First public consultation of ACT Glass Methodology - Short Version - Accepting comments until June 23, 2021

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We understand the original ACT Glass Methodology is long, therefore we developed this short version of the methodology that contains key sections to focus on during the public review.

 

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Glass Sector Methodology

Short version of the methodology

Public consultation – June 2021

 

 

1. Introduction

The 2015 United Nations Climate Change Conference (COP21) in Paris strengthened the global recognition of limiting dangerous climate change. Political agreement was reached on limiting warming to well below “2 degrees” and pursuing efforts to limit temperature rise to “1.5 degree” above pre-industrial levels. The Assessing Low-Carbon Transition (ACT) Initiative measures how ready a company is to transition to a low-carbon economy. The ACT initiative aims at helping businesses to drive their climate strategy, their business model(s), their investments and operations, and set targets compatible with a low-carbon pathway. The general approach of ACT is based on the Sectoral Decarbonization Approach (SDA) developed by the Science-Based Targets Initiative (SBTi) in order to compare a company’s alignment with a low-carbon world (compatible with 2°C - or beyond - climate change scenarios), the application of which is described in the ACT Framework [1]. The ACT Glass methodology aligns with other reporting frameworks where applicable (e.g., CDP, TCFD, EU Taxonomy).

[1] ACT Initiative. ACT Framework, version 1.1. 2019

 

1.1 Introduction to Glass processes

 

1.1.1. What is glass?

Glass is often classified by its chemical composition; 4 main groups can be defined:

  • Soda lime
  • Crystal glass (containing lead, according to the directive 69-493)
  • Borosilicate
  • Special glass

The first three groups represent more than 95% of all the glass produced. The special glass category is composed of more than a thousand different chemical compositions and represents the last 5%.

Soda lime is mainly used in the manufacturing of bottles, jars, tableware and glazing.

Lead crystal and crystal glass are mainly used for glassware, carafe, bowls and other decorative artefacts of high quality.

Borosilicate is mainly used in fibreglass production, both for continuous filaments and fibreglass insulation as well as for cookware and pharmaceutical packaging.

Special glass concerns optical components, wafers and substrates, glass rods, glass tubing, heat tempered and chemically strengthened glass and include glass solutions for the following: abrasives, computer heads, vitrified-bonded grinding wheels, dental glass fillers, electronics, sealing, wood preservation plus many other technical glass applications.

The production of glass can include different steps depending on the type of glass handled and the type of product manufactured. Regardless of the product, the manufacture will always include the following steps:

  1. Batch preparation and mixing (raw material preparation)
  2. Hot end (melting in a furnace, forming process, internal treatment - homogenization and refining, annealing, …)
  3. Cold end (inspection, secondary processing, label, coatings, cooling)

 

1.1.2. Glass products overview

The glass sector is very diverse both in terms of chemical composition and production processes. The three main types of glass products are flat glass, hollow glass (containers, tableware, packaging…) and fibre glass. Inside these 3 main products there is still important diversity of chemical compositions, shapes, colours and aspects. More details on these 3 types of products are given in the following paragraphs.

 

1.1.2.1. Flat glass

The float glass process, invented by Sir Alastair Pilkington in 1952, makes flat glass. This process allows the manufacture of clear, tinted and coated glass for buildings, and clear and tinted glass for vehicles.

The raw materials are mixed in a batch process, then fed together with suitable cullet (waste glass), in a controlled ratio, into a furnace where it is heated to approximately 1500 °C. Common float glass furnaces are 9 m wide, 45 m long, and contain more than 1200 tons of glass (1). Once molten, the temperature of the glass is stabilised to approximately 1200 °C to ensure a homogeneous specific gravity.

(1) http://www.novalglass.com/glass/do-you-konw-how-to-manufacture-float-glass/ and https://www.caremach.com/2018/03/12/float-glass-introduction/

1.1.2.2. Hollow glass

The glass packaging industry is very diverse and covers a wide variety of technology to produce glass bottles, jars and flaconnage. Container glass covers different industries: beverages and food (beer and alcoholic container), cosmetics, pharmaceuticals. From one industry to another, what is changing is the “recipe” of the glass. For example, in the pharmaceutical industry, more borosilicate glass is used because of the specific properties: low thermal expansion, high material strength and chemical stability. Soda-lime(-silica) glass is the most common glass used for beverages and food containers due to the low cost of manufacturing.

Tableware is also a part of the hollow glass sector, this sector is even more diverse in terms of chemical composition, furnace and production technologies.

Hollow glass begins with melting together several largely naturally occurring minerals. The most common input materials used to produce glass are:

  • Cullet (recycled glass)
  • Silica sand
  • Soda ash (brings down melting temperatures)
  • Limestone (enhances durability)
  • Materials can be added to produce different colours.

 

1.1.2.3. Glass fibres

The two basic types of glass fibre products, textile and wool, are manufactured by similar processes.

Glass fibre production can be segmented into three phases: raw materials handling, glass melting and refining, and wool glass fibre forming and finishing, this last phase being slightly different for textile and wool glass fibre production.

In the "indirect" melting process, molten glass passes to a forehearth, where it is drawn off, sheared into globs, and formed into marbles by roll-forming. The marbles are then stress-relieved in annealing ovens, cooled, and conveyed to storage or to other plants for later use. In the "direct" glass fibre process, molten glass passes from the furnace into a refining unit, where bubbles and particles are removed by settling, and the melt is allowed to cool to the proper viscosity for the fibre forming operation.

Continuous Filament Fibre

Continuous filament fibres are especially used for the production of composite materials like fibre-reinforced plastics. Continuous filament fibre is generally manufactured from a glass melt in either cross-fired recuperative furnaces that are employing fossil fuels to supply the melting energy or oxy-fuel fired furnaces, generally using natural gas. In the year 2007, about 55 % of continuous filament fibre furnaces were oxyfuel fired with some of them also applying electric boosting. As the production volume of continuous filament fibre is lower than that of the large bulk materials (hollow glass, flat glass), smaller furnaces are used. The use of regenerative furnaces is technically unfeasible. Most commonly, an E glass formulation is employed for continuous filament fibre. With a low electrical conductivity of E glass, electrical melting is not seen as efficient process for continuous filament fibre production.

Glass wool

Glass wool is essentially used for the building industry. The basic materials for glass wool manufacture include sand, soda ash, dolomite, limestone, sodium sulphate, sodium nitrate, and minerals containing boron and alumina. The furnace (with a few rare exceptions) will either be an electrically heated furnace, a traditional gas-fired recuperative furnace, or less commonly an oxy-gas furnace.

 

1.1.3. Glass production technologies

In a glass manufacturing installation, the high material investments are the furnaces. Regardless of the type of infrastructure, furnaces which contain molten glass cannot be shutdown.

The furnace types and their lifetime are diverse and vary depending on the products manufactured and the amount produced. The most common types of furnace are end fired and cross fired technology, but oxy-fuel furnaces, electric furnaces and hybrid furnaces are coming to the market to decarbonize the sector.

Other levers are under development to decarbonize the sector as for example increased energy efficiency, use of alternative fuels, development of low-carbon electricity melters, design of low-carbon products, use of Carbon capture and Storage and Use (CCS and CCU) technologies.

 

1.1.4. GHG Emissions in the Glass sector ang global glass market

Glass productions require high temperature and therefore energy, the process also emits some GHG as process emissions.

