In an earlier post, we covered the reasons why Scope 3 accounting is broken in the fashion industry. As the industry looks for solutions, an answer that’s been emerging is the use of Product Carbon Footprint (PCF) or Life Cycle Assessment (LCA) for Scope 3 emissions accounting. A PCF is a means to measure and communicate greenhouse gas (GHG) emissions generated by a single product. PCFs are based on life cycle assessment (LCA) but focus on the single impact area of global warming and are measured in kgCO₂e (kilograms of CO₂ equivalent).
Since PCFs measure the total greenhouse gas emissions generated by a product, they can be combined with the total number of such purchased products to power Scope 3 accounting across categories ‘Purchased Goods & Services‘, ‘Use of Sold Products‘, and ‘End-of-life treatment of Sold Products‘ as per the GHG Protocol.
PCF-based Scope 3 emissions accounting is the most accurate and comprehensive way to measure product-related Scope 3 emissions.
What is a Product Carbon Footprint?
A product carbon footprint (PCF) is the overall greenhouse gas (GHG) emissions linked to a product’s entire lifecycle, directly and indirectly, including raw material extraction, manufacturing, transportation, usage, and disposal. Measuring a product’s carbon footprint is pivotal as it helps in understanding the environmental impact of the product as well as the areas where improvement is needed.
To measure the carbon footprint of a product, emissions from extracting and processing raw materials, transporting raw materials, and the disposal, recycling, or treatment of the product at the end of its life, are considered. This helps consumers make informed decisions as they can assess the environmental impact of products. It also identifies inefficiencies in the production processes, leading to potential cost savings.
Options for Reducing PCFs
Sustainable Material Sourcing
Recycled materials must be prioritized to lower emissions associated with new material extraction. Companies should use less environmental impact materials, such as bamboo or organic cotton. When sourced locally, it will also help in minimizing transportation emissions.
Efficient Manufacturing Processes
Manufacturing processes must improve efficiency through better insulation, upgraded machinery, and energy management systems. Renewable energy sources such as wind, solar, or hydroelectric power should be used to power manufacturing facilities.
Optimized Transportation
Supply chain logistics must be optimized to reduce transportation distances and improve load efficiency. Companies should prefer low-emission transport options, such as electric or hybrid vehicles, and shipping methods with lower carbon emissions.
Sustainable Product Design
Companies should design products that can be easily repaired, upgraded, or recycled to extend their useful life. The number of elements and resources used in the product should be reduced for the overall carbon footprint.
Benefits of PCF-based Scope 3 accounting
1. Emerging industry-wide recognition
Joint efforts such as PACT’s Pathfinder framework from World Business Council for Sustainable Development (WBCSD) are currently underway heralding PCF-based Scope 3 accounting as the gold standard. Management of Scope 3 emissions is therefore highly dependent on good-quality accounting for product-level emissions.
The Pathfinder Framework seeks to improve the accuracy and comparability of data, by enabling the exchange of product life-cycle footprints between value chain partners, in turn increasing their access to primary data. In doing so, complete emissions transparency can be created along the product’s value chain.
2. Higher measurement accuracy
The current industry practice, of using spend-based calculation methods and product-level average emission factor datasets (e.g. global average emission factor for a T-Shirt), is highly inaccurate. Even the hybrid approach of allocating supplier-specific emissions data using a pure purchase volume-based method leads to over or under-counting of emissions as each factory typically produces items for multiple brands.
The GHG Protocol states that preference should be given to methods that are more specific and accurate, particularly for the Scope 3 category ‘Purchased goods and Services’. PCF-based Scope 3 emissions accounting is specific to a product and combined with supplier-specific data results in highly accurate emission accounting. Even when a brand hasn’t mapped out its suppliers and lacks primary supply chain data, PCFs should be used to power Scope 3 emissions accounting to create a reliable emission baseline.
3. Decarbonization of the supply chain
As part of the Fashion Industry Charter for Climate Action, brands that have pledged to reduce emissions by 2030 will have to monitor, report, and track their emissions in real-time, similar to how they monitor their total sales. PCF-based Scope 3 emissions accounting gives brands real-time insights into their environmental impact hotspots and also helps assess potential emission reduction opportunities at the product design and procurement stage. Further, armed with emission data across the value chain, brands can encourage and support high-emitting suppliers to reduce their environmental impacts.
4. Comply with government legislation
Sustainability disclosure mandates in Europe like the Corporate Sustainability Reporting Directive (CSRD) require the disclosure of Scope 3 emissions making it increasingly critical for brands to move towards accurate carbon measurement methodologies such as the use of PCFs.
The United States, which has long lagged behind its European counterparts, is also bringing new legislation that would require businesses to report their entire greenhouse-gas emissions inventory including Scope 3 emissions. If the disclosure requirements come through, companies that fail to map their environmental impact thoroughly could open themselves up to securities fraud litigation.
In addition to corporate disclosure, regulations mandating the disclosure of product environmental impact information are also gaining ground in Europe. France has already passed AGEC, a decree mandating “climate impact labeling” of goods and services. Getting started with measuring the PCFs of their products today will give brands a head start in preparing for such upcoming product sustainability disclosure regulations.
