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©EcoLogic Consultancy 2010

Value-chain Carbon Accounting – Ford takes lead Insights Series
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Value-chain Carbon Accounting – Ford takes lead

Worldwide the motor vehicles emit 1 billion tonnes of CO2 annually, 15% of total global carbon
emissions. In the United States, the emissions have increased by 28% from 1990 to 2008 –driven by the
increased travel and sales mix favoring bigger cars. Rising awareness on climate change and its
impacts on business coupled with pressure from investors have led to Ford creating concrete plans to
reduce the GHG emissions from its cars. It has started working with its suppliers to take control of its
supply chain carbon footprint as it creates internal plan for the GHG mitigation.

GHG mitigation spreads to supply chains as well

Ford plans to survey its top 35 global suppliers on their energy use and greenhouse gas emissions.
This is a part of building an understanding of its supply chain’s carbon footprint. This data will be
used to create a carbon-management approach for the company. The suppliers represent about 20
billion US dollars spend by Ford on its procurement. The key to Ford’s actions is that of driving
carbon footprint reduction and energy efficiency gains in energy constrained world. The efforts this
time will be collaborative and information sharing driven as against individual, stand-alone efforts
taken the suppliers. This is bound to put pressure on suppliers that score low on the energy
efficiency to internalize and implement best practices from more energy-efficient counterparts. The
suppliers in the initial list will include suppliers of energy intensive and therefore high carbon
footprint components such as the seats, steering systems, tires and metal components.

Investors in the driving seat

The efforts are in line with Fords stated goal of reducing their greenhouse gas emissions by 30% by
2020 from 2006 baseline. This goal was set in response to the pressure from investors such as
Interfaith Center for Corporate Responsibility (ICCR) and Investor Network on Climate Risk
Network (INCR). The members of the ICCR include more than 300 religious institutional investors
with more than 100 billion US dollars in investments. INCR is a network with members holding
more than 5 trillion US dollars in investments. INCR includes the Connecticut State Treasury office,
a shareholder in Ford.

Ford has responded to the investor pressure by creating a fuel emission goal of 30% less emission
by 2020 in line and towards the 60-80% reduction by 2050 that Ford intends to implement as a
part of US Climate Action Partnership. This partnership includes Chrysler, General Motors and
other US companies. Ford has been able to achieve a 39% reduction in GHG emissions from 2000 to
2007. The difference from the earlier approaches is that of Fords goal this time is very action
oriented step as against the earlier norm of agreeing to undertake enhanced reporting and general
goal setting without a clear plan in place.

Value-chain Carbon Accounting – Ford takes lead Insights Series

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More than just Carbon – it is about costs

There are going to be direct gains for Ford in these efforts. Apart from meeting investor
expectations on climate change disclosures, collaborating with suppliers on carbon, energy and
therefore cost-saving measures will allow it to put pressure on suppliers for cost reductions as they
gain efficiency in their operations, partly assisted by Ford.

Share and Learn

To make this practice more of a norm across the industry, Ford will share the feedback on the data
collection process with World Resource Institute and World Business Council for Sustainable
Development. Both institutes are leading a global collaboration of businesses, governments and
non-governmental organizations to develop credible methods for measuring and reporting
corporate greenhouse gas emissions. They are currently drafting a new standard to be used to
measure indirect or Scope 3 emissions. In tandem, Ford is participating in the Carbon Disclosure
Project Supply Chain Program.

Relevance to Indian Companies

The changes coming up are not a fashion statement, rather signs of the future to come. The
pressures on companies and therefore the suppliers will come from carbon, energy and thus cost
side. Companies at all stages of value chain must be prepared for this future. Having understood
ones carbon footprint, components and drivers of it is the first step of preparedness. Even if the
operations are not energy efficient at high standards, the organization is aware of the specific areas
of interventions.

While building the understanding of its carbon footprint, the organization will get enabled to
respond to investor-facing communications, get ready for future regulations that may arise and also
find opportunities for reducing carbon emissions that can become carbon credit projects. With
carbon accounting and understanding becoming a market access requirement, there are
significantly more long term benefits as against short term costs of carbon accounting and
management enablement of an organization.

References

1. www.greenpeace.org - Deep Green: Cars, Corporations and Society

2. http://www.socialfunds.com/news/article.cgi/2497.html
3. http://www.iccr.org/news/press_releases/2008/pr_ford04.09.08.htm
4. http://www.automotive-fleet.com/News/Story/2010/06/Ford-Probes-GHG-Emissions-of-
Supply-Chain.aspx?interstitial=1

Value-chain Carbon Accounting – Ford takes lead Insights Series

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About Us

EcoLogic Consultancy came into existence with the purpose of “To help our clients in
understanding, establishing sound Environment Management Systems, and pursuing sustainable
business solutions through our various services to abate direct and indirect impact on ecological
balance.”

We have expertise in the areas of carbon accounting and management, energy management
systems, voluntary/compliance carbon markets, environment management and sustainability and
carbon branding.

To know more about EcoLogic, please visit http://www.ecologicconsultancy.in

To schedule a meeting or a discussion with us, do reach us on

Kedar - +91-9000772462 – kedar@ecologicconsultancy.in

Indrajeet - +91-9028788430 – indrajeet@ecologicconsultancy.in

Value-chain Carbon Accounting – Ford takes lead Insights Series