We've all seen the headlines: General Motors goes electric, PepsiCo commits to Net Zero. But as the clock ticks on climate change, we're left wondering: are pledges enough? How do we turn promises into tangible progress?
The truth is, decarbonisation isn't just a corporate PR move—it's a complex, all-hands-on-deck effort that requires action from every corner of society. As reporting mandates loom and stakeholders demand greater transparency, organisations are realising that reducing emissions isn't just good for the planet—it's good for business too.
Corporate decarbonisation is a key component in the battle against climate change. This isn't just about what happens inside their offices or factories - it covers everything from how products are made to how they're shipped. Your company doesn’t need a single solution, it involves a combination of strategies that directly reduce emissions, like switching to renewable energy; and those that improve efficiency, such as reducing employee commutes or optimising operations.
Decarbonisation real-life implementations.
Let's look at a practical example to illustrate this:
Imagine a manufacturing company that has set an ambitious goal to reduce their greenhouse gas emissions by 70% by 2050. To achieve this target, they implement a multi-faceted decarbonisation strategy:
Direct emissions reduction activities
- Sustainable materials: They start using recycled and bio-based feedstocks instead of fossil fuel-based materials in their production processes.
- Renewable energy adoption: They invest in both on-site and off-site renewable energy sources, including solar panels on their facilities, wind power contracts, and hydroelectric power purchases.
- Energy efficiency: The company upgrades its manufacturing equipment to more energy-efficient models and implements smart energy management systems.
- Supply chain optimisation: They work with suppliers to reduce emissions throughout their supply chain, choosing partners with strong sustainability practices.
Indirect emissions reduction activities
- Transparent reporting: The company partners with a third-party auditor to annually verify their emissions data, ensuring they meet reporting requirements and maintain accountability.
- Disclosing data: The company presents clear, easy-to-understand charts on their audited emissions across all scopes - from direct operations to indirect emissions in their value chain.
- Science-Based Target: They prominently display their decarbonisation target, which aligns with the respected Science Based Targets initiative, demonstrating their commitment to science-backed climate action.
- Employee engagement: The company introduces a remote work policy and incentivises low-carbon commuting options for employees who need to be on-site.
This example shows how decarbonisation involves a holistic approach, touching every aspect of a company's operations. It's important to recognise that the path isn't solely paved with renewable energy adoption and fossil fuel switch-outs.
Equally important are the administrative and strategic components that underpin these efforts. It also involves meticulous goal setting, transparent reporting, and robust management practices.
For instance, setting science-based targets and regularly auditing emissions data ensures accountability and drives continuous improvement. Transparent disclosure of emissions across all scopes fosters stakeholder trust and aligns organisational efforts with broader sustainability goals.
By integrating these indirect activities with direct emission reduction strategies, organisations create a comprehensive and resilient approach to achieving their decarbonisation targets.
What is your decarbonisation goal?
Setting decarbonisation goals and targets is essential for businesses aiming to combat climate change. This process involves establishing clear milestones to reduce greenhouse gas (GHG) emissions and move toward a low carbon or carbon neutral state.
This goal could be achieved by the implementation of net zero targets, absolute targets, or intensity targets, which are common targets organisations set to track progress and communicate their sustainability intentions.
To ensure these targets contribute to global climate goals, aligning them with the Science-Based Targets (SBTs) is crucial. This framework provides a clearly defined pathway for reducing GHG emissions in coordination with the Paris Climate Agreement, which aims to keep global average temperatures well below 2°C.
Let us explore and understand these options which will give you a clearer picture of the decarbonisation process and help you choose the right path for your business.
Net targets
Net targets encompass goals like carbon neutral and net zero. These targets aim to balance the amount of GHG emissions produced with an equivalent number of emissions removed from the atmosphere. Achieving these targets often involves a mix of reducing emissions and investing in offset projects.
For example, companies might plant trees or purchase carbon offsets to balance their remaining emissions. Net zero is the most ambitious of these targets, requiring a comprehensive overhaul of business operations, from energy use and transportation to product design and waste management.
