Supply Chain Sustainability: Business Processes for the Carbon Footprint

Raymond Boykin

Brian Hider

Greg Turcotte

California State University, Chico

Abstract

In order to make superior business decisions in the area of sustainability, one must have

real time data on the critical parameters. In this paper, our goal is to define business

processes to assist in development of a methodology to calculate the CO2e (carbon

dioxide equivalent) footprint over the entire supply chain of a food production process

(field to table). The process of defining these business processes is directly transferable

to other industries as they attempt to measure sustainability parameters for their supply

chains.

I. Introduction

The topics of sustainability and global warming are considered by many to be

critical issues needing immediate attention. This has led to calls for numerous rules and

regulations to reduce our carbon footprint. In addition to the regulatory environment, we

are currently inundated with advertising campaigns on who has the “greenest” product.

This has created concerns among some that these claims of being green may be more

sizzle than substance.

A research project was launched through a partnership of SAP Research and

California State University, Chico College of Business to investigate the potential of

developing software involving integration of sustainable business processes into the SAP

ERP software suite. SAP is the world’s largest business software company and the third

largest independent software supplier with annual sales over $15 billion in 2007.

The primary goal of this research project was to first define the processes in the

supply chain of a food producer (rice) and then development a methodology to measure

the CO2e footprint of these processes. From this point our research will move into the

integration of this methodology into the use of enterprise software to automate the

calculation of the CO2e for a product. Initial results of the second goal will be included

at the end of this paper.

This research project focused on the emerging trend across industries to study,

track and manage environmental parameters of the entire lifespan of goods and service

across the entire supply chain. UK based retailer Tesco announced in early 2007 that it

plans to put carbon labels on all its 70,000 food lines

(http://www.tesco.com/greenerliving). Tesco is using a methodology called Life Cycle

Analysis, putting a greenhouse gas cost on every element of a product’s move from farm

to plate. Wal-Mart announced that it will assess and manage the energy footprint of its

suppliers (http://www.cdproject.net/wal-mart-case-study.asp). It will be assisted by UK

based Carbon Disclosure Project (CDP).

As these companies found out, tracking carbon footprint information across the

entire supply and delivery chain is a task of enormous complexity. The motivation of this

project was to start on smaller scale with the expectation that the results can be applicable

to more complex environments.

Our research project investigated the tracking and managing of environmental

parameters (not only the carbon footprint) across the entire lifespan of products including

farming, production, transportation, distribution, retail and recycling. We gave specific

attention to the best practices as developed by the commercial partners. The investigation

was based on the Carbon Trust’s “Carbon Footprint Measurement Methodology”

(http://www.carbon-label.co.uk/pdf/methodology_full.pdf ).

Based on the Carbon Trust “Carbon Footprint Measurement Methodology,” and

the Carnegie Mellon Green Design Institute “Input/Ouput Environmental Model”

business process maps were developed for a large portion of the supply chain. These

maps and models were then used to calculate the carbon equivalent footprint for a food

products manufacturer.

II. Literature Survey

The definition of sustainability or sustainable development is often attributed to

the Brundtland Commission (UN, 1987). The definition adopted by the United Nations

reads, "Sustainable development is development that meets the needs of the present

without compromising the ability of future generations to meet their own needs."

The research in this paper focuses primarily on the carbon footprint of the supply

chain. Recent research has indicated that a majority of the carbon footprint of a product

is caused by indirect emissions, outside the supply chain processes controlled by the

organization, so that understanding the total supply chain carbon footprint of a product is

very important (Matthews et al, 2008). The role of supply chain optimization is also

important in reducing the carbon footprint of products and services (Udell, 2006).

There are a very limited number of articles on the calculation of the carbon

footprint for a product’s supply chain (Rowzie, 2008; Karabell, 2008; Matthews et al,

2008). However, none of these articles suggest the use of enterprise software as a means

of automating the calculation of the supply chain carbon footprint.

The number of articles on the topic of sustainability or sustainable development

exceeds 50,000 (Litton et al, 2007). However, the number of articles related to supply

chain sustainability is much smaller, less than 200 published papers from 1994 to 2007

(Seuring and Muller, 2008). A majority of the papers published on supply chain

sustainability focus more on the environmental issues with very few papers examining

the social or triple bottom line.