Global Standards for Reporting
High-quality product life-cycle accounting requires the use of globally accepted methodology to account for product emissions. While GHG Protocol and ISO standards provide high-level guidance, industry sector guidelines like the Product Environmental Footprint (PEF) provide a more thorough approach to account for emissions at each stage of the product’s life cycle such as raw material extraction, spinning, knitting, etc. Therefore, PCFs should follow the following hierarchy of measurement standards as recommended by the Pathfinder framework:
Prioritization of PCF calculation methods and standards¹
1. Product Environmental Footprint (PEF)
PEF is a European Commission-recommended methodology that provides a standardized framework to perform LCA studies. PEF Category Rules (PEFCR) for the apparel & footwear industry are designed to ensure that all brands follow a common framework to calculate and share the environmental impacts of their products. While the PEFCR covers 16 impact categories, ‘Climate Change’ is the most commonly used impact indicator and is used to materialize the PCF. PEFCR is based on globally accepted International Organizations for Standardization (ISO) standards, 14040 and 14044.
2. The GHG Protocol Product Standard
GHG standard was created by the WRI/WBCSD and it includes requirements for public reporting of GHG emissions and removals associated with a specific product.
3. ISO 14067
ISO 14067 is the most widely accepted standard for PCF and it builds on other existing ISO standards 14040 and 14044 for LCA. It can be considered the international reference standard for creating a PCF.
How is a Product Carbon Footprint Calculated?
PCFs cost a fraction of a classic LCA study and can be powered by cloud-based software that automates the whole process to cover a brand’s entire product inventory.
The first step while calculating a PCF is defining a scope or system boundary. The ones most commonly used are:
Cradle-to-Gate
Used to measure the total GHG emissions from the extraction of raw materials through to product manufacturing up to the factory gate.
Cradle-to-Grave
Used to measure the total GHG emissions from the extraction of raw materials through to the product’s manufacturing, distribution, consumer use, and end of life.
System boundaries for Apparel & Footwear products
Based on the system boundary defined, brands can create PCFs using a minimum set of primary data points such as (a non-exhaustive list):
Raw Material Production
● Material types and quantity per product including trims
● Material provenance (Country of sourcing)
● Quantity of recycled content
● Packaging material types and quantity
● Accessories types and quantity
Manufacturing
● Fabric type i.e., knit vs woven
● Processes and technologies used
● Loss rate at each manufacturing stage
● Weight of the product
● Country of Manufacturing
Distribution and Packing
● Specific modes of transport
● Shipping distances as well as loss rates
● Sales channel i.e., E-commerce, D2C, retail store
Use
● Care instructions as per the care label
End of life
● Country of Sale
Brands typically have some of this data available in their Bill of Materials and Purchase Orders. Sustainability teams can manually pull this data for each product into spreadsheets to calculate PCFs by combining them with the right emission factor datasets. Additionally, we discovered that numerous brands face challenges when it comes to gathering the necessary product details, primarily because a significant portion of this information resides within unstructured text in their internal systems, typically found within content like product descriptions.
To simplify this, sustainability teams can partner with software providers that leverage APIs to retrieve the relevant data from the brand’s ERP systems like SAP & Microsoft Dynamics 365, PLM software like Centric, or e-commerce platforms like Shopify, and then applies machine learning algorithms to automatically extract the useful information for creating PCFs.
This method of creating a PCF, based on product details, is especially useful for small and medium brands that lack visibility into their supply chain and often have limited primary supply chain activity data.
In contrast, many large fashion and luxury brands today have access to extensive primary data from their supply chain either via Higg FEM or their internal supply chain data collection systems. As brands gain access to this primary supply chain data across product life cycle stages, they can use the collected data to update the relevant PCFs and make them more accurate. That said, we’ve realized that this process can be highly complex in the absence of software. Sustainability teams have to manually manage tons of spreadsheets across hundreds of facilities, disaggregate the facility emissions to just the products they purchased, and then allocate the output to the appropriate life-cycle stages of the respective PCFs.
PCF calculation steps as per the PEFCR Apparel & Footwear²
Data sources
To calculate product footprints, the PEFCR Apparel and Footwear recommends using secondary data from the Environmental Footprint (EF) 3.1 database which is comprised of both publicly available and commercial databases like:
Beyond the PEF-recommended databases, the Pathfinder Framework also recommends using the following data sets to fill in data gaps:
● Global Logistics Emissions Council (GLEC) database
● Official national emission factor database
● UNEP Global LCA Data Access network
It’s interesting to note that European Commission hasn’t approved the Higg MSI and other similar datasets for conducting PEF studies so far.
Conclusion
As the world moves towards the implementation of carbon taxes, we foresee that emissions data will be tied to products and passed on from one company to the next in the form of a carbon invoice. Therefore PCFs have industry-wide implications and will force brands, manufacturers, and fashion export houses to move toward this new gold standard of carbon accounting.
A software solution like Carbon Trail can help meet the emission data management needs of brand sustainability teams. Carbon Trail not only helps brands get a grip on their Scope 3 emissions accounting but also provides insights into each product’s environmental impact that can be used to meet upcoming regulations and plan out targeted reduction initiatives. The flexibility of the Carbon Trail platform can accommodate brands at different stages in their sustainability journey so that they don’t have to wait on achieving complete value chain transparency to measure their Scope 3 emissions accurately. It’s our mission to empower brand sustainability teams with the tools they need to accelerate the industry’s decarbonization and help us keep warming below 1.5 °C.
References
1. PACT’s Pathfinder Framework by WBCSD
2. Apparel & Footwear Product Environmental Footprint Category Rules (PEFCR) – Refashion
