Value Chain

Value chain, a concept coined by Michael Porter in 1985, describes all the activities a company carries out to develop a product or service, from its conception through to its arrival with the end consumer and even beyond.

These activities fall into two broad categories:

• Primary activities: directly related to the physical creation of the product, its sale, distribution and after-sales support.
  • Inbound logistics: receiving, storing and managing raw materials.
  • Operations: transforming raw materials into the final product.
  • Outbound logistics: distributing the finished product to customers.
  • Marketing and sales: activities to promote and sell the product.
  • After-sales service: technical support, repairs and returns management.
• Support activities: not directly related to production, but essential for primary activities to run efficiently.
  • Firm infrastructure: administration, planning, finance, etc.
  • Human resource management: recruitment, training and staff development.
  • Technology development: research and development of new technologies and processes.
  • Procurement: sourcing raw materials, supplies and other resources.

In sustainability, value chain analysis makes it possible to distinguish upstream stages (towards suppliers) from downstream stages (towards the customer), which is key to managing environmental impacts.

Value chain and the carbon footprint

The relationship between the value chain and the carbon footprint is intrinsic. Every link, from sourcing raw materials to transport, manufacturing, use and end-of-life, generates greenhouse gas (GHG) emissions, expressed in CO2 equivalent.

Emission scopes

Understanding a company's environmental impact requires analysing its carbon footprint across the entire value chain. The Greenhouse Gas Protocol (GHG Protocol), the international standard for emissions accounting, classifies them into three scopes:

• Scope 1 (direct emissions): from sources owned or controlled by the company, such as burning fossil fuels at its own facilities.
• Scope 2 (indirect energy emissions): associated with electricity, heat or steam the company purchases from third parties.
• Scope 3 (other indirect emissions): covers the rest of the value chain's emissions (suppliers, transport and distribution, customer use of the product and end-of-life management). In many companies, this is by far the most significant scope.

Benefits of analysing the carbon footprint across the value chain

Identifying and quantifying emissions at each stage offers multiple benefits:

• Spotting reduction opportunities: locating the critical points where the largest emissions occur and prioritising the most effective actions.
• Improving efficiency and cutting costs: reducing emissions usually goes hand in hand with process optimisation.
• Strengthening brand and reputation: demonstrating a real, measured commitment avoids greenwashing and builds trust.
• Accessing new business opportunities: demand for sustainable products and services keeps growing.
• Complying with regulation: disclosure and due diligence requirements on sustainability are increasing, and involve working on the sustainable supply chain and its traceability.

At Manglai we help companies measure the carbon footprint of their entire value chain, including Scope 3, and prepare their sustainability information. Discover how Manglai can help you.