1 00:00:00,060 --> 00:00:02,500 The following content is provided under a Creative 2 00:00:02,500 --> 00:00:04,019 Commons license. 3 00:00:04,019 --> 00:00:06,360 Your support will help MIT OpenCourseWare 4 00:00:06,360 --> 00:00:10,730 continue to offer high-quality educational resources for free. 5 00:00:10,730 --> 00:00:13,340 To make a donation or view additional materials 6 00:00:13,340 --> 00:00:17,217 from hundreds of MIT courses, visit MIT OpenCourseWare 7 00:00:17,217 --> 00:00:17,842 at ocw.mit.edu. 8 00:00:30,590 --> 00:00:32,340 PROFESSOR: Basically, the goal for today-- 9 00:00:32,340 --> 00:00:35,390 we're going to sort of go through the case study 10 00:00:35,390 --> 00:00:39,244 that we had to do just as a basic framing tool, 11 00:00:39,244 --> 00:00:41,660 and then talk about what it means to do a corporate carbon 12 00:00:41,660 --> 00:00:42,310 footprint. 13 00:00:42,310 --> 00:00:43,560 What are the mechanisms of it? 14 00:00:43,560 --> 00:00:45,410 What are the issues that you run into? 15 00:00:45,410 --> 00:00:47,370 And really the goal of it is this. 16 00:00:47,370 --> 00:00:49,960 One, understand. 17 00:00:49,960 --> 00:00:53,210 It's a pretty simple process, in terms of there's not much 18 00:00:53,210 --> 00:00:56,310 complexity or theoretical complexity to it. 19 00:00:56,310 --> 00:00:57,810 In practice, it's much more a matter 20 00:00:57,810 --> 00:01:00,510 of data gathering, decisions, talking 21 00:01:00,510 --> 00:01:03,410 with your marketing communications people-- things 22 00:01:03,410 --> 00:01:03,950 like that. 23 00:01:03,950 --> 00:01:06,820 But just to get the mechanics of what 24 00:01:06,820 --> 00:01:09,630 goes into a corporate carbon footprint down 25 00:01:09,630 --> 00:01:11,440 and how you might use it to identify where 26 00:01:11,440 --> 00:01:14,886 the emissions are in your company, 27 00:01:14,886 --> 00:01:17,010 probably the more important things are this, right? 28 00:01:17,010 --> 00:01:19,019 Understand the measurement approach. 29 00:01:19,019 --> 00:01:20,560 What is a corporate carbon footprint? 30 00:01:20,560 --> 00:01:22,100 How does it compare to other things, 31 00:01:22,100 --> 00:01:24,650 like a supply chain carbon footprint or a product carbon 32 00:01:24,650 --> 00:01:26,310 footprint, and how do they go together? 33 00:01:26,310 --> 00:01:27,740 And the other one is to understand 34 00:01:27,740 --> 00:01:30,144 what this means, since most big companies do 35 00:01:30,144 --> 00:01:32,060 release their greenhouse gas emissions, right? 36 00:01:32,060 --> 00:01:34,319 But as we go through this stuff, we 37 00:01:34,319 --> 00:01:36,860 will see that there's a lot of discretion that goes into what 38 00:01:36,860 --> 00:01:38,160 exactly they do with that. 39 00:01:38,160 --> 00:01:41,500 So the goal would hopefully be that, as you go out, 40 00:01:41,500 --> 00:01:44,070 as you're working on your class project. 41 00:01:44,070 --> 00:01:48,170 Or as you start seeing companies doing press releases or things 42 00:01:48,170 --> 00:01:51,880 about how they cut x amount of emissions or whatnot, 43 00:01:51,880 --> 00:01:54,730 understand what went into that and be able to challenge 44 00:01:54,730 --> 00:01:58,402 whether they're really making much of contribution 45 00:01:58,402 --> 00:01:59,360 or what goes into that. 46 00:01:59,360 --> 00:02:01,050 So that's sort of what we're hoping 47 00:02:01,050 --> 00:02:03,810 to get out of today's lecture. 48 00:02:03,810 --> 00:02:05,510 And at the end, we'll probably wrap up 49 00:02:05,510 --> 00:02:07,915 by talking about how this relates to next class, which 50 00:02:07,915 --> 00:02:10,039 will be about life cycle assessment, which is going 51 00:02:10,039 --> 00:02:12,030 to be about a more detailed methodology 52 00:02:12,030 --> 00:02:15,820 for doing product-level comparisons. 53 00:02:15,820 --> 00:02:17,750 So what I want to do first is just 54 00:02:17,750 --> 00:02:21,930 take maybe 10 or 15 minutes here and just sort of recap the case 55 00:02:21,930 --> 00:02:24,244 study and go over the basics. 56 00:02:24,244 --> 00:02:25,660 And then I'm going to have you get 57 00:02:25,660 --> 00:02:28,820 into groups and sort of small groups to discuss 58 00:02:28,820 --> 00:02:33,405 and come together as a consensus about what your approach is 59 00:02:33,405 --> 00:02:35,280 going to be in terms of what you're including 60 00:02:35,280 --> 00:02:37,040 and what you're not in the calculations. 61 00:02:37,040 --> 00:02:39,920 Partly just because just to make sure 62 00:02:39,920 --> 00:02:43,390 we've all arrived at sort of the same general conclusions 63 00:02:43,390 --> 00:02:46,740 about how this works, I did look through most 64 00:02:46,740 --> 00:02:48,070 of what you submitted, though. 65 00:02:48,070 --> 00:02:49,278 Most of it's not too trouble. 66 00:02:49,278 --> 00:02:52,560 There's usually a few things that sometimes trip people up. 67 00:02:52,560 --> 00:02:55,030 So I'll go over what those are so you'll have a chance 68 00:02:55,030 --> 00:02:58,810 to sort of-- in your groups, you can revise or make some changes 69 00:02:58,810 --> 00:03:00,170 if that's the case. 70 00:03:00,170 --> 00:03:02,610 So again, what we're looking at-- 71 00:03:02,610 --> 00:03:05,230 we're putting you in the shoes of WidgetCo. 72 00:03:05,230 --> 00:03:08,120 Essentially you are a chair manufacturer 73 00:03:08,120 --> 00:03:13,409 selling office-type chairs, where you manufacture them. 74 00:03:13,409 --> 00:03:14,700 You own your own manufacturing. 75 00:03:14,700 --> 00:03:16,870 You sell primarily to customers in the US, 76 00:03:16,870 --> 00:03:20,690 both at the retail level and to industrial consumers. 77 00:03:20,690 --> 00:03:23,120 Facilities-wise, you have two manufacturing plants. 78 00:03:23,120 --> 00:03:25,040 One is located in Shanghai. 79 00:03:25,040 --> 00:03:27,762 The one is located here in US in Michigan. 80 00:03:27,762 --> 00:03:29,220 The one in Michigan is fully owned. 81 00:03:29,220 --> 00:03:31,730 The one in China as a 50-50 joint venture 82 00:03:31,730 --> 00:03:34,094 with local investors. 83 00:03:34,094 --> 00:03:35,510 You have two distributions centers 84 00:03:35,510 --> 00:03:38,020 in the US-- one in California and one in Georgia 85 00:03:38,020 --> 00:03:40,670 that you use for finished goods. 86 00:03:40,670 --> 00:03:44,480 And you also have a partnership with a large retailer that 87 00:03:44,480 --> 00:03:46,700 sets aside some dedicated space within each 88 00:03:46,700 --> 00:03:54,310 of their large big box retailers dedicated to just showcasing 89 00:03:54,310 --> 00:03:55,670 your products. 90 00:03:55,670 --> 00:03:56,850 Transportation. 91 00:03:56,850 --> 00:04:00,050 You use a 3PL to bring in imported materials and finished 92 00:04:00,050 --> 00:04:00,550 goods. 93 00:04:00,550 --> 00:04:03,020 So you have the raw materials that 94 00:04:03,020 --> 00:04:06,910 come in by ocean that get sent to your factory in Michigan. 95 00:04:06,910 --> 00:04:08,530 You also have finished chairs coming 96 00:04:08,530 --> 00:04:10,070 in from the plant in China. 97 00:04:10,070 --> 00:04:15,150 Those come in over a dedicated 3PL by ocean to get to the US 98 00:04:15,150 --> 00:04:18,019 and then by rail and by truck once they arrive. 99 00:04:18,019 --> 00:04:20,421 For the retail channel, you service that primarily 100 00:04:20,421 --> 00:04:21,670 with your private truck fleet. 101 00:04:21,670 --> 00:04:23,211 So you own a fleet of trucks that you 102 00:04:23,211 --> 00:04:24,966 use to deliver to retailers. 103 00:04:24,966 --> 00:04:26,340 And then you make up for the rest 104 00:04:26,340 --> 00:04:27,840 of the volume that you can't handle, 105 00:04:27,840 --> 00:04:30,670 either by air or by lessened truckload shipments. 106 00:04:30,670 --> 00:04:32,710 And finally, for the industrial channel, 107 00:04:32,710 --> 00:04:37,880 most of your customers, they actually come and pick it up. 108 00:04:37,880 --> 00:04:39,910 So you don't handle that transportation. 109 00:04:39,910 --> 00:04:41,990 The remaining 40% are done by deliveries. 110 00:04:41,990 --> 00:04:44,260 I think it was by LTL. 111 00:04:44,260 --> 00:04:46,520 So that's basically what we have here, 112 00:04:46,520 --> 00:04:49,670 is sort of the supply chain flow. 113 00:04:49,670 --> 00:04:52,450 Most of your suppliers are located off in China. 114 00:04:52,450 --> 00:04:54,960 That's where your raw materials and parts of coming to, 115 00:04:54,960 --> 00:04:59,300 shipping it out to your plants in Michigan and Shanghai. 116 00:04:59,300 --> 00:05:02,960 Again, this in channel, all this goes on in the US. 117 00:05:02,960 --> 00:05:05,520 And just if we look at it in terms of this flow, 118 00:05:05,520 --> 00:05:08,600 this is sort of where our transportation has come in. 119 00:05:08,600 --> 00:05:12,260 So pretty straightforward and simplified example of a supply 120 00:05:12,260 --> 00:05:13,950 chain. 121 00:05:13,950 --> 00:05:16,170 And the goal is to go through and figure out 122 00:05:16,170 --> 00:05:18,730 what your carbon footprint is based on a couple of things, 123 00:05:18,730 --> 00:05:19,230 right? 124 00:05:19,230 --> 00:05:21,520 You're getting pressure from investors. 125 00:05:21,520 --> 00:05:23,920 You're getting it maybe from some of your customers 126 00:05:23,920 --> 00:05:24,820 asking about it. 127 00:05:24,820 --> 00:05:26,920 So now it's starting to get some attention 128 00:05:26,920 --> 00:05:28,980 within the organization, from the CEO. 129 00:05:28,980 --> 00:05:30,750 And basically you're the one put in charge 130 00:05:30,750 --> 00:05:32,740 of figuring out what that is. 131 00:05:32,740 --> 00:05:35,300 The pressure's sort of ratcheting up. 132 00:05:35,300 --> 00:05:39,540 So FerretCo is basically your main direct competitor. 133 00:05:39,540 --> 00:05:43,255 They operated a little bit lower price point. 134 00:05:43,255 --> 00:05:44,880 But they're starting to try to increase 135 00:05:44,880 --> 00:05:47,560 their profile by doing some of the sustainability initiatives. 136 00:05:47,560 --> 00:05:49,680 So part of that is they want to move into the retail space, 137 00:05:49,680 --> 00:05:51,200 whereas previously they've mainly 138 00:05:51,200 --> 00:05:52,410 served industrial companies. 139 00:05:52,410 --> 00:05:55,750 So as part of that, they've released their carbon footprint 140 00:05:55,750 --> 00:05:58,120 publicly disclosed in the carbon Disclosure Project. 141 00:05:58,120 --> 00:06:01,190 And that came out at 55,000 tons of CO2. 142 00:06:01,190 --> 00:06:03,350 Based on their sales and their product, 143 00:06:03,350 --> 00:06:05,550 that was 1.1 kilograms per product. 144 00:06:05,550 --> 00:06:07,380 So that's aggregate emissions. 145 00:06:07,380 --> 00:06:10,930 And this is sort of a per-product or per-unit level. 146 00:06:10,930 --> 00:06:12,680 They've also announced a plan that they're 147 00:06:12,680 --> 00:06:14,220 going to become carbon neutral. 148 00:06:14,220 --> 00:06:16,670 And also they're exploring putting a carbon label 149 00:06:16,670 --> 00:06:18,709 on their retail products. 150 00:06:18,709 --> 00:06:20,250 A new entry into the market-- they're 151 00:06:20,250 --> 00:06:23,330 trying to appeal directly to the end consumers 152 00:06:23,330 --> 00:06:27,410 that they'll be trying to sell to. 153 00:06:27,410 --> 00:06:30,230 So with that in place, if we look at the supply chain, 154 00:06:30,230 --> 00:06:32,680 we have a number of different emission sources, right? 155 00:06:32,680 --> 00:06:35,050 We have all these different transportation pieces 156 00:06:35,050 --> 00:06:36,970 that are linking these different flows 157 00:06:36,970 --> 00:06:38,220 that we have some data for. 158 00:06:38,220 --> 00:06:40,726 We have emissions coming from our plants, 159 00:06:40,726 --> 00:06:42,600 in terms of electricity and direct emissions. 160 00:06:42,600 --> 00:06:46,020 So obviously you're consuming electricity 161 00:06:46,020 --> 00:06:49,590 that generated emissions of PowerPoint when it was created. 162 00:06:49,590 --> 00:06:51,340 You also might have some direct emissions. 163 00:06:51,340 --> 00:06:53,090 We don't specify where that's coming from, 164 00:06:53,090 --> 00:06:55,420 but you might be burning natural gas or fuel 165 00:06:55,420 --> 00:06:57,430 oil in the facilities. 166 00:06:57,430 --> 00:06:59,890 Other types of manufacturing processes-- 167 00:06:59,890 --> 00:07:01,720 might release chemicals directly, 168 00:07:01,720 --> 00:07:03,330 especially in chemicals. 169 00:07:03,330 --> 00:07:04,780 Agricultural companies, right? 170 00:07:04,780 --> 00:07:06,980 They produce other types of direct admissions. 171 00:07:06,980 --> 00:07:11,140 But we'll just leave it as direct emissions in this case. 172 00:07:11,140 --> 00:07:13,140 You also have some of these different facilities 173 00:07:13,140 --> 00:07:14,500 that are consuming electricity. 174 00:07:14,500 --> 00:07:18,450 So if your DCs and also what's going on at-- you 175 00:07:18,450 --> 00:07:23,450 have those dedicated little show rooms in big depot. 176 00:07:23,450 --> 00:07:27,680 So this is essentially the calculation 177 00:07:27,680 --> 00:07:28,680 set up that we gave you. 178 00:07:28,680 --> 00:07:31,600 I do want to go over just two quickly. 179 00:07:31,600 --> 00:07:35,180 So first, facility is pretty straightforward-- electricity 180 00:07:35,180 --> 00:07:36,920 consumption times the emissions factor. 181 00:07:36,920 --> 00:07:39,790 This is in general how basically every calculation goes, right? 182 00:07:39,790 --> 00:07:41,070 You have these emissions factors that 183 00:07:41,070 --> 00:07:43,319 are published by organizations like the Greenhouse Gas 184 00:07:43,319 --> 00:07:47,902 Protocol that are going to tell you what the emissions are-- 185 00:07:47,902 --> 00:07:48,860 four different factors. 186 00:07:48,860 --> 00:07:50,904 So different fuel types and different electricity 187 00:07:50,904 --> 00:07:52,320 consumptions, where they're going. 188 00:07:52,320 --> 00:07:53,850 How much do they emit? 189 00:07:53,850 --> 00:07:55,840 And then basically it's your job to gather data 190 00:07:55,840 --> 00:07:58,640 about how much you consumed or how much of that material 191 00:07:58,640 --> 00:08:01,932 you used, a factor in the direct emissions. 192 00:08:01,932 --> 00:08:04,140 For some of these other things, when that data is not 193 00:08:04,140 --> 00:08:06,800 available-- especially if this is the case in transportation-- 194 00:08:06,800 --> 00:08:09,008 you might have a choice of several different methods. 195 00:08:09,008 --> 00:08:12,020 So in this case, we had two different ones-- one 196 00:08:12,020 --> 00:08:15,180 based on ton-miles and one based on fuel consumption. 197 00:08:15,180 --> 00:08:18,410 So this would generally be the preferred choice-- fuel 198 00:08:18,410 --> 00:08:21,322 consumption-- mainly because it's simple. 199 00:08:21,322 --> 00:08:22,780 If you know how much fuel consumed, 200 00:08:22,780 --> 00:08:23,880 you know the emissions factor, you 201 00:08:23,880 --> 00:08:25,650 know how much emissions it produce. 202 00:08:25,650 --> 00:08:29,170 And in cases like diesel or gasoline, 203 00:08:29,170 --> 00:08:31,840 the CO2 emissions are pretty much directly tied. 204 00:08:31,840 --> 00:08:34,309 It's basically a one-to-one correspondence in terms of, 205 00:08:34,309 --> 00:08:36,520 every gallon of fuel you consume is going to produce 206 00:08:36,520 --> 00:08:37,919 a set amount of emissions. 207 00:08:37,919 --> 00:08:40,179 It's not going to change too much. 208 00:08:40,179 --> 00:08:42,856 So you'd like to get to that fuel consumption. 209 00:08:42,856 --> 00:08:44,730 But that's not always easy to get, especially 210 00:08:44,730 --> 00:08:46,396 when you're hiring a third-party carrier 211 00:08:46,396 --> 00:08:48,600 or, more importantly, when you're using 212 00:08:48,600 --> 00:08:50,066 shared transportation assets. 213 00:08:50,066 --> 00:08:51,440 So on a dedicated transportation, 214 00:08:51,440 --> 00:08:52,890 I hire a truckload company. 215 00:08:52,890 --> 00:08:55,076 They come up, they put my goods on the truck, 216 00:08:55,076 --> 00:08:56,200 and they take it someplace. 