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INTERNATIONAL WORKSHOP OF GHG PROTOCOL PROGRAMS
World Resources Institute, Washington DC, March 22-23, 2010
Accounting For GHG Emissions In Corporate and Product Supply Chains
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Growing Practice of GHG Management in the Supply Chain
GHG Protocol and Supply Chain Initiative Overview
Scope 3 Standard: Overview and Key Requirements
Product Life Cycle Standard: Overview & Key Requirements
Next Steps
Presentation Outline
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Corporate GHG management moving beyond companies’ own operations, toward full value chain Investors pushing for supply chain GHG
disclosure and risk management Governments programs and policies
increasing public reporting of scope 3 and product-level GHG emissions
Companies requesting product and supply chain information from suppliers
The Growing Practice of GHG Management in the Supply Chain
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Company-specific: Wal-Mart’s supply chain sustainability initiative; Tesco’s product carbon labeling initiative; etc.
Sector-specific: Electronics industry; Beverage industry; Dairy industry; Utility industry; World Auto Steel; etc.
Cross-sector: Carbon Disclosure Project’s Supply Chain Initiative; WWF Climate Positive Initiative (under development)
Methodologies: Carbon Trust/Defra product life cycle methodology
Emerging Initiatives
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New Standards in Development
Scope 3 (Corporate Value Chain)Accounting & Reporting Standard
Quantify and report major GHG emissions in the value chain at the company/organization level (scope 3)
To understand, manage, and report GHG emissions across the entire value chain
Build on GHG Protocol Corporate Standard
Quantify and report product-level emissions
To understand, manage, and report the life cycle GHG emissions associated with individual products
Build on existing life cycle assessment standards
Product Life CycleAccounting & Reporting Standard
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Process Structure
WRI/WBCSD Secretariat
Steering Committee (25 members)
ProductTechnical Working
Groups ( 100+ members)
Scope 3Technical Working
Groups ( 60+ members)
Stakeholder Advisory Group (1,000+)
Product Standard Scope 3 Standard
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Setting Boundaries:
What do you include in scope 3?Steering Committee Members
• Alcan Packaging • Carbon Disclosure Project • Carbon Trust • Carnegie Mellon University • Dow Chemical Company• DNV • Energy Research Institute, China • Environmental Defense Fund• ERM • European Commission Joint Research Centre • General Electric • Georgia Pacific• Harvard School of Public Health • Natura
• Natural Resources Defense Council• New Zealand Ministry of Agriculture and Forestry• Product Carbon Footprint Pilot Project, Germany • PricewaterhouseCoopers• Shell • Tsinghua University, China • UNEP/SETAC Life Cycle Initiative • Unilever • UK Department for Environment, Food and Rural Affairs• US Environmental Protection Agency • ISO TC207 - US TAG• Walmart
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Date ActivityMarch/April 2010 WRI/WBCSD:
– Analyze all written comments by chapter and type
– Make minor edits (i.e. spelling/grammar edits, rather than key issues and inconsistencies)
– Address all written comments to maintain transparency in the process
– Identify a number of options for addressing the key issues
April Calls to brief TWG and Steering Committee members on stakeholder comments and preliminary road testing feedback
WRI/WBCSD conduct internal editing and develop revision options
May 18-21st Product and Scope 3 Road Testing Workshops
June Inventory and feedback reports due from Road Testers TWGs hold calls to review proposed options and develop work plan for the summer Steering Committee meeting (June 28-30)
July/August WRI/WBCSD publish summary of road testing feedback TWG provide input on proposed revisions based on stakeholder comments, road
test feedback, and steering committee feedback
September Release of revised drafts for stakeholder comment 30 day public comment period on revised drafts
October/November WRI/WBCSD compile and analyze written stakeholder comments WRI/WBCSD revise standards with input from Steering Committee and TWG
members as needed
December 2010 Final texts of standards are completed
Process Timeline
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Scope 3Accounting & Reporting Standard
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Scope 3 Standard ContentsPart 1: General Requirements & Guidance
1. Introduction
2. Accounting and reporting principles
3. Business goals and inventory design
