In an era marked by climate change and heightened environmental awareness, carbon footprint reporting is becoming a crucial part of product compliance reporting. Recently, it has been announced that Product Carbon Footprint (PCF) reporting for components and materials is being added to the International Material Data System (IMDS) in 2024.
At first, this reporting will be voluntary. Later it will extend into mandatory aspects of reporting. However, it remains to be seen when and where the mandatory aspects will be added, as everything is subject to change. We do know that in Europe, the IMDS Steering Committee and Catena-X are developing a plan for what the new reporting requirements should be in the near future. Now is the time to start preparing for the eventuality that PCF reporting will be a requirement for your IMDS reporting.
Why is Carbon Footprint Reporting in IMDS Important?
The automotive industry is the world’s second largest producer of carbon emissions. There is a need for transparency in how carbon calculations will be made and who exactly is making which contributions to the carbon totals throughout the supply chain. PCF reporting will provide that needed transparency. This will lead to the discovery of opportunities for improvement and will allow automotive original equipment manufacturers (OEMs) and supplier to work together to make year over year improvements to reduce carbon totals.
While some initial short-term investment will be necessary, PCF reporting may enhance the sustainability and competitiveness of the automotive industry in the long run. Electrical vehicles especially have created more of a need for a harmonized standard for PCF reporting. Harmonizing the new standards in IMDS, insofar as possible, on a global basis is important so that the results of carbon calculations are meaningful when conducted through large interconnected supply chains.
What Are the Limitations in Carbon Footprint Reporting Calculations?
Carbon emissions are generated along the entire supply chain, starting from the raw materials extraction to the manufacturing and use of the product, and ultimately to its recycling. PCF is a measure of the total amount of carbon dioxide emissions caused directly and indirectly by activities. In addition to carbon dioxide, other greenhouse gases are taken into account, usually calculated in metric tons of CO2 equivalent (t CO2-eq).
To calculate true PCFs, individual impacts must me known and assessed. The challenge in the automotive industry is that the supply chain is diverse, globally distributed, and complex. There is not a robust harmonized approach, and therefore the figures are not easy to compare with any level of confidence.
Catena-X and the PCF Rulebook
Catena-X is a network that is working on standardizing the automotive requirements for carbon footprint reporting. The centerpiece of this effort is the anticipated release of the PCF Rulebook.
The PCF Rulebook will indicate a global standard for supply chain reporting. The emphasis is on schemes and methods that will make data shareable. There will also be an integration of the Rulebook with IMDS, which will be the primary means of collecting and reporting this data within the automotive industry.
Catena-X will provide flexibility in supply chains for reporting critical data for developing the Europeans Circular Economy. Companies will also be able to integrate that data in various ways into their own in-house or third-party hosted solutions.
EU Law as a Regulatory Driver for Carbon Footprint Reporting
There are a number of current and upcoming regulations that could lend themselves to promoting the need for more transparency in the carbon footprint reporting. One very notable example is the decision by European Union (EU) leaders in December 2019, that the EU should achieve climate neutrality by 2050.
Climate neutrality means you are only emitting as much greenhouse gas into the atmosphere as can be absorbed by nature (that is, forests, oceans, and soil). To reach such a net-zero emissions balance by 2050, EU countries will have to drastically reduce their greenhouse gas emissions and find ways of compensating for the remaining unavoidable emissions. On their way to this 2050 goal, the EU has also established a goal for EU countries to reduce emissions to 55% below 1990 levels by 2030.
In July 2021, the European Climate Law, a key element of the European Green Deal, entered into force. EU countries are now legally obligated to reach both the 2030 and 2050 climate goals. Carbon footprint reporting will be an essential part of this effort.
How To Prepare for PCF Reporting
PCF reporting will be important for anyone who sells into the automotive industry, regardless of whether you import any products into the EU or not. It will be a customer-driven requirement that will reach the entire global automotive supply chain and will eventually require everyone to report PCF for each component and material supplied. In 2024, this process will be voluntary, but this is merely a dress rehearsal for what is soon to come.
Here is how you can begin evaluating and monitoring your requirements:
- Communicate with your customers about what, if any, upcoming PCF reporting requirements they will be implementing.
- Communicate with your suppliers about what your expectations will be for them with respect to providing you PCF data in the future.
- Learn how to use the new functionality in IMDS as it is added in 2024 and going forward.
- Educate yourself on how to do the calculations, per the Catena-X standards.
- Continually monitor your ongoing reporting requirements.
Get Help with Carbon Footprint Reporting
If you are wondering where to start on all this, Tetra Tech can help you by walking through the process and setting up a PCF reporting action plan which will keep you compliant as the various member states make their changes and amendments to their national laws.
If you need help with any of these tasks, contact Tetra Tech’s compliance experts today at [email protected]. We can help you understand how these changes will affect you and can support you in keeping your compliance intact in the face of changing requirements.