217 00:08:56,200 --> 00:08:57,780 It's nothing but my goods on there. 218 00:08:57,780 --> 00:09:00,321 So all of the emissions that are generated when that truck is 219 00:09:00,321 --> 00:09:03,060 going would be dedicated to me. 220 00:09:03,060 --> 00:09:05,150 So I can just try to maybe make an estimate 221 00:09:05,150 --> 00:09:08,319 of the fuel consumed and get how much the emissions would be. 222 00:09:08,319 --> 00:09:09,860 When you're looking at rail or ocean, 223 00:09:09,860 --> 00:09:11,360 where an ocean ship might have thousands 224 00:09:11,360 --> 00:09:12,984 of different containers on it and maybe 225 00:09:12,984 --> 00:09:15,030 only one or two of those are your goods, 226 00:09:15,030 --> 00:09:16,710 you're not really interested in how much 227 00:09:16,710 --> 00:09:20,480 the total ship or the total rail car might have emitted. 228 00:09:20,480 --> 00:09:25,210 You want to know how much is essentially dedicated to you. 229 00:09:25,210 --> 00:09:27,780 So in this case, usually what we do is that. 230 00:09:27,780 --> 00:09:30,270 We would measure the efficiency of the vehicles 231 00:09:30,270 --> 00:09:32,065 in terms of how much fuel they consume 232 00:09:32,065 --> 00:09:35,130 or emissions they all put per ton-mile, right? 233 00:09:35,130 --> 00:09:39,240 So a ton-mile is a pretty common indicator 234 00:09:39,240 --> 00:09:41,510 in the transportation, right? 235 00:09:41,510 --> 00:09:46,660 And that's just 1 ton times 1 mile. 236 00:09:46,660 --> 00:09:52,280 If you move one ton of goods one mile, that's one ton-mile. 237 00:09:52,280 --> 00:09:53,465 So you can think about it. 238 00:09:53,465 --> 00:09:56,090 If you have 20 tons on there and you go one mile, 20 ton-miles. 239 00:09:56,090 --> 00:09:57,740 So if you had one ton and you took it 240 00:09:57,740 --> 00:10:00,142 20 miles, also 20 ton-miles. 241 00:10:00,142 --> 00:10:01,600 The reason we would do it like this 242 00:10:01,600 --> 00:10:05,180 is because generally those larger vehicles-- the larger 243 00:10:05,180 --> 00:10:08,240 the ocean ship goes, the more fuel it consumes, say, 244 00:10:08,240 --> 00:10:10,050 per kilometer that it moves. 245 00:10:10,050 --> 00:10:12,360 But as it's starting to aggregate, 246 00:10:12,360 --> 00:10:14,369 it carries more and more goods on it. 247 00:10:14,369 --> 00:10:16,410 So it's actually becoming more efficient in terms 248 00:10:16,410 --> 00:10:17,960 of the actual goods that it moves, 249 00:10:17,960 --> 00:10:20,060 because it can move a lot more product 250 00:10:20,060 --> 00:10:24,200 that same amount of distance on a less amount of fuel. 251 00:10:24,200 --> 00:10:26,930 So lower fuel consumption. 252 00:10:26,930 --> 00:10:28,900 The trick with this-- and this is something 253 00:10:28,900 --> 00:10:32,560 that tripped a few of you up on it-- 254 00:10:32,560 --> 00:10:34,510 is when you have aggregated data, right? 255 00:10:34,510 --> 00:10:36,350 So if you look at the data that we had, 256 00:10:36,350 --> 00:10:38,680 we don't have a breakdown of every single shipment, 257 00:10:38,680 --> 00:10:42,006 especially when you're a company that's maybe making thousands 258 00:10:42,006 --> 00:10:43,130 and thousands of shipments. 259 00:10:43,130 --> 00:10:45,870 You may not have a direct record of every single shipment 260 00:10:45,870 --> 00:10:50,010 that you send, in terms of its distance and its total tonnage. 261 00:10:50,010 --> 00:10:51,810 So what you might get is something 262 00:10:51,810 --> 00:10:52,840 like what we gave you. 263 00:10:52,840 --> 00:10:58,660 Say you knew that you had-- let's do a quick example. 264 00:11:11,500 --> 00:11:13,590 Say we just add two shipments. 265 00:11:13,590 --> 00:11:14,730 That's all we sent. 266 00:11:14,730 --> 00:11:18,140 And the first one, I had 10 tons on it and I sent it 10 miles. 267 00:11:18,140 --> 00:11:18,890 So pretty simple. 268 00:11:18,890 --> 00:11:20,314 That's 100 ton-miles. 269 00:11:20,314 --> 00:11:21,730 The second one, we have five times 270 00:11:21,730 --> 00:11:23,550 and we send up five miles. 271 00:11:23,550 --> 00:11:24,820 That's 25 ton-miles. 272 00:11:24,820 --> 00:11:30,750 So in total, I moved 125 ton-miles' worth of goods. 273 00:11:30,750 --> 00:11:34,150 The trick is this, is that if we were to aggregate this-- 274 00:11:34,150 --> 00:11:38,285 and this is what you are given in the exercise. 275 00:11:38,285 --> 00:11:41,940 You know something like, you sent two shipments. 276 00:11:41,940 --> 00:11:44,530 And you moved a total 15 tons. 277 00:11:44,530 --> 00:11:47,810 And you moved a total of 15 miles, right? 278 00:11:47,810 --> 00:11:49,500 The problem is that if you try to take 279 00:11:49,500 --> 00:11:52,490 these aggregated numbers and just multiply them together-- 280 00:11:52,490 --> 00:11:53,605 15 times 15. 281 00:11:56,260 --> 00:11:57,450 It's 225, right? 282 00:11:57,450 --> 00:11:59,780 It's very different from what you actually did. 283 00:11:59,780 --> 00:12:01,740 And this goes back to our-- 284 00:12:07,550 --> 00:12:10,090 If we go all the way back to, I don't know, 285 00:12:10,090 --> 00:12:12,340 our junior high math, right? 286 00:12:12,340 --> 00:12:16,615 A times B plus C times D. That does not equal-- 287 00:12:24,130 --> 00:12:24,940 Right. 288 00:12:24,940 --> 00:12:29,150 So I can't add these two and add these two and multiply them. 289 00:12:29,150 --> 00:12:30,550 You just get a different number. 290 00:12:30,550 --> 00:12:33,280 So if you just take the aggregate 291 00:12:33,280 --> 00:12:35,280 you did, especially when we had 1,000 shipments. 292 00:12:35,280 --> 00:12:38,020 So you moved 26 million miles or whatever it was, 293 00:12:38,020 --> 00:12:40,454 and you moved 50 million kilograms 294 00:12:40,454 --> 00:12:41,870 and just multiplied them together. 295 00:12:41,870 --> 00:12:44,930 You got some really huge number. 296 00:12:44,930 --> 00:12:46,730 And it probably threw off the calculations. 297 00:12:46,730 --> 00:12:48,855 You ended up having, say, your ocean transportation 298 00:12:48,855 --> 00:12:51,660 or something being by far the largest source of emissions. 299 00:12:51,660 --> 00:12:55,200 So that's just one thing to look out for. 300 00:12:55,200 --> 00:12:57,520 When we've done this-- we've given this in the past 301 00:12:57,520 --> 00:13:00,000 with the executive ed participants. 302 00:13:00,000 --> 00:13:02,640 And 99% of them always do the same thing. 303 00:13:02,640 --> 00:13:06,130 So I knew that would possibly trip you up. 304 00:13:06,130 --> 00:13:08,580 But I think in the examples that we gave, 305 00:13:08,580 --> 00:13:10,680 we broke it out is that one way to get around 306 00:13:10,680 --> 00:13:13,872 this would be to assume it went the average distance 307 00:13:13,872 --> 00:13:15,830 and the average weight, and then multiply those 308 00:13:15,830 --> 00:13:18,410 together, and then multiply it by the number of shipments. 309 00:13:18,410 --> 00:13:20,250 It won't be exact, but it'll be closer, 310 00:13:20,250 --> 00:13:23,214 because if you just add them up and then multiply them, 311 00:13:23,214 --> 00:13:25,130 you're going to be off by orders of magnitude. 312 00:13:25,130 --> 00:13:29,810 So in terms of the calculations, that was just one of the things 313 00:13:29,810 --> 00:13:33,791 I saw that that is tricky to look out for. 314 00:13:33,791 --> 00:13:35,050 The emissions factor. 315 00:13:35,050 --> 00:13:37,460 So we only gave you a limited set here. 316 00:13:37,460 --> 00:13:40,300 But if you go out and look at the greenhouse gas protocol, 317 00:13:40,300 --> 00:13:42,740 there will be an emissions factor for basically every type 318 00:13:42,740 --> 00:13:43,240 of fuel. 319 00:13:43,240 --> 00:13:47,070 So you'll have coal, natural gas, fuel oil, diesel, 320 00:13:47,070 --> 00:13:49,140 gasoline-- all different sort of ones. 321 00:13:49,140 --> 00:13:52,100 So even though we just basically did 322 00:13:52,100 --> 00:13:54,730 electricity and diesel in here, there 323 00:13:54,730 --> 00:13:56,460 are a whole host of other factors. 324 00:13:56,460 --> 00:13:58,970 So if you have a company that's consuming 325 00:13:58,970 --> 00:14:02,680 different types of energy, the same principle applies. 326 00:14:02,680 --> 00:14:05,990 You know how many cubic feet of natural gas you consumed, 327 00:14:05,990 --> 00:14:07,570 and you know its factor. 328 00:14:07,570 --> 00:14:09,340 For most companies, you're not going 329 00:14:09,340 --> 00:14:11,794 to really need much more than this to do the calculations, 330 00:14:11,794 --> 00:14:13,460 because most companies aren't doing much 331 00:14:13,460 --> 00:14:18,320 other than either burning fuel, either in furnaces or bunkers 332 00:14:18,320 --> 00:14:21,500 or in vehicles or consuming electricity. 333 00:14:21,500 --> 00:14:23,690 They do make some specialized calculators 334 00:14:23,690 --> 00:14:27,030 for different sectors-- cement manufacturing, certain chemical 335 00:14:27,030 --> 00:14:28,507 production, paper pulp. 336 00:14:28,507 --> 00:14:30,090 Things that actually produce emissions 337 00:14:30,090 --> 00:14:32,280 through, say, different chemical processes that are not 338 00:14:32,280 --> 00:14:33,446 going to be covered by that. 339 00:14:33,446 --> 00:14:36,670 But for the most part, most companies and most facilities 340 00:14:36,670 --> 00:14:38,930 are just going to be able to be done by these pretty 341 00:14:38,930 --> 00:14:40,230 simple calculations. 342 00:14:42,910 --> 00:14:46,220 And just in terms of the actual underlying mechanics of this. 343 00:14:46,220 --> 00:14:48,740 So most of the time, when we're talking about a carbon 344 00:14:48,740 --> 00:14:51,340 footprint, we're talking about the six gases that are usually 345 00:14:51,340 --> 00:14:52,930 known as the Kyoto gases. 346 00:14:52,930 --> 00:14:55,670 These are the six gases that were covered under the Kyoto 347 00:14:55,670 --> 00:14:56,820 Protocol. 348 00:14:56,820 --> 00:15:00,010 Carbon dioxide, especially in transportation and fuel 349 00:15:00,010 --> 00:15:03,410 consumption, is by far the largest contributor. 350 00:15:03,410 --> 00:15:05,480 They usually also produce perhaps a little bit 351 00:15:05,480 --> 00:15:07,240 of methane, nitrous oxide. 352 00:15:07,240 --> 00:15:10,610 And other processes might produce HFCs, PFCs, sulfur 353 00:15:10,610 --> 00:15:12,770 hexafluoride. 354 00:15:12,770 --> 00:15:16,060 There are other gases that contribute to global warming, 355 00:15:16,060 --> 00:15:17,530 other greenhouse gases. 356 00:15:17,530 --> 00:15:19,790 But they're not necessarily covered under Kyoto. 357 00:15:19,790 --> 00:15:21,930 So this is just something to look out for, 358 00:15:21,930 --> 00:15:24,810 especially refrigerants and some of the others 359 00:15:24,810 --> 00:15:27,360 that were covered under the ozone, the Montreal 360 00:15:27,360 --> 00:15:29,240 Protocol, which covered ozone. 361 00:15:29,240 --> 00:15:30,917 Since they were already being regulated, 362 00:15:30,917 --> 00:15:32,750 they weren't included in the Kyoto Protocol. 363 00:15:32,750 --> 00:15:35,160 So a lot of things, especially like the greenhouse gas 364 00:15:35,160 --> 00:15:38,590 protocol, don't require you to measure those. 365 00:15:38,590 --> 00:15:40,990 But you can measure those and report them separately, 366 00:15:40,990 --> 00:15:46,210 because they do contribute to the overall greenhouse effect. 367 00:15:46,210 --> 00:15:48,690 Our emissions factors are usually 368 00:15:48,690 --> 00:15:52,690 represented in a single unit, carbon dioxide equivalence. 369 00:15:52,690 --> 00:15:55,525 Essentially we're trying to measure different gases, 370 00:15:55,525 --> 00:15:57,650 contribute to global warming and different amounts, 371 00:15:57,650 --> 00:16:01,120 based on how much radiative forcing they cause. 372 00:16:01,120 --> 00:16:04,570 So essentially, every kilogram of methane, 373 00:16:04,570 --> 00:16:09,170 say, contributes, say, as much global warming as 34 kilograms 374 00:16:09,170 --> 00:16:10,392 of carbon dioxide. 375 00:16:10,392 --> 00:16:11,850 So essentially what would happen is 376 00:16:11,850 --> 00:16:14,770 that every kilogram of methane you would multiply 377 00:16:14,770 --> 00:16:17,380 by its global warming potential to determine 378 00:16:17,380 --> 00:16:20,900 how much carbon dioxide that would be equivalent to. 379 00:16:20,900 --> 00:16:23,190 And so all of these factors that we give 380 00:16:23,190 --> 00:16:26,290 are in terms of carbon dioxide equivalence. 381 00:16:26,290 --> 00:16:29,820 So they're incorporating the amount of methane and nitrous 382 00:16:29,820 --> 00:16:32,660 oxide that might be emitted in there as well. 383 00:16:32,660 --> 00:16:34,240 Part of this is that these constantly 384 00:16:34,240 --> 00:16:36,281 get updated-- or not constantly, but occasionally 385 00:16:36,281 --> 00:16:38,320 updated as part of the IPCC process. 386 00:16:38,320 --> 00:16:41,830 So they actually just released in 2013, 387 00:16:41,830 --> 00:16:43,970 I think, the fifth version of this. 388 00:16:43,970 --> 00:16:45,720 And so some of these factors have changed. 389 00:16:45,720 --> 00:16:47,095 So that's something to keep track 390 00:16:47,095 --> 00:16:50,160 of, especially for a company that's doing it long term. 391 00:16:50,160 --> 00:16:51,996 Those factors can change as you go, 392 00:16:51,996 --> 00:16:54,370 which sometimes means you need to go back and recalculate 393 00:16:54,370 --> 00:16:55,540 and figure it. 394 00:16:55,540 --> 00:16:58,282 And one thing to be careful for is that people typically 395 00:16:58,282 --> 00:16:59,740 refer to things as carbon footprint 396 00:16:59,740 --> 00:17:01,370 or the amount of carbon they're doing. 397 00:17:01,370 --> 00:17:03,161 Sometimes when they say that, they actually 398 00:17:03,161 --> 00:17:05,109 mean just the carbon dioxide. 399 00:17:05,109 --> 00:17:07,630 Most the time it includes all of these gases. 400 00:17:07,630 --> 00:17:10,432 But you should be careful and look out for that, 401 00:17:10,432 --> 00:17:12,140 and make sure you're stating that upfront 402 00:17:12,140 --> 00:17:13,681 when you're doing this sort of thing, 403 00:17:13,681 --> 00:17:17,910 whether you included all of these or just carbon dioxide. 404 00:17:17,910 --> 00:17:22,099 The other thing we asked in here was the emission scopes. 405 00:17:22,099 --> 00:17:25,869 So this is actually pretty straightforward. 406 00:17:25,869 --> 00:17:27,540 Once you think about what is included 407 00:17:27,540 --> 00:17:29,750 in your organizational boundary and whatnot, 408 00:17:29,750 --> 00:17:32,630 scope one is direct emissions, right? 409 00:17:32,630 --> 00:17:35,370 They're direct because you could put a CO2 410 00:17:35,370 --> 00:17:36,860 to monitor and actually monitor it, 411 00:17:36,860 --> 00:17:38,984 because they're directly coming from your facility, 412 00:17:38,984 --> 00:17:41,620 either from your burning fuels usually or from one 413 00:17:41,620 --> 00:17:42,850 of those chemical processes. 414 00:17:42,850 --> 00:17:44,460 So they're the emissions that are 415 00:17:44,460 --> 00:17:46,570 coming from the vehicles you own-- 416 00:17:46,570 --> 00:17:49,020 they're yours-- or within your facilities, 417 00:17:49,020 --> 00:17:51,780 directly coming at those facilities, usually basically 418 00:17:51,780 --> 00:17:53,700 through fossil fuel combustion. 419 00:17:53,700 --> 00:17:55,856 Scope two are the indirect emissions 420 00:17:55,856 --> 00:17:56,980 that come from electricity. 421 00:17:56,980 --> 00:18:00,037 So your facility is consuming electricity. 422 00:18:00,037 --> 00:18:01,620 Those emissions are actually occurring 423 00:18:01,620 --> 00:18:03,703 at the power plant, where they're burning the coal 424 00:18:03,703 --> 00:18:05,660 to supply that electricity. 425 00:18:05,660 --> 00:18:07,900 So we report that as a separate scope, 426 00:18:07,900 --> 00:18:10,890 because most companies and most buildings 427 00:18:10,890 --> 00:18:13,420 are making use of electricity. 