Major carbonates used in the production of glass are limestone, dolomite, and soda ash. The use of these carbonates in the glass manufacturing process is a complex high-temperature reaction that is not directly comparable to the calcination process used in lime manufacture and limestone/dolomite use but has the same net effect in terms of GHG emissions (IPCC 2006).

In the glass manufacturing industry, heat is used to fuse the carbonates and other raw materials into the specified glass type. Some glass melting furnaces are heated using electricity. For non-electric glass melting furnaces, coal, natural gas, distillate fuel oil, and residual fuel oil are all possible fuel inputs, although most, if not all, are fired with natural gas. The actual mix of fuels will be site-specific and depend on the geographical zone and the possibility of supply. Smaller furnaces are easier to fuel with electricity than largest one.

Transport occurs at different stages in the glass manufacturing process, the transport of raw materials to the plant and the transport of finished products from the plant to the market. The GHG emissions related to raw materials transport represents between 1% and 2% of the total products impacts [5].

[5] AGC. Carbon footprint. [Online] https://www.agc-glass.eu/en/sustainability/environmental-footprint/carbon-footprint.

 

1.2. Principles

The selection of principles to be used for the methodology development and implementation are explained in the general ACT Framework. Table 2 recaps the principles that were adhered to when developing the methodology.

Table 2: PRINCIPLES FOR IMPLEMENTATION

RELEVANCE - Select the most relevant information (core business and stakeholders) to assess low-carbon transition.
VERIFIABILITY - The data required for the assessment shall be verified or verifiable.
CONSERVATIVENESS - Whenever the use of assumptions is required, the assumption shall be on the side of achieving a 2° maximum global warming.
CONSISTENCY - Whenever time series data is used, it should be comparable over time.
LONG-TERM ORIENTATION - Enables the evaluation of the long-term performance of a company while simultaneously providing insights into short- and medium-term outcomes in alignment with the long-term.

 

2. Construction of the ACT score

The ACT rating shall comprise:

  1. Performance score as a number from 1 (lowest) to 20 (highest)
  2. Narrative score as a letter from E (lowest) to A (highest)
  3. Trend score as either “+” for improving, “-” for worsening, or “=” for stable.

 

In some situations, trend scoring may reveal itself unfeasible depending on data availability. In this case, it should be replaced with a “?”.

The highest rating is thus represented as “20A+”, the lowest as “1E-” and the midpoint as “10C=”. to their customers.

 

3. Scope and Boundaries

3.1. Scope of the Glass Sector

 

Figure 11: Actors that can be assessed by the act methodology for the glass sector

 

Note for the road-test: If there is an opportunity to assess a hollow glass shaper or a hollow glass company with hollow glass shaping facility with furnaces it would help improve the methodology to decide whether this actor should be included or excluded from the scope of the sector. If there is also an opportunity to assess special glass actor, it could be interesting to be sure whether the methodology should be applied to this type of actor or not.

 

3.2. Boundaries

Table 5: GHG emissions relating to scope and glass types

*for hollow glass depending on the source, the ratio between electricity and fossil fuels can vary.

 

 

Figure 12: Boundaries for the glass sector methodology

 

 

3.3. Sector benchmark

For the quantitative Modules, a sectoral decarbonization pathway needs to be used to calculate the company’s allocated decarbonization pathway. No decarbonization pathway was found for the glass sector at a global level. In order to develop the sector benchmark, a few options were discussed with the technical working group:

  1. Use an existing generic method such as the Absolute Contraction Approach (ACA) of the Science Based Target initiative (SBTi);
  2. Re-Use one or more GHG emissions and electricity consumption pathways for one or more sectors similar to glass.

The pathways that could be used for the second option are those included in the Sustainable Development Scenario (SDS) used for the International Energy Agency (IEA) Energy Technology Perspective 2020 (ETP 2020) series. In fact, these scenarios are global in scope and compatible with the temperature goals of the Paris Agreement as they achieve zero net emissions by 2070. The scale and ambition of the pathways included in the SDS scenario are therefore the same as those of the scenario to be developed.

The pathways that could be re-used are the GHG emissions and power consumption trajectories of the following sectors:

  • The entire industry sector;
  • Heavy industries.

 

3.3.1. Description of the benchmark

The fundamental target to achieve for all organizations is to contribute to not exceeding a threshold of 2⁰C global warming compared to pre-industrial temperatures. This target has long been widely accepted as a credible threshold for achieving a reasonable likelihood of avoiding climate instability, while a 1.5⁰C rise has been agreed upon as an aspirational target.

Consequently, low carbon scenarios used for the benchmark are Well Below 2°C scenarios or 1.5°C scenarios.

Every company shall be benchmarked according to an acceptable and credible benchmark that aligns with spatial boundary of the methodology.

 

3.3.2. Available reference pathways

The available pathways that can be used as the basis for the methodology development of the reference scenario for the glass sector are the ones described in the IEA ETP 2020 Sustainable Development Scenario presented in Figure 28.

 

 

Figure 28: IEA direct and indirect CO2 emissions in the sustainable development scenario (SDS) for Heavy industries and industry

 

3.3.3. Reference scenario for the glass sector

According to the TWG members, the approach of reusing the existing IEA SDS pathways is the best option, although it is not fully consistent with the glass sector, due to the lack of data and scenarios for GHG emission reductions from this sector.

According to this approach, the reference scenario for the glass sector is presented in Figure 29.

 

Figure 29 : Reference scenario for the glass sector

 

 

4. Performance Indicators

 

4.1. Data sources

In order to carry out an activity at company level assessment, many data points need to be gathered by sourcing from various locations. Principally, ACT relies on the voluntary provision of data by the participating companies. Besides, external data sources are consulted where this would streamline the process, ensure fairness, and provide additional value for checking, validation and preparation of the assessment narrative.

Table 6: ACT ASSESSMENT DATA SOURCES

Data requested to the company
GHG emissions (on scope defined in module 1,2 & 4 in quantitative indicators)
Activity data
Reduction targets (absolute and intensity)
R&D in low-carbon technologies
Low-carbon Patenting Activity
Environmental policy and details regarding governance
Management incentives
Scenario testing
List of environmental/CSR contract clauses in purchasing & suppliers’ selection process
List of initiatives implemented to influence suppliers to reduce their GHG emissions, green purchase policy or track record, supplier code of conduct
Client policy
List of initiatives implemented to influence client behaviour to reduce their GHG emissions
Company policy on engagement with trade associations
Position of the company on significant climate policies (public statements, etc.)
List and turnover or invested capital (or other financial KPI) of activities in new businesses related to low-carbon business models
Current position and action plan of the company towards the identified low-carbon business models

4.2. Indicators table

 

4.3. Performance indicators

The performance indicators have been conceived following the main principles described in Chapter 2.

 

Choice of carbon intensity metric

In the benchmark Carbon intensity metric should be aligned with the emissions intensity of the benchmark chosen. Regarding the proxy used, it would be tonnes of glass.

In the glass industry statistics, two types of data can be used. One is melted glass, which is the actual output coming directly from the glass furnace. The other is packed glass, which is always a lower amount than the melted glass due to losses in the post processing. Any process losses can normally be recycled as internal cullet in the flat and hollow glass subsectors. In order to keep all the approach coherent, as in EU ETS regulation:

  • The packed glass is chosen for carbon intensity metric for the integrated or glass melters concerning hollow glass and fiber glass products. If a type of product is not covered by the EU ETS, the tonnes of glass could be used as it is done currently in the GHG emissions reporting of the company;
  • The melted glass is chosen for carbon intensity metric for the integrated or glass melters concerning the flat glass products.
  • The glass is chosen for carbon intensity metric for shapers

Note for the road-test: The carbon intensity metrics could be improved or detailed after the road-test.

