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Ahead of the Curve Auto Supplier Blog

February 10, 2012

GHG Accounting within the Supply Chain

Recently, the Greenhouse Gas Protocol, a project sponsored by the World Resources Institute and the World Business Council on Sustainable Development, finalized standards to guide companies in measuring, reporting and managing greenhouse gas (GHG) intensity on a company-wide basis or on a product specific basis.  While broad GHG or carbon intensity supply chain accounting at a product or corporate level has not been generally mandated, other internal or external motivations can exist for conducting such accounting. Companies that seek to adhere to these standards must not only account for their own direct or indirect emissions associated with manufacturing a product or providing a service, but also must account for their supply chain’s emissions.  It is becoming increasingly common place to find in supply chain agreements clauses that obligate a seller to cooperate with its buyer relative to environmental initiatives which could be inclusive of accounting for the GHG footprint of the product or service being supplied.  These clauses do not typically identify any specific standard or protocol that might be employed for this accounting or afford other meaningful detail as to the nature or quality of the information that might be required.  Suppliers would be well advised to familiarize themselves with GHG accounting standards like the those recently finalized by the Greenhouse Gas Protocol so that they understand what information they may be required to develop and provide up the supply chain under these clauses.  While data collection is clearly a key to conducting any GHG accounting under any standard, suppliers should also recognize the potential that within some supply chains there may develop a requirement for third party verification of a GHG accounting.  This could impose additional costs within the supply chain.   In the end, suppliers subject to clauses that could trigger an obligation to conduct a GHG accounting need to be sensitive to what GHG accounting and reporting policies buyers up the supply chain are adopting on a corporate or product basis.  This will serve to inform suppliers as to what may be expected of them going forward in the business relationship and identify the data, and the systems necessary to collect the data, that may be necessary.  

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