Supervisor: Michael Browne Master Degree Project No. 2016:74
Master Degree Project in Logistics and Transport Management
Emission factors and its influence on CO2 calculation
A case study of Volvo Group
Josef Larsson and Natalie Goldschmidt
Abstract
Carbon dioxide emissions from freight transport are a great contribution to global warming. The increased awareness of its harmful impact leads to an increase of activities among companies. One part of it is the reporting of CO2 emission values.
Several guidelines have be development by organisations on how to approach the reporting and the carbon footprint. However, no literature could be detected what challenges companies face when they try set an emission factor for such calculation and how it influences the accuracy and uncertainty of the output. This research tries to address these issues for road emission factors for international operating companies by conducting a case study of Volvo Group’s current calculation setup. Moreover, calculation was conducted in order to evaluate the potential influence of the emission factor on the calculated CO2 output. In addition, a company comparison with SKF Group and Tetra Pak was held to enhance understanding of challenges and ways of determining emission factors.
During the research several challenges related to the CO2 calculation and its emission factor determination were detected. The findings emphasize on the need of companies to set their road emission factor with great care, since it has a direct impact on the calculation output, not only in numerical terms, but also on the accuracy and uncertainty of the value. In order to provide guidance to companies how to choose an emission factor, which adds accuracy without increasing the uncertainty three questions are suggested based on the findings of the research: What is the driver for the calculation?
What quality of data is available? Which level of accuracy and certainty in regards of emission factor is wanted and how much effort is prepared to put into the task?
Depending on the self-evaluation of each company a one-fits-all emission factor, a region or specific emission factor is suggested.
Keywords: Emission factor, road emission factor, carbon footprint calculation, challenges in measuring CO2, accuracy and uncertainty in CO2 calculation
Acknowledgement
To start with, the authors would like to express their gratefulness to AB Volvo, and more specifically Volvo Group Logistic Services and its employees for making this thesis possible by giving us the opportunity to conduct a case study at their premises. We would like to thank everyone for the patience and helpfulness by answering all our questions and providing us with all necessary material. A special thanks goes to our external supervisor Susanna Hambeson for continuous support and guidance along the project.
Furthermore the authors would like to thank the companies participating and cooperating in the benchmarking, Zaher Ashiq at SKF Group and Per Nilsson at Tetra Pak. The information provided has been very helpful and a large asset in the research process.
Lastly, the authors want to thank our supervisor Michael Browne at the School of Business, Economics and Law at the University of Gothenburg. Michael´s patiently advices and feedback together with his expertise within this field of research has been essential for the final outcome of this thesis.
Gothenburg, June 2, 2016
_____________________ _____________________
Josef Larsson Natalie Goldschmidt
Table of content
List of figures ... iii
List of tables ... iv
List of abbreviations ... v
1 Introduction ... 1
1.1 Volvo Group Logistics Services ... 2
1.1.1 Transport modes, regions and business processes ... 3
1.1.2 Environmental commitment ... 4
1.2 Research question and aim ... 4
1.3 Delimitation ... 5
2 Methodology ... 7
2.1 Research process ... 7
2.2 Paradigm ... 8
2.3 Primary and secondary data collection ... 8
2.4 Data collection ... 8
2.4.1 Case study ... 9
2.4.2 Interviews ... 9
2.4.3 Internal and organisational documents ... 10
2.5 Searching and reviewing the literature ... 10
2.6 Data analysis ... 12
2.7 Reliability, validity and generalizability ... 14
3 Literature review and theoretical framework ... 15
3.1 Drivers for emission reporting ... 15
3.2 Reporting standards ... 18
3.2.1 The Greenhouse Gas Protocol ... 18
3.2.2 Scopes of the Greenhouse Gas Protocol ... 19
3.2.3 Identify and calculate emission ... 21
3.2.4 Targets related to emissions ... 23
3.3 Emission factors ... 24
3.3.1 Vehicle ... 26
3.3.2 Environmental ... 27
3.3.3 Traffic ... 27
3.3.4 Driver ... 27
3.3.5 Operations ... 27
3.3.6 Overview ... 28
3.4 Carbon footprint calculation tools ... 29
3.5 Challenges and risks ... 29
4 Case Study AB Volvo ... 33
4.1 Drivers of AB Volvo ... 33
4.2 CO2 footprint calculation ... 34
4.2.1 Input ... 35
4.2.2 Calculation ... 36
4.2.3 Reported result ... 38
4.2.4 Scopes and boundaries ... 38
4.3 Challenges ... 38
5 Road emission factor calculation of AB Volvo ... 41
5.1 NTM-based default emission factor ... 41
5.1.1 Input ... 41
5.1.2 Assumptions ... 43
5.1.3 Calculation ... 43
5.1.4 Output ... 44
5.2 Carrier specific emission factor ... 44
5.2.1 Input ... 44
5.2.2 Assumptions ... 45
5.2.3 Calculation ... 46
5.2.4 Output ... 48
6 Findings and analysis of VGLS CO2 emission calculation ... 49
6.1 CO2 emission calculation ... 49
6.2 How are the emission factors in the road emission calculation used? ... 51
6.3 What variables influence the emission factors? ... 52
6.4 Accuracy and uncertainty of the input ... 56