 

4.3.1 Targets

 

4.3.1.1 - GL 1.1 Alignment of incusive scope 1+2 emissions reduction targets

DESCRIPTION & REQUIREMENTS GL 1.1 Alignment of inclusive scope 1+2 emissions reduction targets
SHORT DESCRIPTION OF INDICATOR A measure of the alignment of the company’s emissions reduction target with its decarbonization pathway. with their low-carbon benchmark pathway. The indicator will compare the trend of company’s target pathway to the trend of company’s benchmark and thus identify the gap between both pathways at the target year, which is expressed as the company’s commitment gap.
RATIONALE OF THE INDICATOR

RELEVANCE OF THE INDICATOR:

Direct emissions reduction targets are included in this ACT methodology for the following reasons:

  • Targets are an indicator of corporate commitment to reduce emissions and are a meaningful metric of the company’s internal planning towards the transition.
  • Targets are one of the few metrics that can predict a company’s long-term plan beyond that which can be projected in the short-term, satisfying ACT’s need for indicators that can provide information on the long-term future of a company.

For the sector, direct emissions represent a high source of emissions. A GHG emissions reduction target should be assigned to them

 

4.3.1.2 - GL 1.2 Time horizon of targets

DESCRIPTION & REQUIREMENTS GL 1.2 TIME HORIZON OF TARGETS
SHORT DESCRIPTION OF INDICATOR A measure of the time horizons of company targets. The ideal set of targets is forward looking enough to include a long-time horizon that includes the majority of a company’s asset lifetimes, but also includes short-term targets that incentivize action in the present.
RATIONALE OF THE INDICATOR

RELEVANCE OF THE INDICATOR:

The time horizon of targets is included in this ACT methodology for the following reasons:

  • The target endpoint is an indicator of how forward-looking the company’s transition strategy is.
  • Aside from communicating long-term commitments, short-term action needs to be incentivized. This is why short time intervals between targets are needed. A 5-year interval is seen as a suitable interval to ensure company is taking enough action, holding itself accountable by measuring progress every 5 years.

4.3.1.3 - GL 1.3 Achievement of previous targets

DESCRIPTION & REQUIREMENTS GL 1.3 ACHIEVEMENT OF PREVIOUS TARGETS
SHORT DESCRIPTION OF INDICATOR A measure of the company’s historic target achievements and current progress towards active emission reduction targets. All the scopes of the company are considered. The ambition of the target is qualitatively assessed and is not included in the performance indicators.
RATIONALE OF THE INDICATOR

RELEVANCE OF THE INDICATOR:

The historic target ambition and company performance is included in this ACT methodology for the following reasons:

  • The ACT assessment looks only to the past to the extent where it can inform on the future. This indicator is future-relevant by providing information on the organizational capability to set and meet emission reduction targets. Dimension 1 of this indicator adds credibility to any company claim to commit to a science-based reduction pathway.
  • Dimension 2 of this indicator adds value to the assessment of comparison to the company’s performance with respect to their targets in the reporting year.

4.3.2. Material investment

If some assets represent less than 5% of the production (in tonnes of glass or in tonnes of GHG emissions relative to the overall GHG emissions or the overall glass production), to simplify the calculation, a cut off rule would be applied on this data collection related to these plants.

4.3.2.1 - GL 2.1 PAST PERFORMANCE

DESCRIPTION & REQUIREMENT GL 2.1 PAST PERFORMANCE
Short description of indicator Measure of the alignment of a company's past emissions intensity with its low-carbon benchmark pathway and past absolute emissions with the sectoral benchmark
Rationale of the indicator

Relevance of the indicator:

Past performance indicator is included in this ACT methodology for the following reasons:

  • Dimension 1 (trend in past emissions intensity) shows the speed at which the company has been reducing its emissions intensity over the recent past. Comparing this to the low-carbon benchmark pathway on the same historical period gives an indication of the scale of the change that should have been made within the company to bring it onto a low-carbon pathway. Recent emissions intensity performance indicates the company’s progression towards the future emissions intensity necessary to decarbonize in-line with a low-carbon scenario.
  • Dimension 2 (Alignment of past performance with sectoral carbon budget) helps the company having an overview of its emissions exceedance in the recent past. This dimension also intends to remind that the carbon budget is set for the global economy and that each sector and each company has a defined carbon budget that cannot be exceeded to reach the overall long-term objective of limiting global warming. The sector benchmark is defined for the next years, assuming it was respected for the past years where it was already defined. The emissions overshooting the benchmark in the past correspond to accumulated CO2 that will remain in the atmosphere for decades. Hence, a company having already exceeded the benchmark should further its efforts to decrease its emissions in the near and remote future. This dimension is a ratio of the values of the emissions over a period of time in the past, as companies are very unlikely to provide data for the same period. What is considered here is the emission excess compared to the sectoral carbon budget, proportionally to the period of time.
  • While ACT aims to be as future-oriented as possible, it nevertheless does not want to solely rely on projections of the future, in a way that would make the analysis too vulnerable to the uncertainty of those projections. Therefore, this measure, along with projected emissions intensity and absolute emissions, forms part of a holistic view of company emissions performance in the past, present, and future.
  • This indicator is future-relevant by providing information on the organizational capability to meet emission reduction that is aligned with the benchmark. This indicator adds credibility to any company whose past emissions intensity were aligned with their historic benchmark and whose past carbon budget did not exceed the sectoral carbon budget.

4.3.2.2 - GL 2.2 Locked-in emissions

DESCRIPTION & REQUIREMENT GL 2.2 LOCKED-IN EMISSIONS
Short description of indicator Measure of the company’s cumulative GHG emissions implied by the company’s installed and planned assets over a 15-years period from the reporting year. These locked-in emissions are compared to a theoretical portfolio with a similar locked activity per year and benchmark emission intensity.
Rationale of the indicator

Relevance of the indicator:

Locked-in emissions are included in this ACT methodology for the following reasons:

  • Absolute GHG emissions over time are the most relevant measure of emissions performance for assessing a company’s contribution to global warming. Furthermore, the concept of Locked-in emissions allows a judgement to be made about the company’s outlook in more distant time periods than ones of the investment plans.
  • Analysing a company’s locked-in emissions alongside science-based budgets also introduces the means to scrutinise the potential cost of inaction, including the possibility of stranded assets.
  • Examining absolute emissions, along with recent and short-term emissions intensity trends, forms part of a holistic view of a company’s emissions performance in the past, present, and future.
  • The approach using the secured-activity ratio is a coherence check between the company's ambition for emissions reduction, and its investments (and the inevitable emissions associated). It allows showing the leeway for future investments and alerts for the cost of inaction and the risk of stranded assets.

 

4.3.2.3 - GL 2.3 Trend in future emissions intensity

DESCRIPTION & REQUIREMENT GL 2.3 TREND IN FUTURE EMISSIONS INTENSITY
Short description of indicator Measure of the alignment of a company's future emissions intensity of assets with its low-carbon benchmark pathway.
Rationale of the indicator

Relevance of the indicator:

Trends in future emissions intensity from material investment are included in this ACT methodology for the following reasons:

  • The trend shows the speed at which the company needs to reduce its emissions intensity for the coming years. Comparing this to the low-carbon benchmark pathway gives an indication of the scale of the change that needs to be made within the company to bring it onto a low-carbon pathway.
  • ACT aims to be future-oriented. Therefore, this particular indicator, with projected emissions intensity, forms part of a holistic view of company emissions performance in the past, present, and future.

