Knowledge

Corporate Carbon Footprint vs. Product Carbon Footprint

An increasing number of companies are pursuing ambitious carbon reduction targets towards climate neutrality. However, a systematic reduction of greenhouse gas emissions is only possible if emission intensive hotspots can be identified and quantified. There are two approaches available to companies for this purpose: Corporate Carbon Footprint (CCF, emissions from all corporate activities for a certain period of time) and Product Carbon Footprint (PCF, emissions from the production, delivery, use and disposal of a product over its entire life cycle).

What is a Corporate Carbon Footprint?

A company’s carbon footprint, also known as Corporate Carbon Footprint (CCF), is usually the first step towards climate neutrality, because without transparency about its own emissions, it is impossible to define realistic goals and climate strategies. The Corporate Carbon Footprint includes all emissions that are influenced by a company’s decision. This means that in addition to direct emissions, all indirect emissions are also included. For manufacturing companies this implies that the entire value chain is part of the Corporate Carbon Footprint. This includes all emissions from the supply chain, logistics, usage phase and disposal of all products. The Corporate Carbon Footprint is usually determined for a specific period, such as a calendar year, and changes between reporting periods.

The calculation of the Corporate Carbon Footprint can serve various purposes: On the one hand, it creates transparency and thus enables measures to reduce emissions. This also supports the identification of climate-relevant risks and opportunities. On the other hand, companies signal to their stakeholders such as employees, customers and investors that they are addressing the issue and accepting responsibility.

What is a Product Carbon Footprint?

The Product Carbon Footprint (PCF) is becoming increasingly important in the prevailing climate debate, as the demand from consumers and subcontractors for climate-friendly products is growing. This demand is creating pressure to increase the transparency of product emissions. In order to record these in a transparent manner, PCFs are created, which record the total carbon emissions of a product over its life cycle.

As a rule, the supply chain, logistics, internal production, usage phase and disposal of a product are also recorded. Therefore, the same scope of consideration that is already examined in a Corporate Carbon Footprint.

What is the difference between these two approaches?

The main differences between a Corporate Carbon Footprint and Product Carbon Footprint lie in the breadth and depth of the scope under consideration. While a Corporate Carbon Footprint aims to examine all products of a company and all non-product-related emissions, a Product Carbon Footprint focuses on a specific product and examines it in detail. While the Corporate Carbon Footprint examines all of a company’s processes and has narrowly defined balance sheet limits, the PCFs balance sheet limits can be defined more flexibly.

In general, a CCF consists of the PCFs of all products and additional non-product-related emissions. Strictly speaking, non-product-related emissions such as commuting or business trips can also be part of a PCF but are often not considered. If these volumes are nevertheless taken into account, the CCF is equal to the sum of all PCFs.

How is the Corporate Carbon Footprint calculated?

When calculating a company’s carbon footprint, one of the first steps is to define the scope of consideration. In the case of Corporate Carbon Footprints, this is largely defined by various standards such as the GHG Protocol or ISO 14064 (link GHG vs. ISO article).

The basis for the calculation of a Corporate Carbon Footprint is the data given on business activities: Almost every action and decision of a company can cause carbon. The more comprehensive and exact this data is available, the more accurate the calculation will be. This includes data that is usually available within the company or is easy to retrieve, such as energy consumption (electrical and thermal) and the energy supplier. Company car travels and business trips are also often well documented. Using this activity data and appropriate emission factors, the corresponding greenhouse gas emissions are calculated for each activity.

However, greenhouse gases are also produced in processes that take place outside the company, but are caused by decisions made by the company. These include for example production processes from suppliers from whom the company has ordered products. Services provided by other companies and employee commuter traffic also fall into this category. In some cases, the energy consumption of the products manufactured by the company during the usage phase at the customer’s premises also causes considerable emissions. These so-called Scope 3 activities are activities of which companies are often unaware, but which usually cause the significant part of the company’s emissions.