7 Comparison of Tetra Pak and SKF ... 59
7.1 Tetra Pak ... 59
7.2 SKF ... 60
8 Discussion ... 63
8.1 Drivers ... 64
8.2 Methodologies ... 65
8.3 Challenges ... 66
9 Conclusion ... 69
9.1 Theoretical contributions ... 69
9.2 Practical contributions ... 70
9.3 Further research ... 71
Table of references ... 73
Appendixes ... 81
List of figures
Figure 1: The geographical locations of VGLS ... 2
Figure 2: Transport processes of VGLS ... 3
Figure 3: Examples of Volvo packaging ... 3
Figure 4: Research process of the report. ... 7
Figure 5: Illustration of literature review process ... 12
Figure 6: Illustration of framework used for data analysis. ... 13
Figure 7: Companies motivations to measure and report climate change related information. ... 16
Figure 8: Composition of supply chain mitigation opportunities ... 17
Figure 9: Fuel life cycle analysis ... 19
Figure 10: An illustration of the three scopes, provided to define direct and indirect emissions. ... 20
Figure 11: Five steps of how to calculate GHG emissions ... 21
Figure 12: A description of the difference between centralized and decentralized approach of gathering GHG-emission data ... 23
Figure 13: Hypothetical relationship between model accuracy, input accuracy and level modelling detail ... 25
Figure 14: Visualisation of the interrelation between various variables ... 26
Figure 15: Possible influences on road EFs ... 28
Figure 16: Overview CO2 emission calculation VGLS. ... 34
Figure 17: An overview of transport statistic sources for regions ... 35
Figure 18: Map of VGLS’s road CO2 emission calculation ... 37
Figure 19: Transport modes of distribute products. ... 39
Figure 20: Changes of CO2 footprint with varying EFs in percent for year 2016 ... 49
Figure 21: Analysis usage of default EF in calculation in percent for year 2016. ... 51
List of tables
Table 1: List of interviewees. ... 10 Table 2: Keywords and search terms used ... 11 Table 3: Vehicle group ... 42 Table 4: Fuel Consumption [l/km] of VGLS class 4, per 0% and 100% filling degree .... 42 Table 5: The output of the NTM-based default EF (40t) ... 44 Table 6: Example of result of carrier survey ... 45 Table 7: Default values for carrier specific emission factor calculation. ... 45 Table 8: Fuel consumption (l/km) depending on loading factor, vehicle classification and
Euro class. ... 47 Table 9: NTM-based default emission factors in g/tonkm with different max. loading
capacities ... 52 Table 10: Differences of input values into EF calculation. ... 55 Table 11: Calculated default EFs in g/tonkm for formula (4) and (5) based on region. .. 56 Table 12: Comparison of AB Volvo, Tetra Pak and SKF ... 60
List of abbreviations
Abbreviation Full name
AB Volvo Volvo Group
CDP Carbon Disclosure Project CSR Corporate social responsibility
EF Emission factor
GHG Protocol Greenhouse Gas Protocol
ISO International Standard Organisations MNC Multinational companies
NTM Network for transport measures
QV Qlikview
TRL Transport Research Laboratory
TTW Tank to Wheel
UNEP United Nations Environmental Program VGLS Volvo Group Logistics Services
WTW Well to Wheel
1 Introduction
Freight transport is a big contributor to CO2 emission, with a growing trend for the future.
Around 15% of the world's greenhouse gas emissions occur from freight transportation, whereby CO2 is a major contributor with 23%. From 1990 until 2007 carbon dioxide (CO2) emissions from the freight sector has increased by 45% and is expected to grow by another 40% from 2007 to 2030 (ITF 2010). Research shows a connection between the increasing CO2 levels in environment and the rise of temperature and water levels.
The influence of human behaviour is evident and results in severe impacts on the ecosystem, humans and animals life. Droughts, floods, food shortage and extinctions of species are some of the discussed effects (WWF 2016).
Increased awareness of the harmful impact and governmental initiatives to cut emissions leads to increase of activities among companies. Many companies realize the growing importance and report beside financial matters in bigger shares also about sustainability or corporate responsibility nowadays (Ditlev-Simonsen 2010). Thereby many companies have adopted the triple bottom line in order to evaluate their performance, not only in regards of financial, but also social and ecological matters (Slaper and Hall 2011).
A big stake of the ecological performance is the accounting of emissions. Different initiatives and tools on how to report have been developed over the years. Even though well structured guidelines exist, one challenge for companies is to create a calculation with high accuracy together with low uncertainty. A part of the accuracy and certainty of the output is linked to emission factors. Emission factors (EF) are used to link an activity, such as transporting freight one kilometre far, to the average emitted emission from it.
Picking the right EFs are considered as one of the most challenging tasks when calculating emissions (McKinnon and Piecyk 2010). Literature discusses how to calculate and/or generate EFs, but on a practical level how to apply them in real world scenario is not widely explained. (TRL 1999; GHG Protocol 2012; McKinnon and Piecyk 2010; Williams et al. 2012; Odette 2013; Demir et al. 2014). Thereby it can be discussed if the EF´s provided by an organization, like Network for transport measures (NTM), are comparable to the EFs collected from the actual transport carriers and if those differ in accuracy.
