I interviewed Andrew Deitz who discussed Supply Chain Climate Risk Solution.
Please introduce yourself
I am an entrepreneur, technologist, and sustainability thought leader. I am fascinated by the business challenges of meeting society's demand for water, energy and food at the right price in a changing climate
I cofounded Climate Earth, which develops systems to quantify and visualize environmental impacts at both the product and enterprise level. In my seven years as VP of Business Development, I worked with companies such as f500 to deliver systems to quantify and reduce their environmental footprint. I worked with leaders from those companies to understand how to systematize natural capital valuations, automate the development of environmental product declarations and evaluate the risks imposed on their business do to climate change into decision making.
Since exiting Climate Earth I have worked as an independent sustainability expert with a variety of companies. In this capacity, I have helped companies reimagine the technology infrastructure for carbon credits, and worked with a major retailer to build stores for deconstruction and assist executives to define sustainability and CSR practices.
Currently I am particularly interested in helping companies develop sustainable supply chains, and increase stakeholder transparency.
Tell me about the Concept paper introducing the Carbon Impact Factor (CIF) that was presented in Paris at COP21
At COP21 we introduced the Carbon Impact Factor (CIF) – it is A family of financial instruments to differentiate and reward carbon efficiency in commodity production
We found CIF is an elegant solution for consumers, and multinationals who seek validate low carbon products. Plus for Investors who see carbon intensive products as a financial risk CIF provides a verified mechanism to shift capital to more carbonefficient assets.
Can you provide some background on current approaches to measure corporate environmental footprint
Sure I agree Before we can talk about the CIF it is important to understand the two foundational challenges we identified
First We are in the early stages of untangling vast complex global supply chains. The current methods to measure total corporate footprints is cumbersome.
For companies that sell something you can touch 75% 95% of their environmental impact occurs in the supply chain and mostly at the commodity level. A company has an operational footprint which is what happens inside their walls and a supply chain footprint. The supply chain footprint includes the upstream energy, carbon, water, labor etc that it takes to make the product and the downstream footprint which is all those resources it takes to use the product by turning it on, driving it, washing it or throwing it out. Most global efforts to understand the carbon footprint of corporate supply chains has been focused on untangling these vast supply chain. For our conversation today we will talk about upstream footprint.
For example Wal Mart has the equivalent of 7 SF of indoor retail space, they use lots of energy for the lights, refrigerators, air conditioning to serve the million of customers who walk in thier doors. Yet if we compare the operational footprint which is the sum of all that it takes to run the stores the supply chain footprint is 95% of the company’s footprint
The predominant method to assess corporate supply chain carbon footprint is a fragmented certification system and supplier surveys which yields self reported estimates of reduction The first generation of programs to understand total corporate footprint such as CDP’s or Walmart sustainability index has done a good job increasing awareness and the need for greater transparency. The next step for these approaches is to provide greater scale and verified claims of reduction.
I think the second is much more straightforward. The majority of carbon footprint for most products occurs at the commodity. If we want greener products we need methods to pay the people at the base of the supply chain to produce cleaner commodities. These are industrially grown agricultural products, use high amounts of power in production of chemicals and synthetic materials or are mined. Commodities are sold on price and are not differentiated by other attributes
There is a fundamental disconnect in that commodity producers control the footprint but are rewarded for production by price not environmental attributes like carbon footprint. The CIF is a method to get the farmer, and all other commodity producers paid for making a greener commodity
This sounds like another certification process. Why build another way to measure impact
Certification solutions are rapidly evolving. The current market for solutions is fragmented and relies too much on a manual processes. The right solution will be a cost effect scalable approach to measure impact and create trusted benchmark/best practice data.
The development of a mechanism such as CIF to measures the environmental intensity meets the needs of suppliers, buyers and investors. The measure can be viewed as packaged and verified claims. Suppliers are financially rewarded for the production of low carbon, buyers can make verified claim, and investors can gain greater supply chain visibility to interpret risk
How is your approach different
Our approach is different in that we are creating a mechanism that will directly pay commodity producers to produce products with greater environmental efficiency. The current system has too many manual steps and does not provide sufficient financial rewards for producers to change their method of production.
Combining proven existing systems we can measure on a global scale the efficiency of each commodity impact independent from the specific corporate supply chain it ends up in. The key factors that make this possible are
- the proliferation cellphone which can be used for communication on a global scale
- GPS/seattle data to provide reliable location information
- technology advancement in blockchain to enable a trusted transparent system
- big data to unlock previously siloed data
In place of untangling gnarly supply chains it is more straightforward to measure impacts generated from the commodities at the base of the supply chain independent from the specific corporate supply chain the commodities ends up. For example, with this approach we can connect the carbon impact from each agricultural commodity from the 570 million farms on the planet to the market they are sold at. This is still hard but because there are relatively few supply chain inputs it is not too hard.
There is a gap in information and efficiently matching supply with demand. Commodity markets, in general, trade assets that are undifferentiated. Low carbon commodity producers from sustainable farms recycled oil, green concrete to come to market in a differentiated way.
About Andrew Deitz
Sustainable Business Solutions & Climate Change Expert