A value chain analysis helps you determine where the most emissions in your chain occur and where the greatest reduction opportunities lie. This analysis is an important instrument within the CO₂ Performance Ladder for giving substance to ‘cross-scope’ thinking. In this blog we explain how, both within and beyond the boundaries of your own organisation, you investigate how you can really make an impact.
A value chain analysis is an inventory and analysis of the CO₂ emissions that occur in the value chain in which your organisation is active. The aim of such an analysis is to give you insight into the size and origin of these emissions and the options you have to limit them. This can be done, for example, by adjusting production processes, material and design choices, and by collaborating with partners in the value chain.
For Step 2 and 3 of the CO₂ Performance Ladder you are required to produce a value chain analysis. The value chain analysis is, to a large extent, decisive for other elements and requirements of the Ladder. The outcome of the analysis forms, for example, the basis for the choices you make in your Climate Transition Plan and the translation of these into the short term, the action plan.
If you are certified at Level 4 or 5 of version 3.1 of the CO₂ Performance Ladder, you will already have come across the term value chain analysis. The version 4.0 analysis differs from its predecessor on two important points:
To determine the most important activities you carry out an impact and influence analysis, following these three steps:
After determining the most important activities, you can start drawing up your value chain analysis. Again, you do this step by step.
Every year you review your value chain analysis to check whether it is still up to date. If changes have taken place, for example as regards the most important activities, you adjust your value chain analysis. At a recertification audit – which takes place every three years – you are required to update the value chain analysis.
Another aspect of the value chain analysis is external communication. This means that you publish your value chain analysis on your own and the CO2 Performance Ladder websites. The aim of this is that you are accountable, show that you are transparent, and that other organisations can learn from your value chain analysis.
Although we strive for maximum transparency, we do not expect you to share commercially sensitive information. If, on grounds of sensitivity, you leave something out, such as the name of a supplier, you must clearly indicate that you are omitting something. You may, where relevant, also indicate what type of company is involved.
“The value chain analysis of CO₂ Performance Ladder 4.0 maps even more broadly what the emissions are within scope 3 and beyond, and what influence your organisation has to reduce emissions together with your value chain partners.”
Tijmen de Groot, SKAO
For mapping the emissions of your value chain partners, you can use two methods: spend-based and activity-based.
With spend-based, you calculate the emissions by linking your expenditure per category to macro-economic key figures for CO₂ emissions. The advantage of this method is that it is relatively simple and aligns with your accounts. The disadvantage is that the method works with national average figures and is therefore imprecise. This makes the method suitable for a hotspot analysis, but not for setting targets, monitoring and comparing services or products within a category.
With activity-based, you look at the emissions per activity, such as the purchase of material or equipment. You multiply this activity by CO₂ information from an Environmental Product Declaration (EPD) or a life cycle assessment (LCA) from your supplier. Due to its high accuracy, this method is very well suited to comparing products and suppliers, setting concrete targets and monitoring. A limitation, however, is that in many sectors it is difficult to obtain EPD or LCA information.
The activity-based method is therefore the most accurate for a value chain analysis, but because of the limited data in many sectors it is still very complex. To make the step from spend-based to activity-based, you can use an intermediate method: company spend-based, in other words company-specific spend-based.
With company-specific spend-based, you divide the climate impact of your supplier by the turnover of your purchasing from this supplier. Instead of a macro-economic average, you therefore use company-specific information, but still spend-based. This method is especially suitable for an analysis of suppliers from which you purchase many different services and/or products.
Your value chain analysis does not have to be perfect straight away. Especially with many different suppliers, it will not be possible to make everything activity-based at once. The best way is to work, in a multi-year programme, from a hotspot analysis using spend-based, via company spend-based, towards activity-based. In doing so, you aim to begin with your most important suppliers and suppliers that already have a lot of information about their emissions available.
It can sometimes take a long time to get the required information from your suppliers out into the open. For example, because you are referred to various departments at a supplier, or because a company does not have its emission figures well mapped or does not make them available. It helps to sit down with companies, so that in the following years they may have the figures in order and make them public. You can also obtain figures from financial and environmental annual reports.
“It is important to work out carefully which part of your scope 3 emissions you make activity-based to begin with, and what you leave somewhat more general at the start. If you want to do everything in detail in one go, you will get completely stuck.”
