Earth’s climate is determined by the sunlight it receives, a certain portion of the sunlight is absorbed by the Earth’s surface (soil, mountains, lakes and oceans) and some portion is radiated back to space. According to this simple argument, the average surface temperature of the Earth would be below the freezing temperature of the water and life cannot be sustained without liquid water. These theoretical calculations do not take into account the Green House Gases (GHG) that absorb some of the radiated sunlight in the air and increase the atmospheric temperatures. The GHG including CO2 play an important role in maintaining the suitable atmospheric conditions for life. However, there is a delicate balance between the concentration of GHG and the atmospheric conditions for life; if the GHG concentrations in the atmosphere is below a certain level life flourishes, if the concentration of GHG is high the atmospheric conditions become too difficult for life to continue as it existed for several millennia. According to scientific measurements that date back to the onset of industrial revolution, the atmospheric CO2 concentration in the atmosphere was 290 ppm and the average temperature was 13.4°C. It is observed that there is strong correlation between the CO2 concentration in the atmosphere and the average temperatures. After the World War 2 we can observe a sharp change: in 1960s, the CO2 concentration in the atmosphere was 310 ppm and the average temperature was 13.7°C while in 2020 they were 430 and 14.7°C respectively. It is clear that human activity that accumulates GHG (mainly CO2) in the atmosphere causes increase in atmospheric temperatures. As a result of increased concentration of GHG and therefore average temperatures weather patterns change, sea levels rise and the life of all living organisms including humans change. Notably, important health risks to humans include sharp increase in the lung diseases due to air quality, food and water scarcity, exposure to extreme heat, faster spread of diseases and migration due to climate change.

Among the responsible sectors for modern day GHG emissions globally, energy has the largest share with 73.2%: with 24.2% for energy use in industry, 16.2% in transportation and 17.5% in buildings. Several industrial sectors account for a noticeable GHG emissions: iron and steel industry accounts for 7.2% of the total global emissions. The other sectors include cement (3%), petrochemicals (3.6%), Other notable industries that has a high share in GHG emissions include aluminum, ammonia, manufacturing and agriculture sectors. The transportation sector’s largest contribution to GHG emissions is from road transportation (11.9%).

It has become a business imperative that businesses and supply chains measure, report and reduce their GHG emissions. Governments and intergovernmental organizations such as EU are implementing regulations to control and reduce GHG emissions aggressively. For example, the EU’s Carbon Border Adjustment Mechanism (CBAM) enters into force in its transitional phase as of 1 October 2023. The first sectors covered in the first phase of the CBAM includes cement, iron & steel, aluminum, fertilizer, electricity and hydrogen industries.

One of the important questions is ‘How to measure, report and reduce GHG emissions?’. The perfect approach would be treating GHG emissions just like financial flows. Measurement of GHG emissions for complex supply chains is a complex task that required holistic view of the supply chains from temporal and functional perspectives. Supply chains are established using significant investments and these investments not only consume financial resources but also result in emissions during design, construction, update/maintenance, operation and decommissioning phases.

Most of the activities at the design, construction, update/maintenance and decommissioning phases involve one time emissions such as procurement of materials needed (iron & steel, cement, construction materials, wiring, IT infrastructure), the construction activities (energy needed for activities, construction equipment and spare part, land preparation, bringing utilities (electricity, water, natural gas), waste treatment facilities, office buildings etc. The emissions due to these activities must be discounted for the lifetime of the supply chain or the corresponding supply chain. For example, if a building has 30 years of life then the GHG emissions during the construction should be discounted over 30 years. The second category of emissions are related to operations that result in regular GHS emissions for each procurement/production/distribution activity. In general, each activity in the end-to-end supply chain results in GHG emissions. Procurement activities has to consider not only the purchase price of the raw materials and parts but also GHG emissions per item procured (for example, on the average 1.4 tons of CO2 is emitted per ton of crude steel), the emissions due to inbound logistics activities and inventory related emissions. Production activities generally related to energy use; however some sectors emit GHG during their operations such as iron & steel industries during coking and calcination. Distribution activities are mainly transportation related emissions such as road, rail, sea or air transportation. The packaging used in the distribution operations is also a significant source of emission in certain sectors.

Once all of the data regarding the GHG emissions from temporal and operational perspectives are gathered, it is important to develop a calculation method that considers the use/consumption of resources for each unit of product. The GHG emissions are reported with the annual/seasonal averages for unit product such 1 ton of steel, 1 type of refrigerator, 1 particular model of car etc.

Government and intergovernmental agencies are enacting mechanisms such as CBAM. Initially, these mechanisms are designed to collect data so that sectoral averages and best/worst cases regarding GHG emission are collected. The forthcoming phases will limit GHG emissions and enforce Carbon Taxes for emissions.

Prof.Dr. Metin Türkay, Founder of SmartOpt