Climate Change 19 May 2022
What does net-zero mean for my business?
4 Min Reading Time
Are you thinking about setting a science-based target (SBT) but unsure what you need to do and whether it is a feasible commitment? Have you already set one but are now grappling with how to realise your future climate ambitions?
Setting targets is a process that will require engagement from multiple departments within your business. Each stakeholder group will have their own measures of success, for example financial returns on investment, brand reputation, peer competitiveness, carbon reduction, etc. Therefore, climate targets raise some common questions:
The following steps will help you to develop a robust and feasible emissions reduction strategy, and demonstrate how to set and meet a science-based target with confidence.
Every business is different. Supply chains, service/product offerings, stakeholder priorities and operational footprints all vary from sector to sector and individual business. It is really important to identify what is most important to the business from both a carbon and non-carbon perspective, so you don’t face substantial blockers along the way.
For example, is your business under external pressure to eradicate plastic waste? Is it important to your consumer base that your products be made from only natural ingredients? Does the business want to be a market leader among its peers? Is there a desire to set a Net Zero target as well as a science-based target? Is your business anticipating substantial growth?
Some of your business priorities may be contributing to the decarbonisation of your business and some may not be. It is important to make sure that you have clarity to ensure that they are not fighting against each other.
Quality data will be really important to enable you to accurately understand your impact, assess the implications of your decisions and to substantiate your climate claims. Does the data you have support your endeavours?
For example, spend-based data is a common and useful first step for most companies wanting to get a view of their value chain impact quickly and in the absence of primary data because it is often readily available from procurement departments. However, difficulties arise when you are reliant on this data to show emissions reductions because, ultimately, it is only possible to reduce emissions by reducing your supplier spend. It does not enable you to understand the decarbonisation of initiatives such as changing materials, changing the grade of materials (i.e to a higher recycled content) or understand the climate implications of moving from one supplier to another.
You should target industry/activity-specific data (a more refined estimation approach), or even better, accessing primary data from your suppliers. It will give you a much more detailed understanding of the emissions, a much stronger ability to influence change and more confidence in your measurements and your means for reduction.
Business-as-usual is your emissions trajectory should you take no further action. The main purpose of this exercise is to account for your wider business strategy and how this is going to impact your emissions across the target timescale so that you can account for this when mapping a trajectory for meeting your target. For example, are you planning on opening a new facility in future or introducing a new product line/service? Perhaps you are planning to consolidate operations in another area or close a particular store.
Also consider there may be external factors beyond your control. Obviously, these cannot always be foreseen. However, there are energy and policy forecasts that can be used. For example, we know that the electricity mix will change, and with the rise of renewables, this is likely to lead to a carbon reduction of Scope 2 emissions over time (hopefully in many geographies!). This forecasting should be something you build into your own future projections.
Once data collection is mastered and you have your business-as-usual pathway established, it is time to start looking at the full range of possible reduction initiatives. Focus first on where emissions are material and where reduction technologies are available. Identifying emissions hotspots within your value chain is a great place to start.
Within these hotspots, start to collect information from your facilities and value chain partners to understand what actions can be taken to reduce your impact, how much energy/activity these actions might save and what investment will be needed to implement them.
It is also really important to account for and understand interdependencies between your reduction options. For example, you are considering phasing in 100% electric vehicles by 2030. What impact might this have on your future emissions? How does this compare to a commitment to 100% renewable energy for your direct operations by the same date? What happens if you implement both? Does it make a difference which order these initiatives are implemented to realise the emission reduction in the timescales of your target?
By building up a catalogue of initiatives and understanding the level of decarbonisation available alongside the associated cost, you will be able to build up a picture of possible actions and how effective they could be.
The next step is to refine this analysis and build the case for your strategy.
Marginal abatement cost curves, as shown in Fig.2 can help demonstrate where you can achieve the biggest bang for your buck across your value chain.
In the example we can see that the renewable electricity contract has the largest carbon saving out of all the initiatives. However, it does come at a cost for every tonne of carbon saved. Likewise, the cogeneration project will save just under 2,000 tonnes of carbon per year, however, will come at a cost of $100 dollars per tonne. On the other hand, some smaller, less investment heavy projects like the humidification system upgrade and the LED project will actually deliver carbon savings each year and a return on investment (cost saving per tonne of carbon) over the lifetime of your target.
If possible, this assessment should be carried out at an asset or business unit level and then aggregated to company level in order to provide a breakdown of internal carbon reduction targets to support your group objectives. (Our CRaFT tool can help with this analysis).
You are now ready to present your outputs to internal decision makers. It will be really important that you have buy-in from the top level of the business in order for your climate ambitions to be successful.
Assessing metrics such as investment required, changes to operational expenditure and the cost of carbon over the timeframe of your target will support the approval process but it will also help with target governance.
As your business transitions towards your target, it is likely that carbon reduction technology, and the options available to your business will change. As a result, it is important to remain agile and operate target governance that can adapt to technological change, enabling you to remain confident in your targets and climate ambitions throughout the journey.
The increasing urgency of the climate crisis means that businesses are under growing pressure to set ambitious emissions reduction targets. With only a closing window of time remaining for adequate action, it is really important that we set these targets, but also that we have a robust strategy for achieving them.
How confident are you in your climate target? What measures will you need to implement and what will it cost? How are you going to demonstrate feasibility and gain buy-in from the wider business?
Whether you have already set a target or are planning to set one, in this Factsheet we demonstrate how one platform can help you find a successful pathway to your climate ambitions.
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