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From the carbon footprint of the ICT sector to the carbon footprint of supply chains

Industries managing their greenhouse gas emissions should pay attention to their supply chains, says Timo Seppälä of ETLA Economic Research.

The environmental benefits and harms of various sectors have been the topics of much debate in Finland. However, the focus is on the greenhouse gas emissions of individual companies or sectors, which invites misleading conclusions.

Studies in China and Finland show the environmental impacts of the sector are several times higher when the use of carbon-intensive material, components, and intermediate inputs is included in the calculation of the carbon footprint of the company and sector.

Supply chains should be taken into consideration when managing greenhouse gas emissions in different sectors, as well as the calculation and optimisation of the comprehensive greenhouse gas emissions from
end products and services while they are in use.

In the ICT sector, raw materials, hardware production, service provision, and usage throughout their life cycles cause negative environmental impacts. On the other hand, the multitude of technologies and applications supplied by the sector helps to forecast and optimise the efficiency of work in various
sectors, the energy consumption of equipment, and emissions. Do the benefits outweigh the drawbacks?

The benefits and harms of the ICT sector are the outcomes of its procurement, its own carbon footprint, and the impacts on other sectors of the economy while its products and services are used.

However, there are some problems surrounding measurements, such as the reliability and timeliness of the available data, the definition of the sector, and taking into account the carbon footprint of supply chains and the usage of products and services throughout their life cycles. These can lead to the carbon footprint of the ICT sector being underestimated. It is particularly difficult to estimate the consumption of outputs in specific sectors.

According to the surveys we carried out at ETLA in 2020 and 2022, foreign inputs account for over 60 per cent of total procurements in the ICT sector. The procurements are from sectors whose greenhouse gas emissions were 77 times higher than the ICT sector’s own greenhouse gas emissions in 2018.

Most of the procurements in the Finnish ICT sector originate from Asia – mainly China – the United States, and some European countries.

The greenhouse gas emission intensity (tonnes per euro, also known as carbon intensity) is a metric that companies are recommended to use when they calculate their own greenhouse gas emissions, estimate the greenhouse gas emissions of suppliers, and compare companies and sectors worldwide. It is
also important to understand the energy production methods used in different countries because this
enables more accurate calculations of greenhouse gas emissions.

Timo Seppälä works as a Lead Researcher at ETLA Economic Research. He is particularly interested in digital production and service operations.


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