4. Mapping the value chain
5. Setting the boundary
6. Collecting data
7. Calculating emissions
8. Accounting for GHG reductions
9. Performance tracking
10. Setting a reduction target
11. Managing inventory quality
12. Assurance
13. Reporting and communication
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Scope 3 Standard ContentsPart 2: Guidance for Specific Scope 3 Categories
1. Purchased Goods & Services – Direct Supplier Emissions2. Purchased Goods & Services – Cradle-to-Gate Emissions3. Energy-Related Activities Not Included in Scope 24. Capital Equipment5. Transportation & Distribution (Upstream / Inbound)6. Business Travel7. Waste Generated in Operations8. Franchises (Not Included In Scope 1 and 2) – Upstream9. Leased Assets (Not Included In Scope 1 and 2) – Upstream10. Investments (Not Included In Scope 1 and 2)11. Franchises (Not Included In Scope 1 and 2) – Downstream12. Leased Assets (Not Included In Scope 1 and 2) – Downstream13. Transportation & Distribution (Downstream / Outbound)14. Use of Sold Products15. Disposal of Sold Products at the End of Life16. Employee Commuting
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GHG Protocol Reporting Requirements
Report in conformance with theGHG Protocol Corporate Standard
and Scope 3 Standard
Shall report all scope 1 and 2 emissions
Should optionally report scope 3 emissions
Shall report all scope 1 and 2 emissions
Shall report scope 3 emissions (following the requirements/guidance in this standard)
Report in conformance with theGHG Protocol Corporate Standard
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Review Principles Chapter 2
Define Business
Goals Chapter 3
Map the Value Chain
Chapter 4
Set the Boundary Chapter 5
Collect Data
Chapter 6
Calculate Emissions Chapter 7
Report Emission
s Chapter
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Steps in Scope 3 Accounting and ReportingScope 3: Steps in Accounting & Reporting
…
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Business Goals of Scope 3 Accounting & Reporting
A. GHG management, including identifying GHG reduction opportunities in the value chain; guiding investment and procurement decisions; and managing climate-related risk
B. Performance tracking, including setting a baseline, setting GHG reduction goals, and tracking progress over time
C. Engaging partners in the value chain to expand GHG accountability, transparency and management throughout the value chain
D. Public reporting of GHG emissions to meet the decision-making needs of stakeholders (e.g., policy-makers, investors, purchasers, customers, suppliers, employees, NGOs, etc.), as well as participation in corporate-level GHG reporting programs and registries
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Principle Definition
Relevance Ensure the GHG inventory appropriately reflects the GHG emissions of the company and serves the decision-making needs of users – both internal and external to the company.
Completeness Account for and report on all GHG emission sources and activities within the chosen inventory boundary. Disclose and justify any specific exclusions.
Consistency Use consistent methodologies to allow for meaningful comparisons of emissions over time. Transparently document any changes to the data, inventory boundary, methods, or any other relevant factors in the time series.
Transparency Address all relevant issues in a factual and coherent manner, based on a clear audit trail. Disclose any relevant assumptions and make appropriate references to the accounting and calculation methodologies and data sources used.
Accuracy Ensure that the quantification of GHG emissions is systematically neither over nor under actual emissions, as far as can be judged, and that uncertainties are reduced as far as practicable. Achieve sufficient accuracy to enable users to make decisions with reasonable assurance as to the integrity of the reported information.
Accounting & Reporting Principles
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Tier 1 Suppliers
Reporting Company
VALU
E CHAIN
CradleGrave
Cradle to Gate emissions of
purchased products and services
Gate to Grave emissions from
sold products and services
Gat
e
Gat
e
Raw Materials
Energy Activities
Capital Equipment
Transportation
Product Distribution
Product Use
Product Disposal
Scope 2 and 3 Scope 3Scope 1
Purchase Sale
Emissions from the
company’s operations
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Category Source Description
Upstream Scope 3
Emissions from Purchased Products
1. Purchased Goods & Services: Direct Supplier Emissions
Scope 1 and 2 emissions of a reporting company’s direct (tier 1) suppliers, including outsourced activities, (e.g., contract manufacturing, data centers, outsourced services, etc.)
