SCMAP Perspective is our fortnightly column on PortCalls, tackling the latest developments in the supply chain industry, as well as updates from within SCMAP. On this column, Henrik Batallones shares his perspectives after taking part in an APEC forum on sustainable supply chains in Jeju, South Korea.
Sustainability begins with the right data
JEJU, SOUTH KOREA—This time last year, I had the privilege of moderating a panel on sustainable supply chains for the LogiSYM Asia Pacific conference in Singapore. One of my more important takeaways was before the event, during the pre-event calls I made with my panelists: even in more advanced countries, efforts to make our supply chains sustainable are still at a very early stage. We were, in particular, talking about bottle recycling: one would think things are much more established in Europe, but, as it turns out, not so much.
Fast forward to now – or, technically, last week, by the time this column is published. I am writing from picturesque Jeju Island in South Korea, the site of the APEC Second Senior Officials’ Meeting, one of the many events leading up to the main APEC Economic Leaders’ Meeting in Gyeongju later this year. Specifically, yours truly, alongside SCMAP president Dennis Llovido, are representing the Philippines at a one-day conference on how we can further sustainable supply chains across the APEC economies. (We would like to thank the Bureau of International Trade Relations of the Department of Trade and Industry for the invitation and the opportunity.)
The conference is enlightening because up until now, I personally tended to view efforts to embrace sustainability from a national perspective – one where government and industry work together to agree on standards and build on initiatives that will pursue further economic growth but not at the expense of the environment. Through those lens, it is easy to overlook how international cooperation is very much key, and not just in the perspective of some countries being heavy polluters over others. (In 2023, the Philippines ranked 35th in total greenhouse gas emissions worldwide – although our emissions pale in comparison to China and the United States.) Now, with multinational companies taking the lead in some aspects of sustainable supply chains, and the role of global transport in climate change being scrutinized, global collaboration has never been more essential.
Essential to fostering this collaboration is having the right data at hand, and even here we are already facing challenges. The Greenhouse Gas Protocol defines three “scopes” to help a company identify its own greenhouse gas emissions. Scope 1 covers emissions from sources that an organization directly owns or controls – say, from its fleet of vehicles. Scope 2 covers emissions that an organizer indirectly causes, specifically from where the energy it purchases and uses comes from – for example, there’d be higher emissions if power is derived from coal plants than from renewable sources. Finally, Scope 3 covers emissions not just from the organization, but from across its value chain, including its suppliers, and even including its customers – say, a company’s Scope 3 emissions can include my own emissions when I went to the grocery to buy the company’s products.
Already, this is daunting, even for large companies. (In my limited knowledge, I have only come across one company that is attempting to calculate its Scope 3 emissions.) Gathering all this information, of course, requires significant time and resources – and while it is accepted that an investment in greening your supply chain will pay dividends in the long run, the complexity of the data-gathering alone means it is difficult to know where to start. What about the smaller companies? Say, if my enterprise is a lower-tier supplier to a multinational company. My client can ask me to gather my own data (in aid of their own Scope 3 data-gathering) and I imagine how intimidating this could be for me. That’s time I could spend looking after the business instead.
As countries around the world, including the Philippines, begin to require companies to file ESG reports, another opportunity for international cooperation presents itself. The aim is not just to make reporting requirements more accessible to smaller companies, but to help provide a much more accurate picture not just of a company’s greenhouse gas emissions across its value chain, but also of a country’s. I imagine if everyone starts documenting their Scope 3 emissions, there will be significant overlaps, meaning potentially inflated numbers that could lead to disproportionate interventions.
To begin with, perhaps countries seeking to make reporting mandatory should establish guidelines that will help smaller firms comply with these requirements, whether as part of a larger company’s value chain or as an individual reporter. Currently the Philippine government only requires brand owners to submit ESG requirements, but I think it’s a matter of time before this is broadened to cover more players – and it should, if it is serious about sustainability. We all know the risks. We see ever-stronger typhoons every year.
And then, perhaps countries can work together to further streamline this process, particularly as one company’s emission sources start to cross borders. How can we reduce duplicate and overlapping data? How can we get a clearer picture for our businesses, our governments and everyone in general? Perhaps the emergence of a new type of service provider, dealing specifically with these reporting requirements, could come in.
In any case, as with our quest to make our supply chains more operationally efficient, getting to grips with the large amounts of data at our disposal would make the path ahead clearer for everyone. But of course, some initiatives should not wait for these numbers to come in. As we were being driven around this beautiful island, the presence of many wind turbines – and the knowledge that Jeju has the highest share of generated renewable energy in South Korea, at almost 20% as of 2022 – reminds me that our government should step up investment in renewable energy sources. If we are seeking to industrialize our country and make it attractive to foreign investment, surely a little more spending here is a good way to start. Then I can have my banana milk in peace, knowing my carbon footprint is not as big as it could be.