The PEF’s train toward carbon neutrality: would you take it or leave it? 

The EU Strategy has been set around the common goal to reach carbon neutrality by 2050, putting climate change and environmental degradation at the core of the agenda. The EU needs to drastically reduce its carbon footprint to achieve this ambitious goal. The carbon footprint refers to the global amount of greenhouse gas emissions (GHGs) produced directly or indirectly by anthropogenic activities. This includes people, organisations, industries and their output as products and services, which all impact the environment. Therefore, carbon footprint assessment has become an important tool widely used in EU policies to control and manage carbon emissions. However, among the several misunderstood targets of carbon reduction such as false claims and confusing labelling, a new tool has appeared on the EU scene: the Product Environmental Footprint. This leads to the big question: will it be the tool to help us reach carbon neutrality? Some advocate for yes, some for no, but one thing that everyone agrees on is that most companies will be impacted. If we can reach a point where a product’s environmental and carbon footprint are widely-understood, it could turn into a positive outcome, especially for SMEs, which play a crucial role in achieving environmental sustainability and inclusive economic growth. 

The reason why carbon footprint is important?  

In today’s climate emergency, the slightest increase or decrease in GHGs concentration directly affects  Earth’s atmospheric balance. The decisions made today will shape the next 50 years. In that sense, the 2050 EU long-term strategy to be climate neutral by keeping the global temperature increase below 1.5 degrees (compared to pre-industrial levels) is essential to avoid the negative impacts of climate change, primarily due to the burning of fossil fuels. However, there is more to climate change than the increase of global temperatures. Its consequences are interconnected, spanning an increase in water scarcity, intense droughts, rising sea-levels, biodiversity decline, and more. But aside from environmental impacts, a company’s value is also negatively impacted by the rise of GHGs emissions in the atmosphere. The data is clear, that carbon emission reductions are proven to lead to better financial performance. Companies that are environmentally active in reducing their impact generate positive environmental data. This information can enhance their reputation and attract investors or consumers. Companies that engage with carbon footprint reduction are achieving competitive advantages in sustainability resourcing and business capabilities compared to their competitors. Analyzing the value chain to identify the main carbon-intensive acts is consequently a key determinant for both the environment and economic purposes.  

What gets measured, gets managed 

In broader terms, a carbon footprint calculation considers all the emissions emitted over a period of time and then converts them into tonnes of carbon dioxide equivalent (tCO2-e). This data is used in carbon and sustainability reporting and includes three scopes. The first two scopes concern the owned and controlled emissions emitted by companies, – direct emissions fall under scope 1, and indirect emissions related to the generation of purchased energy under scope 2. On the other hand, Scope 3 targets the emissions not owned and controlled by the company from upstream and downstream activity that is not included in scope 2. Understanding one’s own carbon footprint is a step forward in reducing their environmental impact. Or put simply: what gets measured, gets managed. The Product Environmental Footprint Category Rules (PEFCRs) proposal published in 2013 is built upon the existing international standards, creating a coherent methodology to efficiently measure the product environmental footprint (PEF), among which carbon footprint is included. The EU proposal is a response to the proliferation of independent standards, sustainability scores, and labels developed by industries that is drowning consumers in the greenwashing abyss as well as misleading about companies’ impact on the environment.  

PEFCRs: The highway of carbon neutrality   

Under the umbrella of the European Green Deal, European institutions are working on policies aiming to reduce GHGs, thereby contributing to the net decarbonisation of Europe by 2050. Many legislative frameworks currently exist and are under discussion or in the legislative pipeline of the EU, such as Eco-design requirements, Energy labeling, Green Public Procurement, the EU Ecolabel and the Green Claims Initiative. These policies are closely linked to approved Life Cycle Analyses (LCA). The difference with the new model is that all the previous LCAs will be standardized into a single methodology assessing environmental impacts such as resource depletion, water use, and the carbon emissions of products throughout their life. With the ambition of making Europe greener, the PEFCRS could help several sectors address their environmental pollution. The model will rely on primary data reported by companies and organisations, and on secondary data extracted from databases compiled by NGOs, business alliances, and consulting companies. Therefore, a question could be raised about the availability and the quality of the data collected: their representativeness could be questioned, as well as if they are still current or outdated. The quality of data is fundamental not only in order to calculate a realistic measure of the environmental footprint of a product, but also to be able to compare it with that of other similar products. Comparability should be a key future of the PEFCRs because it would allow consumers to shift to more sustainable consumption patterns. However, comparability is also affected by the way product categories are designed in the environmental footprint (EF) initiative: would a product category including products that are substantially different in the materials they are composed of, and the production processes they go through, really help consumers in making sustainable choices? Or would it compare essentially different products with unique characteristics through the same (and possibly unfit) metrics? Moreover, some companies have neither the expertise nor the resources to adequately collect their data. Some adjustments and guidance will be provided by member states and the Commission to support every actor in the supply chain, despite that for some the transition will be more complicated. Another aspect of the PEFCRs is the voluntary legal value of the methodology. In the context of the three planetary crises that the world is facing, namely climate change, biodiversity and natural loss, as well as pollution and waste, developing a model that could measure and communicate environmental performance is in line with the green transformation of Europe.   

Are you ready and prepared for the PEF?  

First drafted in 2013, the methodology to efficiently measure environmental footprint has been widely tested, improved, and discussed over the years. From 2013 to 2018, PEF was in the pilot phase in which PEFCRs for different products were tested, along with their verification and communication processes. Since 2019, PEF has been in a transition phase. In this phase, PEFCRs for additional product categories are being developed, alongside a framework for monitoring the implementation of PEFCRs, and new methodological improvements are currently being assessed. This phase is decisive and strategically important for any businesses that can be involved in the methodolgical development. The European Commission relies on the Technical Advisory Board (TAB) gathering experts to revise and propose solutions to technical challenges about the methodology, but also Environment Footprint EF-subgroup that gives their expertise and advice on specific sectors such as apparel & footwear, or constructions products. On the side, stakeholders can contribute and give recommendations during open consultation periods. Currently, the first version of PEFCRs is supported by studies that will help draft the second version of PEFCRs. This second version will lead to a second open consultation in which stakeholders will have their say, before this new version will be scrutinized by the TAB and the EF-sub-groups, and finalized. Even if the rules are not yet completely defined, the PEF initiative is going to leave a clear mark on the EU agenda for the months and years to come, and it will have an impact on businesses by pushing them towards more transparency, clarity, and reliability over their environmental performances. The EF initiative is therefore the new train to take. For any business, it might be a little overwhelming especially to keep updated on technical working groups that are taking up a lot of space in the media or public sphere. A better understanding of EU regulations can strengthen every company and create economic opportunities. Lykke Advice has years of experience in lobbying the various EU institutions, taking an active part in stakeholder working groups and consultations and can help you untangle and shape EU policymaking and exemplify to decision-makers the challenges and opportunities of your company or organisation.  

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