2. Purchased Goods & Services: Cradle-to-Gate Emissions
Extraction and production of inputs (i.e., purchased or acquired goods, services, materials, or fuels) associated with all suppliers upstream (tiers 1, 2, 3, 4, etc.) Manufacturing/construction of tier 1, 2, 3, 4… suppliers’ capital equipment Disposal/treatment of waste generated in the production of inputs (i.e., purchased or acquired goods, services, materials or fuels) Transportation and distribution of inputs associated with suppliers further upstream (tier 2, 3, 4., etc.)
3. Energy-Related Activities Not Included in Scope 2
Extraction, production, and transportation of fuels consumed in the generation of electricity, steam, heating and cooling (either purchased or own generated by the reporting company) Generation of electricity, steam, heating, and cooling that is consumed in a T&D system (reported by end user) Purchase of electricity, steam, heating, and cooling that is sold to an end user (reported by utility company)
4. Capital Equipment Manufacturing/construction of capital equipment owned or controlled by the reporting company
5. Transportation & Distribution
Transportation and distribution of inputs (i.e., purchased or acquired goods, services, materials or fuels), including intermediate (inter-facility) transport & distribution, warehousing & storage, warehousing and storage, associated with direct suppliers Transportation of waste generated in operations
6. Business Travel Employee business travel
7. Waste Generated in Operations
Disposal/treatment of waste generated in operations
8. Franchises Operations of franchisor (reported by franchisee)
9. Leased Assets Manufacturing/construction and operation of leased assets not included in lessee’s scope 1 (reported by lessee)
10. Investments GHG emissions associated with investments, including fixed asset investments and equity investments not included in scope 1 and 2
Downstream Scope 3 Emissions from Sold Products
11. Franchises Manufacturing/construction and operation of franchise not included in franchisor’s scope 1 (reported by franchisor)
12. Leased Assets Manufacturing/construction and operation of leased assets not included in lessor’s scope 1 (reported by lessor)
13. Transportation & Distribution
Transportation and distribution of sold products, including warehousing and retail
14. Use of Sold Products
Use of sold products and services
15. Waste Disposal of sold products at the end of their life
Other Scope 3 Emissions
16. Employee Commuting
Employees commuting to and from work
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After mapping the value chain, companies shall account for and report:
The largest scope 3 sources that collectively account for at least 80%* of total anticipated scope 3 emissions (excluding use phase);
The use phase emissions of select product types; and
All scope 1 and scope 2 emissions, as required by the GHG Protocol Corporate Standard
* The selection of an 80% threshold is tentative pending road testing
Setting the Boundary: Boundary Requirements
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To determine which scope 3 activities are most significant in size, companies should follow these steps:
1. Use screening methods to individually estimate the emissions from all scope 3 activities (examples provided in Part 2 of the standard for each category)
2. Express each individual scope 3 activity’s estimated emissions as a fraction of total anticipated scope 3 emissions
3. Rank all scope 3 activities from largest to smallest to determine which activities are most significant
Setting the Boundary
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Product Type Examples
• Consumes energy (fuels or electricity) in the use phase
Automobiles, aircraft, engines, motors, buildings, appliances, electronics, lighting
• FuelsPetroleum products, natural gas, coal, biofuels
• Contains GHGs that are emitted during use
Aerosols, refrigerants, industrial gases, SF6, HFCs, PFCs, fire extinguishers
Use of Sold Products:Required Product Types
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Guidance: Prioritizing Relevant Emissions Based on Other Criteria
• Additional scope 3 activities (below the threshold) should be considered relevant if they meet any of the following criteria:
Criteria Description
Influence There are potential emissions reductions that could be undertaken or influenced by the company
Risk They contribute to the company’s risk exposure
Stakeholders They are deemed critical by key stakeholders (e.g. customers, suppliers, investors or civil society)
Outsourcing They are outsourced activities typically insourced by other companies in the reporting company’s sector
Other They meet additional criteria developed by the company or industry sector
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Collecting Data
Four-step process for collecting and evaluating data:
Prioritizeactivities
1
Assess
data sources
2
Collect
data
3
Evaluate
collected data
4
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Collecting Data: Data Types
Data Type Description Examples
Primary Data
Observed data collected from specific facilities owned or operated by the reporting company or a company in its supply chain
The reporting company surveys its suppliers and collects product-level data or scope 1 and 2 emissions data from specific facilities in its supply chain.