 

4.3.2.4 - GL 2.4 Alternative fuels and energy mix decarbonisation

DESCRIPTION & REQUIREMENT

GL 2.4 ALTERNATIVE FUELS and energy mix decarbonisation

The indicator below should be tested during the sector roadtest to confirm if they are robust enough.

Short description of indicator This indicator is a measure of the company’s energy mix decarbonisation actions at the reporting year. The indicator will evaluate the implementation of global recommendations to decarbonize the assets consuming energy with the share of alternative fuels and low-carbon electricity used at reporting year.
Rationale of the indicator This indicator rewards the alternative fuels and low-carbon electricity switching path. It also valorises the fact that the glass actors are part of a territorial cohesion. The treatment of waste as the biomass use, if supervised by the policy, with applying the best practices, is one step in circular economy.

 

4.3.2.5. - GL 2.5 Recycled content Integration Strategy

DESCRIPTION & REQUIREMENT

GL 2.5 RECYCLED CONTENT INTEGRATION STRATEGY

The indicator below should be tested during the sector roadtest to confirm if they are robust enough.

Short description of indicator The company demonstrates that it has a comprehensive strategy at the corporate level to integrate within its own operations.
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

The integration of external cullet permit to reduce the raw material extraction and reduce the energy for melting and could also increase the lifetime of furnaces. Cullet rates depending on the “quality” needed for the finished product and the cullet availability (geographical zones):

  • For hollow glass and glass wool: average of 60% or more;
  • For flat glass: average of 30%.

Other initiative could be implemented as increasing the reuse of products. The environmental benefit of each solution is very dependant of the geographical zone.

That are the main reason for proposing a qualitative indicator, which could be applicable to all companies in a fair way.

The post-consumer cullet is the most difficult one to integrate because he could be collected a long time after the use. Indicator in Module 9: Business Model is looking at the collection of the cullet flow to improve the circularity of the glass.

The compatibility between types of glass and cullet is not linear too according to the document: End-of-Waste Criteria for Glass Cullet: Technical Proposals, JRC, 2011.

 

4.3.3. Intangible investment

The indicators below should be tested during the sector roadtest to confirm if they are robust enough.

 

MODULE RATIONALE

No benchmark concerning costs/investment in R&D in climate change mitigation technologies for this indicator is currently available for the glass industry. This module could be key to reach the objective of 2050 benchmark regarding the investment and the development that should be done concerning equipment and especially furnaces. Non-mature technologies could be assessed with a company exercise describing on which technologies investments are made as presented in the Figure 25:

 

Figure 25: Exemples of mature and non-mature technologies classification (according to sources at the bottom of the figure)

 

The level of maturity for each technology could be different depending on the sub-sector (flat glass, hollow glass, fiber glass) and also the size of the furnace.

Patenting activity could also help them to distinguish mature and non-mature technologies.

4.3.3.1 - GL 3.1 R&D IN CLIMATE CHANGE MITIGATION TECHNOLOGIES

DESCRIPTION & REQUIREMENTS GL 3.1 R&D IN CLIMATE CHANGE MITIGATION TECHNOLOGIES
Short description of indicator A measure of the ratio of R&D costs/investments in low-carbon technologies. The indicator identifies the ratio between the company’s R&D investment in low-carbon technologies and total R&D investments.
Rationale of the indicator

Relevance of the indicator:

R&D in low-carbon technologies is included in the ACT Generic assessment for the following reasons:

  • To enable the transition, the sector where there are technological stakes relies heavily on the development of low-carbon solutions to replace its currently high emitting systems
  • R&D is the main proactive action to develop these technologies.
  • R&D is also one of the main tools to reduce the costs of a technology in order to increase its market penetration.
  • Aside from technology, companies can also invest into R&D on operational practices to optimize the carbon impact where they have direct responsibility.
  • Lastly, the R&D investment of a company into non-mature technologies and practices allows for direct insight in the company’s commitment to alternative technologies that may not currently be part of its main business model.

Although this indicator may be based on a specific ratio in other ACT methodologies, no benchmark is available for this sector. Therefore, thresholds have been defined accordingly.

Defining R&D:

Research and development (R&D): Refer to the activities of the companies undertake to innovate and introduce new products and services. It is often the first stage in the development process. Investment in R&D is a type of operating expense associated with the research and development of a company's goods or services (definition from CDP guidance).

Research and experimental development (R&D) comprise creative work undertaken on a systematic basis to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications. The term R&D covers three activities (definitions from OECD website, 2012):

  • Basic research is experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundation of phenomena and observable facts, without any application or use in view.
  • Applied research is original investigation undertaken in order to acquire new knowledge. It is, however, directed primarily towards a specific practical aim or objective.
  • Experimental development is systematic work, drawing on existing knowledge gained from research and/or practical experience, which is directed to producing new materials, products or devices, to installing new processes, systems and services, or to improving substantially those already produced or installed.

R&D covers both formal R&D in R&D units and informal or occasional R&D in other units.

DEFINING THE R&D SCOPE:

The indicator focuses on mature and non-mature technologies or construction and organizational methodologies that mitigate climate change.

Climate mitigation technologies for the Glass sector may include:

  • Waste heat recovery
  • Improving energy efficiency (eg: Enhanced batch preparation, Batch and cullet preheating, More energy efficient melting technologies, Enhanced process (controls), Reduction of heat losses…)
  • Switching to alternative fuels (low-carbon: biogaz, hydrogen, biomass, e-gas) low-carbon) and low-carbon electricity and or oxy-fuel combustion
  • Carbon capture and storage (CCS)
  • Carbon capture, utilization and storage (CCUS)
  • Product efficiency that reduces glass demands
  • Improvements of process to reduce process losses
  • Development of low-carbon products
  • Recycled materiel rate integration
  • Increasing of recycling
  • Other relevant technologies for the sector

R&D expenditures should cover development of concepts and ideas and development of pilot projects. A first environmental balance should demonstrate that the solution reduces the overall CO2 emissions on the life cycle and does not make pollution transfers between life cycle stages impact categories or services (functional unit).

DEFINING ‘MITIGATION R&D’:

The ‘mitigation R&D’ is defined by the categorization employed by IEA.

DEFINING ‘NON-MATURE R&D’:

A Technology Readiness Level (TRL) should be used to assess the maturity of a technology. Higher scoring levels of this indicator exclude research in technologies that are already considered mature in terms of market penetration, to incentivise a focus on those technologies that have a higher need for R&D investment, in order to break through technical barriers and reduce the levelized costs of deploying these technologies.

To formalize this distinction in the analysis, the company is asked for a detailed breakdown of R&D expenditure in Section 3 of the data request. Since defining what type of R&D is ‘non-mature’ is theoretically difficult, the classification is inversed, and done based on the principle of exclusion. This methodology excludes only those low-carbon technologies that are considered mature in terms of market position and levelized cost.