Absolute targets
Absolute targets focus on reducing total emissions without relying on offsetting. This approach demands direct reductions in emissions through measures like improving energy efficiency, transitioning to renewable energy sources, and optimising production processes.
Absolute targets are straightforward and demonstrate a clear commitment to cutting emissions. For instance, a company like ANZ might set an absolute reduction target of 20%, showcasing their dedication to making tangible cuts in their carbon footprint.
Intensity targets
Intensity targets measure emissions relative to a specific unit of activity, such as per dollar of revenue, per unit of production, or per employee. This approach allows growing companies to manage their emissions efficiently by focusing on reducing the carbon intensity of their operations.
These targets are particularly useful for businesses experiencing growth, as they provide a scalable way to manage emissions. For example, a rapidly expanding tech company might aim for a 25% reduction in emissions intensity per dollar of revenue, ensuring that their environmental impact grows more slowly than their business.
Aligning targets with organisational and sectoral context
Effective target setting requires a deep understanding of an organisation's unique circumstances. Targets should align with the company's capabilities, growth aspirations, and long-term vision. Establishing clear timeframes is essential for creating actionable goals. The Science-Based Targets initiative (SBTi) provides valuable guidance with Near-Term and Long-Term Target Types:
- Near-Term Target Type: A 5–10-year emission reduction target consistent with 1.5°C scenarios.
- Long-Term Target Type: A commitment to reducing emissions to a residual level in line with 1.5°C scenarios by 2050.
Different businesses cause different amounts of pollution. So, your company's goals should fit with what your business does. Tailoring targets to specific industries acknowledges the unique opportunities, challenges, and technologies available within each industry. For example, the energy sector might prioritise renewable energy adoption, while the transportation industry could focus on electric vehicle transition.
To measure progress and inform decision-making, robust monitoring and reporting systems are indispensable. Regular assessments of emissions, energy consumption, and other relevant metrics enable organisations to track their decarbonisation journey, identify areas for improvement, and adapt their strategies as needed.
The importance of decarbonisation.
Regulatory reporting mandates, along with the growing importance of trust and transparency, are pushing decarbonisation to the forefront of organisational priorities. This aligns with the international fight against climate change.
Investors are increasingly focusing on companies with strong carbon reduction commitments. A survey by EY Global Institutional Investor reveals that 86% of investors consider aggressive carbon reduction programs crucial to their investment strategy.
This trend continues to grow, as companies like Amazon, Netflix, and Xerox are setting ambitious net zero targets, with tech giants like Apple and Microsoft aiming for net zero by 2030.
The renewed interest in carbon markets and the rise of mandatory emissions trading programs have driven companies to participate in both compliance and voluntary carbon markets, further attracting investor interest.
Additionally, employees are also showing a strong preference for sustainability programs. Research by Deloitte highlights that employees at companies with leading sustainability programs are more engaged and less likely to seek other employment. Specifically, 72% of employees at such companies rarely think about leaving, and 79% plan to stay in their roles for the next couple of years.
This engagement is driven by a sense of personal fulfilment and alignment with the company's vision and values. Furthermore, companies with strong sustainability programs often see their employees adopting more sustainable behaviours in their personal lives, creating a positive feedback loop that reinforces the company's environmental goals.
The benefits of decarbonisation.
Decarbonisation isn't just about reducing emissions—it's a strategic move that can transform your business. Here's how embracing a low carbon future benefits your organisation:
Financial resilience and growth: By investing in energy efficiency and renewable sources, companies shield themselves from volatile energy prices and potentially reduce operational costs. Moreover, as carbon pricing becomes more prevalent, early adopters of low carbon strategies may gain a significant financial advantage.
Innovation catalyst: Challenges push companies to think outside the box, fostering a culture of innovation. It leads to the development of new products, services, and business models that cater to an increasingly eco-conscious market, opening fresh revenue streams.
Talent magnet: Today's workforce, especially younger generations, prioritise employers with strong environmental commitments. A robust decarbonisation strategy can help attract and retain top talent, boosting productivity and reducing recruitment costs.
Supply chain resilience: As climate risks increase, decarbonisation efforts often involve making supply chains more robust and diverse. This not only reduces emissions but also protects against disruptions, ensuring business continuity in an uncertain world.
