Companies under the cosh to reduce their carbon footprint should cuddle up to a supply chain partner, says Sue Scott
If the carbon labelling system is an indication of where Europe is with carbon generally "confused, with lots of green messages from lots of different people", as one observer puts it then the waters are about to get a whole lot muddier.
In five days the deadline for companies to submit information for what could turn out to be the most significant piece of environmental legislation ever introduced in the UK will pass. It requires all the major multiples, and most of their suppliers and distributors, to sign up to the domestic version of Europe's Emissions Trading Scheme a cap-and-trade initiative that will require at least 2,500, and possibly as many as 5,000, companies to clean up their act or pay the price in progressively more expensive CO2 permits.
The countdown for registration to the Carbon Reduction Commitment Energy Efficiency Scheme commonly referred to as the CRC has been going on since April, and many (including the Food and Drink Federation) hoped it would be parked by the incoming coalition.
But on 30 September the mountains of data and for some companies possibly pointless paper trails produced in one of the most expensive projects ever visited on the food industry will be dumped on the Department of Energy and Climate Change's desk. There it will be sifted and collated to produce a league table next October that will benchmark companies' carbon-saving performance based on their metered electricity consumption.
What's the link with the carbon label? Well, both require a degree of transparency and joined-up working that doesn't come naturally to the food industry and both are mired in confusion and inconsistency.
So says Tim Price, national commercial manager for Severnside Recycling, part of the £2.1bn David S Smith packaging group, which runs 15 recycling facilities and makes one in three boxes for transit and shelf-ready display in the UK. His 4,000 clients include Tesco, M&S, Morrisons and Sainsbury's, all of whom have had teams dedicated to the CRC for months.
Each have also taken very different views on carbon footprinting and adoption of carbon labels three out of four of them have chosen not to, leaving consumers befuddled, argues Price. "There are gaps in the carbon labelling system and I do not see that changing for a while. Clarity of message is important and carbon labelling is one way of achieving it, but many labels are pointless."
Whichever way you look at, it's a mess and the CRC is unlikely to bring any clarity to a government consultation on carbon reduction schemes this summer. Stephen Reeson, head of climate change and energy policy at the FDF, says the back office work required to prepare for the CRC has been disproportionate, given that some companies might ultimately find they were not required to register in the first place.
Even he agrees, though, that the continuing drive to deliver environmental benefits represented by legislation like the CRC has had an unexpected and welcome side effect: it's radically changing relationships in the supply chain for the better.
"Most of our clients engage with the supply chain on cost. Now there is a new platform carbon," says Jean-Yves Chaurrault, environmental accounting manager for Sustain, which has worked with Kingsmill, The Co-operative Group and others on carbon reduction and labelling.
"There is a link between the Carbon Trust label and the CRC. It's a reduce or lose label you have to reduce the carbon footprint on the product over two years or lose it. And if you do something to reduce the carbon footprint of bread you can also reduce your CRC emissions costs."
Like the label, the CRC league table will expose companies to greater scrutiny not only to consumers, but also investors, the taxman and, of course, competitors. "Tesco and Sainsbury's will be interested to see where they are against each other," observes Chaurrault. Mark Holmes, head of sustainability and principal consultant with environmental solution provider ADAS, agrees that the only way for companies to maintain their green credentials is to snuggle up to a supply chain partner.
PepsiCo used ADAS to help it get into bed with a handful of potato suppliers for its Walkers crisp brand last year and is now playing carbon footsie with all 40 of its growers. Having worked with the Carbon Trust to introduce the footprint label to crisp packets three years ago, Walkers says this isn't a one-night stand to make the Corporate Social Responsibility document look good. It's settling into a stable, environmentally beneficial relationship for life, says Holmes, whose team is working with another 11 food companies on similar projects. He says Walkers' is a model others would do well to follow.
"Ultimately, food manufacturers will have to develop more relationships like these whether the driver is security of supply or having the transparency so they can report against whatever future environmental requirements are around. PepsiCo identified from the start that it did not want to do a one-off six or 12-month project it's an ongoing programme of continuous improvement. Economically, it will benefit PepsiCo, the suppliers and the environment," he says.