The status of the technologies helps to categorize technologies into mature or non-mature according to the table below:

Table 10: categorization of mature and non-mature technologies

 

 

4.3.3.2 - GL 3.2 COMPANY LOW CARBON PATENTING ACTIVITY

DESCRIPTION & REQUIREMENTS GL 3.2 COMPANY LOW CARBON PATENTING ACTIVITY
Short description of indicator A measure of the company patenting activity related to low-carbon technologies. The indicator identifies the ratio between the company’s patent activity for the last 5 years and average patenting activity linked to climate change of the sector and compares it to the sectoral benchmark in the form of a maturity matrix.
Rationale of the indicator

Relevance of the indicator:

The indicator on CCMTs patenting activity is complementary to the one dedicated to R&D in low-carbon technologies, as it monitors the technology diffusion whereas R&D expenditures monitor the technology development.

It is included in this ACT methodology for the following reasons:

  • To enable the transition, the sector where there are technological stakes relies heavily on the development of low-carbon solutions to replace its currently high emitting systems
  • Patent data are commensurable because patents are based on an objective standard (OECD 2015)
  • Patent data measure the intermediate outputs of an inventive process, where R&D data expenditures measure the input (OECD 2015)
  • Patent data can be disaggregated into specific technological fields (OECD 2015)

Relevance of the indicator’s 5-year time horizon

Patents applications are typically disclosed 18 months after their filing date (OECD 2015). To avoid the effects of this “publication lag” and smooth the ratio used for the assessment, the indicator monitors the last 5 years of the company’s patenting activity.

 

4.3.4. Sold product performance

 

4.3.4.1 - GL 4.1 Past performance of purchased glass production assets

DESCRIPTION & REQUIREMENT GL 4.1 PAST PERFORMANCE OF PURCHASED GLASS PRODUCTION ASSETS
Short description of indicator A measure of the alignment of the company’s past sold or purchased product / service emissions intensity trend with its low-carbon benchmark pathway. The indicator will compare the gradient of this trend over a 5-year period to the reporting year (reporting year minus 5 years) with the low-carbon benchmark pathway trend over a 5-year period after the reporting year.
Data requirements

The relevant data for this indicator are:

  • Sold or purchased product / service emission intensity and activity at reporting year and Y-5
Rationale of the indicator

Relevance of the indicator:

Past performance is included in this ACT methodology for the following reasons:

  • The trend shows the speed at which the company has been reducing its emissions intensity over the recent past. Comparing this to the low-carbon transition pathway gives an indication of the scale of the change that needs to be made within the company to bring it onto a low-carbon pathway.
  • While ACT aims to be as future-oriented, it nevertheless does not want to solely rely on projections of the future, in a way that would make the analysis too vulnerable to the uncertainty of those projections. Therefore, this measure, along with projected emissions intensity and absolute emissions, forms part of a holistic view of company emissions performance in the past, present, and future.

 

4.3.4.2 - GL 4.2 Purchased product interventions

DESCRIPTION & REQUIREMENT GL 4.2 purchased product interventions
Short description of indicator

An analysis of the company’s reporting of mature interventions to reduce GHG emissions for purchased product determined as being high GHG impact as glass, soda ash (natural or synthetic), silica, limestone, chemicals, hydrogen extraction, fuel extraction … relative to the other categories of products relevant to the company.

This indicator also covers glass purchased for shaping actors.

Rationale of the indicator

Relevance of the indicator:

Depending on the glass manufactured, the raw materials purchased could be very different and their relative GHG emissions are different too.

For a typical recipe for flat glass (Raw materials for flat glass RER, uncoated from ecoinvent 3.7), soda ash and silica sand represent almost 90% of GHG emissions of the product. For a typical recipe for packaging glass (Raw materials for white packaging glass RER from ecoinvent 3.7), soda ash, chemicals inorganics and silica sand represent 76% of the GHG emissions.

For shaping actors, the glass purchased is a very important indicator to reduce the emissions of the sector.

A key issue with the interventions approach is that if interventions have no measurable impact on GHG emissions, they are effectively “greenwash”. However, we recognise that, when attempting to influence GHG emissions outside of direct operations, measurement may be difficult. Barriers to measurement should not be barriers to action, therefore the analysis will consider interventions where the GHG emissions mitigation has not been measured. Nonetheless, companies should describe the rationale for emissions reduction connected to the intervention so that it is clear this potential exists.

The reporting should also include, where possible, enough detail on mitigation potential, and the scale of impact expected, to distinguish between interventions that could be considered greenwash and those with a material, negative climate change mitigation impact.

 

4.3.5. Management

 

4.3.5.1 - GL 5.1 OVERSIGHT OF CLIMATE CHANGE ISSUES

DESCRIPTION & REQUIREMENT GL 5.1 OVERSIGHT OF CLIMATE CHANGE ISSUES
Short description of indicator The company discloses that responsibility for climate change within the company lies at the highest level of decision making within the company structure.
Rationale of the indicator

Successful change within companies, such as the transition to a low-carbon economy, requires strategic oversight and buy-in from the highest levels of decision-making within the company. For the Glass sector, a change in strategy and potentially business model will be required and this cannot be achieved at lower levels within an organisation. Evidence of how climate change is addressed within the top decision-making structures is a proxy for how seriously the company takes climate change, and how well integrated it is at a strategic level. High-level ownership also increases the likelihood of effective action to address the low-carbon transition.

Changes in strategic direction are necessarily future-oriented, which fits with this principle of the ACT project.

Management oversight of climate change is considered good practice.

 

4.3.5.2 - GL 5.2 CLIMATE CHANGE OVERSIGHT CAPABILITY

DESCRIPTION & REQUIREMENT GL 5.2 CLIMATE CHANGE OVERSIGHT CAPABILITY
Short description of indicator Company board or executive management has expertise on the science and economics of climate change, including an understanding of policy, technology and consumption drivers that can disrupt current business.
Rationale of the indicator

Effective management of the low-carbon transition requires specific expertise related to climate change and its impacts, and their likely direct and indirect effects on the business. Presence of this capability within or closely related to the decision-making bodies that will implement low-carbon transition both indicates company commitment to that transition and increases the chances of success.

Even if companies are managing climate change at the Board level or equivalent, a lack of expertise could be a barrier to successful management of a low-carbon transition.

This disclosure is in line with Governance (a) of the TCFD: "a) Describe the board’s oversight of climate-related risks and opportunities.”

 

4.3.5.3. - GL 5.3 LOW-CARBON TRANSITION PLAN

DESCRIPTION & REQUIREMENT GL 5.3 LOW-CARBON TRANSITION PLAN
Short description of indicator The company has a plan on how to transition the company to a business model compatible with a low-carbon economy.
Rationale of the indicator

The Glass sector will require substantial changes to its business to align with a low-carbon economy over the short, medium and long term, whether voluntarily following a strategy to do so or if forced to change by regulations (ex: obligations to use waste as alternative fuels) and structural changes to the market (ex: customer demands come from low-carbon solutions). It is better for the success of its business and of its transition that these changes occur in a planned and controlled manner.

The Investor Expectations of Companies in the Construction Materials Sector document (17) specifically states that companies in the sector should develop such a plan.

This disclosure is in line with Strategy a) and b) of the TCFD: "a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term." and "b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning."

 

4.3.5.4- GL 5.4 CLIMATE CHANGE MANAGEMENT INCENTIVES

DESCRIPTION & REQUIREMENT GL 5.4 CLIMATE CHANGE MANAGEMENT INCENTIVES
Short description of indicator The Board’s compensation committee has included metrics for the reduction of GHG emissions in the annual and/or long-term compensation plans of senior executives; the company provides monetary incentives for the management of climate change issues as defined by a series of relevant indicators.
Rationale of the indicator

Executive compensation should be aligned with overall business strategy and priorities. As well as commitments to action the company should ensure that incentives, especially at the executive level, are in place to reward progress towards a low-carbon transition. This will improve the likelihood of a successful low-carbon transition.