The first question that needs to be answered is whether the concept of supply

chain sustainability is mature enough to allow for the development of models and

assessment methodologies. One issue that often arises concerns media-hype versus

science (Wildavsky, 1995). However, with the Dow Jones launching a sustainability

index in 1999, this seems to validate of the reality of this issue

(http://www.sustainability-index.com, 2008).

There are a very limited number of articles addressing the “triple bottom line”

definition of sustainability. Some research has been done in the areas of operations and

sustainability (Kleindorfer et al, 2005). Also, there are some cases dealing with supply

chain sustainability (Diniz and Fabbe-Costes, 2007; Koplin et al, 2007; Matos and Hall,

2007; Roberts, 2003; Yakoleva, 2007). These cases include both food, energy and

manufactured products.

III. Methodology Review

The methodology employed on this project involved using the Carbon Trust

model in conjunction with the Carnegie Mellon EIO-LCA Model (Economic Input-

Output Life Cycle Assessment) (http://www.carbontrust.co.uk, 2008;

http://www.eiolca.net, 2008). The Carbon Trust model has been adopted by many

companies and is seen as the industry standard leader (Prickett, 2008).

Carbon Trust Model

The supply chain carbon assessment model developed by the Carbon Trust involves

five steps (http://www.carbontrust.co.uk, 2008).

Analyze internal product data

Build supply chain process map

Define boundary conditions and identify data requirements

Collect primary and secondary data

Calculate carbon emissions by supply chain process steps

The Carbon Trust model encompasses the entire life cycle and supply chain of a

product. Model framework, boundaries, and scope are well defined. The Carbon Trust

is working with several international standard organizations in an attempt to have their

model become the standard for supply chain carbon foot printing of a product.

Economic Input-Output Life Cycle Assessment (EIO-LCA)

In 1995 researchers at Carnegie Mellon University adapted the work of Nobel

Economist Wassily Leontief on economic input-output models to estimate the

environmental emissions from a product or service over the supply chain

(.http://www.eiolca.net, 2008). The models developed by the Green Design Institute of

Carnegie Mellon University are available online for free non-commercial use.

Through the use of EIO-LCA models, one can assess the resource and emissions

impact over the entire supply chain (from raw material to finished product). These

models allow for a much more efficient process of analysis and calculations as compared

to an approach where the business process must be assessed at each step and all

connecting processes to that step. For example, the production of a pencil requires the

assessment of the pencil production process, the wood component production process,

and all the processes associated with obtaining the pencil lead, and so on. This would be

a very complex and time consuming assessment, but the EIO-LCA models handle this for

us.

IV. Process Maps and CO2e Calculations

Process Maps

To calculate the carbon footprint for the entire supply chain a process map of the

supply chain needs to be developed. An example of a supply chain for the manufacturing

of milled rice is provided here for discussion purposes (Figure 1). The research study

was focused on food production and a product was selected that was expected to have a

simple supply chain process.

Figure 1 Milled Rice Supply Chain

CO2e Calculations

The data analysis was done using the EIO-LCA model from Carnegie Mellon.

The approach applied on this project involved separating the manufacturing processes

from the direct emissions resulting from electricity and fuel consumption. A four step

process was applied that (1) quantified the energy consumption and/or greenhouse gas

released during a process step, (2) converted energy use and/or greenhouse gases into

CO2e using emission coefficients, (3) calculated using the EIO-LCA model the amount

of CO2e resulting from the extraction, refining and distribution of the different energy

sources and raw materials, and (4) sum the results from steps 2 and 3 to give a total CO2e

for the given process.

The aggregate production process is broken into three major components and sub

components under each of the three major process steps. The major components are (1)

raw materials, (2) manufacturing, and (3) distribution. The production process for the

rice cakes is provided in Figure 2. The data collection and analysis was performed at

each sub component level using the 4 step process described previously.

Fertilizer Initial Processing Shipping

Farming Operations Milling

Energy Rice Cake Manufacturing

Plant Respiration Packaging

Storage

Figure 2 Rice Cake Production Process

In order to assess possible differences in the EIO-LCA model and actual farming

operations for paddy rice a direct data collection of CO2e emissions was also performed

using both primary operations data and secondary source data (i.e., industry standards).

Raw Materials DistributionManufacturing

V. Results and Conclusions

Using the EIO-LCA model for grain farming the results indicate the farming

operations by far are the biggest contributor to CO2e emissions. However, a majority of

these emissions are part of the natural process of growing grain. When the data from

actual rice growing operations is used, the results are very similar to the EIO-LCA model.

