04.29.25
Insights from the AIM Platform on Deep Value Chain Analysis
Today we’re excited to feature the thought leadership of the AIM Platform with a repost of their latest exploration of deep value chain analysis. This approach draws upon a number of methods to allow companies visibility deep into their value chains – beyond the products they directly purchase – to better understand the GHG emissions associated with their suppliers and those suppliers’ suppliers and identify common emission sources. The resulting insights can help companies prioritize and scale corporate decarbonization investments where they can have the greatest beneficial impact.
The AIM Platform is an initiative developed in collaboration with GMA, C2ES and Gold Standard, with a mission to unlock vast new sums of private climate finance by bringing civil society and the private sector together to remove roadblocks to value chain mitigation and ignite sectoral transition. We encourage you to learn more on the AIM Platform website and engage with their ongoing work developing the AIM Standard and Guidance which is targeted for release in late 2025.
Summary
Scope 3 emissions represent a significant percentage of many companies’ greenhouse gas inventories. But using traditional methods to calculate scope 3 does not actually give companies insight into the biggest impacts in their supply chain. Deep Value Chain Analysis can help companies identify and quantify emissions sources that were previously hidden deep within their supply chains. Using these insights, companies can “match” their scope 3 emissions with effective interventions that can be implemented today, leveraging their purchasing power for maximum impact.
Introduction
Scope 3 emissions represent a significant percentage of many companies’ greenhouse gas inventories. As a result, companies spend a lot of time and effort quantifying these emissions with the goal of figuring out effective ways to reduce them. For many companies, identifying how to reduce scope 3 emissions is a critical part of their overall greenhouse gas reduction strategy.
Unfortunately, when a company uses traditional methods for calculating its scope 3 impact, the resulting data may not actually help them identify the largest drivers of their scope 3 emissions. Nested within a company’s scope 3 numbers are many layers (or tiers) of supply chain activities. This means that although a company might have calculated a perfectly “accurate” scope 3 inventory, that data tells them very little about how they can mitigate those emissions.
Luckily, methods do exist that help companies “see” the critical emission sources that are hidden within their scope 3 data. Identifying and quantifying these emissions sources means companies can match them with impactful interventions. We refer to these methods, collectively, as Deep Value Chain Analysis.
What is Deep Value Chain Analysis?
Deep Value Chain Analysis, sometimes referred to as horizontal LCA analysis, uses input-output data to estimate the quantity of emissions from various upstream materials and processes that are required to produce the products and services that a company purchases. Input-output tables are developed by government agencies for economic assessment and indicators, and environmentally-extended input-output (EEIO) data are commonly used to calculate parts of company scope 3 inventories.
Rather than relying on emission factor data that adds up all emissions that go into producing a given product and then uses that information to assign a single emission factor to that product, Deep Value Chain Analysis identifies the upstream processes (electricity generation, product transportation, different manufacturing processes, etc.) that went into making that product. This analysis is then repeated for products and services across a company’s value chain. Value chain totals for each type of intermediary emissions are then aggregated. This allows the company to identify which processes show up most frequently across its value chain and prioritize mitigation efforts that lower emissions for these specific processes. This allows companies to prioritize decarbonization opportunities that address the biggest drivers of emissions across their value chain, which maximizes the impact of their decarbonization work.
Figure 1. Emission drivers visible through Deep Value Chain Analysis
Image source: A Systematic Approach to Identifying Scope 3 Emissions (2022). Engie Impact
For example, a company might purchase a piece of electronic equipment. In order to manufacture that product, several specific economic activities – manufacturing, transport, etc. – would have taken place. Each of these activities results in GHG emissions. Once this level of detail has been identified within an organization’s supply chain, it is possible to assess the activities driving those emissions, such as electricity generation, diesel fuel combustion, industrial process emissions, etc. Once these actionable sources have been identified, it’s possible for companies to use their purchasing power to increase deployment of industrial decarbonization technologies specific to those sources. In other words, using Deep Value Chain Analysis, a vague scope 3 line item in a company’s inventory can be translated into a set of concrete emissions sources that the company can work to mitigate.
Figure 2. Breaking down electronic equipment emission drivers
Image source: A Systematic Approach to Identifying Scope 3 Emissions (2022). Engie Impact
Benefits of Deep Value Chain Analysis
Companies, researchers, and solutions providers are starting to deploy Deep Value Chain Analysis as a way to develop scope 3 reduction strategies that have a measurable impact on specific emissions sources within companies’ supply chains.
For example, Meta worked with Engie Impact to develop a framework that translates scope 3 data into detailed greenhouse gas emission sources that can be addressed through investment in specific emission reduction projects. This framework has allowed Meta to work with value chain partners to leverage effective, direct emissions reduction strategies traditionally only possible when addressing scope 1 and scope 2 emissions.
Deep Value Chain Analysis in the AIM Platform Association Test
The draft AIM Platform Association Test recommends that companies use Deep Value Chain Analysis methods in two related ways:
- 1.To identify products they may not purchase directly but which are produced deep within their value chains, and
- 2.To aggregate their demand for decarbonization solutions across like products.
Leveraging Deep Value Chain Analysis in these ways will yield detailed information about the specific economic activities and related emissions sources that underpin each company’s value chain. These insights will allow companies to prioritize their participation and investment in buyer alliances such as those GMA and partners manage for chemicals, trucking, and cement & concrete, secure in the knowledge that their actions mitigate emissions sources foundational to their own scope 3 inventory emissions.
Next Steps
Today, more than 20 companies are testing Deep Value Chain Analysis and other methods to identify inventory emission sources, with the ultimate goal of matching these sources with impactful value chain interventions. Early results point to Deep Value Chain Analysis – and the detailed data it reveals – as an important unlock for significantly more effective corporate scope 3 mitigation at scale.
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Interested in trying out Deep Value Chain Analysis yourself? Check out these resources:
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