Supply Chain Frontiers issue #40
Developing countries – even those that have signed and ratified the Kyoto Protocol – appear to have little incentive to measure the carbon footprints of their supply chains. However, research at the Center for Latin-American Logistics Innovation (CLI), headquartered in Bogotá, Colombia, shows that Colombian companies engaged in international trade are responding to growing pressure from customers to manage their carbon emissions. The challenge is to develop measurement models that are suited to operations in emerging economies.
Although Colombia is a signatory of the Kyoto Protocol, as a developing country it is not required to reduce its emissions levels. Initiatives to cut greenhouse gas inventories at the company or product levels are voluntary. Also, there is a general lack of expertise in carbon footprint management within Colombia’s corporate community, and many enterprises are unaware of the benefits of emissions reduction programs.
Even so, a number of organizations are pioneering efforts to establish such programs. “A key element is that these companies are exporting to the United States and Europe, and for them it is important to show customers that they are committed to the environment,” says CLI researcher Vivian Rangel Castelblanco. These trailblazers also see an opportunity to become more competitive in global markets by gaining recognition as leaders in environmental stewardship.
Rangel is in charge of a CLI research project to measure the carbon footprints of 12 companies in Colombia in various industries, including cement, construction and home improvement, food and beverage, and oil and gas. The work started about a year ago and is about to enter the second and final phase of six-to-eight months’ duration.
“Carbon footprint measurement in Colombia and in emerging markets generally is different from similar practices in the United States,” Rangel explains. Take, for example, patterns of electricity generation and consumption. About 78% of Colombia’s electricity is derived from hydroelectric plants, with 11% and 5% generated from natural gas and coal, respectively. As a result, the country’s energy industry is clean relative to developed countries such as the United States. A number of other countries in Latin America – notably Brazil with its extensive use of biofuels – also score well on the green energy scale.
On the other hand, Colombia is also one of the top 10 coal producers in the world, and has the biggest reserves in the region. “There still are a significant number of companies using coal in their manufacturing processes since there is not an economic incentive or a tax incentive for using natural gas or an alternative fuel,” says Rangel. In fact, almost half of the companies that CLI is working with to measure their carbon footprints are using coal as an energy source. The fuel accounts for more than 50% of the total emissions from their manufacturing operations.
Another challenge is managing emissions generated by the freight transportation in Colombia. Difficult road conditions, dense traffic flows, the type of fuel burned, and vehicle age (the average age of a truck is 25 years) mean that the industry performs poorly on emissions control relative to the United States.
Improving this performance will require a reliable and common means of measuring the country’s carbon footprint. For the purposes of its project, CLI is basing these measurements on a global standard: the Greenhouse Gas Protocol Initiative developed by the World Business Council for Sustainable Development and the World Resources Institute. “We are adjusting this methodology to local conditions and the operating context of Colombian companies, creating an adapted version that takes into account the challenges of emerging markets,” says Rangel.
In the next phase, CLI will focus on product carbon footprints for some of the companies that are taking part in the project. The analysis will encompass every stage of a product’s life cycle – from raw materials extraction to final consumption. One of the main issues that needs to be addressed is identifying the carbon emissions that derive from agricultural products, a primary raw material for participant enterprises. “Also, the logistics component gets more complicated since we have to allocate the carbon dioxide emissions to one unit of product, taking into account that there are several third-party transportation providers involved,” says Rangel.
In a forthcoming project, the research team also plans to look at water. The challenges of measuring this resource could be more complicated than with carbon emissions, since footprint size varies according to where, how, and when the water is used. “We will have to identify the characteristics of the supply chain in Colombia that influence the consumption and pollution of this resource,” she explains. Much of the work will be groundbreaking because there is a lack of data on water extraction and usage in developing countries.
Initial results from CLI’s Carbon Footprint Measurement in Emerging Market Supply Chains: The Colombian Case research project will be presented by Vivian Rangel Castelblanco and some of the companies involved in the project at the CLI event, Sustainable Strategies to Strengthen Your Supply Chain, Bogotá, Colombia, September, 2011. For more information on the event, contact Ana María Prieto, CLI Public Relations, at email: aprieto@logyca.org, or telephone: +57 1 4270999, Ext. 191. For more information on the CLI carbon footprint project, contact Vivian Rangel Castelblanco at email: vrangel@logyca.org, or telephone: +57 1 427 0999, Ext. 131.