Decarbonization in Industrial Processes and in the Supply Chain
By: Nicolás Bodek
In the complex dance of industrial production and the global supply chain, industrial processes have left a profound environmental footprint. From raw material extraction to manufacturing and distribution, each step contributes to greenhouse gas emissions and global warming.
At the heart of the response to climate change is the obvious but uncomfortable answer: decarbonization. Decarbonizing industry not only has the potential to mitigate harmful emissions, but to open the door to a more sustainable economic model. Redefining the way we produce and distribute goods is crucial to creating a future where economic prosperity is balanced with respect for our environment, forging a path toward sustainability and climate resilience.
In the complex mosaic of greenhouse gas emissions, different industrial sectors shape the environmental landscape. As we can see in Figure 1, energy production and manufacturing industry top the list, being responsible for at least 59.2% of global emissions. However, agriculture, transportation and construction also play crucial roles; accounting for 18.4%, 16.3% and 3% of global emissions respectively.
What does this data tell us? That our greatest needs as humans (food, light, clothing, mobility, housing), if not met with sustainable processes, will also be great enemies of the environment in which we live.
Fig. 1 Greenhouse gas emissions by sector, from Our World in Data.
Sectors such as cement and steel production are particularly carbon intensive. In other words, to continue consuming at current levels, we must find cleaner ways to produce them. These sectors, often seen as the pillars of the global economy, face the challenge of transforming towards more sustainable practices, as their pursuit of immediate economic results undermines the vision of operational efficiencies in the medium term. However, innovation, adoption of clean technologies and collaboration are essential to facilitate the path towards a more climate-friendly industrial transition and a greener global economy.
One of the most interesting insights from the footprint distribution shown in the Our World in Data graph is that 73% of the carbon footprint is electrifiable. This means that we can change combustion processes to electric processes. As long as we achieve a 100% renewable energy generation mix, this will be the path with the greatest reductions in the impact we have today. There are many challenges to achieving this milestone, but there are also many people who are looking for the solutions.
On the other hand, one of the most significant obstacles faced by industries in Latin America is the lack of comprehensive knowledge on how to address the reduction of their carbon footprint. From accurately measuring emissions to identifying effective decarbonization strategies and projects, many companies lack the necessary guidance.
The inherent complexity of these processes often leaves companies undecided about where to start and how to move forward. There are already emerging technologies that help these companies make their path to decarbonization easier and faster, such as digital decarbonization platforms.
Reducing the carbon footprint of industries is a challenging issue, marked by common obstacles. Resistance to change, initial investment, lack of clear regulations and the complexity of industrial processes are other major challenges. Overcoming these obstacles requires a multifaceted approach and proactive collaboration at both the corporate and governmental levels.
Despite these challenges, there is a growing array of strategies and technologies that industries are adopting to reduce their environmental impact. Transitioning to renewable energy sources, optimizing processes to improve energy efficiency, implementing sustainable waste management practices and investing in carbon capture technologies are some of the most common solutions. These strategies, backed by technological innovation and expert guidance, can pave the way for companies to meet and overcome challenges on their path to decarbonization.
Decarbonizing direct emissions from industry is very important, however, the supply chain of these emissions often represents a much greater impact. According to the World Resources Institute (WRI), on average 75% of industry’s carbon footprint is in its supply chain.
The supply chain triggers a significant environmental impact throughout various stages, from the extraction of raw materials to the distribution of final products. Assessing this impact involves understanding greenhouse gas emissions, natural resource use and other key indicators. Transparency and measurement are essential to identify critical areas and develop effective decarbonization strategies.
Figure 2 shows the distribution of the carbon footprint in different sectors by the 3 scopes measured in the GHG Protocol methodology. This figure from the Carbon Disclosure Project (CDP) shows that Scope 3 predominates in most sectors as the scope with the highest emissions. Scope 3 is totally related to the supply chain.
Fig.2 Carbon footprint distribution by CDP GHG Protocol scope.
Close collaboration between suppliers and customers is proving to be a fundamental pillar in achieving a truly sustainable supply chain. This approach requires open communication and a shared understanding of sustainability objectives. From selecting suppliers committed to sustainable practices to optimizing shipping routes to reduce carbon footprint, collaboration helps create more efficient and responsible supply chains. Implementing sustainable practices throughout the supply chain not only benefits the environment, but also adds value to the brand and responds to growing consumer demand for environmentally conscious products and services.
The main challenge in Latin America is the lack of sustainability knowledge within large, medium and small companies. Large international companies, obliged to report emissions by local regulation, are faced with the arduous task of educating their suppliers to ensure that they can reduce their emissions and together achieve the long-awaited Net Zero.
This process usually starts by identifying the maturity level of the different suppliers, categorizing them and inviting them to take the first steps on the road to decarbonization, the measurement of the carbon footprint. Subsequently, the aim is for these companies to identify their critical emission sources and areas of opportunity, and to develop and execute a decarbonization roadmap. Access to financing can be an additional challenge, but financial institutions have already begun to offer preferential rates for the execution of these projects.
In conclusion, we can say that there are many challenges to achieve decarbonization in the industry and in the supply chain, however there are many emerging technologies that help us to facilitate these tasks, allowing us to achieve global emission reduction goals and fostering the socioeconomic development of the Latin American region.
I invite you to measure your carbon footprint, as a first step, if you have not done so in your company.
