A technology services platform is in the works for carbon-emissions calculation, reporting, and collaboration across commodity supply chains. Trafigura, a group of physical commodity trading companies, and Palantir Technologies announced on 24 May their intent to develop a platform to calculate carbon intensity, beginning with crude oil and refined products, concentrates, and refined metals.
This marks the first time Palantir will go to market with a partner on carbon-emissions tracking. The move combines the efforts of trading and digital technology to account for Scope 3 emissions—companies’ greenhouse-gas footprints indirectly attributable to the impact of shipping their commodities. The aim is to increase transparency of life-cycle emissions and to provide benchmarking against other market participants.
The new platform will bring carbon-emissions tracking into Palantir’s Foundry supply chain software leveraging Trafigura’s commodities experience. It builds on work done over the past year by the two companies, with the initial pilot already having built scenarios across 10 million carbon pathways using actualized commodity shipments by integrating Trafigura’s data and metrics supplemented by third-party data. Trafigura is already using the system, which is expected to be made available for third parties in September for oil and oil products and in October for metals.
“Our customers are increasingly asking us for visibility into the life-cycle emissions of the commodities we move as they prepare for regulated Scope 3 emissions reporting and more generally for net zero,” said Jeremy Weir, Trafigura’s executive chairman and CEO. Alexander C. Karp, Palantir cofounder and CEO, said, “The collective action required to address many of our most pressing global challenges requires more than resolve or a shift in political priorities.”
The Complexity of Scope 3 Criteria
Weir’s reference to the move to “prepare for regulated Scope 3 emissions reporting” is in line with the US Securities Exchange Commission’s (SEC) proposed rule changes announced in March that would require registrants to include climate-related disclosures in their registration statements and periodic reports, including Scope 3 emissions. Assuming the proposed rules would be adopted with an effective date of December 2022, the SEC said Scope 3 metrics would need to be filed in 2025 or 2026, depending on the company’s filer status. Smaller reporting companies may qualify for an exemption.
This potential regulatory requirement ramps up the quest for valid measurement of a complex metric. Sphera, an ESG-performance and risk-management software, data, and consulting service provider, summarized it as “Scope 1 and Scope 2 emissions reporting requirements force companies to get their own house in order. Scope 3 requirements demand that they get their partners’ houses in order, too.”
In a BCG survey reported in October 2021, respondents said their inability to measure accurately and exhaustively is the leading roadblock to their cutting emissions in line with targets. The survey included nearly 1,300 companies across nine major industries worldwide with 1,000 employees or more and revenues ranging from approximately $100 million to more than $10 billion.
Just 9% reported measuring their total emissions comprehensively, while 81% admitted to omitting some of their Scopes 1 and 2 emissions. Sixty-six percent said they did not report any of their Scope 3 emissions. BCG wrote, “Perhaps more surprising is that our respondents estimate an average error rate of 30% to 40% in their emissions measurements.”
In February, CO2 AI by BCG and CDP announced their partnership to codevelop the CO2 AI Product Ecosystem platform to enable transparency at scale and measurement of Scope 3 emissions. CDP’s supply chain program provides sustainability data at the company level, and the collaboration will expand its existing work on Scope 3 data disclosure and its product-level data. For BCG, the partnership helps in the development of CO2 AI by BCG, an AI-powered solution that quantifies current emissions and finds ways to reduce them at scale.
CDP is a member of the Science-Based Targets initiative (SBTi), a global group of partner organizations including the UN Global Compact, World Resources Institute, and World Wildlife Federation. More than 2,000 businesses and financial institutions are working with SBTi to reduce their emissions in line with climate science, according to SBTi.
In March, SBTi announced it would no longer accept commitments from fossil fuel producers. SBTi had drafted criteria for oil and gas companies, which needed to be checked internally by technical experts and then peer reviewed by representatives of oil and gas producers such as Shell, Total, BP, and California Resources; nongovernmental organizations such as the World Wildlife Fund, the World Resource Institute, and Carbon Tracker; and academics and investors such as HSBC and Aviva.
SBTi’s technical director Cynthia Cummis told Climate Home, “We decided it was just a reputational risk for SBTi to continue to accept commitments from oil and gas companies when we don’t know when the method will be available to use.”
The draft criteria for oil and gas firms included both an absolute emissions reduction target and an intensity target. Carbon offsets would not be considered, and it would cover the emissions from the wellhead to the tailpipe.
For now, SBTi membership remains closed to companies “with any level of direct involvement in exploration, extraction, mining, and/or production of oil, natural gas, coal, or other fossil fuels, irrespective of percentage revenue generated by these activities,” as well as their subsidiaries, according to its website.