In order to evaluate the influence of the decision of the EFs on the CO2 emission a case study is conducted at Volvo Group Logistic Services (VGLS). Thereby the question of accuracy1 in regards of usage of different EFs is conducted. The current practice is that VGLS mixes own collected EF with and external EFs based on NTM values and own assumptions. These EFs and the used combination of them are analysed to determine if they are affecting the accuracy of the output.
The thesis will continue with a short background of Volvo Group Logistic Services from where the research questions derive. This is followed by a presentation on the methodology of how the research questions will be addressed. Next, the literature review and theoretical framework will present relevant findings from previous studies.
1Accuracy is defined as “the condition or quality of being true, correct, or exact; freedom from
Afterwards the case of the VGLS´s CO2 calculation is conducted, followed by an a detailed description of the EF calculation. Subsequently an analysis of such comes.
Moreover, two more companies’ way of calculating and setting EFs is presented, which is succeeded by a discussion of the findings. Last, a conclusion of the research is provided.
1.1 Volvo Group Logistics Services
The Volvo Group (AB Volvo) is an international operating manufacturing company for commercial vehicles which origins and headquarters lies in Gothenburg, Sweden (for more information see appendix 1). Volvo Group Logistic Services (VGLS) is part of the Group Trucks Operations, which belongs to Volvo AB. VGLS is responsible for the logistic of packaging, inbound, outbound and distribution of the products and parts of AB Volvo (AB Volvo 2016b). Approximately 5000 employees in 55 locations, “design, handle and optimize the supply chain” as shown in figure 1 below (AB Volvo 2016c).
Figure 1: The geographical locations of VGLS. Source: VGLS (2016b).
VGLS strives to reduce costs together with disruption and decrease of environmental impact. Its responsibilities are considered to ensure the supply of products, design and provide packaging with a maximal utilization and least environmental impact to distribute the products to the dealers. Furthermore, assurance of high availability of aftermarket parts and customs handlings is offered by VGLS. In addition, close co-operations should be present to assure efficient work between AB Volvo’s units. Last, risk management from the logistics perspective for AB Volvo is part of VGLS´s responsibilities (AB Volvo 2016b).
1.1.1 Transport modes, regions and business processes
VGLS provides transport solutions using all four types of transport modes: air, rail, sea and road. In order to perform the transportation VGLS outsources all physical transport activities to service providers. Therefore VGLS does not own any assets, such as trucks or trains by itself (AB Volvo 2016b).
VGLS covers all three AB Volvo’s business regions named: EMEA, APAC and Americas. EMEA stands for Europe, Middle East and Africa, APAC the Asian-Pacific region and Americas includes North and South America (VGLS 2016c).
When dealing with logistics, VGLS identifies four different business processes, presented in figure 2.
Figure 2: Transport processes of VGLS. Source: VGLS (2016c).
● Transport material: the inbound logistics from material suppliers to the plants and to the aftermarket distribution centres.
● Distribute products: the delivery of the finished products from plants to dealers.
● Refill and distribute parts: covers the aftermarket logistics, for example delivery of spare parts to dealers and workshops.
● Transport packaging: AB Volvo uses own packaging, which needs to be moved between the plants, warehouses and material suppliers, as seen in figure 3.
Figure 3: Examples of Volvo packaging. Source: Volvo Group (2016).
For the processes different IT systems are used. For example distribute products uses a program called A4D, which covers the global distribution of products. Therefore required information can be retrieved from a single source. However, the other three processes
and regions use various programs, resulting in no single access point for transport statistics information (VGLS 2016c).
1.1.2 Environmental commitment
AB Volvo assigns high value to environmental matters (AB Volvo 2016a). Thereby AB Volvo is the only automotive company, which joined the Climate Savers commitment from WWF until today. Besides the reduction in CO2 emission in production and in sold products, logistics also plays a major role in the plan. This includes a reduction of CO2 freight transport related emission by 20% from the baseline in 2013 until 2020 (AB Volvo 2016d). VGLS aims to reduce the transportation need, use as CO2 efficient transport modes as possible for every flow, improve the filling degree in vehicles and containers, utilize smarter logistics planning, increase the load capacity by using larger, longer and wider vehicles where it is possible and encourage the usage of more efficient transport fuels and a fuel efficient driving behaviour (VGLS 2016d). In order to achieve the goals and follow up on possible changes through the activities, CO2 emission needs to be measured and documented. The rise of awareness and commitment comes along with a promotion of freight related CO2 emission from a yearly reported figure to a monthly key performance indicator (KPI) reported to top management (VGLS 2016d).
1.2 Research question and aim
For an international company such as AB Volvo, calculating the CO2 footprint can be particularly challenging. Many processes, IT programs and businesses in various countries covering all transport modes create complex supply chains. At the same time, various factors need to be considered and accuracy of the calculation is a concern. This thesis will analyse how international companies proceed with the challenges of determine the emission factor and the issues related to it.
Based on the introduction the following research questions arose:
RQ1 What are the challenges international companies faces when calculating CO2 emissions with a special focus on adopting road emission factor?