Secondary Data
Generic or industry average data from published sources that are representative of a company’s operations, activities, or products
Data from life cycle inventory databases, literature studies, environmentally-extended input-output models; default IPCC emission factors; industry associations; etc.
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Collecting Data: Methods to Fill Data GapsEstimation Method
Description Examples
Extrapolated Data
• Data related to a similar (but not representative) input, process or activity to the one in the inventory
• Customized to a new situation to make more representative
There is secondary data available for electricity in Ukraine but not for electricity in Moldova. The company customizes the data for electricity in Ukraine to make it more representative of electricity in Moldova (e.g., by modifying the electricity generation mix).
Proxy Data
• Data related to a similar (but not representative) input, process, or activity to the one in the inventory
• Not customized to a new situation to make more representative
There is secondary data available for electricity in Ukraine but not for electricity in Moldova. The company uses the data for electricity from Ukraine without modification as a proxy for electricity in Moldova.
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Collecting Data
• As a general rule, companies should apply the following hierarchy in collecting data:
1. Primary data
2. Secondary data
3. Extrapolated data
4. Proxy data
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• When collecting primary data from value chain partners, companies should obtain the most product-specific data available, according to the following hierarchy:
1. Product-level data
2. Process-level data
3. Facility-level data
4. Business unit-level data
5. Corporate-level data
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Collecting Primary Data from Value Chain Partners
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• The degree to which the data represents the relevant activity• The percentage of locations for which site specific or generic data are available and
used out of the total number that relate to a specific activity. Generally, a percent target is identified for the number of sites from which data is collected for each activity
Technological representativeness
Completeness
• Degree to which the data set reflects the actual technology(ies) used
Criteria Description
Temporal representativeness
• Degree to which the data set reflects the actual time (e.g., year) or age of the activity or whether an appropriate time period is used (e.g., annual/seasonal averages may be appropriate to smooth out data variability due to factors such as weather conditions)
Geographical representativeness
• Degree to which the data set reflects actual geographic location of the activity, e.g., country or site
Precision
• Measure of the variability of the data points used to derive the GHG emissions from an activity (e.g., low variance = high precision). Relates mostly to where direct measurements have been used.
Data Quality Criteria
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Illustrative GHG Reporting Form Primary Secondary Total Uncertainty
Scope 1: Direct Emissions from Owned/Controlled Operations
Scope 2: Indirect Emissions from the Use of Purchased Electricity, Steam, Heating and Cooling
Scope 3: Other Indirect Emissions
a. Indirect Emissions from Purchased Products (Upstream) 1. Purchased Goods & Services (Cradle-to-Gate Emissions) (Not Otherwise Included in Categories 2-10)
2. Energy-Related Emissions (Not Included in Scope 2) 3. Capital Equipment 4. Transportation & Distribution 5. Waste Generated in Operations 6. Business Travel 7. Franchises (Not Included in Scope 1 or 2) 8. Leased Assets (Not Included in Scope 1 or 2) 9. Investments (Not Included in Scope 1 or 2) 10. Otherb. Indirect Emissions from Sold Products (Downstream) 1. Franchises (Not Included in Scope 1 or 2
2. Leased Assets (Not Included in Scope 1 or 2 3. Distribution of Sold Products 4. Use of Sold Products 5. Disposal of Sold Products at the End of Life 6. Otherc. Other Indirect Emissions 1. Employee Commuting 2. Other
Direct (Tier 1) Supplier Emissions N/A
% of suppliers accounted for (as a % of total spend)
CO2 from Biomass Combustion 28
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Questions?