428 00:18:13,420 --> 00:18:17,430 So usually this falls into sort of the basic minimum carbon 429 00:18:17,430 --> 00:18:19,930 footprint that we would consider for an organization-- scope 430 00:18:19,930 --> 00:18:21,110 one and scope two. 431 00:18:21,110 --> 00:18:23,490 Scope three is all the other indirect emissions, right? 432 00:18:23,490 --> 00:18:26,490 So one thing to remember is that all these emissions are 433 00:18:26,490 --> 00:18:28,080 somebody's direct emissions. 434 00:18:28,080 --> 00:18:30,220 But they may not necessarily be what you're 435 00:18:30,220 --> 00:18:31,790 consider your organization. 436 00:18:31,790 --> 00:18:34,450 So anything that's not in your scope one or scope two 437 00:18:34,450 --> 00:18:37,847 is going to be scope three, probably because it's 438 00:18:37,847 --> 00:18:38,930 somebody else's scope one. 439 00:18:38,930 --> 00:18:40,857 So when you're going through and thinking 440 00:18:40,857 --> 00:18:42,940 about what's in your organizational boundary, what 441 00:18:42,940 --> 00:18:47,040 you've decided as part of your carbon footprint-- scope one, 442 00:18:47,040 --> 00:18:48,800 emissions you're directly producing; 443 00:18:48,800 --> 00:18:50,370 scope two, the ones that are coming 444 00:18:50,370 --> 00:18:53,100 from electricity that you consume; 445 00:18:53,100 --> 00:18:55,046 and basically everything else is scope three. 446 00:18:58,170 --> 00:19:00,685 AUDIENCE: For transportation, if I owned a fleet, 447 00:19:00,685 --> 00:19:02,070 would that be scope one? 448 00:19:02,070 --> 00:19:05,997 And if I hire someone to move it, would that be scope three? 449 00:19:05,997 --> 00:19:07,455 I'm not really sure how that works. 450 00:19:07,455 --> 00:19:08,121 PROFESSOR: Yeah. 451 00:19:08,121 --> 00:19:09,540 In general, these are going to be 452 00:19:09,540 --> 00:19:15,339 things that occur directly owned by you or in your-- sometimes 453 00:19:15,339 --> 00:19:16,130 you may not own it. 454 00:19:16,130 --> 00:19:18,160 But if you have direct control over it, 455 00:19:18,160 --> 00:19:19,850 especially like some facilities where 456 00:19:19,850 --> 00:19:23,450 you have a long-term lease or if you have a arrangement where 457 00:19:23,450 --> 00:19:26,130 you put down a long term for hire with a carrier, 458 00:19:26,130 --> 00:19:29,065 they still might be scope one even if you didn't do it. 459 00:19:29,065 --> 00:19:31,670 It's Based on what you defined as 460 00:19:31,670 --> 00:19:34,100 your organizational boundary. 461 00:19:34,100 --> 00:19:36,620 So scope one and scope two are things that you basically 462 00:19:36,620 --> 00:19:39,040 have to report, because you directly admitted 463 00:19:39,040 --> 00:19:41,120 them or they have electricity. 464 00:19:41,120 --> 00:19:44,020 Scope three are things that you might 465 00:19:44,020 --> 00:19:46,570 want to consider within your carbon footprint boundary 466 00:19:46,570 --> 00:19:50,780 but aren't directly owned or within your organization. 467 00:19:50,780 --> 00:19:53,710 AUDIENCE: Generally emissions from the usage 468 00:19:53,710 --> 00:19:55,910 would not be considered [INAUDIBLE] 469 00:19:55,910 --> 00:19:58,570 for the purpose of this? 470 00:19:58,570 --> 00:20:00,490 PROFESSOR: Of the products that you produce? 471 00:20:00,490 --> 00:20:02,710 Yeah. 472 00:20:02,710 --> 00:20:07,262 Yes, so we'll talk about this a little bit later. 473 00:20:07,262 --> 00:20:09,720 Scope three is anything that's not scope one and scope two. 474 00:20:09,720 --> 00:20:14,615 And you may be mandated on a minimum 475 00:20:14,615 --> 00:20:15,666 that you need to include. 476 00:20:15,666 --> 00:20:17,040 But usually there's no regulation 477 00:20:17,040 --> 00:20:20,520 that says you can't include something in your boundary. 478 00:20:20,520 --> 00:20:23,510 So you could include those within your company's boundary. 479 00:20:23,510 --> 00:20:26,680 But if it's a product you're selling to a consumer, 480 00:20:26,680 --> 00:20:30,690 that would fall under scope three of indirect. 481 00:20:30,690 --> 00:20:32,530 And we'll talk a little bit more about this 482 00:20:32,530 --> 00:20:35,352 at the end when we go through this. 483 00:20:35,352 --> 00:20:37,310 Again, so the case study, basically go through. 484 00:20:37,310 --> 00:20:39,092 We sort of listed all the activities 485 00:20:39,092 --> 00:20:41,300 in the spreadsheet, asked you to go through, identify 486 00:20:41,300 --> 00:20:44,250 the emission factor, and identify the activity driver. 487 00:20:44,250 --> 00:20:47,122 So how much you consumed of that. 488 00:20:47,122 --> 00:20:49,460 How much you wanted to include in your company's carbon 489 00:20:49,460 --> 00:20:50,970 footprint, anywhere from 0 to 100. 490 00:20:50,970 --> 00:20:53,040 So if you were excluding it, zero. 491 00:20:53,040 --> 00:20:54,790 And then if you are including it, 492 00:20:54,790 --> 00:20:57,452 you'd have to give some percentage for that and why. 493 00:20:57,452 --> 00:20:59,910 And identify whether they're scope one, scope two, or scope 494 00:20:59,910 --> 00:21:01,350 three emissions. 495 00:21:01,350 --> 00:21:04,470 Decide whether you're going to disclose this, 496 00:21:04,470 --> 00:21:06,440 and what you're including. 497 00:21:06,440 --> 00:21:10,409 And also, given what FerretCo's doing, 498 00:21:10,409 --> 00:21:12,700 how do you feel about pledging to become carbon neutral 499 00:21:12,700 --> 00:21:15,200 or labeling your products? 500 00:21:15,200 --> 00:21:17,840 So we've already gone through it. 501 00:21:17,840 --> 00:21:19,240 Hopefully you all did originally. 502 00:21:19,240 --> 00:21:21,294 But I want to give you a few minutes 503 00:21:21,294 --> 00:21:23,460 now just to sit in small groups and talk it through. 504 00:21:23,460 --> 00:21:24,834 And then we'll use that as a-- so 505 00:21:24,834 --> 00:21:27,340 you'll have a chance to go back through the calculations 506 00:21:27,340 --> 00:21:31,060 and settle on as a small group one number 507 00:21:31,060 --> 00:21:34,390 that we'll use as the discussion within your group. 508 00:21:34,390 --> 00:21:35,640 So you can go back throughout. 509 00:21:35,640 --> 00:21:37,098 We've talked it through and revised 510 00:21:37,098 --> 00:21:39,790 any of the calculations or the scope, if you need to do that. 511 00:21:39,790 --> 00:21:42,220 So let's just separate into small-- 512 00:21:42,220 --> 00:21:44,970 I don't know-- three, four, two, whatever. 513 00:21:44,970 --> 00:21:45,910 Just get together. 514 00:21:45,910 --> 00:21:47,920 So you have somebody else to go over it with. 515 00:21:47,920 --> 00:21:50,205 Hopefully each group has a computer with them 516 00:21:50,205 --> 00:21:52,560 that they can pull up the spreadsheet on. 517 00:21:52,560 --> 00:21:55,547 And let's just take-- I don't know-- 10 minutes, 15 minutes, 518 00:21:55,547 --> 00:21:57,630 or whatever and go through and come up with those. 519 00:21:57,630 --> 00:21:59,760 And then we'll sort of run through all of this. 520 00:22:05,110 --> 00:22:09,580 So the first question we have is, what is WidgetCo's carbon 521 00:22:09,580 --> 00:22:10,750 footprint. 522 00:22:10,750 --> 00:22:14,020 So why don't we go through. 523 00:22:14,020 --> 00:22:17,860 And tell me how many times you said WidgetCo's carbon 524 00:22:17,860 --> 00:22:18,610 footprint was. 525 00:22:21,522 --> 00:22:22,480 How many thousand tons. 526 00:22:22,480 --> 00:22:24,438 AUDIENCE: The total aggregate carbon footprint? 527 00:22:24,438 --> 00:22:25,310 PROFESSOR: Yeah. 528 00:22:25,310 --> 00:22:28,252 AUDIENCE: 393. 529 00:22:28,252 --> 00:22:30,660 PROFESSOR: 393. 530 00:22:30,660 --> 00:22:33,147 Yeah, a thousand tons. 531 00:22:33,147 --> 00:22:38,858 AUDIENCE: 395. 532 00:22:38,858 --> 00:22:39,608 PROFESSOR: Others? 533 00:22:43,087 --> 00:22:47,560 AUDIENCE: We had two different [INAUDIBLE]-- 399 and-- 534 00:22:47,560 --> 00:22:50,045 AUDIENCE: I725. 535 00:22:50,045 --> 00:22:53,027 [INTERPOSING VOICES] 536 00:22:56,506 --> 00:22:57,735 AUDIENCE: 378. 537 00:22:57,735 --> 00:22:58,360 PROFESSOR: 378? 538 00:23:05,404 --> 00:23:06,320 AUDIENCE: [INAUDIBLE]. 539 00:23:15,570 --> 00:23:16,910 PROFESSOR: 680 was the other? 540 00:23:16,910 --> 00:23:17,540 AUDIENCE: 650. 541 00:23:17,540 --> 00:23:21,631 PROFESSOR: 650. 542 00:23:21,631 --> 00:23:22,130 [INAUDIBLE]? 543 00:23:30,471 --> 00:23:32,010 AUDIENCE: Do I need to do something? 544 00:23:32,010 --> 00:23:32,640 Hello? 545 00:23:32,640 --> 00:23:35,045 PROFESSOR: Yeah, we hear you. 546 00:23:35,045 --> 00:23:35,990 AUDIENCE: 305. 547 00:23:35,990 --> 00:23:37,565 PROFESSOR: 305? 548 00:23:37,565 --> 00:23:38,190 AUDIENCE: Yeah. 549 00:23:43,878 --> 00:23:45,300 PROFESSOR: OK. 550 00:23:45,300 --> 00:23:50,740 So I went through it earlier and compiled the individual answers 551 00:23:50,740 --> 00:23:54,040 from the people that had submitted. 552 00:23:54,040 --> 00:23:55,910 So here's what they look like. 553 00:23:55,910 --> 00:24:01,230 So we had a couple outliers, because this is basically 554 00:24:01,230 --> 00:24:02,080 just a calculator. 555 00:24:02,080 --> 00:24:04,532 And they're in the calculation overestimating the ton-mile 556 00:24:04,532 --> 00:24:05,490 or something like that. 557 00:24:05,490 --> 00:24:08,840 So if we bring it down to scale or something like this. 558 00:24:08,840 --> 00:24:12,280 Most of you answered in that range 559 00:24:12,280 --> 00:24:15,020 that we talked about-- 300 to 400. 560 00:24:15,020 --> 00:24:16,100 Some high or some less. 561 00:24:16,100 --> 00:24:21,880 We can see where did those emissions come from. 562 00:24:21,880 --> 00:24:24,673 I went through and pulled out a few possibilities. 563 00:24:28,730 --> 00:24:30,900 The highest level-- if we included everything 564 00:24:30,900 --> 00:24:31,930 on that list, right? 565 00:24:31,930 --> 00:24:33,714 100% of the emissions for everything 566 00:24:33,714 --> 00:24:34,630 that was on that list. 567 00:24:34,630 --> 00:24:36,910 That would be essentially our supply chain emissions 568 00:24:36,910 --> 00:24:39,370 for this portion of the supply chain. 569 00:24:39,370 --> 00:24:42,670 That comes out to about $580,000 tons, right? 570 00:24:42,670 --> 00:24:48,440 So on a per kilogram of product basis, that's about 6.93. 571 00:24:48,440 --> 00:24:52,605 So that should be probably be the upper end of the range, 572 00:24:52,605 --> 00:24:54,300 because that's including everything 573 00:24:54,300 --> 00:24:56,290 that we had in there. 574 00:24:56,290 --> 00:24:58,380 You might have made some different assumptions 575 00:24:58,380 --> 00:25:00,129 in how we calculated some of these things. 576 00:25:00,129 --> 00:25:02,640 So that's probably why some are 395 and 399. 577 00:25:02,640 --> 00:25:05,410 Things like that can make them smaller. 578 00:25:05,410 --> 00:25:08,680 Differences in there. 579 00:25:08,680 --> 00:25:10,480 The real question, though, comes to be-- 580 00:25:10,480 --> 00:25:13,389 I mean, the main thing is, how much of that Shanghai operation 581 00:25:13,389 --> 00:25:14,180 are we considering? 582 00:25:14,180 --> 00:25:18,680 So if we look at the supply chain emissions, 583 00:25:18,680 --> 00:25:21,130 we have the manufacturing in the US. 584 00:25:21,130 --> 00:25:24,890 And most of you-- everybody was pretty consistent on that. 585 00:25:24,890 --> 00:25:27,090 Straightforward once you make the calculation. 586 00:25:27,090 --> 00:25:28,760 We pretty much have to include that. 587 00:25:28,760 --> 00:25:30,000 We own that. 588 00:25:30,000 --> 00:25:33,140 It's all scope one or scope two emissions. 589 00:25:33,140 --> 00:25:35,884 The plant in China-- same deal, right? 590 00:25:35,884 --> 00:25:38,300 Scope one or scope two, if we've included in the boundary. 591 00:25:38,300 --> 00:25:40,340 But we can make some different calls 592 00:25:40,340 --> 00:25:42,926 based on what sort of organizational boundary we 593 00:25:42,926 --> 00:25:43,730 want to set. 594 00:25:43,730 --> 00:25:47,940 And so if you look at it in the greenhouse gas protocol-- so 595 00:25:47,940 --> 00:25:51,041 as one of the standards and probably the most popular 596 00:25:51,041 --> 00:25:51,540 standard. 597 00:25:51,540 --> 00:25:53,380 It basically outlines two different approaches 598 00:25:53,380 --> 00:25:53,921 you can take. 599 00:25:53,921 --> 00:25:56,130 One is an equity share approach, right? 600 00:25:56,130 --> 00:25:58,220 So you say, well, how much of this do I own? 601 00:25:58,220 --> 00:26:00,890 And I'll calculate the whole emissions. 602 00:26:00,890 --> 00:26:02,890 And then I own 50% of that plant, 603 00:26:02,890 --> 00:26:05,490 so I'm going to take 50% of those emissions. 604 00:26:05,490 --> 00:26:08,220 So if we were to do the equity share approach, 605 00:26:08,220 --> 00:26:10,740 those emissions from the China plant get cut in half, right? 606 00:26:10,740 --> 00:26:13,420 And so I get a lower, right? 607 00:26:13,420 --> 00:26:15,170 The important thing to remember about this 608 00:26:15,170 --> 00:26:18,312 is that, at the corporate level, it 609 00:26:18,312 --> 00:26:19,520 was mentioned earlier, right? 610 00:26:19,520 --> 00:26:21,310 It's accounting, as you guys say. 611 00:26:21,310 --> 00:26:23,410 And if you look at the greenhouse gas protocol, 612 00:26:23,410 --> 00:26:25,860 it's a corporate accounting and reporting standard. 613 00:26:25,860 --> 00:26:28,110 Nothing changes in terms of the supply 614 00:26:28,110 --> 00:26:30,370 chain or the actual operations, the actual emissions 615 00:26:30,370 --> 00:26:31,720 that were out there, right? 616 00:26:31,720 --> 00:26:33,332 We're just changing how much of them 617 00:26:33,332 --> 00:26:34,915 we're going to take responsibility for 618 00:26:34,915 --> 00:26:37,140 or how much we're going to include in our own. 619 00:26:37,140 --> 00:26:39,530 So that's the equity share, which is basically, 620 00:26:39,530 --> 00:26:41,260 anything that I own a percentage of, 621 00:26:41,260 --> 00:26:44,250 I take that percentage of emissions. 622 00:26:44,250 --> 00:26:47,080 And so all the things that I own are 100%. 623 00:26:47,080 --> 00:26:49,420 And actually it can go down even more 624 00:26:49,420 --> 00:26:51,077 if we want to exclude all of the-- 625 00:26:51,077 --> 00:26:52,910 there's all these scope three activities out 626 00:26:52,910 --> 00:26:55,730 there as well that I don't actually own those, 627 00:26:55,730 --> 00:26:58,160 so I can exclude those as well. 628 00:26:58,160 --> 00:27:00,790 The other approach is what they refer to as a control approach. 629 00:27:00,790 --> 00:27:03,840 And they can do financial or operational control. 630 00:27:03,840 --> 00:27:06,300 So this, we would probably need to know a little bit more 631 00:27:06,300 --> 00:27:07,780 about what's going on at that plant 632 00:27:07,780 --> 00:27:10,800 to decide what the right approach was, because it could 633 00:27:10,800 --> 00:27:13,850 easily be, I'll take 100% of those emissions 634 00:27:13,850 --> 00:27:15,830 or I'll take 0%, depending on who's actually 635 00:27:15,830 --> 00:27:17,330 running the plant and who's actually 636 00:27:17,330 --> 00:27:20,060 making all of those decisions, who ultimately 637 00:27:20,060 --> 00:27:22,200 have responsibility for everything that's 638 00:27:22,200 --> 00:27:22,980 going on in there. 639 00:27:22,980 --> 00:27:27,110 If I've just invested in it and my partner-- I've invested 640 00:27:27,110 --> 00:27:29,110 and I've done a joint venture, because they have 641 00:27:29,110 --> 00:27:30,230 all of the local knowledge. 642 00:27:30,230 --> 00:27:31,550 They're the ones with the expertise. 643 00:27:31,550 --> 00:27:33,008 They're basically running the plant 644 00:27:33,008 --> 00:27:34,310 and making all the decisions. 645 00:27:34,310 --> 00:27:36,020 And I'm doing an operational control. 646 00:27:36,020 --> 00:27:38,420 Then maybe I say I have 0%. 647 00:27:38,420 --> 00:27:42,530 And so I might throw that out of my emissions in my company. 648 00:27:42,530 --> 00:27:44,580 Most likely, if it's a 50-50 joint venture, 649 00:27:44,580 --> 00:27:47,200 supplying directly to you, you have some operational control 650 00:27:47,200 --> 00:27:48,040 over that, right? 651 00:27:48,040 --> 00:27:51,390 They're manufacturing your product almost exclusively. 