Supply Chain Carbon Puzzle: Accounting for Emissions of Simple and Complex Products

Carbon Accounting in the Supply Chain: Emissions Management of Simple and Complex Products

Calculating the Specific Embedded Emission (SEE) of a product is not always a simple process. The complexity of the calculation varies greatly depending on the product's journey and history in the supply chain. At this point, there are two basic product categories: simple products and complex products. So what distinguishes these two categories and what are the challenges that make emissions accounting for complex products a puzzle?

"Product arriving with a load on its back": The Simple and Complex Product Distinction

The main difference between these two product types is whether they carry an emission burden at the start of the production process.

• Simple Product

  These are products that arrive at the producer "unburdened", that is, they have not gone through any other production process before and do not carry any emission burden. The carbon footprint of these products starts with the manufacturing activities of the current manufacturer.

• Complex Product

  Products that arrive at the producer with "a load on their back". Before reaching the end producer, these products have already gone through the production processes of other companies and already carry the "precursor" emission burdens resulting from these processes.

Why Do Complex Products Resemble a Puzzle?

While the emission calculation of a simple product can fit into a single table, the calculation of a complex product is like a puzzle. The main reasons for this are as follows:

1. Reduced Traceability

   The more different manufacturers a product passes through before it reaches the final manufacturer, the more likely it is to lose data at each stage. This reduces traceability and increases uncertainty in the final carbon footprint.

2. Layered Responsibility

   The final producer of a complex product is also responsible for the emission burdens created by all previous suppliers. Each supplier adds its own operational emissions to the product it receives from the previous company. The end producer therefore needs to request and account for this layered data from each link in the chain individually. This leads to a large number of sub-fractions in the calculation table, complicating the process.

Clearing the Blur: CBAM's "Leave No One Behind" Philosophy

As the supply chain lengthens, it is inevitable that the "fuzziness" in SEE calculations will increase, and this is currently seen as an acceptable challenge. However, the underlying philosophy behind regulations such as CBAM is to remove this blurring.

This is where CBAM's "leave no one behind" principle comes into play. The goal is not to push any supplier out of the system or destroy it, but rather to transform the entire system. This complexity will be eliminated when each company in the supply chain starts to transparently pass this information on to the next customer. The key to this transformation is for everyone in the chain to be accountable and transparent.