ADAS was brought in to identify best practice in the potato supply chain and disseminate it through Walkers' grower groups, including the adoption of water irrigation software. No environmental targets were set, but at a corporate level PepsiCo is already a fully signed-up member of the Carbon Disclosure Programme and the Dow Jones Sustainability Index, both of which are increasingly being used by investors as a good indicator of a company's sustainability in a world of diminishing resources.
What Walkers' experiment and others like it have revealed is that when it comes to controlling emissions, no company is an island. It needs partners up and down the chain to work with it, and that requires the sort of disclosure that doesn't come naturally to private organisations as environmentally friendly products supplier Method discovered.
It adopted the Rapid Carbon Modelling software tool one of several to have come to the market recently to scope its own footprint, but found the metric was valueless if others weren't prepared to 'fess up to their own carbon emissions and energy use.
"One of the challenges of managing and improving the carbon footprint of a product is measuring it accurately in the first place," says co-founder Adam Lowry. "And a second, even more difficult challenge, is scope. How far up the supply chain can you measure your impact? Even gaining access to the information needed to measure carbon becomes very difficult.
"This is often referred to as the Scope III emissions. The tough reality is that for most products 80% to 90% of the overall carbon footprint occurs upstream and almost no one measures them. When you see carbon footprint information, it's invariably only the direct emissions associated with production of the finished product, and therefore an incomplete picture of the real carbon footprint."
Method, Severnside and Walkers are all "leaders" as opposed to "laggards", in Holmes' lexicon they understand and embrace the drive towards sustainability and are willing to work with others to achieve it. The laggards, on the other hand, just don't "get it".
For government and industry alike that's a major concern because leaders tend to be found in stable relationships in a dedicated supply chain while laggards mostly exist outside them. Unfortunately, that accounts for much of the food sector, which despite eight years of talking about better integration following the Curry Report into sustainable food and farming in 2002 is still deeply fragmented.
"With Walkers there is a clear message between end user and producer," says Holmes. "The question mark arises with those producers not directly linked into supplying a food manufacturer or retailer, because there is not a message link. Where we have this disconnect, is there going to be enough incentive to change? I'm not sure there will be."
The food industry as a whole recognises the problem. In a recent study by the Cambridge Institute of Food Manufacturing, commissioned by the FDF, companies volunteered to be beaten in the right direction by the government through the introduction of more regulation, not less. Could the compulsory nature of the CRC put them on the path to righteousness? Could it even pave the way for the UK's own compulsory green label, similar to the one planned by the French?
The FDF's Reeson says fiscal policy, ethical purchasing, and the link between reducing emissions and reducing costs, are all responsible for a step change in the way companies view and manage their supply chain relationships. He agrees that where there is already a culture of co-operation and partnership, green wins are easier. Where there isn't, having to assess food and drink's impact on the environment for the taxman or a carbon label will hasten their development.
In this at least, the CRC could turn out to be a deal maker.
"If you look at branded players and supermarkets, between them they only account for 50% of greenhouse gas emissions in the food chain." says Reeson. "The direct control of own operations of retailers and manufacturers is relatively small, so someone who is vertically integrated across the food chain is in a strong position. Where you are in a non-integrated structure it comes back to the whole area of individual supplier buyer relationships, and there is undoubtedly a need for more co-operative approaches."
Meanwhile, what the man in the aisle wants to see is one, trustworthy indication that the product he buys is causing less damage to the environment than the one on the next shelf.
The FDF supports the introduction of global assessment standards and a single, easily understood message. But progress is slow. Thailand is about to introduce labels for PET-bottled drinks, cookies, candies and CDs; South Korea has recently extended its carbon labelling programme, although products exported to the UK will carry the Carbon Trust footprint; even Andalusia has got in the act with a label for olive oil, wine and tomatoes; while Chile is looking at footprinting wine and milk products for export. Initiatives in Europe and America are looking at standardising the methods used to create such labels.
But the fog and the pressure on the food industry has not lifted. "There are arrows coming from all directions," says Reeson. "Where is it ultimately going to end up? The crystal ball is not terribly good."
Footprint labels: the state of play
Asda
Carbon Label: No
Wal-Mart helped initiate the Sustainability Consortium to develop guideline carbon assessments for products, but Asda has no plans for a carbon footprint label. It prefers to "choice edit" by continuously replacing less environmentally friendly products with greener alternatives and has carried out a carbon lifecycle assessment for milk, lamb, potatoes, chicken and eggs.
