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How to Power Scope 3 emissions accounting with Higg FEM data

In an earlier blog, we covered Why Scope 3 Accounting is Broken in the Fashion industry. One of the primary reasons is the lack of primary facility data due to limited traceability in the supply chain. However, as regulatory pressure is mounting in the fashion industry, many fashion players have started to collect primary resource consumption data from Tier-1 and Tier-2 facilities wherever possible.


What is Higg FEM and why is it used?


Higg Facility Environmental Module (FEM) is one such primary facility data collection tool used by many Sustainable Apparel Coalition (SAC) members for assessing the environmental performance of the facilities in their value chain. The Higg FEM tool offers standardized environmental facility data collection and exchange among value chain partners (retailers, brands, and manufacturers) to track the environmental performance of their facilities.

Introducing the Higg Facility Environmental Module (FEM)
Higg Facility Environmental Module (FEM) parameters¹

The Higg FEM tool is used to assess many environmental parameters, such as:

  • Environmental Management Systems

  • Energy Use and Greenhouse Gas Emissions

  • Water Use

  • Wastewater

  • Emissions to Air

  • Waste Management

  • Chemical Management


How long does it take to complete the Higg FEM?


The time required to complete the Higg FEM will vary depending on how much of the required data has been collected before starting the module. After data collection, it can take facilities between 2-4 weeks to complete the entire module, accounting for time to have internal discussions and review.


What value does Higg FEM provide?


  • Consistency in the standard: The primary goal of the FEM is to establish industry sustainability standards, enabling suppliers to align with a unified set of criteria for evaluating their performance.

  • Data sharing across the fashion supply chain: The fashion value chain needs collaboration and information sharing between buyers, suppliers, and third parties. Higg FEM allows easy exchange of environmental data amongst retailers, brands, and manufacturers.

  • Reducing supplier audit fatigue: Higg FEM, with support from SAC, provides capacity-building and training around processes and practices for the apparel and footwear manufacturing factories to achieve higher environmental standards. If the tool gets adoption across the industry, it may reduce the need for multiple audits from brands. Further, the tool goes beyond auditing to include capability assessments and goal-setting for facilities.


Higg FEM still has many limitations²


  • Manual data entry is cumbersome: Sustainability teams have to manually collect facility environmental data and spend considerable effort consolidating the information from several teams, like accounts, utility, water, etc., in multiple spreadsheets. Once the data is consolidated, teams spend valuable time checking for errors in the collected data and manually entering this information in Higg FEM.

  • Self-assessed data has errors: Facility data in FEM today is gathered via self-assessments and typically has anomalies due to manual data wrangling. This leads to low trust in the quality of data exchanged between parties. Therefore, most brands and retailers nowadays require a third-party audit of FEM data. Auditors can conduct both off-site and on-site verifications, however off-site (remote) verification cannot be used or shared publicly.

  • Anomalies in verified data: Despite the audit efforts, numerous brands have raised concerns about errors found in the third-party verified Higg FEM data. These red flags indicate that some facilities are deliberately under-reporting their emissions to achieve inflated scores.

  • Inaccurate allocation of emissions: One of the main challenges, the brands face in estimating their Scope 3 emissions for purchased goods, is allocating total facility emissions to the products purchased. Due to the absence of any guidance or metric in Higg FEM, brands have to rely on inaccurate volume-based allocation for the purchased goods.

  • Lack of incentives: Fashion suppliers and manufacturers (especially, small and medium enterprises) lack incentives to accurately measure, report, and reduce their environmental impact data.

  • Lack of data transparency and collaboration: Higg FEM doesn’t allow the exchange of facility data for benchmarking and sharing innovative and high-impact practices.

  • Reporting frequency once a year: The Higg FEM data is only collected once a year, which implies brands have to wait for an entire year to see the impact of any improvements made in their supply chain.


Despite the tool's limitations, the primary facility environmental data is a rare goldmine and can power brands to generate a more accurate Scope 3 emissions baseline for Science Based Targets and measure year-on-year progress on their decarbonization efforts.


In the next part of the blog, we will cover how brands can work around the Higg FEM data limitations and accurately measure their Scope 3 and product-specific emissions.


How to incorporate Higg FEM data for accurate Scope 3 accounting?


Most GHG accounting software and consulting firms don't integrate with primary supply chain data collection tools like the Higg FEM, Enablon, Sphera, etc. As a result, sustainability teams at brands & retailers struggle to measure their Scope 3 emissions accurately.


The process to leverage primary facility environmental data consists of four steps listed below:

  1. Anomaly detection in Higg FEM data: As mentioned earlier, the self-reported or even third-party audited Higg FEM data sometimes has anomalies and should be checked for errors by brands & retailers before being used internally. This is where technology solutions like AI/ML can help sustainability teams to catch such errors, allowing them to intervene and work with their supply chain partners to improve the quality of data collected.

  2. Accurate allocation of total facility emissions to products: The allocation of facility emissions depends on the types of processes used and products produced in a facility.

    1. Standard Minute Value (SMV) based allocation: For Tier-1 processes like assembly, the most accurate allocation approach is using SMV. SMV is a time measurement used to estimate the time required to perform a specific operation, such as assembly. SMV is a commonly used metric shared between fashion brands and manufacturers for open costing and can be used for facility emission allocation.

    2. Product mix-based allocation: For Tier-2 wet processes like dyeing, the best allocation approach is based on using a product mix manufactured at the facility. Each product may or may not require a dyeing process step and can also use different dyeing processes, so knowing the product mix is critical for accurate allocation. Once the product mix is known, the default process flow can be mapped for them and overall emissions can be allocated accurately for each product.

    3. Volume-based allocation: In cases where SMV or product mix is not available, e.g. at fabric manufacturing stages like knitting, a pure volume-based allocation approach can be used. This approach can lead to over or under-allocation of emissions due to the diversity of products in the catalog produced in a factory. Brands & retailers should aim to get more primary data from these factories over time to move towards higher accuracy allocation approaches detailed above.

  3. Creating unique supplier-specific emission factors: This step holds paramount importance as it requires deep expertise in LCA, access to emission factor databases, and software skills to do this at scale. Every LCA dataset (i.e., emission factor) consists of technosphere and biosphere exchanges, and these exchanges need to be updated with primary resource use data from facilities to create unique supplier-specific emission factors.

  4. Generating product carbon footprint with actual emission data: Finally, the last step requires updating average emission factors with supplier-specific emission factors wherever primary data is available to generate an accurate product carbon footprint. These accurate product carbon footprints can power Scope 3 emissions for categories like Purchased Goods & Services, Upstream & Downstream transportation, Use of Sold Products, and End-of-Life Treatment of Sold Products, as discussed in an earlier blog post.


A software solution like Carbon Trail can help sustainability teams manage the complexity of incorporating primary facility environmental data for accurate Scope 3 and product footprint accounting. Using the accurate environmental impact data, brands & retailers can meet various sustainability disclosure requirements and plan targeted reduction initiatives. The Carbon Trail platform is flexible to accommodate fashion industry players at different stages in their sustainability journey so that they do not have to wait for complete value chain transparency and primary data to measure their Scope 3 emissions accurately.


How to measure Scope 3 emissions in fashion industry accurately
Accurate Scope 3 Accounting in Fashion³
 

References

  1. Introducing the Higg Facility Environmental Module (FEM) from this video

  2. Measurement without Clear Incentives to Improve: The Impacts of the Higg Facility Environmental Module (FEM) on Apparel Factory Practices and Performance, Niklas Lollo and Dara O’Rourke (2020)

  3. Data flow in the Carbon Trail platform to measure Scope 3 emission accurately

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