Monetary incentives at the executive level are an indication of commitment to successful implementation of a low-carbon transition strategy.

 

4.3.5.5 - GL 5.5 CLIMATE CHANGE SCENARIO TESTING

DESCRIPTION & REQUIREMENT GL 5.5 CLIMATE CHANGE SCENARIO TESTING
Short description of indicator Testing or analysis relevant to determining the impact of the transition to a low-carbon economy on the current and projected business model and/or business strategy has been completed, with the results reported to the Board or C-suite (CEO, CFO, etc.), the business strategy revised where necessary, and the results publicly reported.
Rationale of the indicator

Changes predicted to occur due to climate change could have several consequences for the Glass sector, including the risk of “stranded assets”, increased costs, a dramatically changed operating environment and major disruptions to the business. There are a variety of ways of analysing the potential impacts of climate-related changes on the business, whether these are slow and gradual developments or one-off “shocks”. Investors are increasingly calling for actions to reduce greenhouse gas emissions across the value chain (see IIGCC investor expectations document for the sector (17)), effective abatement will require a combination of action: improve energy efficiency, use alternative fuels, use raw materials substitution, develop new technologies, sell less Glass but sell services or advice to use Glass in a better way, etc. These actions should be linked with a strong governance framework to manage physical risks of the sector. The ACT methodology thus provides a broad definition of types of testing and analysis that can be relevant to this information requirement, to identify both current and best practices and consider them in the assessment.

Risk management plan is an important management tool for preparing for the low-carbon transition. For businesses likely to be strongly affected by climate change impacts (both direct and indirect), and businesses with large fixed asset bases and long management horizons, such as the Glass sector, it has even greater importance.

This disclosure is in line with Disclosure c) of the TCFD:  "c) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario".

 

4.3.6. Supplier engagement

 

4.3.6.1 - GL 6.1 Strategy to influence suppliers to reduce their GHG emissions

DESCRIPTION & REQUIREMENT GL6.1 STRATEGY TO INFLUENCE SUPPLIERS TO REDUCE THEIR GHG EMISSIONS
Short description of indicator The company has a strategy, ideally governed by policy and integrated into business decision making, to influence, enable, or otherwise shift suppliers’ choices and behaviour in order to reduce GHG emissions.
Rationale of the indicator

Since the raw material being used is linked to the environmental performance of the final glass product, suppliers must be involved in the strategy action plan of the company, regardless of whether raw materials that has been bought. Due to its consideration in the target calculations, the choice of sustainable purchased product is an important lever to help the company to apply its low-carbon transition.

Supplier engagement is included in the ACT IS assessment for the following reasons:

  1. Given their size and their decision-making power in the value chain, integrated companies can influence the strategy and performance of suppliers regarding climate.
  2. The upstream segment represents a high source of emissions throughout the value chain and should be engaged (between 10% and 50% of the life cycle of the product, depending on the glass product, see Table 5).
  3. Engaging suppliers through contract clauses and sales incentives is necessary to take them on board

 

4.3.6.2 - GL 6.2 Activities to influence suppliers to reduce their GHG emissions

DESCRIPTION & REQUIREMENT 6.2 ACTIVITIES TO INFLUENCE SUPPLIERS TO REDUCE THEIR GHG EMISSIONS
Short description of indicator This indicator assesses the level of engagement that the company has with its suppliers, based on an assessment of previous initiatives that show whether or not the company engages with suppliers in various ways.
Rationale of the indicator

RELEVANCE OF THE INDICATOR:

Activities to influence suppliers are included in the ACT GL assessment for the following reasons:

  1. Given their size and their decision-making power in the value chain, integrated companies can influence the strategy and performance of suppliers regarding climate.
  2. The upstream segment represents a high source of emissions throughout the value chain and should be engaged.
  3. Engaging suppliers through contract clauses and sales incentives is necessary to take them on board.

 

4.3.7. Client engagement

 

4.3.7.1 - GL 7.1 Strategy to influence customer behaviour to reduce ghg emissions

DESCRIPTION & REQUIREMENTS GL7.1 STRATEGY TO INFLUENCE CUSTOMER BEHAVIOUR TO REDUCE GHG EMISSIONS
SHORT DESCRIPTION OF INDICATOR The company has a strategy, ideally governed by policy and integrated into business decision-making, to influence, enable, or otherwise shift customer choices and behaviour in order to reduce GHG emissions.
RATIONALE OF THE INDICATOR

RELEVANCE OF THE INDICATOR:

Strategy to influence consumer behaviour to reduce GHG impacts is included in the analysis for the following reasons:

  1. Given their size and their decision-making power in the value chain, integrated companies can influence the strategy and performance of clients regarding climate.
  2. The downstream segment has a key role to play in cullet availability and quality.
  3. Regarding the type of products, the transport to the final client could be non negligeable in terms of GHG emissions

 

4.3.7.2 - GL 7.2 Activities to influence customer behaviour to reduce ghg emissions

DESCRIPTION & REQUIREMENTS GL7.2 ACTIVITIES TO INFLUENCE CUSTOMER BEHAVIOUR TO REDUCE GHG EMISSIONS
SHORT DESCRIPTION OF INDICATOR The company participates in activities, to influence, enable, or otherwise shift customer choices and behaviour to reduce GHG emissions, scrap reduction, sorting and recycling.
RATIONALE OF THE INDICATOR

RELEVANCE OF THE INDICATOR:

While measurement of strategy as in GL 7.1 is important, measuring activities and their outcome is more insightful with regards to the company’s actual emissions reduction activities in the supply chain. Because of the difficulty in measuring this, the ACT assessment uses this maturity matrix approach that has been piloted by several other institutions (see scoring rationale) to fill this gap in indicators GL6.2 and GL7.2.

 

4.3.8. Policy engagement

 

4.3.8.1 - GL 8.1 Company policy on engagement with trade associations

DESCRIPTION & REQUIREMENTS GL8.1 COMPANY POLICY ON ENGAGEMENT WITH TRADE ASSOCIATIONS
SHORT DESCRIPTION OF INDICATOR The company has a constructive policy on what action to take when industry organisations in which it has membership are found to be opposing ‘climate-friendly’ policies.
RATIONALE OF THE INDICATOR

See also the Module rationale.

Trade associations are a key method by which companies can influence policy on climate indirectly. Thus, where trade associations take positions that are negative for the climate, companies need to take action to ensure that this negative influence is countered or minimised. Transparency about public policy is a specific request of the Investor Expectations report (17).

 

4.3.8.2. - GL 8.2 Trade associations supported do not have climate-negative activities or positions

DESCRIPTION & REQUIREMENTS GL8.2 TRADE ASSOCIATIONS SUPPORTED DO NOT HAVE CLIMATE-NEGATIVE ACTIVITIES OR POSITIONS
SHORT DESCRIPTION OF INDICATOR The company is not on the board or providing funding beyond membership of any trade associations that have climate-negative activities or positions. It should also be considered if the company is supporting trade associations with climate-positive activities and/or positions.
RATIONALE OF THE INDICATOR

See also the Module rationale.

Trade associations are a key instrument by which companies can indirectly influence policy on climate. Thus, participating in trade associations that actively lobby against climate-negative legislation is a negative indicator and likely to obstruct the low-carbon transition.

