Establishing standards for product sustainability

The goal of a carbon-neutral EU by 2050 goes hand-in-hand with the industry's objective of achieving carbon-neutral production. Policymakers are using the Green Deal and the framework for the EU taxonomy to exert pressure on raw materials-heavy enterprises, major corporations, and financial institutions, requiring them to standardize sustainability reporting and meet additional objectives. Business relationships with banks, cascading contracts in the supply chain, and, not least, social obligations have increased the urgency for all companies to establish climate protection measures, ensure the transition to a circular economy and systematically integrate the sustainable use of resources into business practices.  

Implementing product sustainability standards in operations 

Based on conversations with our automotive, aerospace, and mechanical engineering customers, we know that virtually every business is launching initiatives to reduce emissions.

To derive effective measures from these projects, managers face challenges on two levels: They must develop targets and strategies for sustainable production. And they must equip product-related business divisions with the processes, tools, and reference data to ensure emissions can be documented when they arise. 

Integrating product sustainability in product costing  

Businesses use Enterprise Product Costing (EPC) solutions to add product sustainability assessments to existing structures. EPC solutions start by optimizing product costs and can also visualize information on the Product's Carbon Footprint (PCF) across the calculation structure.  

Watch the video to see how product-related emissions are evaluated within the cost calculation.

Combining sustainability and profitability in reporting  

Regulatory provisions on product characteristics, energy, raw materials consumption, or the demand for eco-friendly products – profitability and sustainability are inseparable, as is clearly demonstrated throughout the various phases of the product life cycle. Considering cost optimization in isolation without also considering greenhouse gas emissions creates a disparity between product costs and product sustainability, weakening the overall balance.  

The availability of the Product Carbon Footprint across the entire calculation structure ensures that critical milestones such as energy consumption or machine emissions are documented in the reporting process and optimized over time. This enables enterprises to report key figures on environmental impact and economic efficiency simultaneously.

Free white paper on product-related emissions

Learn in the white paper how product emissions are calculated and made transparent in costing and customer projects.

Identifying the Product's Carbon Footprint in the supply chain  

Initiatives like Catena-X for the automotive industry clearly show that establishing sustainability standards is a concrete target for leading industrial corporations. Developing data exchange standards and methods work in unison with setting a sustainability reporting process. Manufacturers already require information regarding the Life Cycle Assessment (LCA) and the eco-balance in their supplier relationships. Product Carbon Footprint availability is thus becoming a data point vital to success. 

Companies can unify sustainability and profitability when they integrate the CO2 assessment of their products into existing costing structures and processes. Product-related costs and emissions are visualized across machines, materials, and manufacturing and applied within the cost calculation across unit cost-driven systems. Enterprises use the cost breakdown to report information on the Product's Carbon Footprint and the product costs and ensure standardized, audit-compliant reporting in the supply chain.    

Achieving transparency for product costs and emissions  

Within complex value creation structures, the strategic direction of cost management determines whether manufacturing contributes to sustainable corporate growth. We see three trends that motivate us to reduce the complexity of product assessment. 

A qualitative survey among FACTON customers on Sustainable Product Costing (2022); N=24 (multiple answers possible)

• Sustainability impacts all branches of industry and all classes of enterprise. Companies with comprehensive value-creation processes already feel the effects of sustainability reporting requirements today. 
• Carbon-neutral manufacturing poses a challenge to profitability calculation. An integrated costing approach helps identify conflicting targets within calculations. 
• Digital tools facilitate enterprise-wide collaboration. Company teams can access valid emissions and cost data at any time and location to obtain reliable results for investments, quotes, and projects.  
  

The article was published for the first time as a special 'Manager Wissen' article on the topic "How can sustainable product lifecycle management with a digital twin accelerate their transformation towards a circular economy?" in Harvard Business Manager May 2023.