by Nana O Bonsu and Ian Thomson
From the Paris Agreement in 2015 to the agenda for the upcoming COP26 in November, there is a growing consensus that to resolve the climate emergency means making net-zero emissions a priority at international, national, and local levels. Governments, academia, emissions experts and businesses are all working on solutions that will help balance the amount of global greenhouse gas (GHG) produced and the amount removed so that overall emissions are 'net-zero'.
For example, the UK was the world's first major economy to pass net-zero emissions into law by 2050. And in 2020, the UK government published its ten-point net-zero emissions strategy, which included plans to accelerate the shift to net-zero emission vehicles (EVs), ban sales of petrol and diesel cars, and decarbonise the transport sector by 2030.
However, the systemic adoption of zero-emission technologies has created a significant shift in demand for natural resources, causing many cross-boundary sustainability issues within the value chain of the manufacturers of these technologies. The mining of critical raw minerals required for electric vehicle batteries, for example, damages the livelihoods of people living in nearby communities, causing water stress and scarcity, environmental pollution and issues of forced labour.
Where we are now
Given these problems, any responsible business model needs a detailed understanding of the sustainability footprint of its value chain, including all three GHG emissions scopes. Scope 1 emissions are direct from a company's operations, and scope 2 are indirect emissions from purchased energy. Scope 3 are divided into upstream emissions that are from a company's purchased goods, supply chain, employee travel etc., and downstream emissions from the processing and use of a company's products after the sale.
Setting ambitious targets is one thing and delivering against them is another. Unfortunately, at the moment, net-zero emissions is a nebulously defined concept and many companies still only account for scope 1 emissions direct from their operations. There is currently no shared pathway for businesses to align with the Paris Agreement to limit global warming to 1.5 by 2030, considering a company's entire value and supply chain emissions. Likewise, there is a lack of accounting mechanisms that incorporate a circular economy approach necessary to evaluate the GHG emissions and sustainability impacts of different global value chains.
Most policy and regulatory frameworks underplay the essential role of accounting in achieving a circular economy (CE) and the global shift to net-zero emissions. Using a CE accounting approach can reduce the negative impacts of silo and linear thinking, open up new possibilities for transitioning to a net-zero economy, and help a business manage its value chain as a series of interrelated activities that positively and negatively affect each other. It also allows for a fuller representation of a business' production and consumption value chains and how they relate to individuals and institutions.
Like in natural ecosystems, waste is reused and regenerated in a continuous loop in a CE model, helping a business identify how and where to use resources more efficiently and effectively. But a CE approach won't automatically result in the most sustainable solutions for manufacturers of net-zero emissions technologies unless their accountants and sustainability experts map the entire product value chain and its global sustainability impacts across different sectors in their decision-making processes.
Where we want to go
Suppose a mass transition to EVs is key to helping the world deliver on the climate change commitments in the Paris Agreement and tackle air pollution from road transport. In that case, mechanisms must be developed capable of monitoring and addressing the EV industry's impacts across different sectors – from the mining of raw minerals for making batteries to the use of renewable energy for customers charging them from the grid.
The first stage in this process is to analyse GHG emissions for the industry across all three scopes, identifying which activities are core and have the most significant impact on emissions. Secondly, by undertaking what's called a 'nexus analysis', you can map all the relevant flows of the materials and resources used in EV production and consumption – from initial extraction to end-of-life disposal – showing where mining, cleaner energy and EVs structurally intersect each other. It's at these intersections where critical decisions, conflicts and potential changes are most likely to occur.
Understanding where different institutions are positioned relative to these critical intersections will provide valuable insights into their dependencies, powers and agency to transform the value chain of any net-zero technology. For instance, the mass adoption of EVs will require a substantial increase in the mining of cobalt, manganese, nickel and copper, and investments in charging infrastructure and renewable energy sources. Therefore, a CE accounting model will need to consider all these different upstream relationships in the EV global value chain and attempt to geographically unbundle and holistically remodel them as part of a broader industrial ecosystem.
Without this kind of CE accounting and nexus analysis, there is a real risk that the transition to net-zero emissions required by the Paris Agreement could, in fact, end up adversely impacting human rights, the natural environment, climate change, air pollution and local communities within the value chain of net-zero technology companies. That's why this approach must be encouraged and formalised in policies, frameworks and international charters for net-zero emissions. And new digital technologies, like Blockchain and life cycle assessment mechanisms such as ISO 14040:2006, are already helping provide better tracking and verification of materials within a circular economy to help monitor supply chains labour issues and account for carbon emissions from all relevant processes following a product entire life cycle.
Ultimately, this way of circular thinking can help transform the current problems of net-zero emissions transition planning and management into opportunities to address a whole range of underlying and interconnected social, technological, ethical, environmental and political issues that will benefit the entire COP 26 agenda for a more resilient and sustainable world.