Tuesday, March 5, 2013

Mapping The Carbon Use Chain to The Value Chain

I am starting to do a lot of work and study on the impact of the complete value chain on the environment.  I think the argument over whether there is climate change occurring is absolutely over.  It is clear our environment is changing and changing rapidly.  The only question left is how much of this change is due to human interaction and how much is just natural cycles.  The answer, of course, is that it is due to both.

Given that I believe it is due to both I have to ask why would we ignore the portion we can impact just because there is a potion of it we cannot impact?  Further, if we know an activity is causing environmental issues why continue that activity?  Why not try to mitigate the impact of the activity or moderate our engagement in that activity?

A simple example is in fuel mileage of automobiles.  If we can get automobiles to 50mpg or higher (whether by better engineering of the internal combustion engine or moving to another energy source like electric) why not do it? The obvious answer is if there were some functionality we absolutely needed that the 50mpg car could not provide but I find that is few and far between.  Most users of large trucks (i.e.., Pick up trucks and SUVs) are using them because they "like big" more than any real functional use.  Some will say it is for better use in bad weather but as someone who drives a hybrid in Wisconsin during severe weather I can tell you I see as many big trucks / 4wd's in the ditch as I do anything.

So, the answer is we should do whatever we can to effect positively our impact on the environment.  In order to do this we first have to map out our impact (end to end) on the environment.  The best model I have seen (adapted from the Greenhouse Gas Protocol)  breaks it into the following segments:

  1. Extraction of raw materials
  2. Production of product
  3. Transportation and distribution of product
  4. Use of product 
  5. Disposal of product
It is important that the entity which conducts the "pull" in this value chain be the one to impact the actual conduct of the entire chain.  We know the consumer is essentially the entity which pulls all the way through however the consumer is too fragmented to be able to make a consolidated impact.  This must be at the producer of the product level.  This leads us to the 3 Scopes which product producers need to measure if they are truly going to understand the environmental footprint of their product and their company.  

Some may ask why this "burden" should be put on the producer of the product and I think the answer is threefold.  First, virtually all the activities upstream would not occur if they were not "pulled" by the producer.  No one would mine for coal if there were not users who wanted to buy the coal to use.  It is really that simple. 

Second, the user of the product (downstream) does not have enough information to know the art of the possible.  They can conduct good comparisons of products which exist but it is hard for them to know what could exist and therefore they are working with imperfect and incomplete information.  The producer has that information. 

Third, the consumer of the product cannot impact end of life disposal beyond doing the right thing based on societal infrastructure.  For example, I can send my products to a recycle center but I do not actually recycle the product.  Knowing whether the product packaging and end of life product "carcass" is capable of being recycled is beyond the consumer's capability.  This must be put on the producer to execute. 

Ultimately, the cost will be put on the consumer and products will compete within a "sustainable" sandbox.  The choice to operate outside of the sustainable sandbox will very quickly disappear.  

In looking at the totality of the business case we see there are clear cost reducing and brand enhancing reasons to look at your entire value chain, map it it to the environmental / energy supply chain and make impact in each area. 

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