Everything you need to know about the Use of Sold Products
A carbon footprint assessment calculates the greenhouse gas emissions produced by the activities of a firm. But should it also include the emissions caused by the firm’s use of sold products (USP)?
What does the USP really mean? How can a firm calculate its carbon footprint emitted downstream of its production? Is it necessary to include this in your carbon footprint calculation or can you leave this data out?
Read along to find out the answers to all these questions.
A few facts
- The emissions linked to the USP (use of sold products) refer to the emissions linked to the consumption of products by end users;
- These often represent more than the emissions enclosed in scopes 1 and 2 of a product or firm. It is therefore important to know how to quantify them in order to integrate them into one’s carbon balance;
- This quantification may be done by differentiating between finished products and intermediate products and by taking into account their direct or indirect energy consumption.
What is the USP?
A carbon footprint assessment is divided into three scopes, encompassing the different sources of greenhouse gases (GHG) generated by the activities of a firm (direct emissions, energy consumption and indirect emissions).
Scope 3 encloses indirect emissions, and is usually the main emissions item for a firm. Indeed, scope 3 emissions represent from 70% to 90% of a firm’s total GHG emissions.
Scope 3 covers emissions that do not directly come from a product’s manufacturing, but accounts for emissions found upstream or downstream of its value chain, such as:
- The extraction of raw materials;
- The transport of these raw materials;
- Emissions related to the product’s use.
Scope 3 (and hence the final carbon footprint calculation) thus encompasses the use of products after they have been sold, also known as the use of sold products (USP).
How must you calculate the USP emissions in order to integrate them into your carbon footprint assessment? The method will vary depending on the type of product sold and whether or not its destination is known.
For example, it is easier for a car manufacturer to estimate its carbon footprint based on the number and type of cars it sells than for a steel manufacturer to do so, the latter not necessarily knowing the destination of the steel it makes.
There are four possible USP scenarios.
The four USP scenarios
What are the four USP scenarios?
In order to establish a framework for calculating the emissions from the use of sold products, a distinction is made between:
- Finished products: these are products that are directly used in the form in which they are sold (a car, for example).
To calculate their emissions, 3 parameters must be taken into account:
- The product’s life cycle;
- The product’s frequency of use or duration of use;
- The emissions associated with a unit use of the product.
- Intermediate products: these are products that are not directly used in the form in which they are sold, but that undergo a transformation or integration into another product before use (an engine, for example). To estimate their emissions, the 3 criteria above are used, but their share in relation to the final product must also be accounted for.
NB: according to the GHG Protocol (the international protocol providing a framework for measuring corporate greenhouse gas emissions), it is not mandatory to include intermediate products in a firm’s carbon footprint assessment.
These two groups of products are further divided according to two other criteria:
- For finished products, according to whether or not they consume energy directly;
- For intermediate products, according to whether or not their destination is known.
This leads us to the four possible USP scenarios:
- Finished products that consume energy directly;
- Finished products that consume energy indirectly;
- Semi-finished intermediate products for which the destination is known;
- Semi-finished intermediate products for which the destination is unknown.
Finished products that consume energy directly
This category is the easiest to consider. Indeed, these are finished products that consume energy directly, such as mobile phones.
To include them in a carbon footprint balance, one must calculate the emissions caused by the energy they use over their life cycle.
For example, a car’s life cycle is estimated at 10 years. It is assumed that it travels 20,000 kilometres per year. This gives 20,000 x 10 = 200,000 as a lifecycle travel distance. To include this in the manufacturer’s carbon footprint, they must account for carbon emissions of the 200,000 kilometres travelled by the sold car.
Finished products that consume energy indirectly
This category may be a little more difficult to take into account. Indeed, it concerns finished products that require energy indirectly. For instance, think about clothes that require washing and laundry.
Although accounting for these types of emissions remains optional according to the GHG Protocol, it is strongly recommended to do so if one wants to have a complete carbon balance and better estimate climate transition risks.
To include them in a carbon footprint balance, the energy they consume is estimated in the same way as for finished products that require energy directly.
At carbometrix, we try to measure and estimate these emissions as precisely as possible.
Semi-finished intermediate products for which the destination is known
This category refers to all products manufactured by a firm, but intended to be processed or integrated into other products before being used. At the time of sale, the destination of the product is known, enabling an estimate of its carbon impact (for example for manufacturing aircraft engines).
To calculate these semi-finished products’ carbon footprint (for which the destination is known), two steps are involved:
- Calculating the finished product’s total emissions. In the case of an aircraft, its carbon footprint is estimated according to its lifespan and the distance it travels (in the same way as in the car example above);
- Allocating a share of the finished product’s emissions, depending on the product sold. This is calculated from:
- Physical or monetary data. In the case of an aircraft engine, this may be according to the weight of the engine in the final product or according to the value of the engine in relation to the rest of the aircraft;
- The share of the other products that make up the final product, in a proportional manner.
This method makes it possible to take into account a semi-finished product’s carbon footprint by relating it to that of the finished product, thus giving the most accurate estimate possible.
At carbometrix, we try to measure and estimate these emissions as precisely as we can.
Semi-finished intermediate products for which the destination is unknown
This category is certainly the most difficult to estimate. It refers to products manufactured by a firm, but that are later transformed or integrated into other products and whose final destination is impossible to know (this is the case, for example, of an aluminium manufacturer).
The further up the value chain the production is located (and therefore the further away from the final product), the more difficult it is to estimate its destination. The product will indeed undergo various different transformations.
According to the GHG Protocol, it is not mandatory to account for these emissions, them being quite complex to account for. For example, an aluminium producer who sells his production to various customers and whose products may have multiple outlets cannot calculate each product’s USP.
Nevertheless, it may be worthwhile to carry out a market study to estimate the climate risks associated with this production.
Benefits and shortcomings of accounting for the USP
The benefits of accounting for the USP
There are two main benefits for taking into account the use of sold products:
- Drawing up a comprehensive carbon balance sheet. Calculating the emissions of the USP enables a clear mapping of the carbon risk of one’s activities. This may be done throughout the value chain and not just within the product’s sole manufacturing process;
- Integrating this information into the firm’s strategy. Knowing the emissions linked to the use of its products allows a firm to measure its resilience to the stakes of energy transition, since legislation and consumer interests are increasingly focused on low-carbon products.
At carbometrix, we are convinced that carbon has a business impact, so we are very vigilant about measuring these emissions.
The shortcomings of accounting for the USP
There are two main limitations to including the USP in a carbon footprint assessment:
- Lack of data availability. As we have seen above with products for which the destination is unknown, it is sometimes difficult to calculate their exact USP carbon footprint;
- Not all specific cases are covered. For instance, by complying to existing regulations, a consultancy firm specialising in oil and gas doesn’t have USP emissions, even though its activity entirely depends upon polluting energy.
Broadly speaking, integrating the use of sold products into your carbon footprint assessment is essential if you want it to be complete and to be able to adapt your strategy to better limit your climate footprint.
Even if some products seem more difficult to account for than others (such as intermediate products) the carbon footprint methodology makes it possible to estimate their emissions in order to better incorporate them into your climate balance sheet.
If you would like to have the carbon footprint of your company assessed with precision and with all emission types integrated (including those related to USP), get in touch with us today!