RQ2 How does the emission factor influence the result as well as the uncertainty and accuracy of the carbon footprint of road freight movement?
RQ3 What issues should international companies consider when determining the road emission factor?
In the case of AB Volvo, the thesis aims to evaluate the impact of road EFs and provide recommendations in order to reduce the uncertainties and increase the accuracy of the current methodology. The authors will conduct a comparison among companies to reflect on the methods found in the case of AB Volvo, in order to give suggestions of what factors companies should consider when choosing road emission factors. Thereby the thesis aims to fill the recognized gap in literature and make the findings relevant for other companies.
1.3 Delimitation
If not stated otherwise, the description and discussion in the thesis focuses on the main transport mode road. Thereby CO2 emissions are the main focus and it should be noted that if the general term ‘emission’ is used it refers to CO2 emission. In addition, greenhouse gas emission (GHG)2 includes carbon dioxide and hence is used equivalently.
Moreover, the analysis and discussion will focus on the EF and its influence on AB Volvo´s calculation. This does not question if the underlying calculation method of the CO2 footprint is correct or not. For an in depth discussion of other alternative ways to measure an organisation's environmental performance, please see the previous master thesis3.
In addition, the reason for only considering default EF based on NTM values and no other organisation or model is because VGLS uses this methodology today together with the fact that NTM, according to research, is considered as well recognized tool to measure environmental performance.
In the chapters of theoretical framework the Greenhouse Gas Protocol (GHG-protocol) will be discussed. The reason to focus on this scheme is that GHG-Protocol is a well established and commonly accepted methodology used when dealing with GHG emissions. The GHG-protocol is a framework among several other methodologies, such as the ISO 14064. However, most of the schemes are founded upon the GHG-protocol.
A detailed discussion and comparison to other organisations and schemes would not add on to answer the research question.
2GHG are namely: Carbondioxide (CO2), Methane (CH4), Nitrousoxide (N2O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs) and Sulphurhexafluoride (SF6) (GHG Protocol 2012).
3“A method for calculating the carbon footprint at Volvo Logistics Corporation” by Sofie Strömberg Jonzon and André Trönnberg Lundin (2012).
2 Methodology
The following chapter describes the methodologies used in the conducted research. It starts with an overview of the research process, followed by the used paradigm. Next, what data and how it will be collected and analysed is described. Last, a discussion in regards of reliability, validity and generalizability of this thesis is done.
2.1 Research process
This section will present the methodology of the research process of the conducted study. To get an early overview of the project, a process map is designed by the authors.
The process map, figure 4, is divided into three sections depending on the three earlier presented research questions. Each step includes what data is needed to answer the research question, what methodology to use, how the data should be analysed together with the expected result. How the data is collected and analysed is described in detail in chapter 2.4 and 2.6.
Figure 4: Research process of the report. Source: Own creation.
2.2 Paradigm
When designing research projects, philosophical assumptions need to be considered.
Depending on what assumptions are taken this may change the progress of the research. The assumptions of the two main paradigms are positivism and interpretivism.
Even though they use different approaches they still share similarities such as using a research question to drive research, use various methods to collect and summarize data as well as draw conclusions (Collis and Hussey 2014).
In the following thesis, the authors have decided to rely upon the positivism approach.
The positivism tends to use larger samples, produce precise and objective data and allow results to be generalised from a sample to a population. This is considered as a scientific approach using methods that are measurable, organized and involves objective evidence (Collis and Hussey 2014).
2.3 Primary and secondary data collection
Primary data is data that origins from the original source, such as interviews and experiments conducted by the authors themselves. Secondary data on the other hand is data that are collected from already existing sources such as databases, publications and internal registers (Collis and Hussey 2014). One drawback of using secondary data is that one cannot be sure for what purpose the data were collected from in the beginning. According to Saunders et al. (2009), this leads to a lack of information or control about the quality of the collected data. The report will contain both primary and secondary data. To increase the reliability of collected data, main parts of theory are to be collected from scientific articles. This can be considered as more reliable sources, than newspaper articles, as data has been peer-reviewed and thereby monitored by experts in relevant fields (Saunders et al. 2009).
In the conducted research a combination of primary and secondary data will be used.
Primary data is interviews and own conducted calculations. Secondary data will consist of scientific articles, textbooks and information gathered internally within VGLS, such presentation and previous calculations and surveys.
2.4 Data collection
Distinctions between studies can be made in terms of quantitative and qualitative data.
Quantitative data is often precise, can be measurable and used to uncover patterns and formulate facts. Qualitative data on the other hand are more used when there is a need for a greater understanding of underlying reasons and motivations and helps to develop ideas for possible future quantitative research (Collis and Hussey 2014).
In a positivist study the purpose is to ensure that all main variables are identified and it is essential that the collected data is precise and specific (Collis and Hussey 2014).
Thereby to be able to answer the research questions of the challenges connected to CO2 calculation together with recognizing the possible influence of the EF, a blend of quantitative and qualitative data will be collected and processed. The quantitative data will consist of calculations and EF comparison, and the qualitative data will derive from
academic literature, internal documents and interviews. The qualitative and quantitative data will consist of primary data as well as secondary data.
