3 Reasons to Measure Product Carbon Footprint in 2024

Climate change is one of the biggest threats facing our world today. Rising global temperatures, melting glaciers, extreme weather events – the impacts are already being felt across the planet. As a business leader, measuring and reducing your product carbon footprint should be a top priority in 2024. Here are three compelling reasons why:

Compliance with Current and Upcoming Regulations. Governments and regulators around the world are cracking down on carbon emissions. For example, the EU’s new Corporate Sustainability Reporting Directive will require large companies to report on their environmental impacts. Getting ahead of compliance now will save you headaches down the road.

Increasing Consumer Demand. Today’s consumers, especially younger generations, genuinely care about sustainability. In fact, a recent study by Capgemini found that 65% of consumers are willing to pay more for sustainably produced goods. Are you meeting their expectations? Calculating your product carbon footprint provides the data you need to honestly market sustainability claims to green-minded buyers.

Attracting Values-Based Investors. Investor activism around climate change is growing exponentially. Larry Fink of BlackRock, which manages nearly $10 trillion in assets, declared in his 2022 letter to CEOs that “climate risk is investment risk.” Your ability to provide emissions data and reduction plans will increasingly impact your access to capital.

The Growing Regulatory Push Around Carbon Reporting

Governments and international organizations are quickly rolling out policies aimed at curbing emissions. For example, the mandatory EU CSRD coming into effect in 2024 will require companies with more than 500 employees to report on sustainability impacts, including detailed emissions data.

Many countries already implement carbon taxes on emissions, and rates are steadily rising. The global average carbon tax is $3 per ton of CO2, but prices of $50 to $100 per ton are likely needed to drive meaningful reductions. Expect to see costs climb.

Trade policy is also increasingly being tied to climate action, as evident in the EU’s proposed carbon border adjustment tax. Companies that fail to take responsibility for emissions throughout their supply chain could soon face penalties and loss of market access.

By starting your carbon footprint work now, you won’t be caught off guard as new regulations emerge. You’ll also be prepared to participate meaningfully in evolving carbon markets. For example, having product-level footprint data will allow you to identify efficiencies and potentially generate offsets you can sell to other companies.

Consumers Are Demanding Sustainability

Today’s consumers, especially younger generations, factor sustainability into their purchase decisions much more than previous generations. For example, a survey by Capgemini found:

• 65% are willing to pay more for sustainably produced goods
• 61% have switched brands based on sustainability claims
• 73% say sustainability is more important to them today compared to 5 years ago

This preference for green goods is even stronger in certain demographics:

• 71% of millennials say they will pay more for sustainable products
• 82% of Gen Z are willing to pay more for eco-friendly versions of products

With millennials and Gen Z making up an increasing portion of your customer base, demonstrating your sustainability bonafides through comprehensive carbon accounting and labeling is becoming a business imperative.

Leading companies like Unilever, PepsiCo and Microsoft are already marketing major reductions in product and corporate carbon footprints. Are you keeping up with consumer expectations? Measuring and labeling your product footprint provides the hard data needed back up your brand’s sustainability claims.

Investors Consider Emissions Management More Than Ever

In his 2022 annual letter to CEOs, BlackRock’s Larry Fink stated that “Climate risk is investment risk.” More investors than ever before see transition and physical climate risks as threats to their portfolios, and they are pressuring companies to act swiftly.

Increasingly, access to capital depends on your ability to provide emissions data and concrete reduction plans. For example, the Net Zero Asset Managers Initiative now has 220 signatories representing $57 trillion in assets under management committed to pressuring companies on emissions cuts and disclosure.

Investor-led initiatives like Climate Action 100+ actively engage with the world’s largest corporate emitters to curb emissions, with significant success. 500 of the biggest emitting companies have now committed to reaching net zero emissions.

Your company’s emissions data and strategies will impact your attractiveness to values-based investors, as well as your cost of capital. Implementing carbon accounting best practices now demonstrates you are ahead of the curve in managing this systemic risk.

Achieve Financial Benefits Alongside Sustainability

Beyond external pressures, effectively measuring, managing and reducing your carbon footprint delivers significant benefits for your business’s bottom line:

• Identify Savings Opportunities: Locating the biggest sources of emissions often highlights energy waste and other inefficiencies you can eliminate to cut costs.
• Enhance Reputation and Brand Value: An emphasis on sustainability improves customer loyalty, retention and acquisition. Purpose-driven branding also helps attract and retain talent.
• Drive Innovation: The constraints imposed by a carbon target foster innovation to design more sustainable products and processes. These new solutions can become differentiating value propositions.
• Mitigate Risk: Proactively addressing your climate impacts reduces exposure to fluctuating energy prices, supply chain interruptions from extreme weather and other transition hazards.

Leading companies already reaping sustainability benefits include:

• Microsoft saved $10 million annually just by increasing server efficiency to reduce emissions.
• Schneider Electric’s emphasis on environmentally friendly products earned them a top-50 sustainability brand ranking.
• Patagonia’s commitment to sustainable materials and processes provides authenticity that fosters customer loyalty.

Emerging Technologies Set to Revolutionize Carbon Accounting

While collecting accurate and granular emissions data across complex supply chains is challenging, emerging technologies are making the process easier than ever before:

Blockchain – Shared distributed ledgers promote transparency while improving trust in emissions data. Blockchain also enables automatic reporting and verification of impacts across the value chain.

IoT Sensors – Smart sensors provide real-time emissions tracking. When applied across sites and transportation fleets, they offer detailed insight to optimize energy consumption.

Artificial Intelligence – Sophisticated AI models can detect anomalies and identify emissions reduction opportunities. They also generate historical estimates where real data is incomplete.

Cloud Software – Purpose-built SaaS solutions centralize carbon accounting activities and integrate both first- and third-party data from across the product lifecycle and supply chain.

Setting Actionable Science-Based Carbon Targets

While measuring product footprint is an important first step, setting targets aligned with climate science is crucial for guiding meaningful emissions reductions:

• Understand Hot Spots – Map your value chain emissions to identify priority high-impact areas to address.
• Set Ambitious Goals – Adopt science-based targets to reduce footprint at a rate that matches climate objectives.
• Execute Initiatives – Develop products, processes and business models that align with your targets.
• Track Progress – Monitor footprint regularly to ensure initiatives successfully deliver reductions.

Leading target setting frameworks include the Science-Based Targets initiative (SBTi) and the Carbon Leadership Forum‘s Architecture 2030 Challenge.

For example, Swiss food giant Nestle partnered with SBTi to set a scope 3 target of halving upstream supply chain emissions intensity by 2030. They are executing against this through supplier collaboration and agricultural innovation.

Start Your Carbon Footprint Journey Today

Hopefully this breakdown has demonstrated why prioritizing product carbon measurement and management should be at the top of your agenda for 2024 and beyond. With regulatory requirements ramping up, consumers demanding sustainability, and investors focused on emissions risk, addressing your footprint is becoming an imperative.

The good news is the technologies and best practices to track and optimize your impacts already exist. Major brands are proving sustainability can co-exist with profitability.

I encourage you to start your emissions accounting and reduction journey today. Our team would be happy to advise you on carbon measurement strategies and technology selection to meet your specific business needs. Just let me know if you have any questions!