652 00:27:51,390 --> 00:27:53,134 So even then, you might say, even 653 00:27:53,134 --> 00:27:54,550 though it's a 50-50 joint venture, 654 00:27:54,550 --> 00:27:58,570 I'll go ahead and take 100% control. 655 00:27:58,570 --> 00:28:01,240 You don't really have much of a decision 656 00:28:01,240 --> 00:28:04,570 other than 0, 50, or 100 on this, right? 657 00:28:04,570 --> 00:28:08,780 The emissions that are there, you either account for them 658 00:28:08,780 --> 00:28:09,509 or you don't. 659 00:28:09,509 --> 00:28:11,550 That is, they're in your boundary or they're not. 660 00:28:11,550 --> 00:28:15,600 And so that's a 0% or 100% on the operational control side. 661 00:28:15,600 --> 00:28:18,270 And on the equity share, it's basically just decided 50-50. 662 00:28:18,270 --> 00:28:20,999 So you don't get to really hedge and say, 663 00:28:20,999 --> 00:28:23,290 well, I'm only going to take a third of these emissions 664 00:28:23,290 --> 00:28:25,700 or something like that. 665 00:28:25,700 --> 00:28:29,289 At the lowest level, we could do something like-- just 666 00:28:29,289 --> 00:28:30,830 my corporate emissions, which is just 667 00:28:30,830 --> 00:28:33,288 going to say, this would be what you would get if you said, 668 00:28:33,288 --> 00:28:35,570 I'm only going to include things I directly 669 00:28:35,570 --> 00:28:38,120 own-- 100% ownership for. 670 00:28:38,120 --> 00:28:41,520 So that's going to be just my Michigan plant. 671 00:28:41,520 --> 00:28:43,080 Adjust my distribution centers. 672 00:28:43,080 --> 00:28:44,220 Adjust my private fleet. 673 00:28:44,220 --> 00:28:47,320 Those are the things that I own, I have direct control over. 674 00:28:47,320 --> 00:28:49,145 I'm only going to include those. 675 00:28:49,145 --> 00:28:51,470 If you did that, you'll get something 676 00:28:51,470 --> 00:28:57,340 just a bit over 200,000 tons on that. 677 00:28:57,340 --> 00:28:59,801 So one of the other things is that, when 678 00:28:59,801 --> 00:29:01,300 we look at all those different scope 679 00:29:01,300 --> 00:29:03,380 three activities that we had, especially 680 00:29:03,380 --> 00:29:05,046 with the transportation-- I had the LTL. 681 00:29:05,046 --> 00:29:07,990 You have the air, the long haul, the short hall, the ocean. 682 00:29:07,990 --> 00:29:10,744 Usually that's going to be the same case, where 683 00:29:10,744 --> 00:29:13,160 the decision is going to be whether I include that or not. 684 00:29:13,160 --> 00:29:16,200 And once you do, then you need to account for 100%. 685 00:29:16,200 --> 00:29:18,402 You're saying, do I have some operational control, 686 00:29:18,402 --> 00:29:20,980 or is this fitting within what I consider 687 00:29:20,980 --> 00:29:21,980 my company's boundaries? 688 00:29:21,980 --> 00:29:23,855 In which case, I'm going to account for them. 689 00:29:23,855 --> 00:29:25,640 And when I've decided to account for them, 690 00:29:25,640 --> 00:29:29,360 you have to sort of go ahead and take all of them. 691 00:29:29,360 --> 00:29:31,760 They don't contribute a whole lot to the overall carbon 692 00:29:31,760 --> 00:29:32,260 footprints. 693 00:29:32,260 --> 00:29:36,552 So a lot of times, you may spend a lot of time 694 00:29:36,552 --> 00:29:38,010 making these sort of decisions that 695 00:29:38,010 --> 00:29:40,790 turn out to be a pretty small case overall. 696 00:29:40,790 --> 00:29:42,969 For some companies, it can be a pretty large share 697 00:29:42,969 --> 00:29:43,760 of their emissions. 698 00:29:43,760 --> 00:29:46,010 And this is generally for the transportation and distribution 699 00:29:46,010 --> 00:29:46,510 environment. 700 00:29:46,510 --> 00:29:49,054 We'll talk about all the other scope three. 701 00:29:49,054 --> 00:29:52,440 AUDIENCE: My question's about not putting it 702 00:29:52,440 --> 00:29:53,530 in between percentages. 703 00:29:58,320 --> 00:30:02,320 Couldn't it be OK to put, I don't know, a 10% or 15% 704 00:30:02,320 --> 00:30:06,870 just to pressure the company into starting relationships 705 00:30:06,870 --> 00:30:10,833 with your suppliers and trying to talk over these topics. 706 00:30:13,410 --> 00:30:15,840 If not, there's no pressure, and you're just like, OK, 707 00:30:15,840 --> 00:30:16,610 it's fine. 708 00:30:16,610 --> 00:30:17,880 I don't care. 709 00:30:17,880 --> 00:30:21,000 PROFESSOR: So it's almost two separate issues, right? 710 00:30:21,000 --> 00:30:25,170 Whether do we want to account for the-- you're my supplier. 711 00:30:25,170 --> 00:30:26,640 You provide transportation service. 712 00:30:26,640 --> 00:30:28,610 Do I want to account for your emissions 713 00:30:28,610 --> 00:30:30,860 within my corporate carbon footprint, 714 00:30:30,860 --> 00:30:32,610 within my organization boundary? 715 00:30:32,610 --> 00:30:35,920 And that's a yes or no decision in that sense. 716 00:30:35,920 --> 00:30:38,930 I should include these. 717 00:30:38,930 --> 00:30:40,720 Especially for the transportation, 718 00:30:40,720 --> 00:30:42,640 when we talk about operational control, 719 00:30:42,640 --> 00:30:44,040 that's very hard to separate. 720 00:30:44,040 --> 00:30:46,587 If you're a carrier that I have a contract with 721 00:30:46,587 --> 00:30:49,170 and I'm telling you, take this truckload of goods from point A 722 00:30:49,170 --> 00:30:51,610 to point B, it's your truck and your driver. 723 00:30:51,610 --> 00:30:53,520 But I'm the one that's made that decision 724 00:30:53,520 --> 00:30:55,400 to send those truckloads. 725 00:30:55,400 --> 00:30:58,830 So a lot of companies-- we'll see 726 00:30:58,830 --> 00:31:00,640 in a bit about what percentage of companies 727 00:31:00,640 --> 00:31:02,130 start to account for these different things. 728 00:31:02,130 --> 00:31:03,820 But a lot of companies would feel 729 00:31:03,820 --> 00:31:05,910 that that's their emissions, especially when it's 730 00:31:05,910 --> 00:31:09,110 going from my factory to my DC or something like that. 731 00:31:09,110 --> 00:31:11,830 I would maybe consider that part of my selection. 732 00:31:11,830 --> 00:31:14,400 So that's generally yes or no-- I'm going to include these 733 00:31:14,400 --> 00:31:14,916 or I'm not. 734 00:31:14,916 --> 00:31:16,290 And if I'm going to include them, 735 00:31:16,290 --> 00:31:17,860 then you usually are going to include 736 00:31:17,860 --> 00:31:22,220 100%, because part of this is that it's 737 00:31:22,220 --> 00:31:23,280 trying to be a standard. 738 00:31:23,280 --> 00:31:25,480 So it's trying to apply a certain set of principles 739 00:31:25,480 --> 00:31:28,250 and have companies follow it, because 740 00:31:28,250 --> 00:31:30,500 while different companies may make different decisions 741 00:31:30,500 --> 00:31:32,470 about what they include or not, you start 742 00:31:32,470 --> 00:31:34,720 getting into a really gray area when you start saying, 743 00:31:34,720 --> 00:31:36,450 well, I'm including these, but I'm only 744 00:31:36,450 --> 00:31:41,000 going to include 8%, 15%, 25%. 745 00:31:41,000 --> 00:31:44,660 So as to the answer of which is the correct one, 746 00:31:44,660 --> 00:31:45,800 there really isn't one. 747 00:31:45,800 --> 00:31:48,130 So if we look through what it means 748 00:31:48,130 --> 00:31:50,000 to do the corporate carbon footprint, 749 00:31:50,000 --> 00:31:52,550 it typically starts with defining 750 00:31:52,550 --> 00:31:54,470 your organizational boundary or what method 751 00:31:54,470 --> 00:31:55,928 you're going to use to define that. 752 00:31:55,928 --> 00:31:59,480 And once you've done that, it all starts to flow from that. 753 00:31:59,480 --> 00:32:02,465 And there's usually a minimum standard slide. 754 00:32:02,465 --> 00:32:04,800 So if you look at the greenhouse gas protocol, they say, 755 00:32:04,800 --> 00:32:06,672 in order to follow our standard, you 756 00:32:06,672 --> 00:32:08,130 take this approach of deciding what 757 00:32:08,130 --> 00:32:09,547 your organizational boundary is. 758 00:32:09,547 --> 00:32:11,755 And then you must account for the scope one and scope 759 00:32:11,755 --> 00:32:12,780 two emissions, right? 760 00:32:12,780 --> 00:32:15,240 So once you've decided that organizational boundary, scope 761 00:32:15,240 --> 00:32:17,730 one and scope two, you have to include it. 762 00:32:17,730 --> 00:32:19,550 The scope three tend to be optional. 763 00:32:19,550 --> 00:32:21,590 And so it's up to the company to decide. 764 00:32:21,590 --> 00:32:24,325 And I think most people would say it's the more scope three 765 00:32:24,325 --> 00:32:26,450 you include the better so that you're bringing more 766 00:32:26,450 --> 00:32:28,420 into-- more of them become your responsibility. 767 00:32:28,420 --> 00:32:31,810 You start taking more care about what you're doing with those. 768 00:32:31,810 --> 00:32:34,090 But there's no requirement that says you 769 00:32:34,090 --> 00:32:36,370 have to for most scope three. 770 00:32:36,370 --> 00:32:37,950 There's also one other issue, which 771 00:32:37,950 --> 00:32:42,731 is that for some regulatory issues, 772 00:32:42,731 --> 00:32:44,980 you may actually even choose something less than this. 773 00:32:44,980 --> 00:32:50,041 So the California Air Resources Board has regulations. 774 00:32:50,041 --> 00:32:52,290 There's different regional greenhouse gas initiatives. 775 00:32:52,290 --> 00:32:54,250 If you're operating in Europe, you 776 00:32:54,250 --> 00:32:56,540 may have things where you're required 777 00:32:56,540 --> 00:32:59,460 to report on emissions that happened in a even 778 00:32:59,460 --> 00:33:00,540 smaller boundary, right? 779 00:33:00,540 --> 00:33:03,570 So California might be just in the state of California. 780 00:33:03,570 --> 00:33:06,460 Or if you're involved in the EU Emissions Trading Scheme, 781 00:33:06,460 --> 00:33:09,810 you might have some emissions that occur just in the EU. 782 00:33:09,810 --> 00:33:12,320 And you might report even a subset of these 783 00:33:12,320 --> 00:33:13,650 that fall within that boundary. 784 00:33:13,650 --> 00:33:16,950 So there's a lot of different ways 785 00:33:16,950 --> 00:33:19,700 of how we dice up what the company's carbon footprint is. 786 00:33:19,700 --> 00:33:21,310 So that's sort of the first thing 787 00:33:21,310 --> 00:33:24,070 to look for is when a company starts reporting and starts 788 00:33:24,070 --> 00:33:25,400 making announcements of this. 789 00:33:25,400 --> 00:33:28,150 How much information do they give about what they included? 790 00:33:28,150 --> 00:33:30,850 And can you start looking at where those emissions 791 00:33:30,850 --> 00:33:32,130 in the supply chain came from. 792 00:33:32,130 --> 00:33:34,380 AUDIENCE: Change the standard to make it a little more 793 00:33:34,380 --> 00:33:38,021 uniformed in terms of people should report on this 794 00:33:38,021 --> 00:33:39,763 to try to make the numbers make a little 795 00:33:39,763 --> 00:33:42,645 more sense for companies across a certain industry? 796 00:33:42,645 --> 00:33:43,270 PROFESSOR: Yes. 797 00:33:43,270 --> 00:33:44,800 So a couple things. 798 00:33:44,800 --> 00:33:49,440 So one is, it's basically they're 799 00:33:49,440 --> 00:33:51,180 trying to take accounting principles 800 00:33:51,180 --> 00:33:52,501 and just apply them to carbon. 801 00:33:52,501 --> 00:33:54,750 And it's hard enough getting the accounting principles 802 00:33:54,750 --> 00:33:57,910 worked out, which is why you get all sorts of obscure rules 803 00:33:57,910 --> 00:34:00,900 and different companies making different choices about what 804 00:34:00,900 --> 00:34:04,840 they include and where they include it. 805 00:34:04,840 --> 00:34:06,550 So the greenhouse gas protocol has 806 00:34:06,550 --> 00:34:09,659 taken the approach of a generic standard that will work 807 00:34:09,659 --> 00:34:10,848 for a lot of different uses. 808 00:34:10,848 --> 00:34:12,389 And what you'll find is that then you 809 00:34:12,389 --> 00:34:15,080 might have different programs, that if you want to participate 810 00:34:15,080 --> 00:34:17,074 in this program, they might specify 811 00:34:17,074 --> 00:34:18,949 certain rules that, say, you're going to have 812 00:34:18,949 --> 00:34:20,610 to do this or this or this. 813 00:34:20,610 --> 00:34:25,000 So voluntary climate, carbon exchanges, things like that. 814 00:34:25,000 --> 00:34:27,770 They might decide that you must take this approach to doing it 815 00:34:27,770 --> 00:34:30,540 and then you must include these emissions. 816 00:34:30,540 --> 00:34:33,139 So it's more that there are many different programs. 817 00:34:33,139 --> 00:34:36,690 And the greenhouse gas protocol is one standard 818 00:34:36,690 --> 00:34:38,810 and sort of more of a framework perhaps 819 00:34:38,810 --> 00:34:41,400 to think about how we would go through doing this. 820 00:34:41,400 --> 00:34:42,679 It's the most widely used one. 821 00:34:42,679 --> 00:34:45,326 If you look at, for example, the Carbon Disclosure Project, 822 00:34:45,326 --> 00:34:47,659 which is collecting all this information from companies, 823 00:34:47,659 --> 00:34:50,309 they usually ask them what they're using, 824 00:34:50,309 --> 00:34:52,949 or what approach did you use to do this. 825 00:34:52,949 --> 00:34:56,960 And it's something like 90-plus percent of companies that use 826 00:34:56,960 --> 00:34:59,320 the greenhouse gas protocol. 827 00:34:59,320 --> 00:35:02,370 And typically that means scope one, scope two, scope three. 828 00:35:02,370 --> 00:35:05,290 They specify that they use operational control equity 829 00:35:05,290 --> 00:35:08,355 share and things like that. 830 00:35:08,355 --> 00:35:19,220 AUDIENCE: So suppose [INAUDIBLE] scope three or [INAUDIBLE] 25%. 831 00:35:19,220 --> 00:35:22,720 It should be scope one for the first response. 832 00:35:22,720 --> 00:35:27,290 So we'll [INAUDIBLE] twice, or is that 25%? 833 00:35:27,290 --> 00:35:31,130 PROFESSOR: So this is where it gets into different-- 834 00:35:31,130 --> 00:35:38,310 so generally, a program has money at stake, right? 835 00:35:38,310 --> 00:35:41,420 Then a lot of times they're very concerned with double counting, 836 00:35:41,420 --> 00:35:45,380 so especially when you reduce things. 837 00:35:45,380 --> 00:35:47,760 So if you're under the Emissions Trading Scheme or things 838 00:35:47,760 --> 00:35:50,384 like that, you want to make sure two separate organizations are 839 00:35:50,384 --> 00:35:53,420 not taking credit for, say, the same reduction or not counting 840 00:35:53,420 --> 00:35:54,330 it twice. 841 00:35:54,330 --> 00:35:56,360 So in that sense, if you're participating 842 00:35:56,360 --> 00:35:58,462 in a program like that, it might say-- 843 00:35:58,462 --> 00:36:00,420 and this is how most of the regulatory programs 844 00:36:00,420 --> 00:36:02,570 work-- you only report scope one emissions. 845 00:36:02,570 --> 00:36:05,820 So they're actually going after the power companies, 846 00:36:05,820 --> 00:36:08,460 refineries, the main manufacturing plants, 847 00:36:08,460 --> 00:36:11,965 and not getting down to the level of individual cares. 848 00:36:11,965 --> 00:36:14,590 It's starting to move that way, especially as transportation is 849 00:36:14,590 --> 00:36:16,330 added in the EU Trading Scheme. 850 00:36:16,330 --> 00:36:20,260 But that usually then takes a different approach 851 00:36:20,260 --> 00:36:21,260 to what it means, right? 852 00:36:21,260 --> 00:36:24,520 So you would likely report specifically 853 00:36:24,520 --> 00:36:28,120 to the EU Trading Scheme based on their requirements for it. 854 00:36:28,120 --> 00:36:30,520 And what you do as sort of your own corporate disclosure, 855 00:36:30,520 --> 00:36:33,340 whether in your CSR reports or something else, it's up to you 856 00:36:33,340 --> 00:36:33,900 to include. 857 00:36:33,900 --> 00:36:37,060 So both of you may be claiming the same emissions. 