Carbon Labelling: Impacting the Entire Supply Chain

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Carbon labeling is likely to be a powerful tool for informing consumers about the climate impacts of their  purchasing decisions, but generating and interpreting the data for an accurate  label is not without its challenges. Enhesa’s August 2011 webinar, attended by  over 200 EHS professionals, explored the potential effect of carbon labeling throughout  the entire supply chain and discussed the implications of growing government  action on carbon labeling. The webinar examined the case study of France, where  the government is contemplating a mandatory environmental labeling scheme and  is currently conducting a pilot program with 160 companies.

Labeling policy is RAPIDLY developing

As governments around the world  encourage the shift towards providing consumers with more information about the  carbon footprints of the products they buy, the voluntary carbon labeling  sector is transitioning into maturity. Governments in countries like the United  Kingdom, Japan, Thailand and Canada are supporting carbon labeling by  establishing carbon footprinting methodologies and certification bodies.

5,000 products now bear the  UK’s Carbon Reduction Label the Carbon Reduction Label’s life cycle assessment  methodology – PAS 2050 – took the early lead as the de facto international  standard for carbon footprinting a product. To date, PAS 2050 has been used to  footprint a wide variety of products from food to clothing and even household  electrical appliances. However, the recently revised PAS 2050 now faces
competition. In early October 2011,  the  GHG Protocol launched a Product Life Cycle Accounting and Reporting Standard; and  the International Organization for Standardization is currently developing a  standard on carbon footprinting of products (ISO 14067). Both these new  standards, like PAS 2050, will assist companies to understand the climate  impact of their products and seek certification through a labeling scheme. The  Question: “Which standard will be most accepted by companies and governments?”

But perhaps the most significant  development in carbon labeling is the tentative movement by the French  Government towards making carbon labels mandatory. While voluntary carbon  labeling schemes have long been supported by governments in a number of  countries, France is the first country to seriously contemplate a mandatory  carbon labeling scheme for all consumer goods. Mandatory carbon labeling would  actually be part of a larger effort in France with respect to mandatory  environmental labeling.   . Mandatory environmental labeling has been  discussed for several years in France, and last year Parliament agreed to  consider adopting a mandatory scheme after a trial phase of one year starting  in July 2011. Over 160 companies are currently providing French consumers environmental information on the goods they purchase as part of this trial. The  pilot phase covers a wide range of products, from textile products to cosmetics to electronic and electrical products. As participants assess the practical  business impacts of environmental labeling, they are given the opportunity to influence the future shape of the scheme.

To provide a framework for the future scheme, France is currently developing product-by-product methodologies for the  assessment of the environmental impacts of products. A general methodology –  BP-X-30-023 – was developed in 2008, and methodologies for 16 product
categories are now under development with the input of a variety of  stakeholders.

Nevertheless, there is still a long  way to go before a mandatory scheme can actually be enforced in France. One  significant issues still open is the means of communication of the  environmental footprint of products. Current options being considered include  informing consumers of product environmental impacts through an actual  environmental label or through the website of the manufacturer.. The government  also has yet to determine what environmental aspects should be be communicated  for each product type.  Enhesa is closely  watching the ongoing discussions within the French government.   .

What does carbon labeling mean for businesses?

Industry concerns are focused on the  reputational and compliance risks of carbon labeling. Ninety-five per cent of  participants agreed that it was important for their company to be perceived as “green”  – mandatory requirements to disclose information about the environmental
impacts of products present the risk that public confidence in some brands may  be damaged. And while mandatory carbon labeling is still in its infancy, the  prospect of mandatory labeling is already causing anxiety. In our research, 60% of respondents expressed major concerns about complying  with mandatory labeling schemes.

Businesses are already beginning to  feel the impacts of carbon labeling, as requirements for carbon footprinting  ripple through the supply chain. Carbon labeling requires a full analysis of  the production process to identify carbon that is emitted throughout the life  cycle of a product. Life cycle analysis is a challenge for any business as it  requires communication with companies in the supply chain including a  detailed understanding of the inputs involved  in the creation of a product. Significant manpower hours are needed to complete  an analysis.

The difficulty of completing a life  cycle analysis can be balanced out by the significant financial benefits for  companies that achieve it.  Benefits
include:

  • Understanding where inputs come from enables companies to make business decisions which can  lead to significant savings. Energy intensive processes can be identified and energy saving measures employed.
  • Identifying ways in which service delivery can be improved to reduce energy usage, and therefore costs.
  • Utilizing detailed information about efficient processes as a market advantage against rivals.
  • Presenting data to best highlight the strengths of their product.

Be Prepared!

The key lesson for business is to be prepared. Whether a company is a producer of consumer products or a supplier of materials and components, it is likely to be answering more and more requests for information about the environmental impact of their products. Companies that are unprepared for these requests may face negative market results or damage to their reputation as consumers shift towards suppliers that can demonstrate strong environmental performance. Increased scrutiny of the environmental impacts of products appears to be a trend that is here to stay.

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