Supply chains still black as coal – more information acquired than a year ago

Research

Finland’s consumption-based emissions are up to 33 percent higher than the geographical emissions that are presented in official emissions accounting. Around three fourths of this difference is due to the large number of goods imported to Finland. Ignoring these consumption-based emissions gives the wrong impression of Finland’s carbon footprint, but, in spite of this, these only have a minor role in both the national climate policy and the sector-specific carbon neutral road maps that were completed in summer 2020.

In October 2019, Finnwatch published a report, which described the efforts of companies that operate in Finland to control the greenhouse gases of their value chains in risk countries. The report demonstrated that measures to control the emissions of value chains in risk countries such as China and India are still very primitive. The clear majority of companies did not know what type of energy their supplies used and only few companies asked their suppliers to report on their carbon footprint. At the same time as the report was published, an opinion survey was also published the results of which demonstrate that 74 percent of Finns want companies to take climate measures and would favour products that are not produced with fossil-based energy.

As the responses to the first survey demonstrated that the situation was developing in many companies, Finnwatch decided to update the results of the survey in autumn 2020. Responses showed that although the corona pandemic has hindered responsibility efforts by companies to some extent, the work to curb emissions of supply chains has progressed in the past year. However, it is also apparent that actual cuts in emissions are still a long ways off in many places.

This is how the survey was carried out

In the same manner as with the previous report, companies were asked how many direct suppliers they had that were located in risk countries, about the energy sources these suppliers used, and the different ways in which purchaser companies have tried to determine or influence the greenhouse gas emissions of their suppliers. Particularly in the early stages, companies’ climate efforts usually focus on their scope 1 emissions, the direct emissions from their own operations, and scope 2 emissions, the emissions resulting from the electricity the company has purchased. The objective of this survey was to determine the control of scope 3 emissions, which are related to the procurement of goods and materials. New topics that companies were asked about included how the corona pandemic has influenced the mitigation of greenhouse gas emissions of suppliers in risk countries and whether companies intended to begin providing product-specific data on carbon footprints to consumers.   

The survey was sent to companies that import consumer goods to Finland's market and manage their value chains with the help of Amfori BSCI an interest group for European companies and which could on this basis be considered furthest along in their work in monitoring the responsibility of their value chains located in risk countries. The survey was sent to 45 Finnish companies that are members of responsibility network Amfori BSCI. Finnwatch added Lidl Suomi to the group it sent the survey to as its parent company has Amfori BSCI membership in Germany. Including Lidl Suomi in the study ensured that the materials included all of Finland’s largest grocery store actors, A total of 39 companies responded to the survey and the response rate was 85 percent. The following companies did not submit responses to the survey: A. Vesalainen Oy, Agentur A&M Holmberg Oy, Euro-East Oy, Musti Group Nordic Oy, Nordic Wear Int’l Ltd, Nordqvist Oy, and Texmoda Oy.

The survey also aimed to determine the use of the Amfori BEPI environmental responsibility system. The aim of the environmental responsibility system established by Amfori in 2013 is to improve the ecological sustainability of the international supply chains of companies. BEPI provides purchaser companies the opportunity to manage the environmental impacts of production facilities from different sectors, which are located in risk countries.

When Finnwatch started the original research project in late 2018, only five Finnish companies were members of Amfori BEPI. Now in late 2020, the number has risen to 14 as in addition to the 13 official members listed on the Amfori website, Halonen informed Finnwatch in its survey that it had just joined Amfori BEPI. In addition to these, three companies stated that joining would be timely in the near future.

Summary of results

The results of the survey sent out by Finnwatch in autumn 2020 demonstrate that the measures that companies have in place for controlling the emissions of value chains situated in risk countries are in their early days, but have progressed somewhat over the past year. 

None of the companies have yet integrated strict requirements related to greenhouse gas emissions or the use of renewable energy into their purchase agreements. At best, the measures involved generic policies for reducing environmental impacts or emissions or for increasing the use of renewable energy.

On the other hand, companies now showed far more interest in their suppliers’ carbon footprint. A year ago, only Finlayson, Familon and Image Wear as well as S Group, whose CDP Supply Chain emissions reporting related survey had been sent to some of the company’s direct suppliers situated in risk countries, had asked for their suppliers to report on their carbon footprint. Now, 13 respondents stated that they had collected data in some manner or had tried to get at least carbon footprint data from at least some of their suppliers.  In addition to the aforementioned companies, Dayton, Halti, Marimekko, North Outdoor, Orthex, Paulig, Reima, Lindex and Tokmanni had now done so. In addition, six companies (Altia, Berner, Best Friend Group, Luhta, Vallila and Wihuri) reported that they were considering collecting this information in the near future.

Not one of the companies had a target concerning the reduction of emissions by suppliers situated in risk countries. Seven companies mentioned that they had set some kind of emissions reduction target, which also includes emissions by their value chain.

