Leading by Example: A Novel Approach to Decarbonizing Canada's Heavy Industries

Version fran?aise

As the urgency to tackle climate change intensifies, Canada's utilities, often government-owned and heavily regulated, find themselves at the forefront of this battle. These utilities are significant buyers of goods produced by heavy industries, such as concrete, steel, copper, aluminum, and construction services. These sectors are notoriously difficult to decarbonize due to their reliance on fossil fuels for high-temperature processes and the inherent carbon emissions from their production methods. Traditional decarbonization policies, such as strategic energy management and carbon pricing, have not yet borne the desired fruit. It is time for a novel approach: leading by example.

The Challenge of Decarbonizing Heavy Industries

Heavy industries are responsible for a substantial portion of global CO2 emissions. The fixed-process emissions and high-temperature heat requirements make reducing emissions in these sectors particularly challenging. Despite the introduction of carbon pricing and strategic energy management, these measures alone have not been sufficient to drive the deep decarbonization needed. This is where the leading-by-example approach comes into play.

The Power of Leading by Example

Leading-by-example policies, particularly when adopted by governments and utilities, have proven to be highly effective tools for influencing markets and suppliers. Despite representing a fraction of the demand for goods from heavy industries, these policies can drive significant market changes and promote the decarbonization of heavy industries. Here are several key reasons why leading-by-example policies are effective:

• Market Influence and Demonstration of Leadership: Governments and utilities can demonstrate leadership in sustainability, influencing other market participants to adopt similar practices. For example, the U.S. EPA’s ENERGY STAR Program has successfully partnered with over 15,000 organizations to promote energy-efficient solutions.
• Creation of Demand for Sustainable Products: By prioritizing the procurement of low-carbon and environmentally friendly products, governments and utilities create demand for these products, encouraging suppliers to innovate and adopt sustainable practices.
• Policy and Regulatory Support: Leading-by-example policies are often supported by robust regulatory frameworks that mandate or encourage sustainable procurement practices. The Government of Canada’s new green standards for major contracts exemplify this approach.
• Risk Management and Economic Benefits: While lower-carbon products may initially cost more due to process changes and the use of clean electricity, leading-by-example policies offer better risk management and economic benefits compared to command-and-control measures such as bans and overly-specific regulations. This approach allows for more flexibility and innovation in meeting sustainability goals.

The Network Effect: Amplifying Impact Through Collaboration

One of the critical success factors for leading-by-example policies is the network effect. When multiple clients, such as utilities, municipalities, and ministries of transportation and infrastructure, adopt similar sustainable procurement policies, the collective demand can create significant pressure on suppliers to adopt sustainable practices. This network effect ensures that suppliers feel the pressure from multiple sources, making it harder for them to favor other organizations over those leading by example.

A Case in Point: Strategic Roadmapping for Scope 3 Decarbonization

Our team has extensive experience helping organizations develop strategic roadmaps for their procurement strategies to reduce embodied carbon. Recently, we worked with a large utility in North America to decarbonize its Scope 3 (upstream) purchased goods and services—carbon that is embodied in purchased goods and services. The project involved conducting a comprehensive inventory of upstream GHG emissions, performing detailed lifecycle analyses for high-emission products, and creating a strategic roadmap for decarbonizing ten categories of products based on their carbon footprint, strategic importance, and anticipated future demand.

Key Findings and Strategies

• High-Emission Products: The products with the highest embodied GHG emissions were identified as concrete, steel, copper, aluminum, and construction services.
• Supplier Diversity and Capability: The utility's suppliers varied widely in size and sophistication regarding carbon tracking, monitoring, and abatement capabilities, necessitating a tailored approach to supplier engagement.
• Collaborative Procurement Policies: Given the supply crunch for products that are essential to electric utilities and to the energy transition, a restrictive procurement policy could be counterproductive. Instead, a progressive, collaborative approach with suppliers was emphasized, focusing on partnership, support, and incentives to adopt low-carbon practices.

The Importance of Collaboration

To ensure the success of decarbonization efforts, it is crucial to foster a collaborative approach with other utilities, municipalities, and ministries of transportation and infrastructure. These entities use a lot of the same products, and a unified approach can amplify the pressure on suppliers to adopt sustainable practices. I encourage utilities and other large public buyers of concrete and steel to adopt similar procurement policies because it can create a snowball effect, increasing the overall market demand for low-carbon products and services.

Conclusion

The leading-by-example approach is a powerful tool for decarbonizing Canada's hard-to-abate heavy industries. Requiring lower-carbon products and services has the potential to be more effective than utility-based demand-side management and carbon pricing because it leverages the attention that firms naturally pay to the needs and wants of their clients. By leveraging the network effect and fostering collaboration among various government entities and utilities, we can drive significant market changes and fight climate change. Our team is committed to helping organizations develop strategic roadmaps for their procurement strategies to reduce embodied carbon and, in turn, induce the decarbonization of the whole economy, ensuring a sustainable future for Canada.

About Myself

I am an experienced professional in the energy sector, specializing in decarbonization strategies. Feel free to connect with me on LinkedIn or reach out to discuss how we can help your organization lead by example in the fight against climate change.

Hashtags

#Decarbonization #ProcurementStrategy #ESG #ClimateChange #EmbodiedCarbon #Utilities #Canada #SustainablePractices #LeadingByExample #HeavyIndustry #CarbonReduction #GreenProcurement #EnergyTransition