![]() ![]() In particular, carbon embedded within the supply chain for the aluminum refining and production company (66% of emissions) is a much greater percentage of the company’s carbon emissions than is the case for the hypothetical truck transportation company (10% of emissions). However, upon closer examination, the two companies have very different carbon footprints. The hypothetical aluminum refining and production company, like the hypothetical truck transportation company, is also assumed to have $1 billion in annual sales, and the two companies have similar carbon footprints - both approximately 1.4 million metric tons. Scope 3 emissions are all other supply-chain emissions. Scope 2 emissions are supply-chain emissions related to purchased electricity, steam, heating and cooling for the industry’s own use. Specifically, Scope 1 emissions are those that occur from sources owned or controlled by a company. ![]() As summarized in Figure 3, Scope 1 emissions are direct emissions and Scope 2 and Scope 3 are indirect emissions. This segmentation follows the Greenhouse Gas (GHG) Protocol typically used in ESG reporting. Notably, the carbon footprint of a company is often segmented into Scope 1, Scope 2 and Scope 3 emissions. embedded supply-chain emissions is very different, with transportation incurring 92.8% of its carbon footprint directly and manufacturing only incurring 30% directly. For example, while the transportation and manufacturing industries account for similar overall shares of emissions in the economy, Figure 2 shows that their breakdown of direct vs. It also illustrates why strategies for addressing emissions need to be tailored to the specifics of each industry and company. Direct emissions and carbon embedded in supply chains (US energy-related CO2 emissions)Ĭomparing different industries that contribute similar overall amounts of emissions to the economy reveals how varied emissions sources can be. Within each industry, carbon footprints vary from company to company. ![]() In contrast, all of the other industry categories have a majority of their carbon footprint embedded in their supply chains. ![]() For the electric power generation and transportation industries, more than 90% of their carbon footprints result from their use of fossil fuels. The industry categories of electric power generation, transportation, manufacturing, agriculture, mining and construction have the highest direct emissions share. Carbon is embedded in the goods and services a company purchases when its suppliers use fossil fuels in the production of those goods and services.įigure 2 displays the share of industries’ carbon footprints attributable to their direct emissions vs. For other industries, it arises primarily from carbon embedded in the goods and services they purchase from other businesses. The carbon footprint of some industries stems primarily from their use of fossil fuels. Indirect carbon emissions are those emissions embedded in a company’s supply chain.ĭirect carbon emissions as a share of a company’s total carbon footprint (i.e., the sum of its direct and indirect emissions) can vary significantly across industries: Direct carbon emissions are emissions incurred directly by the company via heating/cooling, company-owned vehicles, etc. Included in a company’s carbon footprint are both its direct and indirect carbon emissions. It uses the EY Carbon Modeling Tool to show how a close examination of both direct and indirect carbon emissions embedded in a company’s supply chain can help companies measure and understand their carbon footprint. This article examines the sources of carbon dioxide (CO2) emissions throughout the US economy and highlights issues companies need to think about when determining their carbon footprint. Climate change and climate risk have taken center stage in these discussions, and companies need to understand their carbon footprint to allow them to appropriately disclose risks and opportunities. Investors are weighing ESG considerations when making investment decisions, and consumers and employees seek additional engagement and transparency on these issues. Company environmental, social and governance (ESG) policy and reporting has become increasingly important. ![]()
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