Navigating carbon reporting

A beginner’s guide for minor metals professionals

In a recent CarbonChain-MMTA webinar, we dived deep into the world of carbon reporting for minor metals. Here, Julie Sandilands, Head of Carbon Accounting, CarbonChain, unpacks the key things you should know to prepare for success as customers and regulators request your emissions data.

Are your customers asking about the carbon footprint of your products? Are you unsure what different regulations and standards like ‘EU CBAM’ and ‘GHG Protocol’ mean?

Soon, every minor metals producer, trader and recycler will need to understand and comply with requests and regulations related to their carbon emissions. Your license to operate as a business may depend on it..

Why are minor metals facing growing carbon reporting demands?

The world is transitioning to net zero, and minor metals play a central role in this journey. Manufacturers need them to build lower-carbon products like electric vehicles, batteries, and electricity networks, which can help reduce reliance on fossil fuels.

That’s a clear business opportunity for producers, traders and recyclers alike as the market for critical minerals like lithium, copper and nickel rapidly grows.

Yet, it also means that governments, regulators and customers are scrutinising the sector’s own carbon emissions, and asking for carbon reporting.

Unfortunately, complying with these requests can be very complex, requiring an understanding of various emissions calculation methodologies and rules.  And the trend of carbon reporting requests isn’t slowing down…

Carbon reporting is a necessity and opportunity

A growing number of jurisdictions like the EU, UK, US, Canada, China and Singapore have rules in place, or are planning rules, that require companies to report their emissions (and the emissions of their suppliers).

Regulations aside, customers and financial institutions are increasingly demanding more transparency and action on emissions from businesses. In 2022, financial institutions holding $136 trillion in assets, and procurers worth $6.4 trillion in purchasing power requested companies to disclose their emissions.

Businesses can gain a competitive edge by accurately measuring, reporting and reducing emissions. The demand for lower-carbon products is growing. For instance, a recent Bain analysis estimated a $20–$30 billion market for green steel by 2030.

Carbon accounting comes in many forms

If you’re new to carbon reporting, you first need to start carbon accounting. That’s the process of measuring the emissions from your business activities, products or services. This includes all greenhouse gases (GHGs) like methane, nitrous oxide and carbon dioxide, but is usually expressed in terms of CO₂e (carbon dioxide equivalent).

Let’s break down the types of carbon accounting that minor metals companies may be required to do (depending on the regulation or stakeholder request).

Product Carbon Footprints (PCFs)

What: A PCF gives you the total GHG emissions for each product you produce, trade or recycle. It’s a comprehensive look at the emissions from the entire life cycle of your product, right from the mine to production to shipment (and sometimes beyond, to the product’s use and disposal).

Why: Understanding your product’s carbon footprint helps you report to customers and identify where you can start reducing emissions. If a stakeholder or ratings body asks you to provide an Environmental Product Declaration or Life Cycle Assessment (which cover all the potential environmental impacts of a product, not just GHG emissions), a PCF can contribute to those reports.

Getting started:

In simplified terms, calculating a product carbon footprint involves:

1. Mapping your production process and suppliers within the boundaries you’ve chosen. Let’s take an example. For lithium carbonate from source to shipment, you’d map out the extraction of spodumene from, say, Australia, the transport to China and then the processing into LiCO3.
2. Gather emissions data for each stage (directly from suppliers or from emissions databases) to make the total calculation.

If you struggle to source the emissions data or to map out your supply chain, you can use advanced software like CarbonChain to automatically fill in gaps.

For more detailed guidance, follow the internationally accepted Greenhouse Gas Protocol (GHG Protocol) Product Life Cycle Accounting and Reporting Standard.

 

Trade Portfolio Emissions Accounting

What: A trader’s portfolio emissions are measured by adding up the GHG emissions of every trade activity of every product traded.

Why: Trade finance providers typically request this kind of carbon accounting and reporting. They want to see reports that show the carbon intensity of the part of your portfolio that they finance, and then agree on carbon reduction targets that may lead to sustainability-linked loan agreements.

Getting started: Start with product carbon footprints for the most common goods you trade, over the period of time that you, your banks or your customers require.

 

Corporate Emissions Accounting (or Corporate Carbon Footprinting)

What: Measuring corporate emissions involves all the GHG emissions that your organisation has generated in its operations and value chain over a set period of time (usually a year).

This is where the idea of Scope 1, 2 and 3 emissions comes in:

• Scope 1: Emissions from operations you own or control (e.g. if you own a lithium refinery, its emissions will be part of your Scope 1)
• Scope 2: Emissions from the generation of purchased or acquired electricity
• Scope 3: All other emissions that occur in your value chain, related to purchased, acquired or sold goods and services.

Historically, there’s been more emphasis on reporting Scope 1 and 2 emissions, because getting Scope 3 data is more difficult since it includes supplier data. But the tide is turning. Many key sustainability reporting frameworks now demand Scope 3 reporting.

Why: You’ll likely be asked for a corporate carbon footprint from CDP (the global platform for carbon disclosure), Ecovadis (which provides ratings based on carbon performance), and governments or regulators (like the EU’s Corporate Sustainability Reporting Directive or the US Security and Exchange Commission).

Getting started: The process of calculating a corporate carbon footprint across Scope 1, 2 and 3 is complex and has many variables. But it’s vital for understanding and addressing your biggest carbon-related impacts and risks. As a rule of thumb, your focus needs to be on gathering accurate data across your operations, vendors and customers about activities and their associated emissions. Read our comprehensive guide once you’re ready.

 

How does the EU’s CBAM impact minor metals?

The new EU Carbon Border Adjustment Mechanism (CBAM), effective from 1st October 2023, requires EU importers of goods produced outside the EU to report emissions. From 2026, importers will also have to pay a carbon price on those emissions.

Currently, the EU CBAM’s impact on the minor metals sector is limited. It covers the ferroalloys ferrochromium, ferromanganese, and ferronickel, due to their significant impact on steel’s carbon footprint.

If you’re a producer (“installation” in CBAM language), you need to calculate and provide emissions data to any customer who imports your CBAM-covered good into the EU. The first deadline for this is January 2024. Emissions need to be calculated according to a CBAM-approved methodology, which differs from standard product carbon footprinting.

Importers, in turn, are responsible for reporting those emissions to the European Commission on a quarterly basis. If they don’t, they’ll face fines for non-compliance, and producers will be indirectly penalised: customers will only be able to buy from you if you can provide them with the emissions data they need. Otherwise, they’ll turn to your competitors.

 

How CarbonChain and the MMTA can help

With CarbonChain, minor metals professionals can automatically measure, report and set targets for their emissions (product, trade and corporate), and use our dedicated CBAM reporting solution to help ensure compliance.

MMTA members receive an exclusive 20% discount for their first year’s subscription to CarbonChain for signs up by 31 December 2023 (10% discount thereafter),  Schedule a call.

 

 

 

 

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