858 00:36:37,060 --> 00:36:39,760 But in general, the question is whether that's a problem 859 00:36:39,760 --> 00:36:40,760 or not. 860 00:36:40,760 --> 00:36:44,010 And if there's no money or anything changing hands, 861 00:36:44,010 --> 00:36:46,820 there's not a defined financial payment going on, 862 00:36:46,820 --> 00:36:49,330 it's usually not a problem to include the double counting, 863 00:36:49,330 --> 00:36:52,150 because you have two companies taking responsibility for it 864 00:36:52,150 --> 00:36:55,451 and trying to work through this. 865 00:36:55,451 --> 00:36:55,950 But yeah. 866 00:36:55,950 --> 00:36:58,870 So all the emissions at some point are somebody's scope one. 867 00:36:58,870 --> 00:37:03,790 Somebody burned the fuel or did whatever to produce it. 868 00:37:03,790 --> 00:37:04,290 OK. 869 00:37:04,290 --> 00:37:07,347 So in terms of the carbon footprint. 870 00:37:07,347 --> 00:37:09,180 Even with the standards and things in place, 871 00:37:09,180 --> 00:37:10,763 there's a lot of discretion about what 872 00:37:10,763 --> 00:37:12,680 a company can include. 873 00:37:12,680 --> 00:37:14,516 The more important thing is to recognize 874 00:37:14,516 --> 00:37:16,140 how you draw an organizational boundary 875 00:37:16,140 --> 00:37:19,050 and then sort of what you have to report, 876 00:37:19,050 --> 00:37:21,640 whether it's through a program or a standard 877 00:37:21,640 --> 00:37:25,090 or these minimum requirements. 878 00:37:25,090 --> 00:37:28,360 The other thing is-- so on the emission sources, 879 00:37:28,360 --> 00:37:30,890 because especially when we get into this idea of that 880 00:37:30,890 --> 00:37:33,950 if you're a program, you have to report scope one or scope two. 881 00:37:33,950 --> 00:37:36,264 Identifying where they are is going 882 00:37:36,264 --> 00:37:38,180 to be sort of an important piece and typically 883 00:37:38,180 --> 00:37:39,638 when you report admissions, they're 884 00:37:39,638 --> 00:37:42,440 going to ask you to report them broken out by scope one, scope 885 00:37:42,440 --> 00:37:43,680 two, and scope three. 886 00:37:43,680 --> 00:37:46,640 So if we look at the supply chain 887 00:37:46,640 --> 00:37:49,460 and these different sources of emissions in here, 888 00:37:49,460 --> 00:37:51,593 where are the scope one emissions going to be? 889 00:37:56,740 --> 00:37:58,156 AUDIENCE: Scope one is going to be 890 00:37:58,156 --> 00:38:00,620 the direct emissions from both factories 891 00:38:00,620 --> 00:38:03,032 and the emissions from the trucks that we actually own. 892 00:38:03,032 --> 00:38:03,740 PROFESSOR: Right. 893 00:38:03,740 --> 00:38:06,910 So we're going to have our private fleet. 894 00:38:06,910 --> 00:38:09,260 We own these trucks, so the admissions they burn 895 00:38:09,260 --> 00:38:10,460 are direct emissions. 896 00:38:10,460 --> 00:38:12,250 We have the Michigan plant, which we own. 897 00:38:12,250 --> 00:38:14,980 So those direct emissions are going to be our scope one. 898 00:38:14,980 --> 00:38:17,130 And then these would be scope one, 899 00:38:17,130 --> 00:38:19,680 provided we are considering the Shanghai plant to be part 900 00:38:19,680 --> 00:38:21,935 of our organizational boundary. 901 00:38:21,935 --> 00:38:25,400 If we excluded it, then those would moved to scope three. 902 00:38:25,400 --> 00:38:28,350 And it may be that if we took that equity share approach, 903 00:38:28,350 --> 00:38:30,760 50% of them would be scope one and 50% of them 904 00:38:30,760 --> 00:38:31,940 would be scope three. 905 00:38:31,940 --> 00:38:34,880 So perhaps a little confusing from the reporting standpoint. 906 00:38:34,880 --> 00:38:37,700 But usually it follows straight through from the nature 907 00:38:37,700 --> 00:38:39,610 of the activity that's going on and where 908 00:38:39,610 --> 00:38:42,860 it happens in relation to my organizational boundary. 909 00:38:42,860 --> 00:38:43,972 So our scope two. 910 00:38:47,670 --> 00:38:51,134 AUDIENCE: The electricity in the plants as well as 911 00:38:51,134 --> 00:38:52,452 the distribution center? 912 00:38:52,452 --> 00:38:53,440 PROFESSOR: Right. 913 00:38:53,440 --> 00:38:58,910 So are the other source of electricity we have is that 914 00:38:58,910 --> 00:39:02,350 the retailer, since we have those big depot. 915 00:39:02,350 --> 00:39:04,954 We have those dedicated shared spaces. 916 00:39:04,954 --> 00:39:06,620 That's usually not something that you're 917 00:39:06,620 --> 00:39:09,162 going to have direct control over, operational control 918 00:39:09,162 --> 00:39:09,870 over and whatnot. 919 00:39:09,870 --> 00:39:13,720 And it's not an equity share or not a stake in the company. 920 00:39:13,720 --> 00:39:16,770 So that electricity is generally going to go under the scope 921 00:39:16,770 --> 00:39:19,930 three, which scope three is everything that's 922 00:39:19,930 --> 00:39:21,120 not scope one and scope two. 923 00:39:21,120 --> 00:39:22,750 So it all pretty much comes out in the wash 924 00:39:22,750 --> 00:39:23,666 once you've done that. 925 00:39:23,666 --> 00:39:25,860 So the important thing is to identify what 926 00:39:25,860 --> 00:39:27,390 our scope one and scope two is. 927 00:39:27,390 --> 00:39:30,080 And again, that just comes straightforward from the nature 928 00:39:30,080 --> 00:39:31,540 of the emissions and where it falls 929 00:39:31,540 --> 00:39:33,040 within your organizational boundary. 930 00:39:37,150 --> 00:39:39,620 AUDIENCE: For this, when would you [INAUDIBLE]? 931 00:39:43,710 --> 00:39:47,660 PROFESSOR: So that's a decision you would make before you even 932 00:39:47,660 --> 00:39:50,060 started the exercise, would be to the right thing to do, 933 00:39:50,060 --> 00:39:50,560 right? 934 00:39:50,560 --> 00:39:53,420 Is to decide what the first step in the process 935 00:39:53,420 --> 00:39:56,549 is, to decide what your approach is going to be. 936 00:39:56,549 --> 00:39:57,590 AUDIENCE: Just wondering. 937 00:39:57,590 --> 00:39:59,880 PROFESSOR: Yeah, so then I would divide the emissions. 938 00:39:59,880 --> 00:40:02,379 So in your worksheet, it won't work that way, because I only 939 00:40:02,379 --> 00:40:04,850 gave you one column to do it. 940 00:40:04,850 --> 00:40:09,160 But then I would report 50% of those as scope one, 941 00:40:09,160 --> 00:40:11,700 50% of these as scope two, and the other 50% 942 00:40:11,700 --> 00:40:13,660 of each as scope three. 943 00:40:13,660 --> 00:40:17,370 So this is what the share of scope one, scope two, and scope 944 00:40:17,370 --> 00:40:20,810 three emissions look like, from what people reported. 945 00:40:20,810 --> 00:40:23,855 Some a little thrown off, because if you miscalculated 946 00:40:23,855 --> 00:40:27,840 it a little bit, then the ocean shipment or the LTL 947 00:40:27,840 --> 00:40:30,520 might have contributed a vast majority. 948 00:40:30,520 --> 00:40:33,280 Most of you included some manner of scope three 949 00:40:33,280 --> 00:40:37,540 in the carbon footprint. 950 00:40:37,540 --> 00:40:39,030 A few at least didn't, right? 951 00:40:39,030 --> 00:40:39,770 So you could. 952 00:40:39,770 --> 00:40:41,160 There's no reason that you would necessarily 953 00:40:41,160 --> 00:40:42,785 have to include all of the scope three. 954 00:40:42,785 --> 00:40:44,720 So you could easily exclude those. 955 00:40:44,720 --> 00:40:47,020 So that's one thing to keep track of, 956 00:40:47,020 --> 00:40:49,690 is when we look at the corporate carbon footprint, 957 00:40:49,690 --> 00:40:51,230 scope three is the green. 958 00:40:51,230 --> 00:40:53,650 For most of you, it was pretty small, because we were only 959 00:40:53,650 --> 00:40:55,790 looking at-- in terms of that worksheet, 960 00:40:55,790 --> 00:40:58,040 we were only looking at things like the transportation 961 00:40:58,040 --> 00:41:00,132 and the distribution. 962 00:41:00,132 --> 00:41:02,590 But as we'll talk about in a minute, that's not necessarily 963 00:41:02,590 --> 00:41:04,330 really be the case in reality. 964 00:41:04,330 --> 00:41:06,850 But in terms of what we report, that's 965 00:41:06,850 --> 00:41:09,925 what I saw from what you guys did. 966 00:41:09,925 --> 00:41:12,050 So this is data from the Carbon Disclosure Project, 967 00:41:12,050 --> 00:41:14,640 where they looked at-- this is from, I think, 968 00:41:14,640 --> 00:41:16,220 the 2014 reports. 969 00:41:16,220 --> 00:41:17,810 So this would have been companies 970 00:41:17,810 --> 00:41:19,540 that reported their emissions to the CDP 971 00:41:19,540 --> 00:41:22,980 in 2013 out of the Financial Times 500. 972 00:41:22,980 --> 00:41:24,970 And it was asking them percentage 973 00:41:24,970 --> 00:41:28,920 of companies reporting scope three categories and how much 974 00:41:28,920 --> 00:41:30,420 the emissions were by category. 975 00:41:30,420 --> 00:41:36,390 So this is saying, for a category like business 976 00:41:36,390 --> 00:41:39,380 travel out of the 500 companies surveyed 977 00:41:39,380 --> 00:41:43,710 or whatever, almost 80% of them reported the emissions 978 00:41:43,710 --> 00:41:46,950 from business travel in their carbon footprint estimate. 979 00:41:46,950 --> 00:41:51,240 So you could tell that's by far the highest. 980 00:41:51,240 --> 00:41:53,050 And some of the things that drive these 981 00:41:53,050 --> 00:41:56,672 are-- whether you include it, whether you consider it 982 00:41:56,672 --> 00:41:58,880 really part of your business, and generally if you're 983 00:41:58,880 --> 00:42:01,830 sending your employees on travel, 984 00:42:01,830 --> 00:42:03,587 you would consider those your missions. 985 00:42:03,587 --> 00:42:04,920 That's things that you're doing. 986 00:42:04,920 --> 00:42:06,710 You had control over that. 987 00:42:06,710 --> 00:42:09,350 Even though they flew on United Airlines or whatever, 988 00:42:09,350 --> 00:42:11,290 it's something that you had control 989 00:42:11,290 --> 00:42:13,510 of whether to decide to send them on travel. 990 00:42:13,510 --> 00:42:16,580 So you sort of feel a responsibility to include that. 991 00:42:16,580 --> 00:42:21,376 That was clearly much higher than all of the rest. 992 00:42:21,376 --> 00:42:23,750 if you look down into getting some of these other things, 993 00:42:23,750 --> 00:42:31,190 like investments, end of life of sold products. 994 00:42:31,190 --> 00:42:35,510 Only 10% maybe of companies reported that. 995 00:42:35,510 --> 00:42:36,560 And they have some data. 996 00:42:36,560 --> 00:42:39,360 Now, the problem on this is these bars 997 00:42:39,360 --> 00:42:42,060 are representing how much the actual emissions were. 998 00:42:42,060 --> 00:42:46,380 So the company's accounted for their business travel. 999 00:42:46,380 --> 00:42:49,480 But it's basically an infinitesimal share 1000 00:42:49,480 --> 00:42:51,210 of what's included. 1001 00:42:51,210 --> 00:42:53,100 Part of this is driven by how easy 1002 00:42:53,100 --> 00:42:55,010 it is to get this sort of data, right? 1003 00:42:55,010 --> 00:42:57,760 Your airline will happily sell you a carbon credit 1004 00:42:57,760 --> 00:42:58,870 when you go to buy it. 1005 00:42:58,870 --> 00:42:59,750 Most of them well. 1006 00:42:59,750 --> 00:43:04,760 But if you go back, I did a corporate carbon footprint 1007 00:43:04,760 --> 00:43:06,500 with a large retailer. 1008 00:43:06,500 --> 00:43:08,480 And they have all of this information sitting 1009 00:43:08,480 --> 00:43:09,630 in their travel database. 1010 00:43:09,630 --> 00:43:11,240 So they just dump it out and say, 1011 00:43:11,240 --> 00:43:14,030 here's every flight every employee took from this city 1012 00:43:14,030 --> 00:43:16,010 to that city, how far it was, et cetera. 1013 00:43:16,010 --> 00:43:18,690 So it's very easy to calculate some of these. 1014 00:43:18,690 --> 00:43:21,490 Figuring out what happened to the end of life 1015 00:43:21,490 --> 00:43:23,770 of every single product you sold, right? 1016 00:43:23,770 --> 00:43:27,250 Pretty difficult to track down and get that information. 1017 00:43:27,250 --> 00:43:31,480 So probably explains why less companies did it. 1018 00:43:31,480 --> 00:43:35,110 And then you look at, only 20% percent of companies 1019 00:43:35,110 --> 00:43:37,480 reported, say, on the use of their sold products. 1020 00:43:37,480 --> 00:43:39,820 But you saw magnitude-wise it's more 1021 00:43:39,820 --> 00:43:42,365 than basically every other category added up 1022 00:43:42,365 --> 00:43:44,430 on the ones that did include it. 1023 00:43:44,430 --> 00:43:47,290 So part of the thing with scope three 1024 00:43:47,290 --> 00:43:50,470 is that it's always sort of at your discretion of what 1025 00:43:50,470 --> 00:43:51,310 to include. 1026 00:43:51,310 --> 00:43:55,290 And the decision that drives it within companies 1027 00:43:55,290 --> 00:43:56,820 is not necessarily how important it 1028 00:43:56,820 --> 00:44:01,560 is but a lot of times how easy it is to get that information. 1029 00:44:01,560 --> 00:44:03,490 And also how much responsibility you feel. 1030 00:44:03,490 --> 00:44:07,644 Do you feel that what happens to the end of life 1031 00:44:07,644 --> 00:44:09,310 of your products is your responsibility? 1032 00:44:09,310 --> 00:44:11,090 Or do you consider that the consumer's, 1033 00:44:11,090 --> 00:44:12,917 the one that decides whether to recycle it 1034 00:44:12,917 --> 00:44:14,250 or throw it away or do whatever. 1035 00:44:14,250 --> 00:44:15,934 So maybe you decide that's not emissions 1036 00:44:15,934 --> 00:44:17,725 that you want to consider in your boundary, 1037 00:44:17,725 --> 00:44:19,710 because you don't have the direct control over it. 1038 00:44:19,710 --> 00:44:21,270 Whereas employee travel, that's something 1039 00:44:21,270 --> 00:44:22,311 you do have control over. 1040 00:44:24,670 --> 00:44:25,170 OK. 1041 00:44:25,170 --> 00:44:26,503 Any questions about the scopes? 1042 00:44:31,710 --> 00:44:35,584 OK, just to recap some of the mechanics of carbon footprints, 1043 00:44:35,584 --> 00:44:38,000 the first step-- determining your organizational boundary, 1044 00:44:38,000 --> 00:44:38,500 right? 1045 00:44:38,500 --> 00:44:40,520 And generally, that starts with deciding what 1046 00:44:40,520 --> 00:44:41,510 approach you're going to take. 1047 00:44:41,510 --> 00:44:43,426 And probably you want to decide that and think 1048 00:44:43,426 --> 00:44:44,784 about it ahead of time. 1049 00:44:44,784 --> 00:44:46,450 The greenhouse gas protocol spends a lot 1050 00:44:46,450 --> 00:44:48,650 of time talking about aligning this 1051 00:44:48,650 --> 00:44:50,680 with your financial and accounting reporting. 1052 00:44:50,680 --> 00:44:53,870 So it probably makes sense, especially a large company 1053 00:44:53,870 --> 00:44:56,380 publicly traded, that when you're going to go through it, 1054 00:44:56,380 --> 00:44:58,880 it makes sense to go through and set this up in the same way 1055 00:44:58,880 --> 00:45:01,890 that you've got your accounting system set up 1056 00:45:01,890 --> 00:45:04,210 to make that process a little bit easier. 1057 00:45:04,210 --> 00:45:06,430 Once you've got the organizational boundary set up, 1058 00:45:06,430 --> 00:45:07,846 then you need to start determining 1059 00:45:07,846 --> 00:45:09,370 your operational boundary. 1060 00:45:09,370 --> 00:45:12,790 So anything that's in your organizational boundary that's 1061 00:45:12,790 --> 00:45:17,079 scope one or scope two of your operations, that's 1062 00:45:17,079 --> 00:45:18,870 the things you're going to have to include. 1063 00:45:18,870 --> 00:45:20,170 But then you need to identify which 1064 00:45:20,170 --> 00:45:22,378 of the scope three emissions you're going to include. 1065 00:45:22,378 --> 00:45:26,220 And generally, the decision of this 1066 00:45:26,220 --> 00:45:28,840 should generally be separate from the decision 1067 00:45:28,840 --> 00:45:30,770 of actually gathering the data or doing 1068 00:45:30,770 --> 00:45:31,964 the emission, in theory. 1069 00:45:31,964 --> 00:45:33,630 In practice, they're related because you 1070 00:45:33,630 --> 00:45:35,255 might want to include something but you 1071 00:45:35,255 --> 00:45:36,430 can't get the data on it. 1072 00:45:36,430 --> 00:45:39,652 But otherwise, you're looking at the situation of, 1073 00:45:39,652 --> 00:45:41,110 I'm going to measure the emissions, 1074 00:45:41,110 --> 00:45:42,300 and then I'm going to include all the ones that 1075 00:45:42,300 --> 00:45:43,020 are really small. 