Environmental Profit & Loss Project

Besides the corporation’s financial performance, the environmental impact of its operation and manufacturing processes has become the focus of many stakeholders. However, during the discussion, we found that uncovering various environmental impacts such as carbon emissions, waste, and wastewater volume is only meaningful to those with relevant knowledge background. As for the general stakeholders, they may have doubts in those parameters. For example, when corporations commit to environmental protection, they ask questions such as: What is the most important source of pollution? How to compare the pollution severity resulted by one ton of waste, one ton of wastewater, and one ton of GHG? Is the company's prevention direction correct? Are the countermeasures perfect?

ASUS applied the method of monetary valuation from SROI, whichs measure the social value generated by public welfare activities, to assess environmental profit & loss (EP&L) to include environmental pollution into operational performance considerations. The environmental profit and loss assessment is based on life cycle to measurs the environmental and social impacts of the products from raw material extraction, component manufacturing, and product assembly. The monetary valuation make different environmental consequences, such as the loss in the agricultural and ecological field due to climate change, become comparable, providing important reference for decision makers in future product development and supply chain management strategies. We also plan to incorporate this method into the current procurement process to actively implement the concept of green supply chain and hope to arouse the industry to face the issue of monetizing the natural environment. By working together with the supply chain, we could provide contribution to the sustainable development for humanity.

ASUS has adopted the concept of "digital measurement, technological management" to allow stakeholders to understand the corporation’s ustainability achievement. Moreover, this concept provides decision makers and managers with the reference to conduct resource allocation and performance tracking. By using monetized value to evaluate the environmental profit and loss of a product in their life cycle, a net loss or profit to the environment as a result of the company’s operation can be shown. This helps the corporation review its sustainability achievement year by year.

ASUS Publishes First Environmental Profit and Loss Report in 2017

ASUS choose the industry chain of notebook computer and analyzed based on the Valuing Corporate Environmental Impacts: PwC Methodology Document published by PwC and referred to the evaluating process of natural capital impacts in “Nature Capital Protocol” (NCP) posted by the Natural Capital Coalition (NCC) to identify the environmental profit and loss in the following 4 tiers: mining and manufacturing of raw material, manufacturing of major components, OEM assembly, and ASUS operation.

In view of the characteristics of manufacturing process of notebook computers, and based on the results from previous life cycle assessment projects, we identified that the environmental impact of the manufacturing process of notebook supply chain was primarily from the components manufacturing and energy and resources usage for product assembly, which included electricity usage, water used for manufacturing process, wastewater, and waste discharge. Therefore, 4 environmental indicators were selected, namely greenhouse gases emissions, water consumption, solid waste, and water pollution, for EP&L assessment.

For example, in the past, only the number of tonnes of greenhouse gas produced by the operating activities was investigated. After applying the EP&L methodology, we can further calculate the social impact by climate change due to the emission of greenhouse gases, and consider the loss of the overall economic value such as the loss of the agricultural industry, the destruction of construction assets and the impact on the ecology caused by extreme weather events (such as drought or flooding) due to climate change. In other words, in the past, the "value" of a company's environmental impact, or the externality, was not considered. Calculating EP&L allows us to better understand the externalities (i.e., water consumption, water pollution, greenhouse gas emission and solid waste), and thus use the same monetary value (US dollars in this project) to measure these impacts and communicate with stakeholders. The overall monetary valuation assessment process is shown in the figure below.

According to our analysis, the impact of ASUS notebook computers supply chain for the full 2016 was approximately US$347 million. The monetary valuation results of various environmental impacts at different stages are shown in the table below.

According to the analysis, water pollution had the largest impact among all environmental aspects, followed by greenhouse gas emission, and water consumption the least. The details were as follows:

From EP&L, we learn that in the production of ASUS notebook computer, mining and manufacturing of raw material had the most significant environmental impact in the context of the organization's operations and supply chain, and water pollution was the largest source among the environmental impact categories. The result showed that the priority considerations in the supply chain environment management were the mining and manufacturing of raw material, and the water pollution. Monetary valuation also provided ASUS with the maintenance costs for environmental impacts, and served as an important reference for the reduction strategy.

ASUS' first EP&L report can be downloaded from HERE.

After completing the pioneer project, we expanded the scope to covered 60% of the revenue and calculate the environmental impact of supply chain .Based on the manufacturing process characteristic of the product, 4 environmental indicators (GHG, water resource, waste, and water pollution) are selected to evaluate environmental profit and loss. The analysis result shows that the impact of products supply chain is approximately $387 million US Dollars, and the environmental impact in different phase is shown below:

According to the analysis of the project, water pollution had the largest impact among all environmental aspects, followed by greenhouse gas emission, and water consumption the least. The details were as follows:

Analysis of the environmental impact in different phase of supply chain:

In Tier 0 ASUS Operation and Tier 1 OEM Assembly, and Manufacturing of Major Components: GHG emission had the greatest environmental impact.
In Tier 3 Mining and Manufacturing of Raw Materials: water pollution had the greatest environmental impact.

The analysis demonstrated that GHG and water pollution in supply chain operations created the greatest environmental impacts. Therefore, ASUS increased the level of requirements to qualified suppliers. From 2019, qualified suppliers must possess ISO 14001 environmental management system verification in addition to ISO 9001 quality system verification to show that they could reduce or avoid the environmental impact in the supply chain.

On the other hand, this also highlighted the importance of external environmental factors (in addition to traditional factors such as cost, quality, technology, delivery, and service) when selecting suppliers, thus the actual life cycle costs (LCC) can be obtained. Therefore, ASUS would further promote the ISO 20400 sustainability procurement plan by including the sustainability as a consideration of a qualified supplier. ASUS will use our purchasing power to drive the supply chain towards sustainability transformation.

In the next stage, the scope of the environmental profit and loss project will expand, and we will continue calculating the annual environmental profit and loss intensity of each product line to confirm that the resources invested and the implementation of green product strategies in the supply chain environment management can achieve actual benefits, and gradually establish a complete supply chain environmental gain and loss assessment.