Geert Bergsma, CE Delft
In the webinar below, Tijmen de Groot, project leader of CO₂ Performance Ladder 4.0, explains what a value chain analysis is and how you draw one up. In addition, Geert Bergsma of CE Delft explains how the spend-based and activity-based method, and a variant on these, can help you in mapping the emissions of your purchases.
In the video (with English subtitles), the speakers also answer questions from companies and organisations that attended the session. The most important questions asked are addressed in the FAQ below. If you still have questions after watching the webinar session, please contact us.
A value chain analysis maps out where within an organisation’s chain the greatest climate impact arises, and where the opportunities to exert influence lie.
The analysis helps organisations to:
Within the CO₂ Performance Ladder, the value chain analysis is an important tool for value chain management and collaboration.
A value chain analysis is important because, for many organisations, most emissions arise outside the organisation itself, for example through purchased materials, transport, suppliers, subcontractors, the use phase of products or waste processing. For some organisations, however, the greatest emissions lie within the organisation itself. A value chain analysis shows where the greatest emissions arise and where the greatest opportunities lie to reduce them, regardless of whether this concerns scope 1, 2 or 3 emissions or OIE. This allows organisations to focus their efforts on the parts of the value chain where the most climate gains can be achieved.
This is determined through the impact and influence analysis (I&I analysis). It is important that the chains examined together account for at least half of the organisation’s total scope 1, 2 and 3 emissions.
No. A value chain analysis does not need to be complete or worked out in full detail, but it must provide sufficient insight into the main sources of emissions and the opportunities to influence them. The required depth depends on the complexity of the chain, the data available, the influence the organisation can exert within the chain, and the purpose of the analysis.
How far back and forward you need to look in the chain depends on the specific value chain. The analysis is in any case not limited to the organisation’s direct customers or suppliers. Generally, both the upstream and downstream chain are considered. Upstream includes the extraction of raw materials, suppliers, production and transport. Downstream focuses on the use of products or services, maintenance, service life and end-of-life processing. The focus should be on the parts of the chain where the greatest emissions arise, or where the organisation has the most scope to exert influence.
A value chain analysis must be proportionate. What matters most is that it is clear where the main emissions arise, which assumptions underpin the analysis, which parties form part of the value chain, and where the main reduction opportunities lie. Perfect or fully precise data are not always necessary. Transparency about the assumptions, data sources and uncertainties used is more important than a fully watertight calculation.
It regularly happens that insufficient data are available to base a value chain analysis entirely on primary data. In such cases, organisations can use sector data, emission factors, benchmark figures, studies from comparable chains, or estimates based on the information available. It is important to properly document the assumptions and uncertainties used, and to update the analysis periodically as better data becomes available. Where missing data proves material to the analysis of the chain, the organisation is also expected to actively work on improving data quality.
This is not mandatory, but collaboration with suppliers is often essential.
Many organisations start by:
A value chain analysis can help strengthen this collaboration.
Uncertainties are unavoidable in a value chain analysis. These can arise, for example, from missing data, changing emission factors, changing production methods, or complex international supply chains. It is therefore important to be transparent about the assumptions used, the quality of the available data, and the main uncertainties in the analysis. Explicitly describing these aspects makes clear how the results were arrived at, and where any limitations or opportunities for improvement lie.
Although we have replaced this term in Handbook 4.0 with the more general term ‘collaboration’, the underlying concept remains relevant. A value chain initiative is a collaboration between several parties aimed at reducing emissions within the chain.
Examples include:
Within the CO₂ Performance Ladder, collaborations play an important role in achieving impact beyond an organisation’s own boundaries.
It regularly happens that an organisation has only limited influence over its value chain partners. It is precisely in this situation that collaboration and dialogue within the chain matter most. Organisations can, for example, raise sustainability during tenders, encourage suppliers to provide emissions data, set up joint improvement projects, or take part in and contribute to sector initiatives. Even with limited direct influence, organisations can still make an important contribution to emission reduction within the chain.
A value chain analysis is not a one-off exercise. Each year, the organisation checks whether there are relevant changes in its impact and influence analysis or in its direct relationships that would warrant revision. In addition, before every initial audit and every three years, it examines whether there is reason to renew the value chain analysis or analyses in full.
This keeps the analysis current and useful for decision-making.
Yes.
Smaller organisations, too, have influence over their chain, for example through purchasing, material choices or collaboration with suppliers.
The scope of the analysis can be adapted to the size and complexity of the organisation and the number of value chains in which it operates.
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