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Product Life CycleAccounting & Reporting Standard
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Current Product Standard Content
• Goal and Scope of the Product Standard• Principles of GHG Accounting• Steps to Performing a GHG Inventory• Establishing the Methodology• Defining the Functional Unit• Boundary Setting• Data Collection & Data Quality • Allocation• Calculating GHG Emissions• Assurance• Reporting a Product GHG Inventory
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Goal and Scope
The primary goal of the standard is public disclosure of product level GHG emissions– A product is any good or service
Implementing the standard may support additional business goals including: Identification of GHG reduction opportunities in a supply chain, performance tracking, supply chain engagement, and product differentiation
The standard is sufficiently flexible to support GHG quantification and reporting for many product types
Goal & Scope
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Goal and Scope
• This standard does not fully support product comparison– Valid product comparison, comparative assertion, and
labeling requires a greater degree of prescriptiveness than is provided in this standard.
• The standard will include guidance on how programs, sector specific guidance developers and organizations can specify additional constraints so that valid product comparisons and claims can be made
Goal & Scope
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The overarching method for accounting for product GHG emissions is a life cycle approach
Including all stages of the life cycle, from cradle to grave:
Establishing the Methodology
Raw Material
AcquisitionProduction Distribution
& Retail Use End of Life
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• Companies shall follow the process life cycle accounting approach
• Companies shall use an attributional approach to assign life cycle GHG emissions to an individual product system for the purpose of public reporting
• Companies shall define the unit of analysis as the functional unit of the product
Establishing the Methodology
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Key Requirements: Setting the Boundary
• Processes that are attributable to the function of the product shall be included in the boundary of the product system
• Capital equipment shall be included in the product system if deemed significant for the studied product or product sector– Significance can be proven using a qualitative or
quantitative test. • Companies shall conduct a cradle-to-grave
assessment for all final products • Companies may conduct a cradle-to-gate assessment
for intermediate products when the eventual fate of a product is unknown
Setting the Boundary
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Life Cycle Stages
Setting the Boundary
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Key Requirements: Collecting Data
• Primary data shall be collected for all processes under the control of the company undertaking the product inventory
• For all other processes, primary or secondary data of the highest practical quality shall be collected
• Data gaps shall be filled using extrapolation or proxy data
Collecting Data
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Key Requirements: Data Quality Assessment
• A data quality assessment shall be undertaken for all GHG emissions sources that cumulatively sum to 75% of total product emissions
• For all processes quantified using any primary data, a qualitative data quality assessment shall be undertaken based on technological, temporal and geographical representativeness, completeness, and precision
• For processes that only use secondary data, the data quality assessment shall be undertaken based on technological, temporal and geographical representativeness
Data Quality Assessment
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Key Requirements: Assurance• The product GHG Inventory
shall be assured• The following types of
assurance are permissible:– First Party (“Self” or “Internal”)
assurance– Third Party (”External”) process
assurance
• The assurance opinion shall be expressed in the form of either reasonable (high) assurance or limited (moderate) assurance
Assurance (referred to as “verification” in the GHG Protocol Corporate Standard) is an
objective assessment of the accuracy, completeness and presentation of a reported product GHG inventory and the conformity
of the product GHG inventory to the standard. In order to state compliance with the standard, the product GHG inventory
shall be assured
Performing Assurance
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Key Requirements: Reporting
• A company shall publicly disclose a GHG inventory report– This report is divided into a summary and
detailed report to address the needs of different audiences:
• The summary and detailed reports shall be disclosed together
Reporting
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Key Requirements: Summary Report
• The summary report shall include:– Introduction– Process map– Results– Assurance and data quality information– A statement on the use of results
