“Clearly there will be winners and losers in the transition to a low-carbon economy, and investors should be concerned about companies who are not able to provide the information they require.” – Carbon Disclosure Project Global 500 Report 2008 (also known as CDP6)
To today’s enterprises, greenhouse gas (GHG) emission—amongst various sustainability issues—is one of the highest priorities. Some companies, as I have seen, have set up strategies to address GHG emission issues. At the operational level, companies are modifying accounting systems to report GHG emissions and to accommodate carbon trading; implementing energy management systems to reduce energy consumption; and optimizing supply chain management systems to increase transportation efficiency— to name just a few approaches.
Looking at all the activities that companies are conducting, one thing is certain: management software can help. However, since GHG emission is a complicated issue and the application of software in this area is still quite new, a clear picture that shows the connection between enterprise software and GHG emission has yet to be established.
Recently, I started working on a project about how enterprise software can help tackle environmental issues. I started to feel that the three GHG emission scopes might be a simple way to comb through the various initiatives of using management software in tackling GHG emission. If you are not familiar with the emission scopes, chapter 4 of The Greenhouse Gas Protocol will help you understand them better.
Scope 1: Direct GHG Emissions
“Direct GHG emissions occur from sources that are owned or controlled by the company.”1
Scope 1 emissions can be measured but are more often calculated upon the generation of GHG. The reduction of emissions relies on various technologies, amongst which management software is just a slice of the pie. However, the bottom line is this: before actually reducing emissions, knowing the current emission data is critical to a company, and should be handled by an emission reporting system (or functionality) if you think that spreadsheets and e-mails won’t meet your requirements.
The accuracy of emission reporting relies on both the accuracy of the calculation mechanism, and the effectiveness and efficiency of the reporting process. In fact, as I have learned from a process manufacturer, a well-designed reporting process automated by an enterprise resource planning (ERP) system not only helps generate accurate emission figures, but also raises internal awareness of GHG emissions and reduces emissions caused by human factors in the operation.
There are many other areas that management software can help in scope 1. For example, by using a supply chain optimization system, a company can redesign its supply chain in order to reduce fuel consumption in company-owned or -controlled vehicles, resulting in fewer GHG emissions.
Scope 2: Electricity Indirect GHG Emissions
“Companies report the emissions from the generation of purchased electricity that is consumed in its owned or controlled equipment or operations as scope 2.”2
By definition, scope 2 is not as complicated as the other two. To reduce scope 2 emissions, a company can either switch to lower GHG-emission electricity, reduce electricity consumption, or both. “For many companies, purchased electricity represents one of the largest sources of GHG emissions and the most significant opportunity to reduce these emissions.”3
There are software solutions available on the market to help companies manage energy consumption. These solutions cover more than electricity, and thus should be able to help for both scope 1 and scope 2 emissions. Examples are SAP Energy Management solution and Tririga Real Estate Environmental Sustainability (TREES).
Scope 3: Other indirect GHG emissions
“Other indirect emissions that you cause but that are not from emission sources that you own, e.g. emissions from your supply chain or from business travel on commercial airlines.”4
Although scope 3 is optional, a substantial portion of companies reported their scope 3 emissions in the past two years’ CDP reports (CDP5 and CDP6). The landscape of scope 3 emissions is more complicated than those of the other two scopes, and the reporting practices of scope 3 emissions are still immature. The reasons:
However, I believe that companies can expect more innovative software solutions to come to the market. For instance, according to SAP, its Green 2.0 program is pursuing research partnership on communicating emission data to consumers at the retail level. “The general objective of this potential partnership is to investigate the possibility of a dynamic carbon emission label which addresses all of the variable emissions for an individual product.”5
I hope the realization of the three scopes of GHG emissions will help companies like yours form a clearer vision when looking for help from management software. However, it doesn’t mean that companies should shop software exclusively for each scope. In fact, many software solutions are able to tackle different scopes in a unified system.
For example, the design-for-less-carbon-emission feature that companies may find within a PLM solution in the future should be able to address all the three scopes by developing production processes with less direct emission (scope 1), consuming less purchased electricity (scope 2), and substituting with low-emission purchased materials (scope 3). Nevertheless, with the different scopes in mind, companies may be able to prioritize their GHG emission initiatives more easily and as such locate the right software solutions quicker.
1, 2, 3 The Greenhouse Gas Protocol
your articles are always future-opened and very innovative
This is an excellent article - Scope 1 emissions can be defined more simply as the emissions generated directly by an organisation - for example a company that produces electricity, or produces gas. Eg the utilities/ companies running massive diesel powered electricity generators.
Scope 2 emissions are more complex than this article suggests though - while it is possible to purchase electricity from another supplier, it becomes more complex when a company is spread over a large geographical area, and where multiple suppliers - who will each have a different emissions factor - are involved as well as multiple business units. Scope 2 emissions also includes things like Diesel purchased - which again will have different emissions factors depending on where it was purchased from.
The following URL describes an existing ERP system that tracks all of the above as well as managing subcontractors. http://www.ndevr.com.au/products/ndevr/nger.html worth a read if this is something your organisation is serious about. The solution has been built for the Australian market due to recently imposed legislation there - however it is easily adapted to any international requirements where the general international formats are based around the GHG protocol guidelines.
Visit http://www.ndevr.com.au/products/ndevr/nger.html this solution allows you to capture data without significant impact to business processes - and is easily adapted to international requirements based around the GHG protocol
This article has come at a very appropriate time. I am engaged in developing LED replacements for conventional lighting solutions. My company is emphasizing on benefits of carbon credit claim achieved through saving enormous amount of electrical energy using LED based lighting solutions. We are also developing ERP, CRM and SCM solutions. You have given me a great idea about incorporating GHG emission control facility.
Thanks for the article.
Thanks for an excellent article. Your point “before actually reducing emissions, knowing the current emission data is critical”… is spot on. Effective data capture and reporting is key to an effective reduction strategy. Another product worth a mention is FlexEM at www.carbonreductionreporting.com.
it is an excellent article.but i would like to know how should an organization in third world or developing country should prioratize its task or make a roadmap to reduce emissions .
First of all, thank you all for your valuable inputs.
To Sacha, according to The Greenhouse Gas Protocol, scope 2 emissions, as a special category of indirect emissions, only represent purchased electricity consumed in the equipment or operations that are owned or controlled by the company. I’d like to learn more if you could share more information about the inclusion of purchased diesel in scope 2.
To khalid, I’d like to introduce you another blog post (http://blog.technologyevaluation.com/blog/2009/02/09/what-can-plm-do-for-green/) I wrote earlier. It discusses a specific technology and the environmental issues. The topic is broader than the GHG emission issue, but I hope you can find some hints there. I believe that organizations in developing countries should prioritize their GHG emission initiatives differently. For example, since organizations have lower level of urgency to comply in general, they can have more freedom in bringing cost efficiency into their sustainability equations.
AsiaCarbon- These guys are dealing with software related carbon emission reduction. They are based out of Singapore.. They also provide consultancy services on this topic.. check on (www.asiacarbon.com)