1076 00:45:43,020 --> 00:45:44,630 I'm not going to include the ones that are big. 1077 00:45:44,630 --> 00:45:47,190 So generally you can think of these as a set of principles 1078 00:45:47,190 --> 00:45:48,480 of sort of work down in order. 1079 00:45:48,480 --> 00:45:50,271 So you're going to decide whether something 1080 00:45:50,271 --> 00:45:51,475 should be included or not. 1081 00:45:51,475 --> 00:45:52,850 Then once you make that decision, 1082 00:45:52,850 --> 00:45:57,100 go out and do the work to gather the data and calculate it. 1083 00:45:57,100 --> 00:45:59,393 And finally, once you've decided what's in 1084 00:45:59,393 --> 00:46:01,420 and what's out, what you're including, running 1085 00:46:01,420 --> 00:46:03,280 out and gathering the data and getting 1086 00:46:03,280 --> 00:46:05,240 the appropriate emissions factors from it. 1087 00:46:05,240 --> 00:46:07,840 So this is usually the tricky part 1088 00:46:07,840 --> 00:46:11,897 of going through and figuring out all those facilities, all 1089 00:46:11,897 --> 00:46:14,230 that transportation, anything related to the scope three 1090 00:46:14,230 --> 00:46:17,380 and getting that data, because they 1091 00:46:17,380 --> 00:46:19,610 tend to come for a lot of different data sources, 1092 00:46:19,610 --> 00:46:22,770 if you think about who knows. 1093 00:46:22,770 --> 00:46:24,270 Again, a lot of times if you've paid 1094 00:46:24,270 --> 00:46:26,290 the bill for it-- electricity, fuel, 1095 00:46:26,290 --> 00:46:27,860 things like that-- it's pretty easy 1096 00:46:27,860 --> 00:46:29,490 to track down a little more. 1097 00:46:29,490 --> 00:46:31,110 But as you start getting into it, 1098 00:46:31,110 --> 00:46:33,140 if you wanted to talk about the waste 1099 00:46:33,140 --> 00:46:36,290 that you're generating at your facilities, the transportation 1100 00:46:36,290 --> 00:46:38,500 where you're trying to get. 1101 00:46:38,500 --> 00:46:40,390 How far did things go? 1102 00:46:40,390 --> 00:46:42,584 What sort of mode did I use? 1103 00:46:42,584 --> 00:46:44,250 You have to start going out to basically 1104 00:46:44,250 --> 00:46:45,920 all the different parts of your organization 1105 00:46:45,920 --> 00:46:48,128 to start gathering that data, because there's usually 1106 00:46:48,128 --> 00:46:50,650 not a single repository where that is. 1107 00:46:50,650 --> 00:46:52,360 So the big pain for a lot of companies 1108 00:46:52,360 --> 00:46:55,720 is that it's a very manual process at this stage, 1109 00:46:55,720 --> 00:46:58,890 because you're pulling from the transportation management 1110 00:46:58,890 --> 00:47:01,000 system, your warehouse data or your facilities. 1111 00:47:01,000 --> 00:47:02,950 You're getting from the facilities manager. 1112 00:47:02,950 --> 00:47:04,950 Your procurement group is the one 1113 00:47:04,950 --> 00:47:07,530 that knows what you're buying and who you're buying it from, 1114 00:47:07,530 --> 00:47:08,800 where it's coming from. 1115 00:47:08,800 --> 00:47:11,590 And so usually they're going to dump all that data to an Excel 1116 00:47:11,590 --> 00:47:13,548 spreadsheet or an Access database and something 1117 00:47:13,548 --> 00:47:15,435 like that, and somebody in your organization 1118 00:47:15,435 --> 00:47:17,310 is going to get stuck with the responsibility 1119 00:47:17,310 --> 00:47:19,240 for taking all of that, translating it 1120 00:47:19,240 --> 00:47:21,360 into the calculations. 1121 00:47:21,360 --> 00:47:23,560 If you look at the GHC protocol, they 1122 00:47:23,560 --> 00:47:25,110 have a bunch of calculation tools. 1123 00:47:25,110 --> 00:47:26,330 They're just spreadsheets. 1124 00:47:26,330 --> 00:47:31,070 So it's still a very manual process at this stage. 1125 00:47:31,070 --> 00:47:33,660 Big ERP vendors and things like that will happily 1126 00:47:33,660 --> 00:47:36,640 include some of this carbon calculation in there. 1127 00:47:36,640 --> 00:47:41,450 So there's a move to try to get some of this automated. 1128 00:47:41,450 --> 00:47:43,870 But that's one of the big barriers right now, 1129 00:47:43,870 --> 00:47:47,769 is that it usually just takes some time 1130 00:47:47,769 --> 00:47:49,810 to get it up and get it running within a company, 1131 00:47:49,810 --> 00:47:51,851 to figure out the processes for how you calculate 1132 00:47:51,851 --> 00:47:55,275 the data, what format it comes in, who does the calculation, 1133 00:47:55,275 --> 00:47:57,760 and how you report it, et cetera. 1134 00:47:57,760 --> 00:48:00,970 So as part of that data, integrity is a big issue, 1135 00:48:00,970 --> 00:48:04,210 because you have different people that don't necessarily 1136 00:48:04,210 --> 00:48:07,180 know the overall picture, calculating, pulling the data 1137 00:48:07,180 --> 00:48:09,630 for their bit, sending it in. 1138 00:48:09,630 --> 00:48:11,630 The biggest problem I run into in doing these 1139 00:48:11,630 --> 00:48:12,880 are missing values. 1140 00:48:12,880 --> 00:48:15,189 So you go to one of your distribution centers, 1141 00:48:15,189 --> 00:48:16,730 and they come back with a report that 1142 00:48:16,730 --> 00:48:20,030 said they used electricity, fuel oil, natural gas, refrigerants, 1143 00:48:20,030 --> 00:48:20,864 all of this. 1144 00:48:20,864 --> 00:48:22,530 Your other facility comes back and says, 1145 00:48:22,530 --> 00:48:24,680 here's our electricity bills. 1146 00:48:24,680 --> 00:48:26,180 Are they missing all of this data, 1147 00:48:26,180 --> 00:48:29,530 or did they really just not use any of that. 1148 00:48:29,530 --> 00:48:34,160 So making sure the data you're getting is complete. 1149 00:48:34,160 --> 00:48:35,660 Aggregation issues, right? 1150 00:48:35,660 --> 00:48:38,032 So we saw this. 1151 00:48:38,032 --> 00:48:39,490 I'll look through your spreadsheets 1152 00:48:39,490 --> 00:48:41,740 a little bit at greater detail. 1153 00:48:41,740 --> 00:48:43,620 But when I went through it and did this-- 1154 00:48:43,620 --> 00:48:45,935 so if we look at the data that we gave you in this, 1155 00:48:45,935 --> 00:48:48,060 we had a bunch of data about the shipment you sent, 1156 00:48:48,060 --> 00:48:50,520 x number of shipments by air. 1157 00:48:50,520 --> 00:48:53,020 You knew the average weight of all the shipments you sent. 1158 00:48:53,020 --> 00:48:56,980 But we didn't have it broken out by specific modes. 1159 00:48:56,980 --> 00:48:59,840 So when I did it, I just used the average weight 1160 00:48:59,840 --> 00:49:02,040 of the shipment times the number of shipments 1161 00:49:02,040 --> 00:49:05,092 times the average distance I had for those modes. 1162 00:49:05,092 --> 00:49:07,550 It doesn't make sense that my average air shipment is going 1163 00:49:07,550 --> 00:49:10,650 to be 11,000 kilograms and that my average truckload shipment 1164 00:49:10,650 --> 00:49:11,600 was going to be that. 1165 00:49:11,600 --> 00:49:14,770 Probably sending my air shipments by a few hundred 1166 00:49:14,770 --> 00:49:16,430 kilograms at a time, I'm probably 1167 00:49:16,430 --> 00:49:21,140 sending the truckload right by that 20 tons or so. 1168 00:49:21,140 --> 00:49:24,099 So once you've got the data, figuring out 1169 00:49:24,099 --> 00:49:26,640 what you can do with it, how you get it out in the right way, 1170 00:49:26,640 --> 00:49:29,880 to sort of separate it out can be an issue. 1171 00:49:29,880 --> 00:49:34,470 Making sure you come up with appropriate approximations. 1172 00:49:34,470 --> 00:49:36,880 And finally, finding the right emissions factors. 1173 00:49:36,880 --> 00:49:39,360 One of the big things-- pay attention to units. 1174 00:49:39,360 --> 00:49:41,687 Everybody will report back in different numbers, 1175 00:49:41,687 --> 00:49:43,270 especially if you're a global company. 1176 00:49:43,270 --> 00:49:44,770 You're going to get natural gas back 1177 00:49:44,770 --> 00:49:48,640 in therms, cubic feet, cubic meters, joules, whatever. 1178 00:49:48,640 --> 00:49:51,850 So figuring out the units that everybody's using 1179 00:49:51,850 --> 00:49:56,460 and make sure that you convert those to the appropriate way. 1180 00:49:56,460 --> 00:49:58,940 And apply a consistent set of emissions factors. 1181 00:49:58,940 --> 00:50:00,550 Especially on things like electricity, 1182 00:50:00,550 --> 00:50:02,008 you're going to be able to break it 1183 00:50:02,008 --> 00:50:06,330 down by the country level, regional levels, 1184 00:50:06,330 --> 00:50:07,730 by where the grid is. 1185 00:50:07,730 --> 00:50:09,993 You can find information at the state level, even some 1186 00:50:09,993 --> 00:50:11,440 at the municipality level. 1187 00:50:11,440 --> 00:50:12,940 The question is, what you don't want 1188 00:50:12,940 --> 00:50:15,810 to get caught doing is cherry picking the right commission's 1189 00:50:15,810 --> 00:50:16,310 factors. 1190 00:50:16,310 --> 00:50:20,535 So in areas where they use a lot of nuclear, 1191 00:50:20,535 --> 00:50:21,910 I'm going to use my local factor. 1192 00:50:21,910 --> 00:50:24,460 And when I'm in an area that gets its energy from coal, 1193 00:50:24,460 --> 00:50:28,600 I'm going to use my national factory to sort of keep me 1194 00:50:28,600 --> 00:50:30,160 from ever looking too bad. 1195 00:50:30,160 --> 00:50:33,880 So those are just some of the tricks going in with it. 1196 00:50:37,740 --> 00:50:42,052 So one thing is absolute versus relative measures. 1197 00:50:42,052 --> 00:50:44,010 All of this carbon footprint data in this sense 1198 00:50:44,010 --> 00:50:45,890 is getting reported at the aggregate level. 1199 00:50:45,890 --> 00:50:48,720 That's what's important on a national or a global scale, 1200 00:50:48,720 --> 00:50:49,910 right? 1201 00:50:49,910 --> 00:50:52,630 How much total carbon are we pumping into the atmosphere? 1202 00:50:52,630 --> 00:50:55,400 But for our company, especially as your business is growing, 1203 00:50:55,400 --> 00:50:58,510 you probably want to also have some kind of relative measure, 1204 00:50:58,510 --> 00:51:02,970 like in there, we were just measuring per kilogram, as 1205 00:51:02,970 --> 00:51:03,470 well. 1206 00:51:03,470 --> 00:51:05,990 Just to understand, are you getting more efficient or not? 1207 00:51:05,990 --> 00:51:07,990 Because as your business changes, either growing 1208 00:51:07,990 --> 00:51:10,460 or shrinking, that's going to change your aggregate level 1209 00:51:10,460 --> 00:51:11,030 of emissions. 1210 00:51:11,030 --> 00:51:13,886 But you may actually be getting more efficient at the same time 1211 00:51:13,886 --> 00:51:16,260 that you're producing more aggregate levels of emissions. 1212 00:51:16,260 --> 00:51:19,890 So you probably want to have some other measures 1213 00:51:19,890 --> 00:51:23,670 that you calculate in addition to the absolute one. 1214 00:51:23,670 --> 00:51:26,360 And expected carbon footprint will be refined over time. 1215 00:51:26,360 --> 00:51:29,150 The main use of these things is to compare an organization's 1216 00:51:29,150 --> 00:51:31,480 year-on-year performance. 1217 00:51:31,480 --> 00:51:34,340 So you're picking some year as a baseline year 1218 00:51:34,340 --> 00:51:36,470 and trying to measure how you're doing from that. 1219 00:51:36,470 --> 00:51:38,720 Most companies are going to set some target that says, 1220 00:51:38,720 --> 00:51:43,380 we want to be at 80% of 1994 levels or something like that. 1221 00:51:43,380 --> 00:51:44,970 As your organization changes, as you 1222 00:51:44,970 --> 00:51:47,550 make acquisitions, as you sell off pieces, a lot of times 1223 00:51:47,550 --> 00:51:50,008 you're going to have to go back and restate previous years' 1224 00:51:50,008 --> 00:51:53,210 emissions so that you can keep that consistent baseline going. 1225 00:51:53,210 --> 00:51:55,719 As the emissions factors change over time, 1226 00:51:55,719 --> 00:51:57,885 you may have to go back and revisit old calculations 1227 00:51:57,885 --> 00:51:59,020 and things like that. 1228 00:51:59,020 --> 00:52:02,680 So just be aware that, if you're trying 1229 00:52:02,680 --> 00:52:05,220 to do this for the goal of comparing year on year, 1230 00:52:05,220 --> 00:52:06,900 expect to occasionally have to go back 1231 00:52:06,900 --> 00:52:08,870 and think about what your previous year's emissions 1232 00:52:08,870 --> 00:52:11,411 actually were in comparison to what your business looks like. 1233 00:52:14,040 --> 00:52:17,060 So that's the main thing about the organizational carbon 1234 00:52:17,060 --> 00:52:17,560 footprint. 1235 00:52:17,560 --> 00:52:21,420 But it doesn't really get into the other big issues, 1236 00:52:21,420 --> 00:52:24,130 which is, what do you do once you have them, right? 1237 00:52:24,130 --> 00:52:27,386 So how many of you would disclose? 1238 00:52:32,490 --> 00:52:34,490 So what are the reasons that you would disclose? 1239 00:52:38,170 --> 00:52:40,370 AUDIENCE: That if you were higher 1240 00:52:40,370 --> 00:52:42,930 than your competitor, the disclosure 1241 00:52:42,930 --> 00:52:45,990 to the list itself is probably more 1242 00:52:45,990 --> 00:52:50,600 of a specific group of users who are consuming that data. 1243 00:52:50,600 --> 00:52:53,730 So it's probably not going to hurt your consumer base, even 1244 00:52:53,730 --> 00:52:56,760 if you are a little bit higher and it probably sets you up 1245 00:52:56,760 --> 00:52:59,750 to be maybe a more transparent organization 1246 00:52:59,750 --> 00:53:02,080 in the eyes of the people who reviewed this data. 1247 00:53:02,080 --> 00:53:04,880 So I sort of thought, well, as long 1248 00:53:04,880 --> 00:53:08,990 as you don't have any egregious numbers in there, that it 1249 00:53:08,990 --> 00:53:10,750 probably can only help you. 1250 00:53:10,750 --> 00:53:13,070 And the general public isn't probably 1251 00:53:13,070 --> 00:53:14,526 going to see this data anyway. 1252 00:53:16,852 --> 00:53:18,560 AUDIENCE: If you disclose, even if you're 1253 00:53:18,560 --> 00:53:21,105 higher than your competitor, it gives you 1254 00:53:21,105 --> 00:53:25,940 an opportunity to win the Most Improved award over time. 1255 00:53:25,940 --> 00:53:27,979 And a lot of these numbers don't really 1256 00:53:27,979 --> 00:53:29,470 mean anything to consumers. 1257 00:53:29,470 --> 00:53:33,310 So you're able to do so much business market. 1258 00:53:33,310 --> 00:53:35,040 So if you're able to have a headline that 1259 00:53:35,040 --> 00:53:37,414 says you decreased your carbon footprint in your products 1260 00:53:37,414 --> 00:53:42,565 by x percentage, that could actually fall apart there. 1261 00:53:42,565 --> 00:53:47,585 AUDIENCE: Yeah, I think not disclosing would [INAUDIBLE] 1262 00:53:47,585 --> 00:53:51,370 worse, because then people might assume that you're-- though you 1263 00:53:51,370 --> 00:53:54,640 might be actually worse than your competitor, by disposing, 1264 00:53:54,640 --> 00:53:56,888 you set it up where you can defend that and say, 1265 00:53:56,888 --> 00:53:59,352 but we're improving and these are the reasons, 1266 00:53:59,352 --> 00:54:01,685 rather than not disclosing, which they could just assume 1267 00:54:01,685 --> 00:54:02,826 you're [INAUDIBLE]. 1268 00:54:02,826 --> 00:54:05,760 That's why [INAUDIBLE]. 1269 00:54:05,760 --> 00:54:07,550 AUDIENCE: [INAUDIBLE] that probably what 1270 00:54:07,550 --> 00:54:09,810 the other company ended up doing is 1271 00:54:09,810 --> 00:54:11,420 defining a very limited scope. 1272 00:54:11,420 --> 00:54:14,760 So in terms of comparing the two, 1273 00:54:14,760 --> 00:54:17,820 I think it's not a debate about what the script should be 1274 00:54:17,820 --> 00:54:20,965 and how each compare to the two companies. 1275 00:54:20,965 --> 00:54:25,410 So for me, not realizing the data was even worse, 1276 00:54:25,410 --> 00:54:27,201 that means that they'll give you a paper. 1277 00:54:27,201 --> 00:54:27,700 [INAUDIBLE] 1278 00:54:34,670 --> 00:54:36,251 PROFESSOR: Who would not disclose? 1279 00:54:38,897 --> 00:54:42,800 Is it because FerretCo was so low? 1280 00:54:42,800 --> 00:54:47,436 Most of your submissions indicated that as the reason. 1281 00:54:47,436 --> 00:54:48,060 AUDIENCE: Yeah. 1282 00:54:48,060 --> 00:54:50,845 So it's assumed that there's so much discretion 1283 00:54:50,845 --> 00:54:53,960 applied to the figures. 