6 Key Takeaways from Our Panel Discussion at COP29

On November 14, 2024, at COP29 Azerbaijan COP29 in Baku, Azerbaijan, we organized a panel discussion focused on the challenges of and practical solutions for decarbonization by businesses.

This event brought together reputable experts in sustainability and climate change to share insights and best practices.

The session’s experts included:?

• Anna Klimchukova , Climate Change Business Manager, Eastern Europe and Middle East, at SGS
• Dr. Faye Gerard , Energy Transition Director at IOGP
• Murad Sadikhov , Country Manager, Azerbaijan at Masdar (Abu Dhabi Future Energy Company)
• Teymur Guliyev , Deputy Vice President, Energy Transition, Environment and Decarbonization Segment, at State Oil Company of the Republic of Azerbaijan (SOCAR)
• Sophie Punte , Founder and Board Member at Smart Freight Centre

The session was moderated by Sebastián Galeano , Sustainability Officer, Middle East and Africa, at SGS .

In this article, we reflect on the panel discussion through six key takeaways that market players should consider when implementing their decarbonization strategies.

1 - Regulations get tougher; businesses need to stay ahead and prepare early

Regulatory frameworks play an important role in achieving net zero targets, although approaches might differ from country to country, giving varying degrees of freedom to market players.?

Moreover, regional regulations tend to have global impacts, as the EU’s Сarbon Border Adjustment Mechanism (CBAM) and Corporate Sustainability Reporting Directive (CSRD) show. Although both of these were initiated by the EU, they also stimulate companies operating outside Europe to push climate initiatives forward.

It is highly recommended that businesses start preparing, without delay, by undertaking a gap assessment to determine what still needs to be done to comply with regulatory requirements and implementing actions to reduce carbon emissions intensity.?

2 - Decarbonization is now a license to operate

Legal requirements affect different sectors, all of which are now feeling the pressure to decarbonize. For example, CBAM relates to cement, iron, steel, aluminum, fertilizers, hydrogen and electricity generation.?

Many businesses are already ahead of regulatory developments and have set science-based emission reduction targets, embedded climate considerations in business operations and are implementing decarbonization strategies. These businesses realize that climate change mitigation is required to continue operating in the market.

3 - International standards exist to help?

When developing and implementing decarbonization programs, companies need guidance on how to calculate and disclose emissions indicators, how to set targets and which measures to implement.

The number of international standards being developed to provide this guidance is constantly increasing. Here are just a few:

• ISO 14064-1 and GHG Protocol for calculating and reporting on GHG emissions of organizations
• GLEC framework and ISO 14083 for accounting and reporting GHG emissions from freight and logistics activities
• ISO 14067 for calculating a product’s carbon footprint
• IFRS S2 for climate-related disclosures
• SBTi guidance for setting science-based targets for organizations covering multiple sectors
• ISO 14001 for building a robust environmental management system
• ISO 50001 for implementing an effective energy management system

These standards are regularly updated and help market players to benefit from global best practices and streamline their efforts.?

4 - Opt for collaboration regardless of competition

Climate change is a challenge to be resolved collectively in a fragmented world. Collaboration is key, even among direct competitors.?

Industry associations can be great facilitators in this process. Thus, IOGP has used the expertise of its 95+ members to develop a comprehensive Energy Transition Integrated Framework, which will guide upstream oil and gas organizations along their respective decarbonization pathways by providing different decarbonization solutions and approaches that reflect the vast diversity of operational settings across the industry.

IOGP has also led the development of the OGDC Methane and Flaring Framework, which includes three stages: Foundation, Reduction and Continuous Improvement. The framework outlines the best approaches and suggests practical steps for companies to eliminate routine flaring and reduce methane emissions. It includes best practice from technical experts, including IOGP, MGP, OGCI, EDF and other associations, and links to resources from leaders in the field.

Collaboration is also important for logistics. When supply chains are complicated, as they often are, collaborating with your competitors is essential for reducing carbon footprint. Decarbonization will be achieved more rapidly as soon as companies realize they should compete on the shelf and not in the truck.

5 - Quality of data is critical

When it comes to emissions calculations and disclosure, data reliability is being questioned.

Nowadays, when carbon footprint is reflected in taxes to be paid and loan terms to be granted, data accuracy is money. Companies, especially those in industries with complex value chains,? are struggling to obtain quality data that reflects real life situation, and are getting blamed for greenwashing if they cannot prove the trustworthiness of their disclosures.

The solution is, firstly, to use recognized methodology and, secondly, to apply for third-party verification.

6 - Financial viability of climate change initiatives?

Climate change requires businesses to shift from well-established technologies to previously unknown ones. This has created challenges involving technical feasibility – is suitable technology and equipment available?? – and commercial feasibility – how much does it cost? Ensuring commercial stability is crucial for moving the decarbonization agenda forward.?

As technology progresses, its industrial application becomes more and more commercially viable.?For example, with solar panels becoming affordable, the demand for solar energy has been growing. Electric trucks are gaining popularity in many countries as the total cost of operation becomes more favorable.

In some remote locations it is more beneficial for the site owner to establish a local power solution based on solar, geothermal or wind energy, as it increases flexibility and reliability of operations. In the long run, higher initial investment pays back, as costly downtimes due to electricity cutoffs are reduced.

In fact, decarbonization technologies might not only be comparable in cost with conventional ones but also bring clear financial benefits. For example, while low rolling resistance tires that improve vehicle fuel efficiency are twice as expensive as conventional tires, their longer durability gives the vehicle user an overall financial gain.?

Implementation of energy efficiency measures not only has an immediate impact on GHG emissions reduction but also brings down operational costs and consequently improves profitability.?

Сonclusion

With the growing focus on sustainability and reducing carbon emissions, businesses are facing new challenges. However, these are also opportunities for businesses to innovate and find new ways to operate more efficiently and sustainably.

By using best practices and the tools available, businesses can not only reduce their environmental impacts but also position themselves for long term success in a changing market.

Join the conversation by adding your comments below on what are the decarbonization challenges companies face and how to overcome them.