In principle, there is a wide range of methods for recording these Scope 3 emissions. The most accurate method is to request consumption data from employees, suppliers and service providers. However, since this is often not possible, there are various recognised databases that can be used to evaluate various business activities on the basis of key figures available in the company, such as the number of employees, purchase quantities or sales, although the accuracy decreases depending on the method used. In particular purely cost-based approaches are usually very imprecise, since average values over entire industrial sectors are used here, so that we always recommend to calculate carbon emissions at least on the basis of the purchased material quantities.

How does the PCF calculation work?

Similar to a Corporate Carbon Footprint, the calculation for creating a Product Carbon Footprint is unified by various standards, such as ISO 14067, GHG Protocol and PAS 2050. In general the creation of a Product Carbon Footprint is divided into 4 steps:

  1. Definition of the goal and scope of the analysis

The first step is to briefly define what is to be achieved by creating the Product Carbon Footprint. The respective goal of the analysis has a considerable influence on the level of detail and scope of the analysis. If, for example, two similar products are to be compared with each other, those aspects of the product life cycle in particular that differ should be considered in detail. If, on the other hand, the aim is to optimise the emissions of the product, those aspects that can be easily influenced or have a high expected share in the emissions should be prioritised. As a result, there is more freedom in defining the scope of a Product Carbon Footprint than a Corporate Carbon Footprint.

Usually, a distinction is made between the cradle-to-grave approach and the cradle-to-gate approach. The cradle-to-grave approach considers the complete life cycle of the product from raw material production, production, delivery, use to disposal. In the cradle-to-gate approach, only the processes up to delivery are considered.

  1. Creation of the Life Cycle Inventory of the product

In this phase, the inputs and outputs of all processes that take place over the life cycle of the product are analysed. Inputs here are usually raw materials, preliminary products, auxiliary materials and energy. Outputs are products or intermediate products, waste and emissions. In the case of intermediate products, the inventory is also extended to their manufacturer. This phase is usually the most costly part of a Product Carbon Footprint, as all processes related to the product have to be analysed and modelled in detail.

  1. Impact assessment of the Life Cycle Inventory

After completion of the Life Cycle Inventory, the inputs and outputs determined in it are evaluated with emission factors, e.g. to convert the various chemical emissions into uniform and comparable figures such as carbon equivalents (link GWP).

  1. Interpretation of the results

In the last step, the results of the impact assessment are processed and interpreted in relation to the defined goal of the analysis. Usually this results in concrete findings, such as a benchmark of different products or optimisation potentials of a product.

With the Product Carbon Footprint method it is possible to identify and evaluate the greenhouse gases that are produced during all or part of the life cycle of a product, depending on the calculation approach and the scope of the analysis. This makes it possible to identify the main sources of emissions in a product, which in turn shows the potential for optimisation and avoidance. In the Product Carbon Footprint, the emissions per unit of a product are determined.

On the basis of the transparency achieved with the Product Carbon Footprint, it is possible to produce “carbon-neutral” products by purchasing offset certificates, which can become a decisive differentiating factor compared to competitors, especially for companies with direct access to end customers.

Which approach to begin with?

Product- and Corporate Carbon Footprints pursue different goals, so the answer which to choose from depends on your own goals. However, we recommend to start with a Corporate Carbon Footprint in order to define the scope of the Product Carbon Footprint in a qualified way. The Corporate Carbon Footprint also records product-related emissions, so that initial findings can be derived on the necessary focal points of a Product Carbon Footprint.

Planetly therefore recommends a two-step procedure in which the Corporate Carbon Footprint is calculated first to obtain an overview of all emissions generated by your company. After the analysis, you can make your entire company climate-neutral through carbon compensation. The Corporate Carbon Footprint also provides a better starting point for defining and implementing carbon reduction strategies through the complete analysis of all emission sources. It is possible that, in addition to production or purchasing of products, there is also an enormous need for action in the area of business travel, which is difficult to credit to individual products. Or there is the chance to significantly reduce the corporate carbon footprint by terminating cooperation with individual very greenhouse gas-intensive suppliers.

The next step is to increase the depth of analysis of product-related emissions. In this way, a Product Carbon Footprint can be carried out on the basis of the analysis and data collection processes already built into the Corporate Carbon Footprint. We are happy to take up these and other questions in order to find pragmatic solutions for individual customers.