The biggest difference is that growing paddy rice in flooded fields increases the amount

of methane released to the atmosphere. Table 1 provides the comparison between the

EIO-LCA model for generic grain farming and the calculated values from an actual

paddy rice operation in California.

Fertilizer and Plant Respiration

Energy - Equipment

Energy - Operations

Generic Grain Farming

88% 3% 9%

Paddy Rice 97% 2% 1%

Table 1 – CO2e Emissions (Farming Operations)

The key contributors to the carbon footprint for rice cake production are the

natural processes involved in growing the rice. However, the manufacturing process for

rice cakes does increase the percentage of non-natural emissions when compared to the

farming and processing of paddy rice (primary ingredient in rice cakes). The milled rice

CO2e component is included in the rice cake CO2e calculations. The reason for a

smaller growing CO2e number is that the rice is popped in the rice caking manufacturing

process, thereby using less poundage of milled rice.

The following tables (Table 2 and 3) provide the summary results of paddy rice

and rice cake carbon footprint estimates.

Growing Manufacturing Packaging DistributionMilled Rice (per pound)

1925g CO2e 52g CO2e 114g CO2e

Rice Cakes (per pound)

1164g CO2e 188g CO2e 180 CO2e 88g CO2e

Table 2 – Total Carbon Footprint Breakdown

These results give a total CO2e for milled rice of 2091g per pound of rice and a

total CO2e of 1620g per pound of rice cakes. Of this total CO2e for milled rice 92% is

from the farming process which is primarily natural emissions. When we remove the

natural occurring emissions from the growing operation the carbon footprint is very

different (Table 3).

Growing Manufacturing Packaging DistributionMilled Rice (per pound)

60g CO2e 52g CO2e 114g CO2e

Rice Cakes (per pound)

36g CO2e 188g CO2e 180 CO2e 88g CO2e

Table 3 – Carbon Footprint Breakdown without Natural Processes

The results here show a carbon footprint of only 226g CO2e for a pound of milled

rice and 492c CO2e for a pound of rice cakes. This is a significant difference from the

total carbon footprint, 89% reduction for milled rice and a 70% reduction for rice cakes.

This raises the question as to which number should be reported if a product were to have

a carbon footprint label.

Future Research and Issues

This paper has presented the first phase of a multi-phased research product

involving the development of methodologies for the estimation of the carbon footprint of

a product across the entire supply chain. Through this project phase the estimation of the

carbon footprint of a product was completed. These estimations were performed using

both the EIO-LCA model from Carnegie Mellon and direct calculations from a rice

farming operation in California. Comparison of the results showed that the EIO-LCA

model did provide a good generic estimate, but the factors of individual operations need

to be considered.

However, the results of this research may raise more questions than it answered.

How do we integrate natural processes into the estimation of carbon footprint over

a product’s supply chain?

Will the inclusion of CO2e emissions for natural processes bias the analysis when

it comes to food products, especially organic food products?

How can an automated approach be implemented that will calculate a products

carbon footprint efficiently and accurately?

The first two questions will need to be addressed by policy makers, hopefully with

the input of experts in this field. The last question provided the motivation for phase 2 of

this project. In the next phase of this project, the use of enterprise systems in the

calculation and tracking of CO2e for a product across the entire supply chain will be

studied. The initial results of phase 2 of this project indicate that through the use of SAP

ERP software, the CO2e calculations can be performed. The initial process proposed for

doing this involves creating a material master for CO2e and attaching CO2e values

through the production planning and order steps. CO2e would be included as a

component in the bill of materials and summed throughout the internal supply chain.

Preliminary tests of this business process indicate that CO2e can be tracked as an

inventory item and CO2e amounts can be assigned at the individual product level.

VI. References

http://www.carbontrust.co.uk

http://www.cdproject.net/wal-mart-case-study.asp

http://www.eiolca.net/index.html

http://www.sustainability-index.com/

http://www.tesco.com/greenerliving/what_we_are_doing/carbon_labelling.page?

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Kleindorfer, P., K. Singhal, and L. van Wassenhove, “Sustainable Operations Management,” Production and Operations Management, Vol. 14 (4), 2005, 482-492.

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Seuring, S. and M. Müller, “From a Literature Review to a Conceptual Framework for Sustainable Supply Chain Management,” Journal of Cleaner Production, Vol. 16 (15), 2008, 1699-1710.

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