Insight into your value chain: getting started with a value chain analysis 

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. 

Basis for the Climate Transition Plan 

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. 

Difference from the chain analysis in Handbook 3.1 

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: 

• The 4.0 value chain analysis is broader than for 3.1. Under 3.1 it was only required (for Level 4 and 5) to map scope 3 emissions upstream and downstream, but in the updated version you must look more broadly still. For Step 3, even beyond your direct value chain, to other influenceable emissions (OIEs). Given this broad view, the 4.0 value chain analysis is cross-scope. 
• The second difference is the way in which you carry out the analysis. Whereas in the old version organisations looked at the most important topics on the basis of a PMC (product-market combination) analysis, in the 4.0 value chain analysis the focus is on the most important activities of your organisation. 

Determining the most important activities 

To determine the most important activities you carry out  an impact and influence analysis, following these three steps: 

• Step 1: Draw up a list of self-selected activities. You can do this at a higher level of abstraction or in a more detailed way. 
• Step 2: Establish a ranking using various criteria, such as the emissions volume, the influence you have and the risks you run if you were to omit that activity. For Step 3 you also include the OIEs in the ranking. 
• Step 3: Select from the list the most important activities on the basis of emissions. You do this by adding up the emissions and assigning (allocating) them to activities, such as design, advice/consultancy, construction or demolition. Together, the most important activities must contain at least half of your scope 3 emissions. 

Drawing up the value chain analysis 

After determining the most important activities, you can start drawing up your value chain analysis. Again, you do this step by step. 

• Step 1: Map your direct relationships. Here you look at the customers and suppliers you work with. 
• Step 2: Map the value chain in broad strokes.  
• Step 3: Allocate or calculate the emissions of the value chain. 
• Step 4: Indicate why a particular party is important for your organisation and for what proportion this party is responsible for your scope 1, 2 or 3 emissions and, where applicable (at Step 3), your OIEs.
• Step 5: Carry out an analysis of your reduction options. For Step 2 you do this for the medium term (5–10 years); for Step 3 also for the long term (2050). 

Updating the value chain analysis 

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. 

Communicating about 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

Spend-based and activity-based method 

For mapping the emissions of your value chain partners, you can use two methods: spend-based and activity-based. 

Spend-based method 

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. 

Activity-based method 

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. 

Intermediate method: company spend-based 

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. 

Working step by step towards activity-based 

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. 

Tip: get started in good time 

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

Webinar ‘Understanding your supply chain: getting started with a value chain analysis’ (with English subtitles)

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. If you still have questions after watching the webinar session, please contact us. 

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