New Report Prepares Supply Chain Managers for Cap-and-Trade Programs

Aug. 19, 2009
The average major U.S. industrial good/services company emits 1.2 million metric tons of greenhouse gases (GHG) annually, and more than 70% of emissions originate from supply chains, according to a new report from NSF International, a public health and safety organization, and Trucost Plc, a provider of environmental data and analysis.

The organizations examined GHG emissions emitted by S&P 500 companies in chemicals, food and beverage, healthcare, industrial goods and services, personal and household goods, automobiles and parts and retail.

The report, “Carbon Emissions—Measuring the Risks,” helps prepare U.S. companies for the planned cap-and-trade program, an approach used to control pollution by providing economic incentives to companies achieving reductions in pollutant emissions. Under cap-and-trade, companies will have to pay for GHG emissions. The cost of carbon may reach as high as 18% percent of earnings for some firms, according to Trucost.

“Climate change represents serious challenges to the environment, as well as risks and opportunities to U.S. corporations,” says Malcolm Fox, vice president of corporate services at Trucost. “The first step in mitigating those risks is to calculate carbon emissions and their potential costs from direct operations and supply chains.”

Fox says the risks can be turned into a competitive advantage. “For example, the average industrial service firm needs to prepare for the fact that more than 70% of its carbon emissions are embedded in its supply chain, representing a significant financial risk.”

The free report also details which companies are measuring and reporting GHG emissions; which sectors emit the most direct, operational GHGs; which sectors are most exposed to carbon costs under regulations; and other environmental impacts, beyond carbon, that each sector faces.

“Carbon-intensive companies will be most exposed to carbon costs under the cap-and-trade program to be introduced in 2012 under the draft American Clean Energy and Security Act of 2009 (Waxman-Markey Bill),” says Koen Bontinck, vice president of NSF Sustainability Services. “The goal of this report is to not only provide companies with an affordable analysis of their current operations and exposure to carbon costs, but also to help them implement sustainable business practices and verify their GHG emissions data in preparation for the new regulations.”

The report is based on findings from Trucost’s study Carbon Risks and Opportunities in the S&P 500, which assessed GHG emissions, carbon intensity and exposure to carbon costs of S&P companies internationally using publicly disclosed information.

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