Oct 24

Importance of Transparency and Traceability of Carbon footprint to accelerate Net zero transition → Digitalization as the key enabler.

Introduction

COVID 19 pandemic was big challenge for humankind. If we look at the journey of handling the pandemic, the first major milestone achieved was by tracing the infected & isolating them & additionally having transparency of number of people infected to have lockdown measures implemented accordingly to prevent virus from spreading.

It is proven fact that Transparency and Traceability creates strong foundation of any system & helps to solve complex problems. It just not only about access to information but also allows stake holders to make progress based on the details available both in professional & personal life.

Transparency is foundation of trust environment & breeds accountability, which is a big part of what drives change.

Traceability goes hand in hand with transparency as it tracks the movement of product & services throughout the supply chain.

Net zero transition is complex undertaking. One side we need to create awareness in consumers to use low carbon products to create demand & other side we need huge investments to transform the existing supply system to low carbon manufacturing process by tracing carbon emission sources & mitigating them. Transparency & traceability of carbon footprint plays vital role to accelerate Net Zero transition.

Why is Transparency & Traceability of carbon footprint important for Net Zero Transition

Let’s us understand the benefits stake holders have through transparent & traceable eco system:

Consumers

It’s been found that 94% of consumers are more likely to be loyal to a brand that’s completely transparent. Increase in transparency of carbon footprint involved in product & services raises awareness in consumer & plays important role in mindset shift of price-based purchase to value-based purchase fostering the increase in consumption of low carbon footprint products.

In case of consuming products with high carbon footprint, consumer can offset the carbon consumption by other means.

One of classical example where transparency in place is aviation industry where we know how much our travel contribute to carbon emission, though mitigation steps still need to be incorporated.

Supplier

Manufacture’s and service providers are facing huge pressure to reduce carbon footprint. Setting targets to reduce emissions throughout the value chain (Scope 3) is becoming a new business norm and suppliers must be ready for the same. This is only achievable with strong transparent and traceable system which provides below advantages:

1. Transparency in manufacturing process will help to identify operational challenges leading to carbon emission and accordingly mitigate them at design phase itself and during production cycle.

2. Supply chain emissions are on average 11.4 times higher than operational emissions. Traceability helps to cascade the carbon footprint information across supply chain & in turn mitigating scope3 emissions by encouraging low carbon sub-suppliers.

3. Suppliers can publish carbon reports with help of transparent and traceable system helping them to handle regulations, attracting investors and creating strong brand image in market.

Investors

Finance world works on credibility. Transparency creates trust & trust builds credibility. The need for enabling tools to mobilize finance for the low-carbon transition is urgent. Carbon markets have strong potential to unlock finance to achieve climate goals.

However, transactions in carbon markets will only reduce emissions globally if these reductions are real and credible, and accurately accounted and tracked. Transparency and accountability are therefore critical to a well-functioning carbon market.

How can we increase the transparency and traceability

Think BIG, act small. Transparent & traceable eco system cannot be build overnight. We need to have step wise approach with digitalization & Governance plays major role.

Digitalization: Data has the power to drive decarbonization. We need to build digital infrastructure through implementing digitalization solution & utilize power of data for net zero transition. It’s easier said than done however possible through strong collaboration & right use of technologies.

We need to have emission management tools (e.g. SiGreen software from Siemens) which facilitates data exchange throughout value chain, creating transparency of product carbon footprint chain.

Governance: If you Walkin supermarket or look at adds then you will find lot of products featuring claims like “climate neutral” or “packaging reusable*. Putting ‘Green’ as prefix to any product or technology is new marketing strategy. Lack of clear regulation and definition means companies can call their products ‘carbon-neutral’ and provide no further information which is not good for trust based ecosystem.

So strong legislation is necessary which defines clear process and criteria to declare product green. EU is already working on green claim directives legislation which is a governance framework on how you make the system more democratic, transparent, and balanced with respect to carbon footprint declarations.

Used Case

'Carbon Is the New Calorie': Logitech's Carbon Impact Label to Drive Transparency in Sustainability

Logitech, Swiss based multinational organization in business of peripherals and software’s, to increase the transparency of carbon emissions for their products, the company has introduced a carbon transparency label that denotes the number of carbon emissions that the product causes over its full lifecycle as well as if these emissions have been offset which then allows for labelling the product carbon neutral. Therefore, the firm not only calculates the emissions resulting from use of raw materials, manufacturing, and distribution but also the emissions from its usage by the end-user which are then all offset to allow for a carbon-neutral product.

Conclusion

Digitalization and strong legislation are key drivers for increasing transparency and traceability of carbon footprint which we can create positive reinforcement feedback in the complete system to promote low carbon society mindset & also necessary steps to reduce carbon emission required for net zero transition.

References:

Author: Pradeep Singh, Student of MBA Sustainability Management Class 1 (2023-2025)

Importance of Transparency and Traceability of Carbon footprint to accelerate Net zero transition → Digitalization as the key enabler.

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