With the effects of climate change coming into focus, investors, customers, and regulators have raised their expectations for companies, demanding that they set targets for reducing net emissions of greenhouse gasses (GHGs) to zero and offer clear plans for achieving them.
Sustainability has been the buzz word for years but 2021 was the year net-zero commitments went mainstream. Following the COP 26 climate conference in Glasgow, well over 100 governments have set a net-zero decarbonization target. These commitments cover 88% of global emissions, 90% of global GDP, and 85% of global population. Nearly one-thousand municipalities and over three thousand private businesses have also made net-zero commitments as part of the UN’s Race to Zero decarbonization initiative.
While these commitments are a positive first step, they must now be backed by concerted action. The stakes are higher than ever as climate change continues to intensify. Net-zero by 2050 is a science-based goal that aims to limit the worst effects of global warming.
Rising Demand and Potential of Carbon Intelligence
With the increased regulatory focus on carbon footprint, the importance of multi-scale zero carbon technology deployment across industries has become vital. Organizations have been turning to their technology and innovation partners to integrate decarbonization and energy management solutions to protect their bottom lines. Sustainability is high on the agenda of industrials and large commercial companies. In a recent Arthur D. Little survey among industry leaders about Carbon emission management priorities, 87% of energy executives rated sustainability as a “high or very high” priority for their company.
A recent McKinsey report found that growing demand for net-zero offerings could generate more than $12 trillion of annual sales by 2030 across 11 value pools, including transport ($2.3 trillion to $2.7 trillion per year), power ($1.0 trillion to $1.5 trillion), and Carbon Management ($100 billion to $200 billion). This transformation of the global economy creates a significant growth potential for climate technologies and solutions.
How can organizations take real action on net-zero?
The run up to COP26 in Glasgow saw a flurry of net zero promises from companies and authorities. The recent global analysis of net zero targets highlights that while over a third (702) of the world’s 2,000 largest publicly traded companies have set net zero targets, 65% (456) of those targets miss minimum standards, and 40% intended to rely on carbon offsets.
With customer and investor scrutiny increasing on organizational net zero ambitions, 4 steps can help business ensure they turn their emission reduction goals into actions.
Measure: You cannot manage what you can’t measure.
The first step an organization can take to fight climate change is to measure its carbon footprint. Carbon footprint measurement at an organizational level follows precise rules. Several protocols exist to measure CO2, such as the GHG Protocol, which is the most widely used greenhouse gas accounting standard and is recognized internationally. The GHG Protocol divides greenhouse gas emissions into three scopes- Scope 1, 2, and 3. Scope 1 emissions are direct greenhouse (GHG) emissions that occur from sources that are controlled or owned by an organization (e.g., emissions associated with fuel combustion in boilers, furnaces, vehicles). Scope 2 emissions are indirect GHG emissions associated with the purchase of electricity, steam, heat, or cooling. Scope 3 emissions are a consequence of the activities of the company, but occur from sources not owned or controlled by the company. Some examples of scope 3 activities are, extraction and production of purchased materials and transportation of purchased fuels.
Mitigate: Take action to reduce your emissions.
Measuring the total carbon footprint in their value chain will allow companies to identify the major sources of emissions and design a sustainability strategy to achieve their reduction objectives. Various science-based initiatives like CDP (formerly Carbon Disclosure Project) and Science Based Targets (SBTi) provide companies with emission reduction guidelines that are in line with the achievement of the Paris Agreement objectives. According to these guidelines, Scope 1, 2, and 3 targets must be consistent with a level of decarbonization required to meet the 1.5°C climate goal. To reach this ambition, organizations should set medium and long term targets up to 2050. The SBTi also recommends using “the most ambitious decarbonization scenarios that lead to the earliest reductions and the least cumulative emissions.”
Offset: Compensate for your unavoidable emissions.
Carbon offsetting is a voluntary action that can be done at either an individual or an organization level. To account for their unavoidable or residual emissions, organizations or individuals can purchase carbon credits, which are generated by emission reduction projects that either absorb or avoid CO2. These projects not only have environmental benefits but also co-benefits that target the United Nations Sustainable Development Goals, such as biodiversity protection and support local communities.
Report: Share the results of your climate action with stakeholders.
After successfully completing the three stages of net-zero, companies must communicate the results to their stakeholders in an accurate and precise way. A good and transparent reporting strategy will protect the organization from potential reputation threats. A valuable reporting strategy consists of proper disclosure of information about the projects supported, the environmental and social impacts generated, as well as the co-benefits like biodiversity, and target Sustainable Development Goals (SDG’s). It also requires an additional explanation of the carbon finance mechanism and its role in achieving the 1.5°C climate goals. Using the correct terminology to communicate climate action is key to a successful reporting strategy.
A recent report by Deloitte aptly sums up the state of organizational action on climate change “Not all businesses are at the same stage in their climate journeys, but all companies will soon need to move from “why?” to “how?” to “how fast?” when it comes to climate action. We’re in a decisive decade to act against climate change, and bold actions resulting in measurable impact are needed to accelerate the pace of intervention while there’s still time to limit the damage.”
Wherever you are in your journey towards climate action, our team of climate tech experts can help you achieve your goals with a solution tailored to your organization. Get in touch with us today to know more.
Wayne Lloyd is the CEO of Tracesafe.