, and help individuals and organisations reduce all their emissions. Additionally, having access to data helps ensure that all stakeholders are held accountable for their actions and have the necessary information to make informed decisions.
In this context, other industries can build on the efforts undertaken by TfS. Establishing organisations such as TfS is critical. Professional and trusted not-for-profit foundations facilitate safe data exchange and help extract commercial sensitivity out of them. Three important lessons learned from TfS can be outlined to increase the chance of success for such an initiative.
First, it is of utmost importance to have a dedicated professional organisation. Orchestrating data sharing requires establishing professional not-for-profit foundations. Only not-for-profit foundations can rapidly rise as a trusted body; they can ensure that diverse regulations including antitrust laws are respected, and that potentially sensitive data is protected. Such not-for-profit organisations are best served by a transparent governance process where decisions are documented and widely available. Decisions need to be taken collectively within key projects, endorsed by all members. Good governance also requires an active board that mainly sets the ambitions, defines the functioning of the organisation, and steers the direction of the organisation.
Second, such initiatives need to balance short- and long-term benefits for participants. In the case of TfS, all participants benefit, right from the start, from the elimination of excessive paperwork, the availability of a data-sharing infrastructure, and access to knowledge. However, over time, participants can gain further benefits both at the company level and at the industry level. They can strengthen their credibility in the market and take advantage of a more transparent and sustainable supply chain.
Third, such initiatives need to create a positive ecosystem momentum and mobilise a broad array of members. A not-for-profit foundation that manages a data-sharing initiative plays a pivotal role in attracting new members, but it should also set the bar high for participants. It needs to ensure that members act responsibly, contribute to the collective efforts, and remain exemplary. Members’ contributions and participation should be visible and publicly recognised. At the same time, the not-for-profit foundation that supports data-sharing initiatives should ensure that only exemplary members can join and that all members contribute a fair share of resources to the collective effort. The initiative will be successful if a critical mass of industry players can be rapidly created to instil a virtuous circle of mobilisation and progress.
At a time when we need solid data foundations for the decarbonisation of supply chains, TfS is a prime example of how collaboration can enable the transformation of industries. TfS has created a standard that serves the chemical industry well; the organisation is also ready to support other industries. We need to promote and progress towards the democratisation of product carbon footprint data, which will help create actionable insights and drive progress. Some of the TfS members even believe that they have a responsibility to help other industries fast-track their development. Our collective stake is to create standards that are available for free, avoiding total fragmentation in the way product carbon footprint is measured. Let’s make it happen fast!
About the Author
Hervé Legenvre is a Professor and Research Director at EIPM. He manages educational programmes for global clients. He conducts research and teaches on digitalisation, innovation, and supply chain. Lately, Hervé has conducted extensive research on how open-source software and open hardware are transforming industry foundations. (www.eipm.org)