2.4.1 Case study
The thesis is conducted as a case study of VGLS. Case study is a methodology used to investigate a single phenomenon within its natural environment. Thereby different methodologies can be used in order to examine such (Collis and Hussey 2014). Within the case study the authors use descriptive, experimental and exploratory case study in order to answer the research question. Descriptive case studies are used in order to describe a current situation, experimental case studies focus on challenges of a process and discuss advantages of it. Explanatory case studies combine research knowledge with the present situation in order to recognize and explain patterns (Ryan et al. 2002).
In the case of AB Volvo the CO2 calculation is described in detail as well as the EF determination. Moreover, different EFs are used to explore and overcome the challenge of determining an EF.
Flyvbjerg (2006) argues that case studies are an underestimated method in scientific research and cannot only be used to create a hypothesis, but also testing it. Thereby the selection of the right cases help to create a generalizable result (Flyvbjerg 2006).
As the gap in literature has shown, this thesis will provide valuable insights into the challenges companies face when calculating their CO2 footprint and the usage of EFs.
By performing a case study, it will be possible to discover contextual challenges within a company. AB Volvo is a company with high efforts towards environmental care as shown through the WWF engagement. Through selective comparison a more general conclusion will be achievable, which will provide the possibility to generalize the findings.
2.4.2 Interviews
Interviews are used in order to collect primary data whereby interviewees are asked questions in order to learn more about opinions, actions or feelings (Collis and Hussey 2014). For this research, unstructured and semi-structured interviews with open questions will be used. These methods have the advantage to discover several dimensions of a topic as well as the possibility to create an in-depth discussion (Collis and Hussey 2014). In the beginning unstructured interviews will be used to discover relevant information and to let VGLS explain their practices and the processes. Later semi-structured interviews will be used to emphasize on certain areas. For the company comparison, which is conducted through qualitative data collection, semi structured interviews will be used. This is done in order to compare the companies with each other on how they calculate the CO2 emission and determine the EF, but also to give space to elaborate further on possible variations and challenges of the used methodology.
Interviews are a good method to gather detailed information but potential bias can occur, which influences validity and reliability. It could be that the interviewee has more than one role and thereby has incentives to not always say the truth or reveal all relevant information. It is also possible that the interviewee wants to meet certain expectations or give the ‘correct’ answer (Collis and Hussey 2014).
Interview bias will be tried to avoid as much as possible by asking neutral questions and interview people from different backgrounds, such as employees of companies. The questionnaire templates used for the interviews can be seen in appendix 2 and 3.
Interviews will be done by internet-call or face-to-face and recorded in addition to the taken notes. Below follows table 1 with the list of interviewees.
Table 1: List of interviewees. Source: Own creation.
2.4.3 Internal and organisational documents
To get an insight and understanding of the on-going work of CO2 calculations of AB Volvo, the authors will use internal documentation as a source of data. Bryman and Bell (2011) describes several kinds of internal and organisational documents, such as annual reports, mission statements, internal and external correspondence and manuals. The internal documents used within this report will consist of emission data collected from units and regions, material used for public presentations, internal documentation of processes and manuals. This internal documentation, together with other sources of data, will provide information about the current methodology that is used by VGLS. In the process of examining these documents, the authors need to take into consideration the trustworthiness of the information. Bryman and Bell (2011) state that organizational documents can be inaccurate due to that various actors perceive the situations differently. At VGLS a lot of documentation has been conducted with many different sources. In these various sources some information can be contradicting. This can be an issue to know what information to use and why. To overcome this problem the authors continuously validate the collected information by cross-referencing the documents. By doing this the authors will achieve accurate data throughout the report also for internal documents.
2.5 Searching and reviewing the literature
Collis and Hussey (2014) describe a literature search as a systematic procedure with a goal of locating a clear body of knowledge within a certain area or topic. The purpose of the literature search is to locate and gather appropriate literature to read and analyse. By doing this, the authors are given the opportunity to locate possible gaps of literature within the actual topic of this research. The literature is collected from sources of secondary data. This data derives from academic journal databases, reports and papers as well as commercial and governmental created industry data and statistics. The first step of the literature search is to define the scope and in what context to look for
information. This step can be considered partly as a limitation of the future conducted research (Collis and Hussey 2014). The defined scope included time, geography and industry. For example when looking into the time perspective it was prioritized to look into the most recent sources since the CO2 calculations, equally to technology, is a topic of fast changes. Furthermore, looking into CO2 calculations methodologies origin from different regions in combination with different industries would possibly increase the generalizability of the research outcome. Articles that by the authors were considered as too old or not fit into the research topic were excluded from the literature review.
The authors carefully chose the keywords used in the search. The aims of the keywords were to reflect the purpose of the report and to be associated with the research topic.
The keywords and its connected search term are presented in table 2 below:
Table 2: Keywords and search terms used. Source: Own creation.
Once all relevant literature is collected the literature review will be held. This is described as critical assessment of already existing knowledge within a certain field of study (Collis and Hussey 2014). The literature review conducted by the authors will aim to collect and present the most appropriate theories within the topic of choice, and in sections present the core content showing possible trends or themes. The process of the literature review is presented in figure 5.
Figure 5: Illustration of literature review process. Source: Adapted from Collis and Hussey (2014).