The Co-operative Group
Carbon Label: No
The Co-op Group was the first food retailer to undertake a carbon footprinting project with the Carbon Trust in 2007 for Scottish and Spanish strawberries, and went on to develop footprinting software package 'Ready Reckoner'. Its policy is not to carbon label products. Instead, it uses the software to identify carbon hotspots in the supply chain and works to reduce them.
Tesco
Carbon Label: Yes
Tesco is the first and so far only multiple among the big four to have adopted a universal carbon labelling scheme. It announced ambitious plans to put carbon counts on up to 70,000 products in 2007, but admits it underestimated the complexities. Working with the Carbon Trust it has so far managed to label fewer than 500, although that does include most everyday lines like milk.
Sainsbury's
Carbon Label: No
Sainsbury's has no plans to introduce carbon labels on any of its products, although it does work with agricultural supplier groups on driving carbon out of the chain, reducing its overall carbon footprint. When it comes to communicating its efforts to consumers, though, they are left to wade through the company's annual corporate responsibility report or trawl the website.
Marks & Spencer
Carbon Label: No
The retailer completed labelling all its air-freighted products in 2008 but has been slower to adopt carbon labelling on own-brand grocery. Its environmental strategy Plan A commits it to developing a carbon labelling scheme for consumer products and services by 2012. Meanwhile, it encourages suppliers to follow the PAS 2050 guidelines developed by the BSI Institute for assessing a product's lifecycle greenhouse gas emissions.
Morrisons
Carbon Label: No
Morrisons has not adopted carbon labelling because, like Asda, it doesn't believe it is widely understood by consumers. It also has doubts over the data behind it. "It is questionable how accurate it is due to the variables in food production and shifting sourcing patterns," a spokesperson said. However it has worked with the Carbon Trust on producing carbon metrics to enable it to identify 'carbon hotspots' in the supply chain.
Labels help French wise up to aproduct’s impact on the planet
This summer the French government broke ranks with the rest of Europe and passed legislation that pre-empts the EU's first compulsory carbon labelling scheme.
Thirty per cent of carbon emissions in France come from food retailing and production, and French consumers are fully behind the new law, says Jean-Yves Cherruault of Sustain in the UK.
"And in terms of marketing and PR, people in the food industry are very keen to adopt the labelling experiment."
The Grenelle 2 Environmental Protection Act went live in July with a voluntary phase for carbon labelling running for at least one year so producers and supermarkets can adjust. Initially, the legislation will translate as a figure on a label.
But the ambition is to include a host of sophisticated environmental indicators to create a comprehensive picture of a product's impact on the planet. Two leading chains have stolen a march by introducing their own labelling schemes. The E Leclerc group started working with LCA (Life Cycle Assessment) specialists Greenext and the environment and energy agency ADEME in 2007 to introduce carbon labelling on 20,000 food products.
It starts with lifecycle analysis of generic products in a range, then the carbon profile of all products in that range is calculated, and finally data from suppliers and distributors is used to "fine tune" and give an individual carbon footprint.
Greenext has compiled a carbon profile database of more than 500,000 household products, which allows companies to buy data "off the shelf". At E Leclerc, the carbon data is incorporated in the shelf price label rather than packaging so all products can be included and not just own label, giving customers the opportunity to compare products.
The carbon data is included in the barcode so the checkout receipt gives the total footprint of all food items purchased. The information is expressed as kilos of CO2 per CSU (consumer sales unit), so a 200g box of chocolate chip cookies is labelled 0.5 KCO2 (ie 500g CO2). The scheme is supported by a wide range of information and in-store demonstrations.
The Casino Group worked with LCA specialists BIO Intelligence Service and ADEME to create a carbon labelling scheme for its own-brand food lines in 2006, bearing the entire cost itself. So far more than 500 lines bear Casino's green leaf, which shows the grams equivalent of CO2 per 100g of product, so a 200g box of 12 cookies is labelled '305g of CO2' (ie 610g for 200g).
There is nothing in-store yet to flag up the scheme but Casino claims high customer support.
