ESG/CSRD: The 3 Essential Keys for Leaders to Slash Greenhouse Gas Emissions and Eliminate Greenwashing Risk

Why You Should Read This?

The concept of climate change may be new territory for many leaders, but with emerging ESG regulations (like CSRD in Europe), environmental responsibility and accountability are now at the forefront of business priorities. It's essential for leaders to master this subject and confront their impact on the planet to maintain their business's license to operate, avoid fines, prevent greenwashing, and even gain a competitive advantage in their industry with investors, employees, customers, and regulators.

This article serves as a guide for leadership in navigating this evolving landscape. We will discuss herein the 3 essential keys for leaders to slash greenhouse gas emissions and eliminate greenwashing risk:

1- Understanding the Phenomenon of Carbon/Greenhouse Gas Emissions.

2- Understanding Carbon Neutrality/Net Zero and how to achieve it.

3- Strategies and practical solutions for Achieving Carbon Neutrality/Net Zero Swiftly.

Spoiler alert: It's easier than you think!

I. Understanding the Phenomenon of Carbon/Greenhouse Gas Emissions

1.1. GHG emissions, Sources and Impact

This information is crucial, especially considering the requirements of ESG/CSRD Reporting, which require reporting these emissions.

Greenhouse gas (GHG) emissions are the release of gases into the Earth's atmosphere that trap heat and contribute to global warming and climate change. Here is the list of Gases, their source and their contribution to Global Warming:

· Carbon Dioxide (CO?): Carbon dioxide accounts for about 76% of global GHG emissions and is primarily produced by burning fossil fuels, deforestation, and industrial processes.

·?Methane (CH?): Methane is responsible for roughly 16% of global GHG emissions and comes from agriculture, landfills, and natural gas extraction.

·?Nitrous Oxide (N?O): Nitrous oxide contributes about 6% of global GHG emissions and is emitted through agricultural activities, fossil fuel combustion, and industrial processes.

·? Fluorinated Gases: Fluorinated gases, comprising about 2% of global GHG emissions, are used in industrial processes, refrigeration, and air conditioning.

1.2. Classification of emission & Ownership

When evaluating greenhouse gas emissions, it's essential to categorize them based on: (1) ownership in the business/ Investment and (2) Role in the supply chain. This is essential for developing effective and cost-effective reduction strategies. This approach allows for the assignment of responsibility based on the simple principle of "I clean my Carbon, You clean yours."

(1)?Ownership in the business/ Investment ?

Within the businesses, investments or portfolio’s you have invested in, you need to look at your equity share and the control you have over the investment. Your share of the GHG emissions is proportional to your equity share. ?

(2)?Ownership and Role in the supply chain

Within your supply chain you can segment the ownership based on:

o??Scope 1 Emissions: These are direct emissions from sources owned or controlled by the reporting entity, such as company-owned vehicles or on-site fuel combustion.

o??Scope 2 Emissions: This category comprises indirect emissions from purchased electricity, steam, heating, or cooling used by the reporting entity.

o??Scope 3 Emissions: Indirect emissions from sources not owned or controlled by the reporting entity, such as purchased goods and services, business travel, employee commuting, and product use by customers.

Assignment of responsibility based on the simple principle of "I clean my Carbon, You clean yours."

To illustrate the significance of this classification, consider the following example: As a tenant renting office space, you are responsible for the greenhouse gas emissions associated with heating, cooling, and electricity consumption. Your level of GHG emissions may be very high. However, once you realize that this falls under Scope 2, the approach changes. Now you can persuade your landlord to invest in greener energy and heating, significantly reducing the greenhouse gas emissions associated with your office's energy consumption. At zero cost for you, you can slash these GHG emissions.

II. Understanding Carbon Neutrality/Net Zero and how to achieve it

2.1. Why Carbon emission is becoming Such an Issue

A Looming Threat. Our planet faces a critical challenge: climate change. This phenomenon, primarily driven by the excessive release of greenhouse gases (GHGs), is altering the Earth's climate at an alarming rate.

A Delicate Balance. Carbon is a fundamental building block of life and a natural part of Earth's cycle. Plants absorb CO2 through photosynthesis, the process by which they convert sunlight, water, and CO2 into energy (glucose) and oxygen. This oxygen is what we breathe, sustaining all life on Earth. Volcanoes and decomposition also release CO2, contributing to a natural atmospheric balance.?

Human Disruption. While carbon is a vital part of our planet's ecosystem, human activities have significantly disrupted this delicate balance. Our reliance on burning fossil fuels for energy and transportation, industrial processes, and deforestation have all led to an excessive release of CO2 into the atmosphere. This disrupts the natural absorption processes, causing a buildup of CO2 that traps heat, leading to global warming and its devastating consequences.

We can’t eliminate it all. Completely eliminating GHGs is not a practical solution. CO2 plays a vital role in regulating Earth's temperature. Without the natural greenhouse effect, caused by the presence of CO2 and other gases in the atmosphere, our planet would be a much colder place, unsuitable for life as we know it. However, the current rate of emissions far exceeds natural absorption processes, leading to an alarming buildup in the atmosphere. This disrupts the delicate balance, causing a net warming effect and the associated problems we face today.

Why an issue now. The consequences of climate change are becoming increasingly evident. Extreme weather events like floods, droughts, and wildfires are becoming more frequent and severe. Rising sea levels threaten coastal communities and ecosystems. These issues not only disrupt lives and livelihoods but also cause significant economic damage.?

