From Barrier to Breakthrough: Exploring CO2 Challenges and Embracing New Opportunities

There is no hiding from the fact that decarbonising a business model is difficult. Ultimately, corporate decarbonisation is a collaborative effort: It requires effective calculation of footprint, embedding climate considerations across internal governance and operations, shifting from a linear model to circular and regenerative ones, and addressing the entire carbon footprint of a company’s value chain. Businesses are not alone in this journey and should leverage the opportunities available in their wider ecosystem.

In today's socio-economic landscape, businesses are under increasing pressure to decarbonise their operations. This pressure is from all angles: from stakeholders including investors, employees, legislators, and society at large. In spite of these pressures, roughly one-third of large businesses have established net-zero targets but, nearly half of these are overwhelmed by the extent of steps required to meet these targets and remain unsure about where to begin. As the demand for credible and robust net zero targets continues to grow, some analysis has shown that corporates are falling short according to the Economist. Dr Takeshi Kuramochi, senior climate policy researcher at NewClimate Institute explained in the 2022 NetZero Stocktake that we have reached a “watershed moment where peer pressure to hastily set net zero pledges, especially in the business sector, could result in either a mass flow of greenwashing - or a fundamental shift towards decarbonisation”. The time for competitive advantage from sustainability is past, getting started on decarbonisation as a business is overdue, but it is important to still be pragmatic.

Realistically, comprehensive decarbonisation extends beyond direct operations to encompass supply chains. Yet only 9% of organisations are confident in their ability to measure their carbon footprint. In stark contrast, 38% of companies assert they account for emissions across their entire value chain - a discrepancy that illustrates a significant aim-action gap when it comes to the CO2 challenge.

As Dr Kuramochi pointed out, the urgency to decarbonise may lead to hasty, poorly thought-out actions that risk greenwashing accusations, a phenomenon some call ‘green botching’. It's crucial to adopt a pragmatic approach and optimise resource allocation to ensure actions are as effective as they can be for your organisation and the planet. This becomes especially important in light of the continuously evolving reporting standards and regulations, a problem Christina Geierlehner, speaker at the most recent SUSTAINX roundtable, attested to.

With this lack of common standards to inform data collection, the difficulties inherent in accurately measuring carbon footprints are exacerbated. Combined with the complexities of modern supply chains and the lack of transparency within value chains, it is unsurprising many organisations decarbonisation daunting. Without the proper knowhow and with limited motivation in some cases, it can be difficult to drive stakeholder engagement and so the necessary collaboration is lacking.

A 4 step approach

The discussion at the SUSTAINX roundtable clarified a four-step approach: Measure, Avoid, Reduce, and Compensate.

Measure

The initial step involves accurately identifying, measuring, and calculating CO2 emissions across Scopes 1, 2, and 3. Julian G?bel, speaker at the SUSTAINX roundtable, explained his can be facilitated by digital tools, where necessary, to ensure precision and ease the burden. Of course, this is no easy task, but make every effort to be as accurate as possible. With the help of these tools an organisation can collect the data it needs to identify emissions drivers and areas where emissions can be reduced effectively or processes streamlined, to meet reduction targets.

Avoid and Reduce

The difference between avoid and reduce can be explained 3 words: innovate versus enhance. The avoid step is about reinventing processes and investing in solutions or projects that prevent further carbon emissions. For instance, M&S's decarbonisation strategy has identified ten priority areas - eight of which concentrate on Scope 3 emissions, prioritising traceability and supplier collaboration. Similarly, Hapag Lloyd invests in identifying optimal propulsion technology for future container ships and supports suppliers in utilising alternative fuels to mitigate the industry's overall footprint. Robin Schenkewitz confirmed at the SUSTAINX roundtable that collaborating with suppliers to address the transparency issues in the supply chain is a critical step towards decarbonisation.

The reduction step focusses on enhancing existing structures to minimise carbon emissions. After identifying drivers in the emission calculation stage, determine reduction actions and begin with the largest driver proportionally. M&S centred its reduction efforts around improving efficiency in stores and transport, such as transitioning to low-carbon logistics. Hapag Lloyd, conversely, focus on enhancing the efficiency and traceability of container movements to identify and rectify inefficiencies. Not every process can be streamlined to reduce inefficiency, nor will every emission reduction action be a success. Often technology is the limiting factor, or a process being crucial to the business function. See this as an innovation opportunity for avoidance—design new technology or invent a new process, and failing that, it is at least clear, which emissions are unavoidable and where compensation or emissions trading may help reach reduction targets.

Compensate

Finally, compensation for unavoidable or already emitted CO2 emissions should be done through certified projects. Proper communication is critical here to avoid accusations of greenwashing. Compensation is not inherently flawed, but it needs to be executed and communicated properly. Compensation and offsetting projects must be designed for the long term and be guaranteed by independent reviewers. Transparency is key in offsetting projects to ensure the desired climate effect. For more information on effectively communicating sustainability progress, check out my article on sustainability reporting.

Collaboration internally with other functions for example, and externally with suppliers, industry partners, and even competitors, will ease the burdens of decarbonisation. The key takeaway from the SUSTAINX roundtable was that collaboration must underscore the 4-step approach outlined above, focusing on all possible internal and value chain measures before moving to compensation. Collaboration is a key driver in this strategy.

Conclusion

The journey towards corporate decarbonisation is complex, challenging, and fraught with potential pitfalls. However, by adopting a pragmatic, structured approach that incorporates measurement, avoidance, reduction, and compensation, businesses can overcome these challenges. Don’t forget decarbonisation is a collaborative effort requiring engagement from every stakeholder, this is a challenge and an opportunity—businesses are not alone in this journey, they are part of a global community working together towards a sustainable future.