• e.g., a company will use the results to reduce GHG emissions along the product life cycle
Reporting
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• The detailed report shall include more information on:– Sector or product specific data sources used– Assumptions and justifications
• Cradle to Gate Inventories• Temporal Boundary• Exclusion of Capital Goods• Allocation (performed on data collected under the
ownership of the company)• Recycling
Key Requirements: Detailed ReportReporting
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Next Steps
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Road Testing
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More than 70 companies currently road testing one or both of the standards Wide range of sizes, sectors, and
geographical locations Kick-off meeting: January 21st 2010 Process continues through the end of June
Each company will provide detailed feedback and a case study on their experience with the standard
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Scope 3 Standard Road Testing Companies
3M Company Kraft FoodsAbengoa Levi Strauss & Co.Acer Inc National GridAirbus S.A.S Natura CosméticosAkzoNobel New Belgium BrewingAlcan Packaging PE InternationalAutodesk, Inc. PfizerBaoshan Iron & Steel CO. LTD Pinchin Environmental Ltd.BASF SE PricewaterhouseCoopersCoca-Cola Erfrischungsgetränke AG Public Service Enterprise Group, Inc.Deutsche Post DHL SAP AGDeutsche Telekom AG SC Johnson and SonEclipse Networks (Pty) Ltd. SiemensFord Motor Company Suzano Pulp and PaperUS GSA Federal Acquisition Service Swire BeveragesHasbro Inc. UK Highways AgencyHydro Tasmania Veolia WaterIBM VT Group IKEA Webcor BuildersItalcementi Group
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Product Standard Road Testing Companies
3M Company Italcementi GroupAcer Inc JohnsonDiverseyAkzoNobel LenovoAlcan Packaging Levi Strauss & Co.Alcoa Mitsubishi Chemical CorporationAnvil Knitwear, Inc. Natura CosméticosBaoshan Iron & Steel CO. LTD New Belgium BrewingBASF SE Ningbo Youngor Sunrise Textile Dyeing & Finishing Co., ltd. Belkin PepsiCo, Inc.Belron International Procter & Gamble EurocorBloomberg LP Rogers CommunicationsBT plc Shanghai Zidan Food Packaging and Printing Co., Ltd.CA, Inc. Shell International Petroleum Company Ltd Colors Fruit SA (Pty) Ltd Siemens AGDeutsche Post DHL Suzano Pulp and PaperDeutsche Telekom AG Swire BeveragesDuPont TAL Apparel Limited
Eclipse Networks (Pty) Ltd.Tech-Front (Shanghai) Computer Co., Ltd. / Quanta Shanghai Manufacturing City
Ecolab Tennant CompanyGeneral Electric Verso Paper Corp.Gold’n Plump Poultry, LLC WeyerhaeuserUS GSA Federal Acquisition Service WorldAutoSteel
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List of Products (to date) 2.5 MW Wind Turbine Food Packaging Product
Advanced High Strength Steels Forged Aluminum Wheel
AnvilSustainable™ Transitional Cotton Tee Home insurance
Bloomberg Flat Panel Hot rolled coil
Bresso Packaged Cream Cheese Industrial Chemical
Calcestruzzo (concrete) Just BARE chicken
Chemicals for a T-Shirt Production Magazine
Citrus Fruit Exports from South Africa to the UK Men's Levi Jeans
Coated Freesheet Paper MPLS (Multi-Protocol Label Switching) network product
Coca-Cola Branded Products Non-iron shirt
Conserve Smart AV Notebook Computer
Cosmetics and soap products Restaurant Meals
Cotton bleached fabric Scotchkote Spray in Place Pipe 269 Coating
Desktop ComputerSIPROTEC 4 (Universal Differential Protection Relay for Two Line Ends)
DetergentT3 with ec-H2O, floor scrubber with chemical free cleaning technology
Deutsche Post PLUSPÄCKCHEN; DHL Express TDI Vehicle windscreen replacement/repair
European Disposable Diaper Size 4 Videoconferencing system
Fat Tire Amber Ale Wood Product
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In 2010, WRI and WBCSD, in collaboration with the Steering Committee and Technical Working Groups, will: Revise draft standards based on feedback received
during 5 stakeholder workshops and the stakeholder comment period (November 11 – December 21, 2009)
Revise draft standards based on feedback received during road testing
Circulate second drafts for public comment in September 2010
Revise second drafts based on feedback received Finalize text in December 2010
Finalizing Draft Standards
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• For copies of any GHG Protocol Publication, please see: www.ghgprotocol.org
• For copies of the draft Scope 3 and Product Standards, please see: www.ghgprotocol.org/standards/product-and-supply-chain-standard
• For updates on the standard development process, please join the stakeholder advisory group
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GHG Protocol Standards & Publications
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• Are any existing programs considering the incorporation of the scope 3 and/or product standard?
• What are the anticipated challenges to incorporate these standards into your programs?
• Do you anticipate any new programs or policies being developed once these standards are finalized?
• What role can WRI play in the design and implementation of programs/policies based on these new standards?
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Discussion Questions