2.6 Data analysis
The following section will present the process of analysing gathered data. The collection and the analysis of data, qualitative and quantitative, will be performed in parallel continuously during the research. According to Bryman and Bell (2011) this is a common approach to use when analysing data.
Analysing large volumes of data is a challenging task. One of several challenges is that there are no universally set of methodologies to analyse collected data (Collis and Hussey 2014). One method that is widely used when analysing qualitative data is the method “General analytical procedure”. This procedure is useful since it is not connected to a specific data collection method. The general analytical procedure includes three flows of activities, which are conducted simultaneous:
● Reduce data
● Display data
● Drawing conclusions and verify the validity of conclusions
Quantitative data is data that is presented in numerical form, which can be put into rank order or into categories (Collis and Hussey 2014). This data can thereby be used to build graphs or presented in tables. The quantitative data used in this research will derive from already existing data, such as emission statistics originating from different regions and processes. For this research, the objective of the quantitative data collection is to visualise current status and envision future development as a result of possible changes of the calculation methodology.
The authors will analyse the quantitative data by creating statistics, which is define as numbers describing a sample, and from the presented result draw conclusions. Statistics will be used to explain for example averages and means of samples, which will help the authors to define a population and estimate unknown variables (Collis and Hussey 2014).
Together with the above presented analytical procedure, the authors have formulated a framework used for the data analysis, see figure 6. This framework is based on the research question and keywords of the literature search. The presented model will be used as a red thread throughout the report, represented in the literature review, the case study, as well as in the comparison with other companies and finally in the discussion chapter.
Figure 6: Illustration of framework used for data analysis. Source: Own creation.
Furthermore, triangulation is used in the thesis. This is part of research when more than one method, multiple sources of data and more than one researcher is involved in the research (Collis and Hussey 2014). Advantages of this methodology are the reduction of possible bias in the sources of data and methods (Jick 1979). Bias could be a problem with this thesis, because a case study is performed and working within the analysed company could influence researches. Therefore, for this case a qualitative, as well as quantitative approach will be conducted to evaluate the research questions. Interviews of different people in various functions and positions within and outside of AB Volvo will be accomplished, as well as examination of internal data and documents of VGLS and a literature review will be done. In addition, to be able to assess the sensitivity of the EF, calculations in VGLS’s CO2 footprint calculation tool is conducted, comprising different combinations of EFs. Moreover, company comparisons will be used to acquire further knowledge of common challenges and business procedures in regards the usage of EF and confirm/questions the findings gathered within AB Volvo.
2.7 Reliability, validity and generalizability
Reliability is a term of repeatability and refers to if the data collection and analysis procedures are generating consistent findings, thereby the same result from repeated observations by other researchers will be achieved (Saunders et al. 2009). Threats connected to reliability in qualitative study, are according to Saunders et al. (2009) related to both observer or participant error and bias. In the conducted research the risks of observer error and bias are avoided by following structured templates and performing interviews with both authors together and afterwards discuss the outcome to make sure all data is interpreted equally. In regards of the interpretations of the written reports and journals, still there is a risk that it might be perceived differently. To avoid misinterpretations the authors continuously discuss findings and results of ongoing research as well as apply triangulation, which according to Saunders et al. (2009) is a way to increase the reliability of a research. Furthermore the authors will describe the own conducted calculations, together with the formulas and the tool used. Moreover, all used EFs are attached in the appendix. In this way the authors ensure high repeatability.
Collis and Hussey (2014) describe validity as whether a test is measuring what the researchers want to measure. Reasons that can undermine the validity are research errors such as poor samples, misleading or inaccurate measurements. To increase the validity and make sure that what is measured actually captures what it is suppose to measure, the authors will set clear and defined objectives and continuously follow up targets. For example, predefined keywords will be used to ensure that the data is collected and analysed in connection to the research questions. Furthermore, by comparing conducted measures of EF calculations with other companies and calculating the EF with data from different sources, this will increase the validity of the report.
Thereby the focus will be on calculating the EF and the CO2, which are in line with the topic that the authors want to investigate to answer the research questions. Furthermore actions to guarantee the validity of the interviews is to follow pre structured templates that will ensure that the desired questions are asked to the right persons.
Generalizability is to what extent the findings of a research can be extended to other populations or settings (Collis and Hussey 2014). This thesis conducts the research following the positivistic approach, and thereby a sample has been chosen and it is of interest of how this sample would be generalizable to further populations. Research argues for that it is possible to generalize from a small population or even a single case.
But for this to apply the analysis must capture the main characteristics and interactions of the studied phenomena (Collis and Hussey 2014). By conducting a case study in combination with a comparison among other companies from different industries, the authors aim to see whether concepts, patterns and theories can be applied in further environments. To be capable to do this, Collis and Hussey (2014) state that the authors need to have a deep and comprehensive understanding of behaviour and activities. Due to this the authors will conduct the company comparison in the end of the research, at a stage where the authors have gained the level of understanding. Thereby, the authors believe that the result of this thesis is generalizable.
3 Literature review and theoretical framework
This chapter presents relevant literature in regards of why companies report their CO2 emission and how CO2 emission can be reported. The chapter starts with the driver for emission reporting, followed by the reporting standard of the greenhouse gas protocol.