 

4.3.8.3 - GL 8.3 Position on significant climate policies

DESCRIPTION & REQUIREMENTS GL8.3 POSITION ON SIGNIFICANT CLIMATE POLICIES
SHORT DESCRIPTION OF INDICATOR The company is not opposed to any significant climate relevant policies and/or supports climate friendly policies.
RATIONALE OF THE INDICATOR

See also the Module rationale.

Policy and regulation that acts to promote transition to a low-carbon economy is key to the success of the transition. Companies should not oppose effective and well-designed regulations in these areas but should support it.

 

4.3.9. Business model

A company may transition its business model to other areas to remain profitable in a low-carbon economy. The company’s future business model should enable it to decouple financial results from GHG emissions, in order to meet the constraints of a low-carbon transition while continuing to generate value. This can be done by developing activities outside the core business of the company.

This module aims to identify both relevant current business activities and those still at a burgeoning stage. It is recognised that transition to a low-carbon economy, with the associated change in business models, will take place over a number of years. The analysis will thus seek to identify and reward projects at an early stage as well as more mature business activities, although the latter (i.e. substantially sized, profitable, and/or expanding) business activities will be better rewarded.

  • Focus will be on new business models
  • High emissive / involved in high emissive activity companies should be benchmarked by quantitative modules (not in business model module)
  • Score will be based on long-term viability of the company’s business model in the low-carbon economy
  • Is the company developing levers, and actioning them, to transition to low-carbon economy?
  • Is there a need to change the fundamental business model? e.g. ticket agencies can just do train not air travel, engineering services no longer provided to fossil fuel companies.
  • How linked to emissive activities is the business model?
  • New business models vs. transitioning existing business model
  • We shouldn’t penalise companies who can’t shift a business model because they are already low-carbon

 

Flat glass

It seems that the most crucial for flat glass would be the contribution to the decarbonization of other sectors, including the production of products that help energy production (PV panels for example), and products that allow less consumption (thanks to less weight in the automotive sector for example), and better performance (thanks to a better insulation of the windows in building sector for example).

 

Hollow glass

General remarks on the business models:

  • Hybrid / electric furnaces are only for some products (not for crystal glass & flaconnage for instance).
  • The rate of cullet is limited with actual furnaces & electrified furnaces.
  • There are very different technologies to produce different products.

Regarding circular economy, a work on refilled bottles can be done, as well as on external recycling value chain and recycled products (for some products only).

The design of low-carbon products is also a solution including changing the product’s color, reducing the weight, reviewing the glass specification in order to find the best compromise between emissions & product performance, and producing not transparent flaconnage bottles (such as grey bottles).

Currently, due to technology non-mature yet, it does not seem to be any movement towards CCS/CCUS technologies.

 

Fiber glass

For fiber glass the most important elements in business model are:

  • Fuel switching: oxy-fuel and electrification
  • Cullet use is not an option for this sector (the technology does not accept cullet)
  • Design of low-carbon products by reducing the weight of the products is the main business model action (both in their products and products from other sectors in composites)
  • Low-carbon products promoted by companies are also products specifically made with low-carbon energy

Avoided emissions are also important for fiber glass, the sector contributes to lighter products and thus GHG reductions in several other sectors:

  • Transport by use of fiber glass in composite materials (cars, boats, train…)
  • Electricity by use of fiber glass reinforced composites in windmills for example
  • Building by use of insulation products made of fiber glass

 

4.3.9.1 - GL 9.1 Low carbon business activities that aim at increasing energy efficiency and the use of low-carbon energy or optimizing of the process

DESCRIPTION & REQUIREMENTS GL9.1 LOW CARBON BUSINESS ACTIVITIES THAT AIM AT INCREASING ENERGY EFFICIENCY AND THE USE OF LOW-CARBON ENERGY OR OPTIMIZING OF THE PROCESS
SHORT DESCRIPTION OF INDICATOR The company is actively developing business models for a low-carbon future and participating in business activities that increase energy efficiency, optimize the process or the use of low carbon energy
RATIONALE OF THE INDICATOR See the Module rationale.

 

4.3.9.2 - GL 9.2 Low carbon business activities that aim at developing synergies with other industries

DESCRIPTION & REQUIREMENTS GL9.2 LOW CARBON BUSINESS ACTIVITIES THAT AIM AT DEVELOPPING SYNERGIES WITH OTHER INDUSTRIES
SHORT DESCRIPTION OF INDICATOR

The company is actively developing business models around circular economy, in participating in business activities related to create synergies with other industries.

It also evaluates in a dimension 2 the avoided emission reported by the company if any.

RATIONALE OF THE INDICATOR

Collaboration helps create innovation. The synergies with other industries to help them to reduce their emissions is a necessary topic where each company could help to reach a global objective of decarbonization in 2050.

The avoided emissions are also topic which is becoming increasingly important for companies because it helps to communicate in a positive way. The method of quantification and the way of communication should follow the best practices. In addition, the avoided emissions calculation helps to promote the fact that some industry contributes to reducing emissions of other sectors with their products. Beyond that positive communication on their products and their actions, the company should focus on decarbonizing their assets.

 

4.3.9.3 - GL 9.3 Low carbon business activities that aim at developping the circular economy

DESCRIPTION & REQUIREMENTS GL9.3 LOW CARBON BUSINESS ACTIVITIES THAT AIM AT DEVELOPPING THE CIRCULAR ECONOMY
SHORT DESCRIPTION OF INDICATOR The company is actively developing business models around circular economy, in participating in business activities associated with collecting, reuse and recycling of material. In addition, the company is actively working on improving design and use of their product that could increase the lifetime or environmental performance of the systems with equivalent or better performance
RATIONALE OF THE INDICATOR See the Module rationale.

 

4.3.9.4 - GL 9.4 LOW CARBON BUSINESS ACTIVITIES THAT AIM AT REDUCING THE STRUCTURAL BARRIERS TO MARKET PENETRATION OF LOW-CARBON PRODUCTS WITHOUT DEGRADING THE PERFORMANCE OF THE PRODUCT

DESCRIPTION & REQUIREMENTS GL9.4 LOW CARBON BUSINESS ACTIVITIES THAT AIM AT REDUCING THE STRUCTURAL BARRIERS TO MARKET PENETRATION OF LOW-CARBON PRODUCTS WITHOUT DEGRADING THE PERFORMANCE OF THE PRODUCT
SHORT DESCRIPTION OF INDICATOR The company is actively developing business models for a low-carbon future and participating in business activities that reduce structural barriers to market penetration of low-carbon products.
RATIONALE OF THE INDICATOR See the Module rationale.

 

4.4 Benchmarks used for indicators

The following table lists the benchmarks used for the quantitative indicators and their sources:

Table 11: BENCHMARKS FOR THE INDICATORS

 

4.5. Weightings

 

4.5.1. Weightings

For a first interpretation, indicators which are looking into the future have always higher weighting than indicator looking at the past. Some indicators are looking to the present (reporting year) situation and the strategy. This indicator could have high weightings because they will be more robust than indicators looking at the future situation.

Table 12: PERFORMANCE INDICATOR WEIGHTINGS

 

4.5.2 Dynamic Weightings of Module 2 and Module 4

Modules are weighted depending on where the emissions of the assessed company are the most significant:

  • The Module 2 (Material investment) is focussed on the actions of the company to reduce its inclusive Scope 1+2 emissions.
  • The Module 4 (Sold product performance) is focussed on the actions of the company to reduce its Scope 3 upstream emissions

This dynamic calculation has been developed to consider the products variable CO2 emissions.

