Are Carbon Neutral Products for Real? IPE’s Ma Jun Shares Deep Concerns over Apple’s Latest Green Claim

By Ma Jun 20 October, 2023

Is Apple's 'carbon neutral' watch truly neutral? How can Apple be sure when it has stopped pushing suppliers to disclose GHG data this year? See why Ma Jun, IPE Director, is worried Apple's neutrality claim is just a smokescreen in our sit down with him

CWR: Apple has just unveiled its first carbon neutral product – an Apple Watch – to much fanfare. But your report raised the question: how do we really know that it is truly carbon neutral when Apple has this year stopped pushing its suppliers to disclose GHG emissions ‘due to technical issues’. Can you tell us why you felt compelled to publish this report? Is Apple greenwashing?

Ma Jun (MJ): As an organization that has long been tracking, promoting and evaluating green supply chain practices, IPE followed Apple’s announcement of its first carbon neutral product – we had hoped this can contribute to the IT/ICT industry’s global push to reduce emissions.

However, after analyzing Apple’s product environmental reports and discussing with experts, we concluded that Apple was not revealing enough information about suppliers who manufacture Apple products to substantiate the claim of a carbon neutral product.

IPE analyzed Apple’s reports & concluded there isn’t enough supplier data to back carbon neutral claim; plus, found claim surprising given new iPhone 15 Pro has a higher carbon emission than the 14 Pro

Given the fact that electricity used by manufacturing suppliers represents the largest single source of carbon emissions throughout Apple’s manufacturing supply chain, and that many of Apple’s suppliers still have only limited access to renewable energy, it is reasonable for green credits to be allocated fairly among its product portfolios.

However, we found to our surprise that as Apple Watch goes carbon neutral, its new flagship iPhone 15 Pro (with much higher production volume and per unit carbon emission), has a higher carbon footprint than that of the previous generation iPhone 14 Pro. We raised the question of the sudden increase of iPhone 15 Pro’s carbon footprint in our report and would like to know how renewable energy is allocated between iPhones and Apple Watches. So far, we have not received a direct response – this makes us wonder if Apple is cherry-picking limited clean electricity from its suppliers to produce the “numerical” carbon neutral product.

In the meantime, we also found that despite a fall in global smartphone shipments of 12% in 2022, Apple’s supply chain emissions data, (which we collected through various channels), showed that the carbon emissions from some of its suppliers have only decreased slightly, and in some cases were even increasing.

…concerns about transparency & carbon neutrality claims prompted report; to prevent industry exploiting  loopholes

In addition, we are particularly concerned that when Apple started making the claim of a carbon neutral product, the company made a regression on public disclosure this year. In response to IPE, Apple made clear that “we may not request suppliers to provide facility level carbon disclosure this year”.

This “murkiness” in calculating emissions in the supply chain plus the fact that such an order-based mathematical equation model of carbon neutrality would limit its suppliers motivation for real emission reduction, compelled us to publish the report. It is especially important because with Apple’s leading position in the IT/ICT industry, others may copy this model and take advantage of the same loophole in the rules that allow the allocation of limited credits to make their own carbon neutral claims. Such claims would serve the need for “green marketing” but may not lead to real transformation urgently needed for the IT/ICT industry.

CWR: It seems that Apple has dropped the ball despite being a leader in the green space in recent years – what can Apple do to up transparency in supply chain emissions and reassure its customers/stakeholders that its products are truly carbon neutral as touted?

(MJ): Carbon neutral product is such a high bar and the concept is being increasingly questioned. We believe that any company making carbon neutral claims will need to make full disclosure of related data.

This means putting the progress of carbon neutrality of its entire value chain under public scrutiny, so as to prevent climate-washing and inspire the synergies of all parties to empower the supply chain to achieve emissions reductions at scale. We understand and recognize the need to protect commercial secrets. But we don’t accept the excuses that pollution and carbon-related data be categorized as a commercial secret, as pollution and carbon emissions can have impacts on local communities, ecosystems and our climate.

Carbon disclosure should cover Scope 1, 2 & 3 emissions, as per disclosure standards…

“…we don’t accept the excuses that pollution & carbon-related data be categorized as a commercial secret”

As is required or suggested by various regulations and mechanisms, such as EU’s Corporate Sustainability Reporting Directive (CSRD), and IFRS S2 Climate-related Disclosures issued by the International Sustainability Standards Board (ISSB), comprehensive carbon disclosure should cover Scope 1, 2 and 3 emissions.

For companies like Apple who outsource all of its manufacturing to suppliers, measuring and disclosing emissions from Scope 3 – especially Category 1 Purchased Goods and Services – is essential, as supply chain is by far the emissions hotspot compared to its business operation.

Up to date, most suppliers share of renewable electricity use remains limited, and some still rely heavily on Renewable Energy Certificates (RECs) for their reported renewable electricity shares. As pointed out by experts from New Climate Institute, like carbon credits, RECs are unlikely to have any meaningful impact on really reducing emissions.

In order to reassure customers/stakeholders that a product is truly carbon neutral as touted, a full disclosure of Scope 3 emissions should include but not be limited to the following:

• Supplier facility-level carbon emission data,
• Supplier facility-level data on the allocation of renewable energy usage, clean electricity certificates, or other green credits into different product lines/customers,
• Information regarding the retirement of the carbon credits sufficient to prevent their use by others, including a link to the registry where the credit has been retired etc.,

In addition to Purchased Goods and Services, the disclosure of other Scope 3 emissions categories, such as downstream & upstream logistics, product use, end-of-life treatment (including recycling) can also be included.

