Tracking supply chain emissions (FT Commodities 2023)

Why are supply chain emissions the new hot topic for commodities? And why is tracking them so hard?

It was a pleasure to speak at the FT Commodities Summit alongside Eman Abdalla (Cargill), Matthew Babin (Palantir Technologies), Maartje Collignon (Glencore), Georgina Hallett (London Metal Exchange), Georges Tijbosch (MiQ) and moderator Emiko Terazono (Financial Times).

Here are my top takeaways for commodities traders from our insightful discussion:

1. Regulators are looking beyond company operations to carbon emissions across the whole value chain.

Strict new rules are coming into force (e.g. the EU's Carbon Border Adjustment Mechanism - CBAM and the US Securities and Exchange Commission - SEC - climate disclosure requirements).

2. Most companies aren’t prepared for the reporting burden.

This is partly because some regulatory details aren’t fully published yet, and partly because of the carbon accounting challenge.

3. It’s no secret that gathering or calculating supply chain emissions is extremely difficult.

But, that’s no excuse for inaction. First-movers in the commodities industry have been rising to the challenge for years.

4. Supply chains are the stumbling block for net-zero progress.

Companies with huge webs of suppliers question their own ability to exert influence upstream and downstream, especially if they trade goods that they never even physically move.

5. The solution: companies need to map out their full supply chain emissions, asset by asset.

Only then is it possible to compare suppliers, find opportunities to tackle the biggest hotspots, and collaborate with supply chain partners, while meeting demands for transparency.

6. Are there too many good standards or not enough?

While there are globally accepted carbon accounting standards (the most important being the GHG Protocol), there’s variation in which standards and frameworks companies follow, and how they adopt them. Some companies fear they will lose a competitive edge in the market if another company’s product looks lower-carbon thanks to a weaker methodology.

7. Therefore, data quality, standardization and comparability are key.

That’s where independent tech, automation and verification solutions can help.

8. Different stakeholders need different things measured.

Measuring your whole Scope 1, 2 and 3 carbon footprint is critical for a corporate net-zero strategy. Yet, many customers specifically want to know the product carbon footprint of their particular purchase. 

9. Don't let the journey to perfection be the enemy of 'good enough'.

Companies must get started with the best available existing methodologies, and be transparent about any omissions, errors or mistakes, at the same time as methodologies and calculations are standardized and improved. 

10. Now is the time for mining companies to speak up

Traditionally, miners don't communicate directly to end customers about the part they play in the low-carbon transition and their efforts to reduce emissions. They must remind the economy of their critical role in the net-zero economy, in order to attract more capital support, sharing the risk of the significant investment required to decarbonize the economy.

The IPCC’s latest warning from climate scientists is clear: act now before it's too late. The need for the commodities industry to double down on carbon emissions has become all the more urgent. If all actors of the value chain come together — from producer to trader to freight firm to manufacturer to financier — we can accelerate the transition to a net-zero economy.