Following the success of the Corporate Standard and Project Protocol for measuring greenhouse gas emissions, the World Resources Institute and the World Business Council for Sustainable Development are now working on a new standard for measuring greenhouse gas (GHG) emissions from a product and supply chain to allow GHG accounting and reporting beyond direct emissions.
To develop the new guidelines, the GHG Protocol is following the same broad, multi-stakeholder process used to develop the Corporate and Project Protocol, with participation from businesses, policymakers, NGOs, academics and other experts and stakeholders from around the world.
The WRI/WBCSD announced that the new standard will include guidelines on both product life cycle accounting (”carbon footprinting”) and scope 3 accounting and reporting, which encompasses the full value chain of an organization. Building upon existing methodologies, the guidelines will provide a standardized approach for companies to inventory GHG emissions along their value chains and better incorporate GHG impacts into business decision-making, based on a life cycle perspective.
The protocol apparently is designed allow companies such as Wall Mart who have asked their suppliers and their suppliers' suppliers to demonstrate the sustainability of their products to measure the GHG emissions from the product supply chain. What will be interesting to see unfold is to what extent these protocols lead to GHG reductions in developing countries. For example, since many products are manufactured in China, where GHG emissions have grown dramatically and continue to grow, what steps will or can the suppliers make locally to reduce greenhouse gas emissions? Will they have to build windmills or install solar panels to avoid power use from Chinese coal-fired power plants? Will such costs take away or at least reduce China's cost advantage? The question is what level of affect could such standards and the insistence by retailers that the suppliers demonstrate reductions have on the suppliers?
The market could be a powerful force for incentivizing GHG reductions. To what extent this will occur remains to be seen. The formation of such standards may be seen as a potential alternative to the GHG tariffs that have been discussed in bills filed in Congress and discussed in the European Union. The goal of such tariffs is to take away the competitive advantage that the failure to control GHG emissions is thought to have for countries that are not required or refuse to reduce their emissions. China and to some extent India are the main examples of such countries. The suppliers in China and other developing countries may find it more and more difficult to deal with either customer or government imposed GHG emission reductions and the potential impact on their price advantage over manufacturers in developed countries.