Stakeholder trust and investment appeal: Transparent efforts strengthen relationships with customers, investors, and regulators. Companies with clear climate strategies are favoured by ESG-focused investors and may enjoy better access to capital.
First-mover advantage: As regulations tighten and markets shift, companies leading in decarbonisation are better positioned to influence policy, shape industry standards, and capture market share in the growing low-carbon economy.
Risk management: By addressing climate-related risks, companies protect their assets, operations, and reputation. This foresight prevents costly disruptions and maintain business value in a changing climate landscape.
Collaborative opportunities: Decarbonisation often requires partnerships across the value chain, opening doors to new collaborations, shared learning, and joint ventures that can drive innovation and create mutual benefits.
By viewing decarbonisation as an opportunity rather than a burden, companies turn climate action into a powerful driver of business value, positioning themselves for success in a low carbon future.
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Overcoming challenges in decarbonisation.
Now that we understand the benefits of decarbonisation, let's explore the hurdles we might face on the road to zero emissions. Getting there isn't always a smooth ride. Complex supply chains, hefty upfront costs, and even unclear regulations throw a wrench in your organisation's decarbonisation efforts.
Here's how to navigate these roadblocks and pave the way to a sustainable future:
Untangling the operations and supply chains emissions
Challenge: Operate complex systems and extensive global supply chains make tracking and reducing emissions a daunting task.
Solution: To tackle this issue, companies can implement detailed carbon footprint analyses and collaborate closely with their upstream suppliers. This partnership not only promotes decarbonisation efforts but also provides valuable data and insights for more effective emission reduction strategies.
For instance, a food and beverage company might work with its agricultural suppliers to adopt sustainable farming practices that lower emissions. Similarly, a fashion retailer could collaborate with textile manufacturers to reduce emissions by using eco-friendly materials and processes.
Financial hurdles
Challenge: The upfront costs of going green can be steep, even if it pays off in the long run.
Solution: The key is to approach this financial hurdle with creativity and anticipation, investigating innovative funding options that align with your sustainability goals. Explore green bonds, energy efficiency grants, or partner with eco-conscious investors. Start with initiatives with shorter payback periods that provide a tangible return on investment.
Policy and regulations patchwork
Challenge: A patchwork of environmental regulations across different regions makes it difficult for companies to develop and implement comprehensive decarbonisation plans.
Solution: The key here is to be proactive and engage with policymakers, join industry groups, and advocate for supportive frameworks. Your voice matters in shaping the future of climate policy.
The human factor
Challenge: Changing an organisation's culture and getting everyone on board can be tough.
Solution: Make sustainability part of your DNA. Communicate clearly, offer training, and reward green initiatives. When employees are engaged, decarbonisation becomes a team sport.
Measuring the unmeasurable
Challenge: Accurately tracking emissions, especially for global companies, is complex.
Solution: Adopt recognised standards like the Greenhouse Gas Protocol and invest in robust data systems. Regular sustainability audits ensure you're on the right track.
Tech troubles
Challenge: The absence of readily available and scalable low-carbon alternatives, coupled with technological limitations, poses a significant challenge for many industries in their journey. Imagine the construction industry, where traditional concrete production has a massive carbon footprint. Replacing those materials with sustainable alternatives requires significant innovation.
Even when solutions exist, scaling them up for widespread adoption can be challenging. For instance, capturing and storing carbon emissions from power plants requires advanced technology that's still in its early stages.
Solution: This is where research and development (R&D) become crucial. Increased investment in R&D, coupled with partnerships with academic institutions at the forefront of clean technology research, can significantly accelerate progress.
Ready to take action?
Remember, these challenges aren't roadblocks – they're opportunities for innovation and leadership. By tackling them head-on, companies can not only reduce their carbon footprint but also position themselves as pioneers in the sustainable economy of tomorrow.
The path to decarbonisation may be winding, but with creativity, collaboration, and commitment, it's a journey well worth taking. After all, the destination isn't just a cleaner planet – it's a more resilient, innovative, and successful business.