Regulations and fines: The rising concern over climate change is reflected in stricter regulations and fines. News headlines show authorities cracking down on ESG risk assessment, ESG adoption and disclosure. This suggests a growing recognition of the need for stronger measures to address this escalating issue and a focus on directing investment towards a more sustainable future.

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2.2. The Role of ESG/CSRD Regulations: A Global Response

Regulations such as the Corporate Sustainability Reporting Directive (CSRD) in the European Union aim to make companies responsible and accountable for their environmental impact. These regulations emerging from the UN Sustainable Development Goals (SDGs) and the Paris Agreement represent a global commitment to tackling climate change. They pursue efforts to limit global temperature rises to 1.5°C above pre-industrial levels and aim to keep them well below 2.0°C; Achieving this goal requires reaching net zero emissions or carbon neutrality. ??

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2.3. Carbon Neutrality… What is it and how to achieve it

The Ultimate Ambition for every responsible individual and business, would be to become Carbon Neutral. Carbon neutrality is something we all can achieve, at individual/ business level. It involves reducing greenhouse gas emissions as much as possible and offsetting any remaining emissions. Following the following formula:

Carbon Footprint- (Carbon Reduction+ Offset + Capture & Removal)= Net Zero.

III. Strategies and practical solutions for Achieving Carbon Neutrality Swiftly

Carbon Neutrality (Net Zero) can be achieved, according to the discussed formula through 4 actions:

Step 1: Define your Carbon Footprint

Step 2: Reduce as much as you can

Step 3: Offset what you did not yet reduce

Step 4: Carbon Capture and Removal (Advanced)

Step 1: Define your Carbon Footprint

Defining your footprint is measuring your total emissions, using a reliable Carbon Emission Calculator. This is a standard request of every ESG regulation (like CSRD). Once you measure your emission, the next steps is how to eliminate your emissions. Let's now discuss points (2), (3) and (4) of the formula to?explain how to eliminate the emissions,?

Step 2: Reduce as much as you can

The responsibility for curbing GHG emissions rests on everyone's shoulders. As a leader you can drive the change through leadership and stewardship. Leadership; is changing your business and mobilising your employees to reduce carbon emissions. Stewardship consists of lobbying with your government/ municipality to facilitate the change. To facilitate your process, here is an overview of every stakeholder's potential contribution.

·?Businesses (Your Business) : Transitioning to renewable energy sources, moving towards eco-friendly sourcing and consumption, contributing to circularity initiatives, reducing the need for commuting and travelling, adopting sustainable production methods, optimizing supply chains for sustainability, and offering eco-friendly products and services.

·?Every Individual (Employees): Reducing their carbon footprint at home (energy-efficient appliances, sustainable transportation), making conscious consumer choices (less processed foods, lower overall consumption), supporting businesses committed to net zero, reducing meat consumption, participating in tree-planting initiatives, using greener transportation alternatives and/or reducing commuting/traveling.

·?Governments: Setting ambitious climate targets, implementing policies that incentivize renewable energy and energy efficiency, investing in research and development of clean technologies, and promoting international cooperation.

Step 3: Offset what you did not yet reduce

When you have reduced carbon emissions as much as possible within your business and supply chain (Scope 1, Scope 2, and Scope 3), offsetting can be utilized to address the remaining emissions. This approach involves investing in projects that reduce or remove an equivalent amount of emissions elsewhere, effectively balancing out your carbon footprint. By employing offsetting in conjunction with emission reduction efforts, you can take comprehensive action to mitigate your environmental impact and work towards achieving carbon neutrality (Net 0), all while transitioning your operations towards a net-zero emissions future. Companies engaged in offsetting their greenhouse gas emissions must ensure that they invest in reliable initiatives and projects and obtain certificates that serve as proof of the environmental benefits achieved through their investments in offsetting, ensuring transparency, accountability, and evidence of their sustainability efforts.?

Step 4: Capture/Removal (Advanced)

While individual actions are crucial, technological advancements offer powerful solutions for achieving carbon neutrality. Carbon Capture and Storage (CCS) stands out as a promising technology in this regard. CCS has the potential to capture CO2 emissions from power plants and factories, transport them, and store them deep underground in geological formations. This innovative approach, while still under development, holds a significant promise for reducing emissions and combating climate change. However, it's important to acknowledge that CCS is not a silver bullet. Ensuring safe, long-term storage and further developing the technology to be cost-effective and widely adopted are essential steps moving forward. Companies like Microsoft are heavily investing in Carbon Capture and Storage to enable this technology as a viable and cost-efficient technique for decarbonization.

To conclude…

In conclusion, it's evident that mastering the 3 essential keys outlined in this article is essential for leaders committed to slashing greenhouse gas emissions, eliminating the risk of greenwashing, and gaining a competitive advantage with investors, employees, customers, and regulators.

By understanding the phenomenon of carbon emissions, understanding how to reach carbon neutrality and Which strategies to implement for reducing emissions, leaders can play a pivotal role in driving environmental responsibility within their organizations and beyond.

With emerging ESG regulations like CSRD in Europe and increasing scrutiny on sustainability practices, adopting these 3 keys isn't just beneficial—it's imperative for maintaining credibility, fostering trust, and securing a competitive edge in today's evolving business landscape.

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