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Embodied carbon emissions in the supply chains of multinational enterprises

Nature Climate Change volume 10, pages 1096–1101 (2020)Cite this article

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Abstract

Enterprises are at the forefront of climate actions and multinational enterprises (MNEs) engage in foreign direct investment, allowing them substantial influence over the entire supply chain. Yet emissions embodied in the international supply chains of MNEs are poorly known. Here we trace the carbon footprints of foreign affiliates of MNEs and show that the gross volume of global carbon transfer through investment peaked in 2011, mainly driven by the decline in carbon intensity. Despite declining carbon footprints of developed country-based MNEs, there has been a notable increase in carbon transfer sourced from the Chinese mainland. We propose an investment-based accounting framework to allocate carbon footprints of MNEs to the investing country. Investment-based accounting of emissions could inform targeted and effective climate policies and actions. For instance, some large MNEs play a crucial role in carbon transfer, therefore their originating country should bear more responsibilities of carbon emission reduction as an investor.

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Fig. 1: Changes in CO2 emissions embodied in supply chains of MNEs.
Fig. 2: Carbon transfer embodied in global FDI.
Fig. 3: Carbon footprint of MNEs at the sectoral level in 2016 (MtCO2).

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Data availability

This study uses a newly published time series inter-regional input–output table61 that is constructed by the Organization for Economic Co-operation and Development (OECD) and captures firm heterogeneity for 60 regions (http://www.oecd.org/sti/ind/analytical-AMNE-database.htm). The other data adopted by this study are bilateral FDI stock data from the OECD (https://www.oecd-ilibrary.org/finance-and-investment) and the United Nations (https://unctad.org/en/Pages/DIAE/FDI%20Statistics/FDI-Statistics-Bilateral.aspx)61,62, sectoral CO2 emissions data from the International Energy Agency (https://www.iea.org/data-and-statistics)63 and emissions data of selected MNEs from their sustainability reports (Supplementary information 3). Those data can be freely downloaded as public data. We also provide a detailed explanation of these data in the Supplementary Information.

Code availability

The code of the method is available at Mendeley Data for academic use (https://data.mendeley.com/datasets/xcgs9xjhp9/draft?a=72300da9-59f1-43ac-8e64-ce19d31208e3).

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Acknowledgements

The authors gratefully acknowledge the financial support from National Key R&D Program of China (grant no. 2018YFC0213600), National Natural Science Foundation of China (grant nos. 71974141, 71690243, 71603179, 71834004, 71733002, 71673198, 41921005 and 91846301), UK Natural Environment Research Council (grant nos. NE/N00714X/1 and NE/P019900/1), British Academy (grant no. NAFR2180103) and the Fundamental Research Funds for the Central Universities in UIBE (grant no. CXTD7-06).

Author information

Authors and Affiliations

  1. College of Management and Economics, Tianjin University, Tianjin, China

    Zengkai Zhang & Huibin Du

  2. Department of Earth System Science, Tsinghua University, Beijing, China

    Dabo Guan

  3. The Bartlett School of Construction and Project Management, University College London, London, UK

    Dabo Guan & Jing Meng

  4. Research Institute for Global Value Chains, University of International Business and Economics, Beijing, China

    Ran Wang & Kunfu Zhu

  5. Industrial Ecology Programme, Department of Energy and Process Technology, Norwegian University of Science and Technology, Trondheim, Norway

    Heran Zheng

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Contributions

D.G., H.D. and Z.Z. designed the research. Z.Z. and K.Z. determined the calculation method. Z.Z. J.M., H.Z. and R.W. carried out the calculation and analysis. Z.Z and D.G. wrote the manuscript and all authors contributed to this manuscript.

Corresponding authors

Correspondence to Dabo Guan, Jing Meng or Huibin Du.

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The authors declare no competing interests.

Additional information

Peer review information Nature Climate Change thanks Yuhuan Zhao and the other, anonymous, reviewer(s) for their contribution to the peer review of this work.

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Extended data

Extended Data Fig. 1 Changing trends of CO2 emissions embodied in supply chains of MNEs’ foreign affiliates.

The changing trends of the annual volume of the carbon footprints of MNEs’ foreign affiliates and the share of MNEs’ carbon footprints to global emissions. Please refer to Supplementary Information 1.1 for detailed explanation.

Extended Data Fig. 2 Trade-related and investment-related carbon emissions.

The volume of carbon emissions embodied in supply chains of MNEs is comparable to the volume of carbon emissions embodied in international trade at global level. Please refer to Supplementary Information 1.1 for detailed explanation.

Extended Data Fig. 3 Carbon footprint of MNEs hosted by and originated in different regions.

MNEs hosted by the Chinese mainland correspond to the largest volume of carbon footprint, followed by the EU and the U.S. The volume of carbon footprints of MNEs originating from the Chinese mainland was significantly lower than that of the U.S. and the EU. There was a significant increasing trend in the carbon footprint of MNEs originating from the Chinese mainland. Please refer to Supplementary Information 1.2 for detailed explanation.

Extended Data Fig. 4 CO2 emissions related to MNEs under investment-based and production-based accounting in 2016 (Mt).

The figure shows that the developed countries outsourced embodied carbon emissions to the developing countries through FDI. Please refer to Supplementary Information 1.3 for detailed explanation.

Extended Data Fig. 5 Share of CO2 emissions and value added induced by foreign-owned firms.

The figure shows that the share of CO2 emissions related to foreign-owned firms is greater than the share of value added for most regions. Please refer to Supplementary Information 1.5 for detailed explanation.

Supplementary information

Supplementary Information

Supplementary discussion, Figs. 1–7 and Tables 1–6.

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Zhang, Z., Guan, D., Wang, R. et al. Embodied carbon emissions in the supply chains of multinational enterprises. Nat. Clim. Chang. 10, 1096–1101 (2020). https://doi.org/10.1038/s41558-020-0895-9

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