If the carbon labelling system is an indication of where Europe is with carbon generally "confused, with lots of green messages from lots of different people", as one observer puts it then the waters are about to get a whole lot muddier.
In five days the deadline for companies to submit information for what could turn out to be the most significant piece of environmental legislation ever introduced in the UK will pass. It requires all the major multiples, and most of their suppliers and distributors, to sign up to the domestic version of Europe's Emissions Trading Scheme a cap-and-trade initiative that will require at least 2,500, and possibly as many as 5,000, companies to clean up their act or pay the price in progressively more expensive CO2 permits.
The countdown for registration to the Carbon Reduction Commitment Energy Efficiency Scheme commonly referred to as the CRC has been going on since April, and many (including the Food and Drink Federation) hoped it would be parked by the incoming coalition.
But on 30 September the mountains of data and for some companies possibly pointless paper trails produced in one of the most expensive projects ever visited on the food industry will be dumped on the Department of Energy and Climate Change's desk. There it will be sifted and collated to produce a league table next October that will benchmark companies' carbon-saving performance based on their metered electricity consumption.
What's the link with the carbon label? Well, both require a degree of transparency and joined-up working that doesn't come naturally to the food industry and both are mired in confusion and inconsistency.
So says Tim Price, national commercial manager for Severnside Recycling, part of the £2.1bn David S Smith packaging group, which runs 15 recycling facilities and makes one in three boxes for transit and shelf-ready display in the UK. His 4,000 clients include Tesco, M&S, Morrisons and Sainsbury's, all of whom have had teams dedicated to the CRC for months.
Each have also taken very different views on carbon footprinting and adoption of carbon labels three out of four of them have chosen not to, leaving consumers befuddled, argues Price. "There are gaps in the carbon labelling system and I do not see that changing for a while. Clarity of message is important and carbon labelling is one way of achieving it, but many labels are pointless."
Whichever way you look at, it's a mess and the CRC is unlikely to bring any clarity to a government consultation on carbon reduction schemes this summer. Stephen Reeson, head of climate change and energy policy at the FDF, says the back office work required to prepare for the CRC has been disproportionate, given that some companies might ultimately find they were not required to register in the first place.
Even he agrees, though, that the continuing drive to deliver environmental benefits represented by legislation like the CRC has had an unexpected and welcome side effect: it's radically changing relationships in the supply chain for the better.
"Most of our clients engage with the supply chain on cost. Now there is a new platform carbon," says Jean-Yves Chaurrault, environmental accounting manager for Sustain, which has worked with Kingsmill, The Co-operative Group and others on carbon reduction and labelling.
"There is a link between the Carbon Trust label and the CRC. It's a reduce or lose label you have to reduce the carbon footprint on the product over two years or lose it. And if you do something to reduce the carbon footprint of bread you can also reduce your CRC emissions costs."
Like the label, the CRC league table will expose companies to greater scrutiny not only to consumers, but also investors, the taxman and, of course, competitors. "Tesco and Sainsbury's will be interested to see where they are against each other," observes Chaurrault. Mark Holmes, head of sustainability and principal consultant with environmental solution provider ADAS, agrees that the only way for companies to maintain their green credentials is to snuggle up to a supply chain partner.
PepsiCo used ADAS to help it get into bed with a handful of potato suppliers for its Walkers crisp brand last year and is now playing carbon footsie with all 40 of its growers. Having worked with the Carbon Trust to introduce the footprint label to crisp packets three years ago, Walkers says this isn't a one-night stand to make the Corporate Social Responsibility document look good. It's settling into a stable, environmentally beneficial relationship for life, says Holmes, whose team is working with another 11 food companies on similar projects. He says Walkers' is a model others would do well to follow.
"Ultimately, food manufacturers will have to develop more relationships like these whether the driver is security of supply or having the transparency so they can report against whatever future environmental requirements are around. PepsiCo identified from the start that it did not want to do a one-off six or 12-month project it's an ongoing programme of continuous improvement. Economically, it will benefit PepsiCo, the suppliers and the environment," he says.
ADAS was brought in to identify best practice in the potato supply chain and disseminate it through Walkers' grower groups, including the adoption of water irrigation software. No environmental targets were set, but at a corporate level PepsiCo is already a fully signed-up member of the Carbon Disclosure Programme and the Dow Jones Sustainability Index, both of which are increasingly being used by investors as a good indicator of a company's sustainability in a world of diminishing resources.