1284 00:54:53,960 --> 00:54:55,920 I just computed that. 1285 00:54:55,920 --> 00:54:59,120 It was impossible for an uninformed person looking 1286 00:54:59,120 --> 00:55:02,372 at the numbers to know what went into the number. 1287 00:55:02,372 --> 00:55:06,110 And so to the uninformed, they might 1288 00:55:06,110 --> 00:55:10,710 think that he's comparing apples to apples, but [INAUDIBLE]. 1289 00:55:10,710 --> 00:55:12,702 So that's why. 1290 00:55:12,702 --> 00:55:16,437 AUDIENCE: I think the customers' perspective would 1291 00:55:16,437 --> 00:55:27,144 be [INAUDIBLE] the carbon footprint. 1292 00:55:27,144 --> 00:55:32,124 So I thought it would be like [INAUDIBLE] to publish this 1293 00:55:32,124 --> 00:55:34,116 just out of the blue and impossibly, 1294 00:55:34,116 --> 00:55:38,100 because the competitor would have just published theirs. 1295 00:55:38,100 --> 00:55:41,130 And I think the company might not already 1296 00:55:41,130 --> 00:55:43,130 be ready to actually publish them, 1297 00:55:43,130 --> 00:55:46,330 because they were not ready also to take action 1298 00:55:46,330 --> 00:55:48,904 on their manufacturing or operations 1299 00:55:48,904 --> 00:55:51,264 to actually reduce this problem. 1300 00:55:51,264 --> 00:55:55,520 So I think that I would have delayed [INAUDIBLE]. 1301 00:55:55,520 --> 00:55:57,721 I would have delayed the disclosure. 1302 00:55:57,721 --> 00:56:00,610 The time to come out with a strategy 1303 00:56:00,610 --> 00:56:04,200 and figure out what we can do to reduce to which part 1304 00:56:04,200 --> 00:56:07,420 we can reduce and to which part we can make neutral 1305 00:56:07,420 --> 00:56:09,980 make an announcement that we're moving 1306 00:56:09,980 --> 00:56:13,270 on that half and that [INAUDIBLE] 1307 00:56:13,270 --> 00:56:18,440 2015 and to be carbon neutral in 2020 based on our strategy, 1308 00:56:18,440 --> 00:56:19,800 and then move from there. 1309 00:56:19,800 --> 00:56:22,960 But I don't think I would have just put the number of there 1310 00:56:22,960 --> 00:56:25,910 without making sure in the company that what we can do 1311 00:56:25,910 --> 00:56:30,154 and making sure that it's communicating properly. 1312 00:56:30,154 --> 00:56:30,820 PROFESSOR: Yeah. 1313 00:56:30,820 --> 00:56:33,920 So if we look at what's driving this, 1314 00:56:33,920 --> 00:56:38,060 the carbon disclosure project is probably the most widely done 1315 00:56:38,060 --> 00:56:39,920 of public disclosure programs, right? 1316 00:56:39,920 --> 00:56:44,382 And so this is data from the 2012 report, 1317 00:56:44,382 --> 00:56:45,840 which is the most recent one that I 1318 00:56:45,840 --> 00:56:46,940 could find this graph for. 1319 00:56:46,940 --> 00:56:50,410 So when they started this in 2003, right there. 1320 00:56:50,410 --> 00:56:52,330 This is out of the top 500 companies 1321 00:56:52,330 --> 00:56:53,840 in the world, 500 largest companies. 1322 00:56:53,840 --> 00:56:58,650 They were getting less than a 50% response rate. 1323 00:56:58,650 --> 00:57:02,100 And I think they might have even [INAUDIBLE]. 1324 00:57:02,100 --> 00:57:05,470 But that's pretty much steadily grown over time until now. 1325 00:57:05,470 --> 00:57:07,654 It's pretty much hovering around the 80% level 1326 00:57:07,654 --> 00:57:09,570 that it's been there for the last three years. 1327 00:57:09,570 --> 00:57:12,990 So most of the big companies are going ahead and disclosing 1328 00:57:12,990 --> 00:57:16,390 the emissions, probably because this is driven 1329 00:57:16,390 --> 00:57:18,190 by institutional investors. 1330 00:57:18,190 --> 00:57:22,030 So essentially they get mutual funds and other people 1331 00:57:22,030 --> 00:57:23,180 to sign on to this. 1332 00:57:23,180 --> 00:57:26,310 So it's being driven by investors [INAUDIBLE], 1333 00:57:26,310 --> 00:57:28,054 not end consumers. 1334 00:57:28,054 --> 00:57:29,470 And you have the same sort of deal 1335 00:57:29,470 --> 00:57:31,303 with that the business-to-business pressure. 1336 00:57:31,303 --> 00:57:35,910 Most companies somewhere in their CSR 1337 00:57:35,910 --> 00:57:38,700 or in their organization have maybe some requirements 1338 00:57:38,700 --> 00:57:40,290 where they're asking their suppliers 1339 00:57:40,290 --> 00:57:42,980 to do this sort of thing, to report on it. 1340 00:57:42,980 --> 00:57:45,170 A lot of them are not yet penalizing you 1341 00:57:45,170 --> 00:57:46,090 if you don't do it. 1342 00:57:46,090 --> 00:57:48,019 But they're starting to ask, and enough people 1343 00:57:48,019 --> 00:57:49,810 are starting to ask that most companies are 1344 00:57:49,810 --> 00:57:51,190 starting to respond. 1345 00:57:51,190 --> 00:57:54,050 The end consumer, the average consumer I do not think 1346 00:57:54,050 --> 00:57:56,840 is paying much attention to whether a company has reported 1347 00:57:56,840 --> 00:57:59,450 its carbon footprint or not. 1348 00:57:59,450 --> 00:58:02,500 And even companies that don't respond to this 1349 00:58:02,500 --> 00:58:04,780 may be disclosing this information on their websites 1350 00:58:04,780 --> 00:58:06,270 or things like that. 1351 00:58:06,270 --> 00:58:09,984 And the other thing is that some of this 1352 00:58:09,984 --> 00:58:12,400 depends on when these companies started thinking about it, 1353 00:58:12,400 --> 00:58:15,530 to your point of the first time you get it, 1354 00:58:15,530 --> 00:58:17,520 it may not be the right time to disclose that. 1355 00:58:17,520 --> 00:58:19,630 You might want to wait a little bit. 1356 00:58:19,630 --> 00:58:21,470 One of the companies that we did this with, 1357 00:58:21,470 --> 00:58:25,210 I think we did it with them back in 2006. 1358 00:58:25,210 --> 00:58:28,140 And they didn't start reporting until 2011. 1359 00:58:28,140 --> 00:58:30,430 So, I mean, there's five years between when they first 1360 00:58:30,430 --> 00:58:31,930 did their corporate carbon footprint 1361 00:58:31,930 --> 00:58:33,940 and when they started answering it. 1362 00:58:33,940 --> 00:58:36,880 And actually at the time when we went and did it for them, 1363 00:58:36,880 --> 00:58:39,880 they didn't even know they were getting this survey. 1364 00:58:39,880 --> 00:58:41,380 And so I went and looked at their-- 1365 00:58:41,380 --> 00:58:44,040 you can actually track companies' responses over time 1366 00:58:44,040 --> 00:58:46,230 on the CDP, and you can go back and look. 1367 00:58:46,230 --> 00:58:49,610 And for the first four or five years, 1368 00:58:49,610 --> 00:58:53,180 they had a mix of just didn't respond or declined to respond. 1369 00:58:53,180 --> 00:58:57,940 And their VPs of supply chain, their CSR person, 1370 00:58:57,940 --> 00:59:01,537 their communications director, and marketing-- none of them 1371 00:59:01,537 --> 00:59:04,120 even knew that they were getting this and declining it, right? 1372 00:59:04,120 --> 00:59:05,380 So I don't know who it was going to, 1373 00:59:05,380 --> 00:59:07,550 but somebody in the organization was taking it and throwing it 1374 00:59:07,550 --> 00:59:08,150 away. 1375 00:59:08,150 --> 00:59:12,570 So part of this comes down to getting this 1376 00:59:12,570 --> 00:59:13,820 within the organization. 1377 00:59:13,820 --> 00:59:16,590 Just the process of starting this 1378 00:59:16,590 --> 00:59:18,360 can be useful in terms of getting the ball 1379 00:59:18,360 --> 00:59:20,360 rolling of understanding where the emissions are 1380 00:59:20,360 --> 00:59:22,720 in your organization, how to respond to these, giving you 1381 00:59:22,720 --> 00:59:25,136 time to start thinking about how you're going to formulate 1382 00:59:25,136 --> 00:59:28,190 a response to win, when the pressure might start 1383 00:59:28,190 --> 00:59:29,460 mounting a little bit more. 1384 00:59:29,460 --> 00:59:31,709 Because the other thing that these investors are doing 1385 00:59:31,709 --> 00:59:34,470 is sort of pressuring the SEC to make it a mandated 1386 00:59:34,470 --> 00:59:36,700 requirement in the same way they might 1387 00:59:36,700 --> 00:59:39,070 disclose other financial information or other 1388 00:59:39,070 --> 00:59:41,050 of their public disclosures to start 1389 00:59:41,050 --> 00:59:43,770 releasing some of this information, the mandatory SEC 1390 00:59:43,770 --> 00:59:44,270 filing. 1391 00:59:44,270 --> 00:59:46,280 So most companies would prefer to avoid that. 1392 00:59:46,280 --> 00:59:49,520 So some of it could be seen as a bit of risk mitigation 1393 00:59:49,520 --> 00:59:52,770 that if you disclose voluntarily now and enough companies go 1394 00:59:52,770 --> 00:59:55,400 along with this, you could avoid the regulation that comes down 1395 00:59:55,400 --> 00:59:55,900 to it. 1396 00:59:58,930 --> 01:00:00,860 AUDIENCE: Do you think there's industries 1397 01:00:00,860 --> 01:00:04,110 where there is way more pressure to answer than ours? 1398 01:00:04,110 --> 01:00:09,030 Because my original interest was doing Amazon. 1399 01:00:09,030 --> 01:00:10,320 They don't report it. 1400 01:00:10,320 --> 01:00:13,530 And then it was looking for comparables just in case 1401 01:00:13,530 --> 01:00:18,700 to see if I could find a market leader in e-commerce. 1402 01:00:18,700 --> 01:00:22,590 And I found no leaders in that specific industry. 1403 01:00:22,590 --> 01:00:26,040 So I don't know how that is-- 1404 01:00:26,040 --> 01:00:28,800 PROFESSOR: So this is something we've talked about informally 1405 01:00:28,800 --> 01:00:29,640 on our researcher. 1406 01:00:29,640 --> 01:00:34,580 And part of this comes from looking at-- OK, 1407 01:00:34,580 --> 01:00:36,630 so what happens if you don't respond, right? 1408 01:00:36,630 --> 01:00:39,970 So eventually there's enough buildup of pressure 1409 01:00:39,970 --> 01:00:42,500 to get boycotts or things like that going. 1410 01:00:42,500 --> 01:00:46,570 And the ability to withstand the research on why do companies 1411 01:00:46,570 --> 01:00:48,620 give into these sort of demands tends 1412 01:00:48,620 --> 01:00:51,880 to come down to the fact that, one, it tends to be cheaper 1413 01:00:51,880 --> 01:00:53,140 just to do it, right? 1414 01:00:53,140 --> 01:00:55,690 You really just need an intern and some people 1415 01:00:55,690 --> 01:00:58,430 to actually take the time to pull this data together 1416 01:00:58,430 --> 01:00:59,060 to do this. 1417 01:00:59,060 --> 01:01:01,020 It's not that complicated. 1418 01:01:01,020 --> 01:01:03,270 And most big companies already have a department 1419 01:01:03,270 --> 01:01:04,970 that does the sort of thing. 1420 01:01:04,970 --> 01:01:07,670 So the transaction cost essentially 1421 01:01:07,670 --> 01:01:09,832 to do this is pretty low, so they give in. 1422 01:01:09,832 --> 01:01:11,290 The other thing has to do with that 1423 01:01:11,290 --> 01:01:13,980 whether you're consumer-facing and brand-oriented 1424 01:01:13,980 --> 01:01:16,252 or not and what your market position is. 1425 01:01:16,252 --> 01:01:17,960 And the stronger your market position is, 1426 01:01:17,960 --> 01:01:19,990 the less you have to care what people think. 1427 01:01:19,990 --> 01:01:22,480 So somebody like Amazon, Apple, may not 1428 01:01:22,480 --> 01:01:24,480 feel that they necessarily have to do this test. 1429 01:01:27,910 --> 01:01:31,000 And again, and why did I measure? 1430 01:01:31,000 --> 01:01:32,790 So one of things to think about this 1431 01:01:32,790 --> 01:01:35,434 is that there's external and internal reasons 1432 01:01:35,434 --> 01:01:37,600 that you might want to do this measure, the same way 1433 01:01:37,600 --> 01:01:39,100 that any accounting system you might 1434 01:01:39,100 --> 01:01:40,980 have an external financial reporting system. 1435 01:01:40,980 --> 01:01:42,980 You might have your internal managerial systems 1436 01:01:42,980 --> 01:01:45,110 that you use for something different. 1437 01:01:45,110 --> 01:01:47,466 So most of this tends to be to put it 1438 01:01:47,466 --> 01:01:51,640 in a CSR report, investors or customers asking for you. 1439 01:01:51,640 --> 01:01:53,880 You might have regulation to do it. 1440 01:01:53,880 --> 01:01:57,370 You might also have some internal ones to do it. 1441 01:01:57,370 --> 01:02:00,331 If you're setting goals internally in preparation 1442 01:02:00,331 --> 01:02:01,830 for eventually disclosing, you might 1443 01:02:01,830 --> 01:02:02,990 want to do this so you can understand 1444 01:02:02,990 --> 01:02:04,460 where the carbon footprint is. 1445 01:02:04,460 --> 01:02:05,380 You can set targets. 1446 01:02:05,380 --> 01:02:07,950 You can start putting requirements on your managers. 1447 01:02:07,950 --> 01:02:09,447 You can figure out where this is. 1448 01:02:09,447 --> 01:02:11,530 The other thing to remember is that the boundaries 1449 01:02:11,530 --> 01:02:13,710 we use for this don't have to be the same. 1450 01:02:13,710 --> 01:02:16,386 So especially in the internal business, 1451 01:02:16,386 --> 01:02:17,760 you can include whatever you want 1452 01:02:17,760 --> 01:02:19,100 to include in that measurement. 1453 01:02:19,100 --> 01:02:22,380 So to help you drive reductions at your suppliers, 1454 01:02:22,380 --> 01:02:24,377 you might have an internal system 1455 01:02:24,377 --> 01:02:26,710 where you grade managers and your procurement department 1456 01:02:26,710 --> 01:02:28,180 of transportation. 1457 01:02:28,180 --> 01:02:30,300 In terms of emissions, that would be scope three. 1458 01:02:30,300 --> 01:02:31,675 But at the same time, you may not 1459 01:02:31,675 --> 01:02:33,600 include those in your external reports. 1460 01:02:33,600 --> 01:02:37,566 So again, there's different uses for the information. 1461 01:02:37,566 --> 01:02:39,440 And depending on what you want to do with it, 1462 01:02:39,440 --> 01:02:43,251 you might draw the boundary in a separate way. 1463 01:02:43,251 --> 01:02:43,750 All right. 1464 01:02:43,750 --> 01:02:45,125 So the other thing is that I want 1465 01:02:45,125 --> 01:02:47,000 to cover before I'll wrap up here 1466 01:02:47,000 --> 01:02:49,930 is, does it make sense to compare WidgetCo and FerretCo. 1467 01:02:49,930 --> 01:02:52,160 We saw FerretCo 55,000 tons, right? 1468 01:02:52,160 --> 01:02:54,100 Very small. 1469 01:02:54,100 --> 01:02:58,880 And so the question is, is it worthwhile to compare companies 1470 01:02:58,880 --> 01:03:00,960 that are direct competitors to each other, 1471 01:03:00,960 --> 01:03:02,960 but because of their operations, they 1472 01:03:02,960 --> 01:03:04,620 may be doing something differently? 1473 01:03:04,620 --> 01:03:09,220 So I actually the Ferret company numbers, actually-- I 1474 01:03:09,220 --> 01:03:12,410 made a fake supply chain with data the same way 1475 01:03:12,410 --> 01:03:16,880 I did for the [INAUDIBLE] from WidgetCo. 1476 01:03:16,880 --> 01:03:20,710 They use contract manufacturers, as opposed to owning 1477 01:03:20,710 --> 01:03:21,960 their own manufacturer plants. 1478 01:03:21,960 --> 01:03:24,750 And I just assumed that they have the same efficiency 1479 01:03:24,750 --> 01:03:26,770 as your Shanghai plant does. 1480 01:03:26,770 --> 01:03:27,860 They produce less, right? 1481 01:03:27,860 --> 01:03:31,940 If you look at the numbers, their revenues are lower. 1482 01:03:31,940 --> 01:03:34,170 You sell about 84 million kilograms of products. 1483 01:03:34,170 --> 01:03:35,930 They sold 50 million. 1484 01:03:35,930 --> 01:03:38,860 So they don't produce as much, but their efficiency per unit 1485 01:03:38,860 --> 01:03:40,272 was the same here. 1486 01:03:40,272 --> 01:03:42,730 I made up of supply chain where they had a different model, 1487 01:03:42,730 --> 01:03:46,530 which is local sales offices serving industrial consumers, 1488 01:03:46,530 --> 01:03:48,210 because they have a longer supply chain, 1489 01:03:48,210 --> 01:03:50,960 because of all their manufacturing goes on in Asia. 1490 01:03:50,960 --> 01:03:53,820 I assume they used ocean and then rail 1491 01:03:53,820 --> 01:03:55,520 and that they had a network of 40 seas, 1492 01:03:55,520 --> 01:03:58,290 a bunch of local sales offices, and then a local fleet that 1493 01:03:58,290 --> 01:03:59,992 did the transportation there. 1494 01:03:59,992 --> 01:04:02,200 So I actually figured out what these numbers would be 1495 01:04:02,200 --> 01:04:03,940 and calculated. 