Next, a discussion of possible influences on EFs is presented, succeeded by a chapter about calculation tool for emission factors with emphasize on the Network for Transport Measures (NTM), an organisation providing default values in connection to EFs to companies and organisation. The chapter ends with a description of possible challenges when companies report/ why companies choose not to report CO2 emissions.
3.1 Drivers for emission reporting
Recently there has been a trend of significant increase in companies’ awareness of Corporate Social Responsibility (CSR) as well as an increase of the willingness to report on their CSR performance to the public (Lueg et al. 2016). The increased awareness of the impacts caused by climate change connected to company’s activities are leading companies to address and assess opportunities and threats in a new manner. Large part of the corporations nowadays measure the emissions of GHG that are generated by their activity and use this information to weigh their exposure to climate changes, market conditions together with consumer preferences. According to Kauffmann et al. (2012) this evolvement has become an important component of company’s strategy and risk management. Publications present a range of motivations and drivers for firms to conduct environmental reporting (Berthelot et al. 2003). Observation is that firms tend to balance external and internal pressures from a diversity of stakeholders to whom the information can be useful in the decision-making processes (Kolk 2010).
Investors, governments and other stakeholders request a higher corporate transparency in regards of corporations’ environmental footprint. The demand from governments often generates schemes that encourage corporations to report their GHG emissions (Kauffmann et al. 2012). Depending on the geographical location of the company, different countries and regions have different requirements of how to report their CSR- performance (UNCTAD 2010). In certain nations the legislations of reporting are introduced by governments (comprising Indonesia, France and South Africa) and in other countries the guidelines are introduced by stock exchanges (for example in Malaysia, Brazil and Singapore). In countries for instance, Denmark, France and South Africa, the requirements cover a wide range of environmental, social and governance areas. Furthermore, several countries follow the approach of the UK to assign specific targets of GHG-emissions. Another example of how government can influence is India where government legislate social responsibility (KPMG 2015). Those schemes provided by governments, drive companies to report and also serve as guidance for how to report and to disclose the information (Kauffmann et al. 2012).
In addition, several aspects emerged from a study of multinational companies (MNC) conducted by the Sustainability and United Nations Environmental Program (UNEP).
Except internal and company specific reasons, reputation and credibility was found to be important factors (Kauffmann et al. 2012). Furthermore, Kolk (2005) discuss the ability
for companies to express the corporate vision internally and externally as well as communicate the efforts achieved. Additionally, the enhanced ability to monitor progress and facilitate an environmental strategy is a reason of reporting and creating a greater awareness of environmental issues within the organisation.
Besides regulations and demand from government, other reasons for reporting environmental performance exist. Dias-Sardinha and Reijnders (2001) state that reporting is done to comply with regulations in order to reduce the costs of future compliance. Furthermore reasons may according to Odette (2013) be able to measure changes in carbon emission over time.
According to Kauffmann et al (2012) companies address their motivations in relation to their size, sector and location. To maintain or increase a company’s competitiveness in a changing market, figure 7 presents three dimensions of how to achieve this in relation to GHG emissions:
● Identification of potential cost savings
● Identification of potential risk factors and
● New business opportunities
Figure 7: Companies motivations to measure and report climate change related information. Source: Kauffmann et al. (2012).
Identification of potential cost savings
The measure and reporting of energy use in terms of CO2 emissions is often a starting point for corporations to reduce emissions (Kauffmann et al. 2012). Depending on what industry the companies are active in, different approaches can be taken. In upstream, savings can be identified in for example raw material, packaging, transport and manufacturing. In downstream the improvements can likely be spotted in distribution,
retail, consumer use and waste/disposal. The mitigation opportunities of the upstream input are located in optimising transports, change transport mode and use of alternative fuels. In the downstream input, mitigation opportunities are discovered in efficient logistics together with recycling and reuse of packaging (OECD 2010). See figure 8 for a visualisation of mitigation opportunities.
Figure 8: Composition of supply chain mitigation opportunities. Source: OECD (2010).
Identification of potential risk factors
A survey performed by OECD in 2010, 59 of 63 respondents assessed increased concern of climate change in relation to their company’s businesses. The primary risks are in connection to operational risks, such as impacts of raising energy and transport prices as well as demand changes. Further mentioned in the report are regulatory risks such as compression of international and national regulations, reputational risks related to consumer perception and the competitive risks from loss of advantage (Kauffmann et al. 2012). Agrawala et al. (2011) emphasizes the importance of developing an internal strategy to cope and protect the business activity from these risks.
Seeking new business opportunities
Climate change-related laws and regulations are by some businesses considered as opportunities instead of constraints and can be used to acquire new market shares and create incentives to realize changes of companies structure (Kauffmann et al. 2012).
According to CDP (2010), due to customer demands it is more and more important for companies to provide a reliable, secure and less climate damaging supply chain.
3.2 Reporting standards
The content of GHG emissions are in general looked upon from two main aspects;
organisational emission and product life-cycle emissions.4
Organisational emissions are generated directly and indirectly by the operations deriving and controlled by an organisation. Product life-cycle emissions are a result of direct and indirect emissions from the manufacturing and the use of a product and service, from an end to end approach including raw material, production, transport and waste management (Odette 2013).