What Walkers' experiment and others like it have revealed is that when it comes to controlling emissions, no company is an island. It needs partners up and down the chain to work with it, and that requires the sort of disclosure that doesn't come naturally to private organisations as environmentally friendly products supplier Method discovered.
It adopted the Rapid Carbon Modelling software tool one of several to have come to the market recently to scope its own footprint, but found the metric was valueless if others weren't prepared to 'fess up to their own carbon emissions and energy use.
"One of the challenges of managing and improving the carbon footprint of a product is measuring it accurately in the first place," says co-founder Adam Lowry. "And a second, even more difficult challenge, is scope. How far up the supply chain can you measure your impact? Even gaining access to the information needed to measure carbon becomes very difficult.
"This is often referred to as the Scope III emissions. The tough reality is that for most products 80% to 90% of the overall carbon footprint occurs upstream and almost no one measures them. When you see carbon footprint information, it's invariably only the direct emissions associated with production of the finished product, and therefore an incomplete picture of the real carbon footprint."
Method, Severnside and Walkers are all "leaders" as opposed to "laggards", in Holmes' lexicon they understand and embrace the drive towards sustainability and are willing to work with others to achieve it. The laggards, on the other hand, just don't "get it".
For government and industry alike that's a major concern because leaders tend to be found in stable relationships in a dedicated supply chain while laggards mostly exist outside them. Unfortunately, that accounts for much of the food sector, which despite eight years of talking about better integration following the Curry Report into sustainable food and farming in 2002 is still deeply fragmented.
"With Walkers there is a clear message between end user and producer," says Holmes. "The question mark arises with those producers not directly linked into supplying a food manufacturer or retailer, because there is not a message link. Where we have this disconnect, is there going to be enough incentive to change? I'm not sure there will be."
The food industry as a whole recognises the problem. In a recent study by the Cambridge Institute of Food Manufacturing, commissioned by the FDF, companies volunteered to be beaten in the right direction by the government through the introduction of more regulation, not less. Could the compulsory nature of the CRC put them on the path to righteousness? Could it even pave the way for the UK's own compulsory green label, similar to the one planned by the French?
The FDF's Reeson says fiscal policy, ethical purchasing, and the link between reducing emissions and reducing costs, are all responsible for a step change in the way companies view and manage their supply chain relationships. He agrees that where there is already a culture of co-operation and partnership, green wins are easier. Where there isn't, having to assess food and drink's impact on the environment for the taxman or a carbon label will hasten their development.
In this at least, the CRC could turn out to be a deal maker.
"If you look at branded players and supermarkets, between them they only account for 50% of greenhouse gas emissions in the food chain." says Reeson. "The direct control of own operations of retailers and manufacturers is relatively small, so someone who is vertically integrated across the food chain is in a strong position. Where you are in a non-integrated structure it comes back to the whole area of individual supplier buyer relationships, and there is undoubtedly a need for more co-operative approaches."
Meanwhile, what the man in the aisle wants to see is one, trustworthy indication that the product he buys is causing less damage to the environment than the one on the next shelf.
The FDF supports the introduction of global assessment standards and a single, easily understood message. But progress is slow. Thailand is about to introduce labels for PET-bottled drinks, cookies, candies and CDs; South Korea has recently extended its carbon labelling programme, although products exported to the UK will carry the Carbon Trust footprint; even Andalusia has got in the act with a label for olive oil, wine and tomatoes; while Chile is looking at footprinting wine and milk products for export. Initiatives in Europe and America are looking at standardising the methods used to create such labels.
But the fog and the pressure on the food industry has not lifted. "There are arrows coming from all directions," says Reeson. "Where is it ultimately going to end up? The crystal ball is not terribly good."
Footprint labels: the state of play
Asda
Carbon Label: No
Wal-Mart helped initiate the Sustainability Consortium to develop guideline carbon assessments for products, but Asda has no plans for a carbon footprint label. It prefers to "choice edit" by continuously replacing less environmentally friendly products with greener alternatives and has carried out a carbon lifecycle assessment for milk, lamb, potatoes, chicken and eggs.
