Vibhu Kapoor, Regional Vice President – Middle East, Africa & India, Epicor
In September last year, the United Arab Emirates announced its intention to submit its new climate NDC (nationally determined contribution) to the UN ahead of November’s COP29 summit. Among major emitters, the UAE was one of the first to announce its intentions to disclose carbon-reduction plans for the next decade, demonstrating its eagerness to lead on this issue. The Gulf country, like many of its regional peers, is firmly on a path of economic diversification that relies upon a thriving private sector, and so the question of how to sustain growth alongside aggressive net-zero action is one close to its leaders’ hearts.
It is not an easy needle to thread. Industrial byproducts are a way of life for growing economies, which explains environmentalists’ tense shoulders and clenched teeth whenever growth is mentioned. For industrialists, however, the choice has been made. Governments and citizens both want action on emissions, be they in the form of greenhouse gases (GHG) or other pollutants. To get to a level of efficiency that allows a business to grow the bottom line while staying true to its sustainability promises requires much more than a stated moral commitment. It requires detailed measurement and deep analysis, which requires data. The organisation must quantify waste and emissions before it can reduce them, after which it must quantify the reductions to ensure it is on track.
A forward-thinking method for detailed measurement involves treating CO2 emissions as a form of currency. This innovative approach transforms carbon tracking by adapting the well-established “Cost Rollup” technique from standard costing systems. By calculating the carbon cost for each component at the most basic level of the bill of materials and operations, and then aggregating these costs through each tier, the total carbon expenditure for the final product becomes evident. This method simplifies the complex calculations involved in carbon accounting and integrates smoothly with existing cost accounting software, reducing the learning curve for users. Globally, business leaders are recognising that their sustainability initiatives, particularly carbon accounting, are essential elements of their strategies for driving long-term business growth and success.
Manufacturers must put their entire value chain under the microscope to determine paths to efficiency. What specific business activities produce waste and pollutants, and how can workflows and methods change to bring about the necessary reversals?
Other people’s carbon?
Federal Decree-Law No. 11 of 2024 on the Reduction of Climate Change Effects comes into effect on 30 May 2025. It obligates UAE government and private enterprises, including free-zone businesses, to make a concerted effort on emissions. Overseen by the Ministry of Climate Change and Environment, the Decree is aimed at fulfilling the nation’s ambition of achieving net zero by 2050. The modern manufacturer is no stranger to driving efficiency and minimising waste. The profit motive incentivizes these actions. But the latest expectations from regulators and the public call for much more. In the reexamination of their value chains, manufacturers must use data from Scope 3 emissions — what are often scathingly called “other people’s carbon”.
Extracting data from other parts of the value chain is a challenge. To address it, UAE manufacturers must revisit their data management strategies and ensure that the right approaches are applied to ensure integration, accuracy, and accessibility. The dreaded silos — fragmented data systems that are controlled by separate stakeholders within the business itself and outside — make it difficult to extract meaningful insights. While quality data may be on hand, its lack of accessibility might mean that a critical stakeholder is left in the dark and opportunities for concrete action on sustainability are missed. The most effective carbon action comes from the realisation that while quality data is important, its collection, storage, accessibility, analysis, contextualisation, and presentation are just as important if decision-makers are to receive an actionable view of the enterprise.
International sources like the GHG Protocol outline the steps of effective action. It is up to the individual organisation to graft best practices onto its business model. If it does not have data on its carbon emissions and their sources, the business must come up with ways to acquire it. Issued guidelines will then come into play, suggesting ways to use the gathered data to address Scope 1, 2, and 3 emissions. NDC declarations are made in the form of tons of CO2 equivalent (CO2e), which enables comparisons across geographies and organisations. While many static tools are available, an organisation that wants real-time production updates will favor a calculator that integrates with its enterprise resource planning (ERP) suite.
Future-Focus
When measurement begins, the first order of business will be to establish a CO2e baseline. The complexity of the task precludes the use of spreadsheets, indicating the ERP system as a logical hub for the collection, storage, and analysis of raw carbon-emission data. The ERP can also serve as a calculator for CO2e data from upstream sources like the inventory supply chain, and from the manufacturing process itself. Modern smart factories are adept at these data surveys and calculations because of their enhanced connectivity. They would, for example, be able to measure energy consumption directly through IoT sensors linked to manufacturing execution systems (MES).
Moving on to downstream carbon usage, such as the impact of logistics, consumer use, and end-of-life actions like recycling or disposal, organisations will be best served by adopting a Product Lifecycle Management (PLM) and lifetime measurement approach. Resultant actions are likely to include product redesigns to reduce emissions at every link in the chain, starting with manufacture. The data collected in downstream analysis will only be useful if fed through the right BI and analytics tools operated by a qualified data analyst or analysed by a business user supported by a low-code or no-code tool.
Because of the increased attention to downstream and upstream operations (“other people’s carbon”), smaller businesses that supply to, or distribute or alter goods on behalf of, larger organisations will have to adjust their climate goals to satisfy their partners. The modern world is now full of balance-sheet incentives to pursue what would have previously been considered moral luxuries. However, sustainability involves more than being held to account by a concerned consumer base and a principled government. It is about all the things manufacturers have been chasing for years — more efficiency and less waste for the chance to maximise longevity. So, whether you do it for our children or you do it for the bottom line, you end up helping both.