The recent 15-years, a number of governmental schemes and methodologies have been developed in different OECD countries. Australia, Japan, the UK, Canada, France, the US and Israel are examples of countries that have or are developing standards. Even though different countries have been using different methodologies, joint standards such as GHG Protocol and ISO 14064 have evolved over time. One common part of practice and language is the use of scope 1, 2, 3 to classify emissions as defined by the GHG Protocol (Kauffmann et al. 2012).
To enable international comparability there have been efforts made to create a joint standard of measuring and reporting of emissions. So far no single standard has been agreed upon but there are two main standards5 that are used in a great extent internationally (Odette 2013; McKinnon and Piecyk 2010). The Greenhouse Gas Protocol together with the second largely used standard; International Standard Organisations (ISO) 14064, that is based on the Greenhouse Gas Protocol (GHG Protocol 2012). Both standards are in general alike (McKinnon and Piecyk 2010;
Kauffmann et al. 2012).
3.2.1 The Greenhouse Gas Protocol
The GHG-Protocol is a multi stakeholder collaboration of governments, non- governmental organizations, businesses and other actors organized by the World Resources Institute (WRI). The mission of this collaboration is to develop an accounting system for GHG that are internationally accepted and applicable (GHG Protocol 2012).
By year 2014, 86% of the Fortune 500 companies reporting to CDP (Carbon Disclosure Project) used the GHG Protocol, direct or indirect through initiatives based upon GHG Protocol (GHG Protocol 2012).
Basically the GHG-Protocol aims to provide standards and supports in preparation of creating a GHG emission inventory. A fair and true account of emissions is to be withheld by standardized principles and approaches. The full use of the protocol covers the reporting and accounting of the six major GHG Kyoto protocol Carbon dioxide (CO2), Methane (CH4), Nitrous oxide (N2O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs), Sulphur hexafluoride (SF6) (GHG Protocol 2012).
4This report focuses on emissions connected to logistics and transports; therefore product emissions will not be reviewed.
5Besides the two general standards for GHG reporting, for freight GHG reporting known standard are as well: CEN Standard, French Decree and the UK DEFRA Guidance (Source: Odette 2013).
The GHG-Protocol is according to Odette (2013) an instrument for defining high-level system boundaries for corporations external reporting. Today the protocol is used by actors such as governments, institutions and business leaders to manage, quantify and understand greenhouse gas emission (Odette 2013; GHG Protocol 2012) and is a considered as a well recognized verification standard (Lee 2011; Kauffmann et al. 2012;
McKinnon and Piecyk 2012; UK Government 2013).
3.2.2 Scopes of the Greenhouse Gas Protocol
The GHG Protocol offers a framework of how to keep apart and report emissions that are produced by companies’ operations and activities (Odette 2013).
The major part of emissions derive from the fuel combustion, thus it is of importance to have a methodology to quantify these emissions. The general approach is to measure or evaluate how much CO2´s produced by each consumed litre used by a vehicle, this approach is known as tank to wheel (TTW). TTW does not include the environmental impact caused by the production of the fuel. Except the operating phase, emissions can be linked to the upstream-phase, for example the extraction and the transport of the fuel.
When considering this phase as well, the total emissions are known as well to wheel (WTW). See figure 9 for an illustration of what is included in WWT (Odette 2013).
Figure 9: Fuel life cycle analysis. Source: Odette (2013).
According to Lee (2011) a distinct scope with clear boundaries of what emissions to include is critical for identification and measuring of direct and indirect emissions within the supply chain. Three scopes were developed to create a clear range of how to define direct and indirect emissions, improve the transparency and simplify the categorisation of emissions (GHG Protocol 2012). In order to avoid counting emissions more than once, companies need to cover scope 1 and 2 in their calculations (GHG Protocol 2012).
Avoidance of double counting emissions and should be considered as a top priority (Williams et al. 2012). In figure 10, an overview of the scopes and the emissions emitted within a value chain is presented.
Figure 10: An illustration of the three scopes, provided to define direct and indirect emissions. Source: GHG Protocol (2012).
Scope 1 – Direct emissions
Scope 1 covers the emissions deriving from the processes and activities that are owned or controlled by the company that conduct the reporting. These emissions are described as direct emissions, for example companies own transports (Odette 2013; GHG Protocol 2012).
Scope 2 – Indirect emissions
Scope 2 covers the emissions classified as indirect, which results from the production of energy used by the direct and controlled processes and activities of an organisation, for example power stations or purchased electricity (Odette 2013; GHG Protocol 2012).
Scope 3 – Other indirect emissions
Scope 3 covers indirect emissions that derive from processes and activities that are contracted by an organisation but controlled directly by others (Odette 2013). The Greenhouse Gas Protocol (2012) describes these emissions as a consequence of the corporation, but arise from processes not owned by the company itself. Therefore, one company’s direct emissions (scope 1) may be a part of another’s company’s indirect emissions (scope 3), for example contracted transports (Odette 2013). A detailed description of the definitions of each scope together with example of emission sources is shown in appendix 4.
