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The reality is that our Earth is in trouble. 

We’ve known it for quite some time now – Swedish scientist Svante Arrhenius theorised about the impact of increased carbon levels back in 1896 – but only in the last few years has the urgency of the situation and the need for immediate change become more mainstream.

Every company must now prepare for regulation whiplash in the coming years, as new climate warming data released this month paints a bleak outlook for a warming world, going beyond 2.5 degrees Celsius to previous estimates.

According to data from NASA, human activities have raised the atmosphere’s carbon dioxide content by 50% since the 1800s. This excess carbon dioxide changes the climate of our planet – increasing global temperatures, causing ocean acidification, and disrupting the planet’s ecosystems – and if left unchecked could lead to irreversible changes.

These environmental shifts also come with significant economic impacts, including increased costs in agriculture, infrastructure, and healthcare, further emphasising the urgent need for sustainable practices. According to a World Economic Forum report, climate change is likely to cause up to $12.5 trillion in economic losses by 2050.

Thankfully, governments and industries around the world are beginning to take action.

Emissions disclosures: Necessary, but a nightmare

Ecological needs and increased public attention have put pressure on regulators, consumers, and financial institutions to demand more transparency in terms of the environmental impact of global supply chains.

These stakeholders want assurances that commodities traders and financiers throughout the distribution network are compliant with current regulations and prepared to adapt to future standards.

While this is a step in the right direction for the health of our planet in the long term, it has led to a labyrinth of varied reporting frameworks that often require different types of mandatory emission information. Layer on the many voluntary disclosures expected by financial institutions and customers, and the reporting burden on firms can seem overwhelming. 

For instance, the European Union’s Corporate Sustainability Reporting Directive (CSRD) demands comprehensive Scope 1-3 emissions disclosures from corporations, while banks and trading partners might also require specific product carbon footprints or detailed trade portfolio emissions. 

Each of these frameworks may dictate different data types, ranging from estimated emissions to detailed supplier-specific data, further complicating the reporting process. 

And that doesn’t even begin to cover the technical challenges businesses face when confronted with carbon accounting. There is further difficulty in aggregating and analysing emissions data across complex supply chains, which requires systems to gather and normalise data from varied sources while ensuring information remains consistent and comparable. 

Robust carbon reporting relies on robust data

Needless to say, carbon reporting is a complex process. 

To get a semblance of accurate information, companies must source high-quality, primary data that is robust enough to withstand scrutiny from these various stakeholders while also providing meaningful, actionable insights to help the business navigate its way to net-zero emissions.

Ideally, this data would encompass both absolute emissions metrics (which measure the total amount of carbon an entity emits over a specific period) and carbon intensity metrics (which measure the amount of carbon emissions per unit of some physical or economic activity such as production output, revenue, or employee).

Acquiring intensity metrics from companies directly enables asset- or product-specific mapping, which dramatically enhances the precision of emissions reporting.

Metrics this precise have been difficult to gather in the past since supply chains can be long and complex and many firms have lacked visibility of their upstream suppliers and downstream customers beyond a certain tier.

As technology has improved, however, acquiring a degree of data granularity that can capture the nuances of specific operations is increasingly feasible. Today, tools such as big data or artificial intelligence (AI) can enable companies to quickly and accurately track asset-specific emissions metrics across the supply chain.

This is particularly important for firms in the energy and metals sectors as their emissions are embodied in the products they trade. Understanding carbon intensity and where the hotspots lie within the product life cycle or supply chain can provide valuable insights for these firms to make decarbonisation decisions. 

Carbon intensity reporting, however, will only be truly credible if it can impact absolute global emissions in a positive way. This makes the way that intensity-based metrics are used along supply chains and interpreted by stakeholders even more critical. 

For it to work, firms will need to engage more closely with suppliers to share consistent and comparable emissions data. Inconsistent or non-comparable data will make it difficult – if not impossible – to understand the actual impact that any decisions will have on emissions.

Embracing a future where robust carbon reporting becomes the norm rather than the exception requires a shift towards greater data transparency and collaboration.

Data transparency begets more data transparency

Improving trade data on product sources will provide a solid information base, but in the real world, there are going to be some gaps. When this happens it becomes critical to actively engage with suppliers to collect primary data to fill the gaps and enhance the accuracy of the carbon reports. 

We can take this a step further by encouraging data sharing across all levels to achieve greater transparency and foster accountability throughout the supply chain. 

As each participant begins to share data and align with broader environmental sustainability goals, more and more will feel pressured to follow suit, creating an environmentally virtuous domino effect down the supply chain. 

As more dominos fall, more data will become available.

Transforming that data into actionable insights requires a data management system equipped with advanced automation capabilities that are fine-tuned to handle asset-level, activity-based emissions factors. 

That’s where CarbonChain comes in.

CarbonChain Comply, simplifying a complex process

CarbonChain provides carbon accounting software for manufacturers, commodity traders, and their banks, with a primary focus on scope 3 supply chain emissions.

Unlike ‘one size fits all’ platforms, CarbonChain is purpose-built for energy and metals supply chains and builds up a complete picture of emissions from the transaction level using activity-based emission factors. We create a record of carbon in supply chains so that reporting and monitoring are easy. Other companies don’t need to waste time and money doing it themselves. That’s why we built CarbonChain, in concept, and as a company.

Our latest solution – “CarbonChain Comply” – acts as a source of truth for carbon data for commodity traders and manufacturers and allows users to create corporate emissions reports that comply with the Greenhouse Gas Protocol.

CarbonChain is purpose-built for complex global supply chains and big complex data sets with an AI-powered platform capable of handling data-intensive calculations, providing an interface for consistency for different actors across the supply chain. 

How complex is this data? CarbonChain modelled thousands of supply chains and used independent databases of emissions factors with 80% of global emissions coverage. We did this to ensure CarbonChain Comply is an accurate tool for companies to use for their carbon accounting needs.

In 2021, CarbonChain helped Gunvor Group meet customer demands by conducting a carbon accounting pilot.

Our team exported all the relevant data, using our automated carbon accounting software to calculate Gunvor’s carbon emissions, and providing a per-cargo analysis of each trade’s emissions, along with auditable reports for verification purposes. Since then, many more of the biggest commodity traders and trade finance providers have relied on CarbonChain’s software to take control of their carbon reporting and explore the development of sustainability-linked loans.

Carbon accounting seems like an overwhelming task, and it can be a confusing process but that’s why we’ve built CarbonChain Comply: so it doesn’t have to be difficult for you. 

We want to help our customers mitigate their future climate risks and communicate it to their stakeholders – through any credible reporting scheme. Without following new regulations like CBAM, companies risk being subjected to heavy fines, and potentially losing their license to import steel, aluminium, iron, electricity, hydrogen or fertiliser products.

At the end of the day, emissions reporting and transparency aren’t just necessary to avoid penalties, they are simply good for business!