Note: For upstream Scope 3 emissions, the analyst should focus on the ones that are relevant for the company. The exercise is not to get an exhaustive list except if it is the first time the company makes this list.

 

4.5.3. Dynamic Weightings of Module 6 and Module 7

Modules are weighted depending on where the levers of the company are the most significant:

  • The Module 6 (Supplier engagement) is focussed on the actions of the company regarding their supplier (raw materials, energy, transport of raw materials).
  • The Module 7 (Client engagement) is focussed on the actions of the company regarding their clients (reuse of the final product, transport of the finale product, recycling at the end of life).

This dynamic calculation has been developed to consider the different levers linked to the type of products.

 

4.5.4. Rationale for weightings

Principle Explanation
Value of information The value of the information that an indicator gives about a company’s outlook for the low-carbon transition is the primary principle for the selection of the weights.
Impact of variation A high impact of variation in an indicator means that not performing in such an indicator has a large impact on the success of a low-carbon transition, and this makes it more relevant for the assessment.
Future orientation Indicators that measure the future, or a proxy for the future, are more relevant for the ACT assessment than past & present indicators, which serve only to inform the likelihood and credibility of the transition.
Data quality sensitivity Indicators that are highly sensitive to expected data quality variations are not recommended for a high weight compared to other indicators, unless there is no other way to measure a dimension of the transition.

 

5. Aligned State

The table below presents the response of a low-carbon aligned company of the sector to the five ACT questions:

→ What is the company planning to do? [Commitment]

→ How is the company planning to get there? [Transition Plan]

→ What is the company doing at present? [Present]

→ What has the company done in the recent past? [Legacy]

→ How do all these plans and actions fit together? [Consistency]

 

Figure 29: ALIGNED STATE FOR COMPANIES IN THE GLASS SECTOR

 

 

6. Integration of Physical risks and Adaptation in ACT

 

6.1. Introduction and context

 

This is a first version of a maturity matrix that aims to integrate climate physical risks and adaptation in ACT.

A specific method will be developed with a separate score, modules specific to climate risks and adaptation, and a possible joint assessment with the mitigation part of ACT. This is a first draft of its integration in ACT historical assessment method.

To be noted :

Each line (row) of the matrix corresponds to a category that is independent from others. Categories are just grouped by module. The matrix is composed of two dimensions, the physical climate risks and adaption. Each of these dimensions contains several modules.

Scores and weightings are detailed in this document.

The lists of impacts and vulnerabilities for the different activities of a company along its value chain are not exhaustive. Any other impact or vulnerability that is relevant for the company can be considered and analysed.

Any comment or feedback is welcome.

Two questions are for consultation.

A glossary of climate physical risks and adaptation terms is available in the longer version of this document.

6.2. Maturity Matrix

The two dimensions of the maturity matrix are climate physical risks and adaptation.

Physical climate risks correspond to the potential for negative consequences from physical climate events or trends. Risks from climate change impacts arise from the interaction between hazard (triggered by an event or trend related to climate change), vulnerability (susceptibility to harm) and exposure (people, assets or ecosystems at risk).

Hazards refer to the potential occurrence of a natural or human-induced physical event or trend or physical impact that may cause loss of life, injury, or other health impacts, as well as damage and loss to property, infrastructure, livelihoods, service provision, ecosystems and environmental resources. In this note, the term hazard usually refers to climate-related physical events or trends or their physical impacts. Thus, it includes processes that range from brief events, such as severe storms, to slow trends, such as multi-decade droughts or multi-century sea level rise.

Exposition is the degree to which a company’s value chain (e.g., assets, operations, supply chain, customers) has the potential to be impacted by physical climate hazards due to its geographic location. These metrics should link part of a company’s value chain (e.g., physical assets) with specific physical climate hazards (e.g., tropical cyclones).

Vulnerability is the propensity of different parts of a company’s value chain to suffer negative impacts when exposed to and then impacted by physical climate hazards. These metrics should assess specific characteristics of a company’s value chain (e.g., water intensity) that may make that part of the value chain more or less likely to suffer negative impacts from physical climate hazards.

The second dimension of the matrix is adaptation. It is the process of adjustment to actual or expected climate and its effects. In human systems, adaptation seeks to moderate or avoid harm or exploit beneficial opportunities. In some natural systems, human intervention may facilitate adjustment to expected climate and its effects.

Adaptation options exist in all sectors, but their context for implementation and potential to reduce climate-related risks differs across sectors and regions. Some adaptation responses involve significant co-benefits, synergies and trade-offs.

Here is presented a summary of the maturity matrix with a short description of each indicator. You can find the full maturity matrix in the longer version. Any comment or feedback regarding these indicators is welcome.

 

6.3. Weightings

The weightings on 100% are distributed equally among Physical risks and Adaptation dimensions. Analysis and Organizational capacity modules are both fixed to 25%. If a company is not concerned by one or several modules between Supply chain, Production, Logistics or Demand, the analyst can decide

  • To attribute a weighting of 0% for it and to redistribute the corresponding weightings
  • To change marginally the weightings between these four modules for another distribution that could be more appropriate for the company

The final score of the complete matrix will be computed on 20 thanks to a weighted average. Two other scores will be computed, the physical risks score on 100% and the adaptation score on 100%.

Any comment or feedback regarding these weightings is welcome.

 

4. Questions for consultation

 

Question 1: How do we want to assess the “Demand and sales” (5) aspect for the company?

 

OPTION 1: keep the module as it is now

OPTION 2: Modify the « Demand & sales » module (5) to make it more business related and integrate more in it the notion of climate-related opportunities, as well as keeping the risks analysis dimension

 

 

Question 2: How do we want to address the notion of climate-related opportunities in the matrix?

 

Climate-related opportunities in the ACT framework are defined as follow:

It is the potential positive impacts related to climate change on an organisation. It will vary depending on the region, market and industry in which an organisation operates. In the ACT framework, climate-related opportunity focuses on opportunities to adapt to market shifts driven by physical climate impacts and cater to any resulting new market needs, that is to say, the fundamental shifts in climate over the longer term may affect value chains and drive new consumer needs. For example, technology to keep buildings cool, along with water- and energy-efficient technologies, or crops that are better suited to chronic changes in precipitation and temperature. (EBRD)

  • OPTION 1: Add « Identification climate-related opportunities related to climate change » at the low-carbon aligned level in the matrix for
    • Analysis module (1)
    • Production module (3)
  • OPTION 2: Modify the « Demand & sales » module (5) to make it more business related and integrate more in it the notion of climate-related opportunities, as well as keeping the risks analysis dimension.

 

Acknowledgements

ADEME and CDP warmly thank the members of the Technical Working Group for their inputs and feedbacks on the methodology (see list of members in Annex).

Technical coordination:

Edouard Fourdin (ADEME)

Anaïs Goburdhun (ADEME)

Dua ZEHRA (CDP)

 
ACT co-founders:

 

 

 

 

 

supported by:

Technical assistance provided by:

Cécile Beaudard

Salomé LERUCH

Lucie MOUTHUY

Adrien DE COURCELLES

Tom NICO

 

 

 

 

Quality assurance and methodology harmonization provided by:

Rémi MARCUS

Patrick HARDY

© CDP Worldwide & ADEME 2021. Reproduction of all or part of work without licence of use permission of CDP Worldwide & ADEME is prohibited.