Companies now had more knowledge on the sources of energy used in production than previously, as nearly half of respondents knew at least something about the origin of the energy used in production. Six companies were able to give quite comprehensive accounts of the energy used by their suppliers, and, in addition to these, four were in the process of completing or planning an investigation into the matter and two had gathered the necessary data, but had yet to compile it into usable form. Not one of the companies reported that their suppliers exclusively used emission-free energy sources. Many of the direct suppliers for Finnish companies located in risk countries use electricity from the public grid, which in many countries such as China and India is predominantly energy produced with coal. Not one of the companies that responded to the Finnwatch survey mentioned that their suppliers has purchased renewable energy certificated for the energy they used or used other market mechanisms to choose renewable energy,

The impacts of the corona pandemic on climate responsibility work were considered insignificant. Numerous companies responded that the corona pandemic resulted in a cut in production at least at some point in the year, thus resulting in a temporary reduction in emissions. Visits to suppliers’ facilities had also been reduced generally. Direct impacts related to the mitigation of emissions reported by companies included delays in membership in or implementation of Amfori BEPI in a few cases as well as a general slowdown of other environmental responsibility work due to lack of resources or other reasons related to the pandemic. 

Use of Amfori BEPI increasing

The number of companies that are members of the Amfori BEPI environmental responsibility system is increasing markedly. When Finnwatch started the original research project for mapping out the emissions of company value chains in late 2018, only five Finnish companies were members of Amfori BEPI. Now in late 2020, the number has risen to 14 as in addition to the 13 official members listed on the Amfori website, Halonen informed Finnwatch in its survey that it had just joined Amfori BEPI. In addition to these, Finlayson, Hofler and Logonet stated that their membership would be timely in the near future. Eleven companies also stated that they were planning on joining or were currently determining the requirements for membership. In addition, A. Vesalainen Oy and Nordqvist Oy, which did not respond to the survey, are members of Amfori BEPI.

However, membership alone is only the first step. Only around one seventh of the suppliers of member companies were themselves members of BEPI. The number of suppliers who are members of BEPI has increased from last year notably. In the same manner as last year, Tokmanni was BEPI’s most active user. Tokmanni’s approximately 400 suppliers have around 700 factories, of which 231 are involved in BEPI. A second company that actively utilises the system is Tammer Brands, which has just recently joined Amfori BEPI. The company estimates that of its around 900 suppliers one tenth are involved in BEPI.

Last year, only Kesko was able to report that nine of its direct suppliers situated in risk countries monitored their greenhouse gas emissions in accordance with Amfori BEPI. Now, four companies reported that they have at least one supplier that monitors its greenhouse gas emissions. The number of monitoring suppliers grew the most in the case of Tokmanni, which was unable to provide information last year on the number of its suppliers that monitored their greenhouse gas emissions.

Views on the reporting of the carbon footprints of individual products

As a new question companies were asked about whether they intended to provide product-specific carbon footprint data directly to consumers. The majority of respondents were interested in carbon footprint calculations for individual products but felt that mapping out the emissions directly from their own operations was of primary importance. Current calculators and the available information are considered predominantly so primitive that not one respondent had planned to include comprehensive data on carbon footprints on their consumer products in the near future. Information of the carbon footprint was also considered difficult for consumers to understand. Three respondents stated that the matter was not in their hands as they do not produce their own products directly for the consumer market.

On the other hand, some companies said that they already calculated the carbon footprint of certain products in order to be able to offset their emissions and to sell the products as carbon neutral. However, this possibility for compensating emissions does not eliminate the emissions created during production and is not a substitute for emission reductions.

Recommendations

Although companies have taken small steps forward in carrying their responsibility for the emissions in their value chains over this past year, we are still a long way from actual emission reductions. The focus is still on calculating or estimating the climate impacts of value chains, and not all the companies that responded to the survey have even progressed in this. Where companies have set emission reduction targets for their value chains, monitoring and efforts to reduce emissions are only in their early stages.

Companies must take on responsibility for the emissions of their entire value chain.

The effective mitigation of the climate crisis would require significantly more ambitious measures, as the emissions created in the production of products brought to Finland’s consumer market are significant in scope. Companies must take on responsibility for the emissions of their entire value chain. This involves calculating not only their own but also their suppliers’ emissions as well as scheduled targets for their quantitative reduction.

Emissions reductions can be promoted for example by including requirements for the use of renewable energy or for the reduction of emissions into new purchase agreements, and by encouraging partners to use renewable energy certificates within the scope of their old purchase agreements.  Sector-specific cooperation or within systems such as Amfori BEPI, can help in promoting the availability of data and in disseminating the message to production countries that European markets will require the use of clean energy in the future.

Citizens and the measures undertaken by the State will also be of key importance in helping to mitigate emissions by the value chains of companies. Public debate and pressure from consumers can encourage companies to act very quickly where necessary. Just the companies that responded to the survey have thousands of direct suppliers in risk countries. If companies began to demand that these suppliers take steps to use renewable energy and save energy, this would have a significant impact on greenhouse gas emissions.

Finnwatch is requesting that more attention be given than at present to Finland’s consumption-based emissions. This can be accomplished by amending the Climate Change Act, so it includes a requirement for reporting of consumption-based emissions to Parliament in the annual climate review. Officials must also determine and promote the capacity of companies to calculate product-specific carbon footprints. The collection of data on production emissions must be promoted for example by requiring carbon footprint data on public procurements. The collection of carbon footprint data for import products as part of tendering must be piloted for example at the time the Hankinta Suomi (Procurement Finland) strategy is implemented.

In order to reduce consumption-based emissions, the introduction of a carbon tax or a carbon tariff for imported products must be explored. Social justice must be taken into consideration both nationally and internationally in the development and implementation of both measures.

The article received financial support from Finland’s development cooperation funds.