Emissions reported by companies in the ICT sector can be notably higher when looking at companies’ supply chains. According to a recent Etla study, the procurement decisions of a company in Finland can significantly change the company’s emission intensity calculations, as the industry’s inputs come from industries in which emissions are much higher than in the ICT-sector itself. The focus of company emissions reporting should therefore be shifted to cover the entire supply chains. Particular attention should be paid to the impact of streaming companies that operate on the over the top business models.
The emission intensity of companies in the ICT sector has decreased in Finland, as the industry is viewed without their supply chain. Hence, the climate impact of the ICT sector is formed through three channels: procurement, the sector’s own carbon footprint and its impact on other economic sectors.
The current reporting of ICT sector’s emissions may create too good picture of ICT companies. The amount of emissions rises significantly when considering companies’ procurement and earlier parts of the supply chains. This is evident from a recent Etla study Greenhouse Gas Emissions of Finland’s Information Economy Sector: A Supply Chain Perspective (Etla Report 121) by Natalia Kuosmanen, Timo Seppälä and Ilkka Ylhäinen. The study, funded by The Finnish Innovation Fund Sitra, investigates how the emissions in the ICT sector have developed in Finland during 2011–2019.
Procurement in the ICT sector come from industries in which greenhouse gas emissions are 77 times higher than the sectors’ own reported emissions, of which more than 60 % come from abroad. The focus of reporting should therefore be shifted to emission analyzes covering the entire supply chain to avoid an erroneous picture, says Etla researcher Timo Seppälä.
– Sectoral reporting of greenhouse gas emissions provides a flawed picture of how environmentally friendly single company or industry is. Procurement decisions of materials, components, subassemblies and services for an individual company and industry, as well as other outsourcing decisions, can significantly change a company’s emission intensity, Seppälä points out.
In recent years, Finland has outsourced its greenhouse gas emissions and emission intensity more abroad in the supply chain of the ICT sector. The inputs of the sector come mainly from China and United States.
The inputs and outputs of streaming service companies have not been considered in the study because the companies are not registered in Finnish statistics. The emissions of such companies operating in the “Over the top” (OTT) business model are recorded in the statistics of the company’s country of registration, which makes it difficult to analyze the actual emissions.
– Streaming service companies are increasing the foreign inputs in the ICT sector. Finnish ministries should pay special attention to these companies operating on the OTT business models and their wider environmental effects focusing on their carbon footprint and emissions, says Etla researcher Natalia Kuosmanen.
Companies should also be required more detailed emissions reporting as well as to consider emissions more comprehensively, comments Etla researcher Ilkka Ylhäinen.
– Corporate management should pay particular attention to emissions in the selection and management of suppliers, especially for high-volume inputs such as mobile devices and computers, Ylhäinen says.