CWR: What you have suggested makes sense but getting this data may be difficult. Where would you start? And what is IPE doing on this front to help?

(MJ): To achieve a comprehensive disclosure of the data listed above is not easy. We suggest that facility-level environmental and carbon data disclosure could be a starting point as it is essential to demonstrate the supply chain emissions reduction efforts led by a brand, and provide indirect evidence that a supplier is actually making solid green and low carbon transformation, including ensuring stable access to renewable energy.

Facility-level environmental disclosure is fundamental to safeguard the interests and rights of the local communities and the eco-environment, while facility-level carbon accounting is doable as the GHG Protocol: Accounting and Reporting Standard clearly outlines the methodologies.

In China, facility-level environmental & carbon data has been recently included in regulations…

…IPE’s Blue Map has collected >11,600 pieces of facility-level carbon data disclosed by enterprises in China

In China, facility-level environmental and carbon data has been recently included in regulations such as “The Measures for the Administration of Legal Disclosure of Enterprise Environmental Information” issued by China’s Ministry of Ecology and Environment which came into effect on February 8, 2022, which consolidates the disclosure requirement made by the rules on carbon market and emission trading.

As of September 2023, IPE’s Blue Map has collected more than 11,600 pieces of facility-level carbon data disclosed by enterprises in China on regional platforms. Moreover, over the past 6 years, brands have worked with IPE to motivate thousands of their suppliers to publicly disclose their facility-level carbon emission data on a voluntary basis. We expect to see both the mandatory and voluntary environmental and carbon disclosure at facility-level continue to grow in the coming years

CWR: Should Scope 3 be standardised and audited – especially given the EU Green Claims Directive to address greenwashing with stringent requirements to tackle false environmental claims? Also, what are your views on using carbon credits to offset Scope 3?

(MJ): As the EU Green Claims Directive is being drafted to address greenwashing with stringent requirements to tackle false environmental claims, we believe the methodologies, standards and rules that are current in use need to be improved.

So far, the offset part has aroused increasing concerns in the West. New findings of the major failure of forestry and land-use carbon dioxide removal projects indicate that carbon storage in forestry and land-use projects is in no way comparable with carbon reduction efforts. This aligns with research on carbon credit quality which finds widespread over-crediting across registries and offset project. We would like to see the rules regarding offsetting to be strengthened.

Scope 3 accounting & disclosure should be standardised & audited

But coming from the perspective of the “factory of the world”, we pay special attention to the Scope 3 and share the view that the accounting and disclosure should be standardised and audited. We call upon attention to the major loopholes in existing carbon neutral product criteria that allow cherry picking and unreasonable allocation of green credits in the manufacturing process.

If we don’t want puzzling cases such as a carbon neutral Apple Watch vs. more carbon intensive iPhone 15 Pro to cast further doubts on the credibility of carbon neutral products, we need to start by substantially expanding disclosure requirements for the relevant processes.

CWR: Clearly emissions could be higher with better Scope 3 accounting – indeed, we found this to be the case when we deep dived into Scope 3 emissions for the ‘big 5’ China ICT listco’s for our report on ICT sector transition. Right now, it appears that local and global ICT brands are cherry picking what to report in Scope 3 emissions. As the go-to supply chain environmental watchdog in China, surely this is worrying as everyone can claim their products are carbon neutral?

(MJ): We believe that the reallocation of green resources among production lines and contractors is in no way meaningful in terms of leading a high-emitting industry to achieve significant emissions reductions.

If Apple could get away with its high-profile marketing of a carbon neutral product without making comprehensive disclosure to substantiate it, we worry that other companies could easily pick their own niche product and copy Apple’s approach.

With Apple’s successful marketing of an unsubstantiated carbon neutral product, others may copy approach…

…IPE calls upon stakeholders to ensure accountability & validate claims to prevent climate washing

A potential marketing craze of dubious carbon neutral products will not help consumers to green their choices. Instead, it may mislead them to take carbon neutrality as an easy target to achieve and encourage them to embrace the current fast fashion model of consumption.

We noticed that a number of Chinese and global brands who launched carbon neutral products withdrawing their carbon neutral labels, and Carbon Trust announcing “they are transitioning the carbon neutral verification and label to have a greater emphasis on reduction”.

We therefore call upon stakeholders, including regulators, research groups, third-party auditing bodies to work together to build an accountability mechanism based on comprehensive disclosure to allow open validation of any carbon neutral product claims to check climate wash.

Click here to read this interview in Chinese on IPE’s website.

Further readings

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• All quiet on the ESG Front as Oil Back-Pedals on Net Zero — Greenwashing Alert! So-called climate activist shareholders are loud when oil is waning but silent when profits soar. Are investors just riding the green wave? CWR’s Lam breaks it down
• Financing Tech’s Decarb: Insights on Ant’s journey from BNP Paribas’ Chaoni Huang — Given ICT’s carbon intensity the sector will need green finance to help it decarbonise. CWR chats to Huang, Head of BNP Paribas’ Sustainable Capital Markets APAC division, on Ant Group’s SLL & green finance opportunities in China ICT
• China ICT transition: The good, bad & ugly of 5 HKEX ICT listco’s net zero pledges & climate action — How can China’s ICT giants accelerate their transition to net-zero emissions & seize green finance opportunities? CWR releases its groundbreaking report,

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