1496 01:04:03,940 --> 01:04:06,922 And that's where that 55,000 tons came up. 1497 01:04:06,922 --> 01:04:08,130 The big issue, though, right? 1498 01:04:08,130 --> 01:04:11,306 If we looked at what I would sort of consider WidgetCo's 1499 01:04:11,306 --> 01:04:12,680 boundary and what most of you did 1500 01:04:12,680 --> 01:04:15,710 is that you're basically stuck reporting on the Michigan 1501 01:04:15,710 --> 01:04:19,080 plant and the California and Georgia, DC, 1502 01:04:19,080 --> 01:04:20,750 and your private fleet. 1503 01:04:20,750 --> 01:04:24,620 Most of you included some share of the Shanghai plant. 1504 01:04:24,620 --> 01:04:26,700 And as we saw, the emissions were 1505 01:04:26,700 --> 01:04:29,170 being driven by what's going on at the manufacturing plant. 1506 01:04:29,170 --> 01:04:31,170 That was by far the largest source of emissions. 1507 01:04:31,170 --> 01:04:33,710 It was something like 85% of the entire supply chain 1508 01:04:33,710 --> 01:04:35,390 emissions are coming in there. 1509 01:04:35,390 --> 01:04:37,880 WidgetCo's using a contract manufacturer. 1510 01:04:37,880 --> 01:04:41,020 So none of this falls within their scope one and scope two. 1511 01:04:41,020 --> 01:04:43,951 They have a similar distribution operation to you. 1512 01:04:43,951 --> 01:04:45,700 I included their distribution all the way, 1513 01:04:45,700 --> 01:04:50,240 their transportation all the way up to the industrial customers 1514 01:04:50,240 --> 01:04:51,820 that they have. 1515 01:04:51,820 --> 01:04:54,230 But when we do it this way, we draw different boundaries 1516 01:04:54,230 --> 01:04:56,040 that allows them to exclude this piece. 1517 01:04:56,040 --> 01:04:57,760 Since they don't know it, they're buying. 1518 01:04:57,760 --> 01:04:59,926 They don't even necessarily have operational control 1519 01:04:59,926 --> 01:05:02,560 if they're just doing contracts with different manufacturers 1520 01:05:02,560 --> 01:05:04,860 to do it along the way. 1521 01:05:04,860 --> 01:05:07,414 So this is what happens is that, under these different 1522 01:05:07,414 --> 01:05:09,830 definitions of what we might consider in the supply chain, 1523 01:05:09,830 --> 01:05:10,970 we're going to get different numbers. 1524 01:05:10,970 --> 01:05:11,700 And one of the things to remember 1525 01:05:11,700 --> 01:05:14,520 is FerretCo's always going to have a smaller looking number 1526 01:05:14,520 --> 01:05:17,090 just because they sell less goods. 1527 01:05:17,090 --> 01:05:21,080 So I did at sort of the smallest level, the corporate level, 1528 01:05:21,080 --> 01:05:26,725 which is down into that 370, level 370-some thousand tons. 1529 01:05:26,725 --> 01:05:30,490 If WidgetCo does that, it's 4.51 per unit. 1530 01:05:30,490 --> 01:05:34,250 FerretCo's is about 48,000 and 0.95. 1531 01:05:34,250 --> 01:05:37,110 This is what I-- saying I was publicly disclosed, 1532 01:05:37,110 --> 01:05:40,280 which I was going to include the equity share of what goes on 1533 01:05:40,280 --> 01:05:41,730 at Shanghai. 1534 01:05:41,730 --> 01:05:43,580 FerretCo, that's their disclosed number. 1535 01:05:43,580 --> 01:05:45,246 That includes some of those scope three, 1536 01:05:45,246 --> 01:05:47,410 and that's what I gave you in the case. 1537 01:05:47,410 --> 01:05:48,890 But if we look at the supply chain, 1538 01:05:48,890 --> 01:05:51,370 if we look at this end-to-end to what it takes rather 1539 01:05:51,370 --> 01:05:55,490 than ignore who owns what, their emissions 1540 01:05:55,490 --> 01:05:57,320 are still going to be less. 1541 01:05:57,320 --> 01:06:00,480 But on a per unit basis, I came up with a higher number. 1542 01:06:00,480 --> 01:06:03,561 So this is what a lot of you got to in your write-ups 1543 01:06:03,561 --> 01:06:04,185 and discussion. 1544 01:06:04,185 --> 01:06:07,970 It is reporting at the organizational level 1545 01:06:07,970 --> 01:06:10,880 makes you look worse perhaps than FerretCo does, 1546 01:06:10,880 --> 01:06:13,160 if we're just disclosing this carbon footprint. 1547 01:06:13,160 --> 01:06:15,720 So when you're going in and thinking 1548 01:06:15,720 --> 01:06:18,700 about that as a disclosure strategy, 1549 01:06:18,700 --> 01:06:20,650 it's obviously something you want to include. 1550 01:06:20,650 --> 01:06:23,470 And in this case, a lot of companies 1551 01:06:23,470 --> 01:06:27,100 tend to want to be less transparent. 1552 01:06:27,100 --> 01:06:28,610 FerretCo might disclose this number 1553 01:06:28,610 --> 01:06:29,920 and then say nothing about it, knowing 1554 01:06:29,920 --> 01:06:31,220 that it's going to be low. 1555 01:06:31,220 --> 01:06:34,100 So perhaps transparency is your friend in this case. 1556 01:06:34,100 --> 01:06:36,400 When you disclose yours, you can say 1557 01:06:36,400 --> 01:06:39,169 we include these because we own this, this, and this. 1558 01:06:39,169 --> 01:06:41,085 And then maybe when somebody looks up FerretCo 1559 01:06:41,085 --> 01:06:44,295 and they're trying to figure out why their emissions are so low 1560 01:06:44,295 --> 01:06:46,600 and they say, well, there's no information available, 1561 01:06:46,600 --> 01:06:49,810 then they'll see that as there's a push for more transparency 1562 01:06:49,810 --> 01:06:52,560 and they start having to disclose perhaps what they're 1563 01:06:52,560 --> 01:06:53,860 including and what they're not. 1564 01:06:53,860 --> 01:06:55,693 It starts to come to light a little bit more 1565 01:06:55,693 --> 01:06:57,810 that really it's because they're doing 1566 01:06:57,810 --> 01:07:01,590 different things in their supply chain that you are. 1567 01:07:01,590 --> 01:07:04,730 Supply chain is very similar, a little bit different 1568 01:07:04,730 --> 01:07:06,359 in terms of how they sell. 1569 01:07:06,359 --> 01:07:08,400 But they're doing essentially the same activities 1570 01:07:08,400 --> 01:07:09,790 for very similar products. 1571 01:07:09,790 --> 01:07:12,300 But it can produce a very different corporate carbon 1572 01:07:12,300 --> 01:07:15,480 footprint depending on where you draw those boundaries. 1573 01:07:15,480 --> 01:07:19,260 And this is starting to get a lot more attention. 1574 01:07:19,260 --> 01:07:22,320 So this is data that Apple released, right? 1575 01:07:22,320 --> 01:07:24,400 So they actually have a lot of good data 1576 01:07:24,400 --> 01:07:27,521 about their environmental impacts on their web page. 1577 01:07:27,521 --> 01:07:29,020 But the thing that they were showing 1578 01:07:29,020 --> 01:07:32,440 is that, out of their total end-to-end everything 1579 01:07:32,440 --> 01:07:34,820 from the raw materials that go into their products 1580 01:07:34,820 --> 01:07:37,210 to customer use and ventral disposal, 1581 01:07:37,210 --> 01:07:40,560 Apple only owns 2% of those emissions at their facilities. 1582 01:07:40,560 --> 01:07:41,810 Everything else is outsourced. 1583 01:07:41,810 --> 01:07:43,810 They have somebody else doing the manufacturing. 1584 01:07:43,810 --> 01:07:45,860 Somebody else is doing the transportation. 1585 01:07:45,860 --> 01:07:49,310 Somebody else does the raw materials, et cetera. 1586 01:07:49,310 --> 01:07:52,690 And yet, they won the Best Supply Chain award from Gartner 1587 01:07:52,690 --> 01:07:53,990 for the last six years. 1588 01:07:53,990 --> 01:07:58,590 So the idea of the supply chain is no longer the idea 1589 01:07:58,590 --> 01:07:59,810 that I'm owning that. 1590 01:07:59,810 --> 01:08:01,830 They're managing all of these activities, 1591 01:08:01,830 --> 01:08:03,475 but they aren't necessarily doing them 1592 01:08:03,475 --> 01:08:04,600 in any of their facilities. 1593 01:08:04,600 --> 01:08:06,690 So does it make sense for me to try 1594 01:08:06,690 --> 01:08:11,120 to compare Apple against some of these other companies. 1595 01:08:11,120 --> 01:08:12,620 in the computer space, they might be 1596 01:08:12,620 --> 01:08:13,930 competing against, say, Dell. 1597 01:08:13,930 --> 01:08:16,260 Or in the phones, they might deal with Samsung. 1598 01:08:16,260 --> 01:08:20,080 Samsung has 240,000 employees, 40 manufacturing sites. 1599 01:08:20,080 --> 01:08:22,160 They produce refrigerators, washing 1600 01:08:22,160 --> 01:08:23,990 machines, all of these things, in addition 1601 01:08:23,990 --> 01:08:27,790 to, say, the Galaxy Tab that you might compare to the iPhone. 1602 01:08:27,790 --> 01:08:32,200 So does it really makes sense to compare these sort of companies 1603 01:08:32,200 --> 01:08:33,830 together on the corporate level? 1604 01:08:33,830 --> 01:08:36,350 And the answer is increasingly, no, it doesn't. 1605 01:08:36,350 --> 01:08:38,439 And this is not unusual for a company 1606 01:08:38,439 --> 01:08:40,890 to have a pretty low amount of many emissions 1607 01:08:40,890 --> 01:08:42,359 being in their facilities. 1608 01:08:42,359 --> 01:08:45,279 These researchers looked across a wide range 1609 01:08:45,279 --> 01:08:48,189 of activities of manufacturers of goods-- producers 1610 01:08:48,189 --> 01:08:49,960 of actual goods by industry. 1611 01:08:49,960 --> 01:08:52,850 What percent of their emissions were scope one and scope two? 1612 01:08:52,850 --> 01:08:55,130 And as you can see, the top of the red line 1613 01:08:55,130 --> 01:08:57,550 is where the scope one and scope two end. 1614 01:08:57,550 --> 01:08:59,080 It can vary a bit. 1615 01:08:59,080 --> 01:09:01,950 But on average, they found it at around 25%. 1616 01:09:01,950 --> 01:09:05,540 So most companies, even the ones that are producing goods, 1617 01:09:05,540 --> 01:09:09,149 do not own the majority of their emissions in the supply chain. 1618 01:09:09,149 --> 01:09:11,649 And so we're starting to see expansion of the greenhouse gas 1619 01:09:11,649 --> 01:09:12,149 protocol. 1620 01:09:12,149 --> 01:09:14,810 They've actually created new standards. 1621 01:09:14,810 --> 01:09:17,640 One is what they call the value chain approach. 1622 01:09:17,640 --> 01:09:20,130 So this is looking at the entire supply chain, 1623 01:09:20,130 --> 01:09:24,050 from raw materials all the way to product use and disposal, 1624 01:09:24,050 --> 01:09:25,790 and looking at it at the aggregate level. 1625 01:09:25,790 --> 01:09:28,040 So this is trying to say, what are the total emissions 1626 01:09:28,040 --> 01:09:30,863 globally for everything from beginning to end? 1627 01:09:30,863 --> 01:09:33,529 And what they've done is they've identified different categories 1628 01:09:33,529 --> 01:09:36,149 and provided some guidance on how you measure that. 1629 01:09:36,149 --> 01:09:38,420 And so companies can now start to choose 1630 01:09:38,420 --> 01:09:41,290 which of these categories they report. 1631 01:09:41,290 --> 01:09:45,600 I think they said only one company has reported emissions 1632 01:09:45,600 --> 01:09:48,140 in all 14 of these categories of what they have. 1633 01:09:48,140 --> 01:09:50,189 So it's an ongoing process as companies 1634 01:09:50,189 --> 01:09:52,540 try to help them include more and more of this 1635 01:09:52,540 --> 01:09:55,820 so that we can start to see. 1636 01:09:55,820 --> 01:09:57,720 This carbon Disclosure Project started 1637 01:09:57,720 --> 01:10:00,260 something called the CDB Supply Chain Report. 1638 01:10:00,260 --> 01:10:03,540 It was started by Dell, L'Oreal, a couple other companies-- 1639 01:10:03,540 --> 01:10:05,740 Walmart is now part of it-- where they're actually 1640 01:10:05,740 --> 01:10:08,860 surveying their suppliers and asking them the same questions 1641 01:10:08,860 --> 01:10:10,170 that are in the CDP. 1642 01:10:10,170 --> 01:10:14,200 And CDP manages it and helps get those responses. 1643 01:10:14,200 --> 01:10:19,410 The big thing to know is that it started in 2008 with 1,402 1644 01:10:19,410 --> 01:10:20,510 suppliers contracted. 1645 01:10:20,510 --> 01:10:23,690 It's grown to be over 5,000 of them. 1646 01:10:23,690 --> 01:10:27,210 So more companies are doing this with more of their suppliers. 1647 01:10:27,210 --> 01:10:30,930 One of the big things is that the more requests a company 1648 01:10:30,930 --> 01:10:34,520 gets for this from different customers of theirs, 1649 01:10:34,520 --> 01:10:36,390 the more likely they are to respond to it. 1650 01:10:36,390 --> 01:10:38,260 So as this pressure's increasing, 1651 01:10:38,260 --> 01:10:41,840 starting to see more companies willing to respond. 1652 01:10:41,840 --> 01:10:43,530 And finally, to set up what we're 1653 01:10:43,530 --> 01:10:46,580 going to talk about next time. 1654 01:10:46,580 --> 01:10:48,620 There's also a huge issue in protocol 1655 01:10:48,620 --> 01:10:50,300 has started a product standard. 1656 01:10:50,300 --> 01:10:52,350 So what separates a product standard 1657 01:10:52,350 --> 01:10:55,520 is that the value chain-- my company produces 1658 01:10:55,520 --> 01:10:56,580 many different products. 1659 01:10:56,580 --> 01:10:58,709 I'm going to include everything in the value chain. 1660 01:10:58,709 --> 01:11:01,000 For all those, I'm going to report aggregate emissions. 1661 01:11:01,000 --> 01:11:04,050 The product level says, now I'm going to instead focus. 1662 01:11:04,050 --> 01:11:06,690 I'm going to still do this end to end upstream all the way 1663 01:11:06,690 --> 01:11:07,960 down to stream. 1664 01:11:07,960 --> 01:11:10,441 But I'm going to focus on one specific product. 1665 01:11:10,441 --> 01:11:12,440 And I'm going to report it at the product level. 1666 01:11:12,440 --> 01:11:16,940 So when we talk about labeling-- would you put out a carbon 1667 01:11:16,940 --> 01:11:18,647 footprint of a product on a label?-- 1668 01:11:18,647 --> 01:11:21,230 typically this product standard is the kind of thing you would 1669 01:11:21,230 --> 01:11:22,270 need to do. 1670 01:11:22,270 --> 01:11:24,510 And that includes all of the emissions 1671 01:11:24,510 --> 01:11:25,500 from beginning to end. 1672 01:11:25,500 --> 01:11:27,480 So that includes, in our example, 1673 01:11:27,480 --> 01:11:29,152 we only talked about the manufacturing, 1674 01:11:29,152 --> 01:11:29,860 the distribution. 1675 01:11:29,860 --> 01:11:33,300 We didn't get into the raw materials, the disposal, 1676 01:11:33,300 --> 01:11:34,800 all of these things that go into it. 1677 01:11:34,800 --> 01:11:36,910 So these is actually what we're going 1678 01:11:36,910 --> 01:11:39,410 to talk about on Monday when we talk about life cycle 1679 01:11:39,410 --> 01:11:42,040 assessment, which is basically the methodology for how we go 1680 01:11:42,040 --> 01:11:45,180 into this at the product level. 1681 01:11:45,180 --> 01:11:49,200 So just as a recap for that, I posted-- so essentially there, 1682 01:11:49,200 --> 01:11:52,150 I posted an actual report that some colleagues here at MIT 1683 01:11:52,150 --> 01:11:54,770 did that looked at handwriting systems. 1684 01:11:54,770 --> 01:11:56,661 They were looking at that Dyson air blade 1685 01:11:56,661 --> 01:11:58,910 to try to figure out whether it's more environmentally 1686 01:11:58,910 --> 01:12:01,020 friendly to do that than have paper towels or some 1687 01:12:01,020 --> 01:12:01,936 of these other things. 1688 01:12:01,936 --> 01:12:04,739 So for Monday, we're asking you to read that. 1689 01:12:04,739 --> 01:12:05,780 So it's a little bit dry. 1690 01:12:05,780 --> 01:12:07,363 But there's lots of tables and charts, 1691 01:12:07,363 --> 01:12:09,542 so it should go by fairly quickly. 1692 01:12:09,542 --> 01:12:11,500 But it's a pretty good example of what it takes 1693 01:12:11,500 --> 01:12:13,590 to get into the product level. 1694 01:12:13,590 --> 01:12:16,320 And we'll use that for a discussion about life cycle 1695 01:12:16,320 --> 01:12:18,620 assessment and what it means for a company that 1696 01:12:18,620 --> 01:12:19,880 wants to do it at this level. 1697 01:12:19,880 --> 01:12:21,830 And then next Wednesday, we have Martin Wolf 1698 01:12:21,830 --> 01:12:24,560 from Seventh Generation to talk about actually 1699 01:12:24,560 --> 01:12:27,270 how their company uses life cycle assessment to make sure 1700 01:12:27,270 --> 01:12:30,460 all the products they're selling are environmentally friendly. 1701 01:12:30,460 --> 01:12:32,010 OK.