The Co-operative Group
Carbon Label: No
The Co-op Group was the first food retailer to undertake a carbon footprinting project with the Carbon Trust in 2007 for Scottish and Spanish strawberries, and went on to develop footprinting software package 'Ready Reckoner'. Its policy is not to carbon label products. Instead, it uses the software to identify carbon hotspots in the supply chain and works to reduce them.
Tesco
Carbon Label: Yes
Tesco is the first and so far only multiple among the big four to have adopted a universal carbon labelling scheme. It announced ambitious plans to put carbon counts on up to 70,000 products in 2007, but admits it underestimated the complexities. Working with the Carbon Trust it has so far managed to label fewer than 500, although that does include most everyday lines like milk.
Sainsbury's
Carbon Label: No
Sainsbury's has no plans to introduce carbon labels on any of its products, although it does work with agricultural supplier groups on driving carbon out of the chain, reducing its overall carbon footprint. When it comes to communicating its efforts to consumers, though, they are left to wade through the company's annual corporate responsibility report or trawl the website.
Marks & Spencer
Carbon Label: No
The retailer completed labelling all its air-freighted products in 2008 but has been slower to adopt carbon labelling on own-brand grocery. Its environmental strategy Plan A commits it to developing a carbon labelling scheme for consumer products and services by 2012. Meanwhile, it encourages suppliers to follow the PAS 2050 guidelines developed by the BSI Institute for assessing a product's lifecycle greenhouse gas emissions.
Morrisons
Carbon Label: No
Morrisons has not adopted carbon labelling because, like Asda, it doesn't believe it is widely understood by consumers. It also has doubts over the data behind it. "It is questionable how accurate it is due to the variables in food production and shifting sourcing patterns," a spokesperson said. However it has worked with the Carbon Trust on producing carbon metrics to enable it to identify 'carbon hotspots' in the supply chain.
Labels help French wise up to aproduct’s impact on the planet
This summer the French government broke ranks with the rest of Europe and passed legislation that pre-empts the EU's first compulsory carbon labelling scheme.
Thirty per cent of carbon emissions in France come from food retailing and production, and French consumers are fully behind the new law, says Jean-Yves Cherruault of Sustain in the UK.
"And in terms of marketing and PR, people in the food industry are very keen to adopt the labelling experiment."
The Grenelle 2 Environmental Protection Act went live in July with a voluntary phase for carbon labelling running for at least one year so producers and supermarkets can adjust. Initially, the legislation will translate as a figure on a label.
But the ambition is to include a host of sophisticated environmental indicators to create a comprehensive picture of a product's impact on the planet. Two leading chains have stolen a march by introducing their own labelling schemes. The E Leclerc group started working with LCA (Life Cycle Assessment) specialists Greenext and the environment and energy agency ADEME in 2007 to introduce carbon labelling on 20,000 food products.
It starts with lifecycle analysis of generic products in a range, then the carbon profile of all products in that range is calculated, and finally data from suppliers and distributors is used to "fine tune" and give an individual carbon footprint.
Greenext has compiled a carbon profile database of more than 500,000 household products, which allows companies to buy data "off the shelf". At E Leclerc, the carbon data is incorporated in the shelf price label rather than packaging so all products can be included and not just own label, giving customers the opportunity to compare products.
The carbon data is included in the barcode so the checkout receipt gives the total footprint of all food items purchased. The information is expressed as kilos of CO2 per CSU (consumer sales unit), so a 200g box of chocolate chip cookies is labelled 0.5 KCO2 (ie 500g CO2). The scheme is supported by a wide range of information and in-store demonstrations.
The Casino Group worked with LCA specialists BIO Intelligence Service and ADEME to create a carbon labelling scheme for its own-brand food lines in 2006, bearing the entire cost itself. So far more than 500 lines bear Casino's green leaf, which shows the grams equivalent of CO2 per 100g of product, so a 200g box of 12 cookies is labelled '305g of CO2' (ie 610g for 200g).
There is nothing in-store yet to flag up the scheme but Casino claims high customer support.
![TGK-05.09.24-3477[12]](https://dmrqkbkq8el9i.cloudfront.net/Pictures/380x253/2/6/2/340262_tgk05.09.24347712_514256_crop.jpg)
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