Issues addressed by this output

This output addresses the questions:

• How far up the supply chain are the suppliers that contribute most to our impact?
• Are they our immediate suppliers or are they remote, somewhere in the background economy?
• Which layer of the supply chain are they in?

Underlying calculation

The software breaks down your total impacts into the production layers responsible for those impacts. It takes apart your impact information and groups it into contributions from different production layers.

Table: Impact by layer

The first column of the impact by layer table shows the indicators that you have chosen to address. The production layers are numbered from 1 to 8. The numbers represent the order of organisations in the production chain. Production layer one is MyBakery itself, it’s the first order (if you were to add in MyBakery’s shop customers, the final consumers, they would be in column zero, that is, the zero-th order); two is a producer who supplies MyBakery (second order); three is the producer who supplies the producer who supplies MyBakery … And so it goes on (a bit like “the boys who put the powder on the noses on the faces of the ladies of the harem of the court of King Caractacus”).

Impacts occur in every production layer. Total impact can be broken down to reveal the contribution made by different orders in the production chain. Let’s go through an example for the indicator Energy consumption. MyBakery is connected to town gas and fires ovens. The gas used on-site belongs into production layer 1.

My Bakery buys flour. This flour needs to be produced by a flourmill. The energy used in the flourmill belongs into production layer 2, since the flourmill is a direct supplier of MyBakery. The flour also needs to be delivered to MyBakery by a transport firm. The diesel used by the truck also belongs into production layer 2, since the truck company supplies the transport service to MyBakery.

The truck that the transport firm uses needs to be assembled by a vehicle manufacturer. The energy used during this assembly process belongs into production layer 3, since the vehicle manufacturer is a supplier of the transport firm which in turn supplies MyBakery.

And so on. For example, the energy needed to mine the iron to make the steel to make the truck to deliver the flour to MyBakery belongs into production layer 5, since there are four supply-stages in that chain.

In the example of an impact by layer table above, the total impact of the indicator, say employment, is broken down showing in layer 1 the impact attributable to MyBakery, which is a producer (i.e. not a final consumer). Layer 1 (14.9 emp-y) shows onsite employment created by MyBakery actually on its premises (layer one is sometimes referred to as direct). Layer 2 shows the employment (1.45 emp-y) created by MyBakery in all of MyBakery’s suppliers. Layer 3 shows the employment (0.76 emp-y) created by MyBakery in all the suppliers of suppliers of MyBakery.

The impact by layer table shows that with each step away from MyBakery (each step further upstream) the impact generally diminishes, gradually flattening out so that each successive step adds a smaller and smaller amount to the total.

Table 3: Cumulative impact by layer

This table contains the same information in the same arrangement as the previous table but each layer’s impact is added to the previous total making it cumulative so that the final column shows the total impact. If, for example we keep adding up the contribution of water use from successive production layers as we go upstream, we end up with MyBakery’s total water use impact which is 36.9ML (Megalitres).

You can see from the table that something close to the final value is reached only after about adding at least 4 production layers. These 4 production layers contain more than 14 billion contributions!

In technical terms the impact curve is said to ‘converge to completeness’. This highlights a feature of the ISA methodology which guarantees complete coverage of the entire upstream supply chain.

Visual representation: area graph and bar graph

Area graph for the indicator Water use

The area graph for the indicator Water use contains some detail on the types of inputs that contribute to MyBakery’s impact. The colours indicate MyBakery’s inputs grouped into 18 broad areas (the 344 sectors have been put into 18 groups because it would be difficult to show all inputs separately on one graph). A glance at the area graph shows that significant contributions to the total impact of MyBakery originate from production layers one to four, after layer four the graph tends to flatten off. The colouring shows that most water use occurs in production layer 2, in the broader area Agriculture. This is represented for example by irrigation water used in growing produce. The content of these production layers is further unravelled in Structural Path Analyses.

The complexity of the calculations can be appreciated when you consider that in the ISA model of the Australian economy each production layer has 344 suppliers, each of the suppliers has 344 suppliers, which means that each producer has 118,336 suppliers of suppliers and over 4m suppliers of suppliers of suppliers and so on.

Bar graphs for the indicator Employment

The bar graph differs from the area graph in that it not only shows the production layers but is also suitable for benchmarking. This is because it depicts intensities rather than total impacts (compare Software Info 6). The T Bar (in this case the bar that extends down into the column graph from the top of the column) represents the benchmark for that indicator in your sector of the economy. In this case the benchmark is 1.24 employment-minutes per dollar worth of output, which is the employment intensity of the entire pies, cakes and biscuits sector.

The stacked columns in the bar graph show a breakdown of total intensities (total impact per ($)’s worth of output) into layers one to four and then the remainder (conflated into the top layer). The bar extends from the top of the column to the level of the sector benchmark. The bar can go either upwards or downwards depending on whether MyBakery’s impact is lower or higher than the benchmark.

The next stack in the column represents MyBakery ‘s suppliers’ employment contributing 0.6 mins per $’s worth of pie or cake to MyBakery’s total intensity. Viewed against the benchmark bar extending from the column it can be seen that the sector has on average an hour less employment intensity than MyBakery.

Using this output

A Production Layer Decomposition tells you how far from your immediate influence are the organisations that are responsible for the various upstream impacts.

For example, MyBakery’s Impact by layer table shows a water use figure of 0.78 Megalitres (ML) in production layer 1. This is MyBakery’s share of on-site water use. Much more water is used in production layer 2, 17.2 ML. This could be for example water that is used to irrigate vegetables grown by MyBakery’s vegetable supplier. Or water used by the flourmill, etc. In layer 3, still 17.9 ML are used. This could be water for irrigating wheat delivered into the flourmill and ground into flour for MyBakery. In layer 4, only 0.91 ML are used. This could be water used for irrigating pastures for hay, to feed beef, slaughtered into meat, and delivered to MyBakery. Proceeding upstream, contributions become smaller and smaller.

Next: Impact Area Graphs