Net-zero carbon transformation for your company: Where do you start?

The net zero carbon train started moving. As a leader in any organisation, you may decide whether you will sit in its first or second class, and which station you decide to get on. The train is moving though, so the best option is to be prepared. This article outlines the essentials of preparing your company for a net zero carbon transformation. You may decide to phase these steps over time or engage a consultant to deliver them to you in a few months. Whatever the case, your approach will entail:

1. Detailing of your carbon footprint
2. Identification of possible targets on a timeline of 2030-2050
3. Development of decarbonisation strategy
4. Development of a roadmap with specific initiatives for carbon reduction with five-year timeline
5. Getting buy-in from your management, board and launching the new strategy

No regret actions

If you are still hesitating or lacking resources, numbers 1 and 2 are your no-regret actions. Knowing your carbon footprint and having a high-level view of your possible targets will improve your risk management in terms of access to capital, managing your customer and stakeholder relations. The reason is the increasing number of demands for transparency on the carbon footprint of businesses and associated increased costs for your business.

Examples

In 2020 alone, CDP, a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts, reported “24% increase in large scale purchasers asking their suppliers to report environmental data compared to 2019”. Companies quoted included Nike, Airbus, Sainsbury’s and ?rsted.

1. Your carbon footprint

Understanding your current footprint and its future evolution under the ??business as usual?? scenario is your starting point on a net zero carbon journey. Depending on the complexity of your company’s business, this could be a simple calculation in excel or an extensive mapping exercise across your multiple business units and subsidiaries across various geographical locations. It may sound daunting and it needs to be done, because “you cannot manage what you cannot measure”. [For the purpose of this article, I use CO2 and GHG emissions interchangeably. If you want to know about the difference, you can study it here and access data about CO2 tons of emissions per capita? indicator at a country level.]

You will be measuring and tracking CO2 emissions from your business which are divided into three different categories. The categories are based on the most common protocol used for measuring emissions, the Greenhouse Gas (GHG) Protocol. The categories are widely applied to all organisations tracking their CO2 footprint (in a way that by adding them together, we could theoretically calculate global emissions).

Scope 1 are emissions from owned and controlled sources, including fuels that your organisation is using in your production and processes, any fuel consumption by vehicles and fugitive emissions which is the fuel that is wasted (e.g in gas leaks, steam leakage, etc).?

Scope 2 are emissions from the production of electricity, heat, steam and district cooling/cooling that your organisation is procuring (purchasing) from outside your organisation.

Scope 3 emissions are the tricky part of this exercise. These are emissions from everything that your organization is buying or selling, from travel of your employees, from the end uses of your products and solutions (yes, this can be quite sizable), etc.?

Examples

Lego has a great graphic describing its carbon footprint. Its complete report can be viewed here .?

Lego climate footprint 2018. The source is here .?

2. Your decarbonisation targets

The direction today is pretty clear. The expected ambition for your organisation is to be net-zero carbon by 2050 which means emitting no (zero)? CO2. That constitutes your ultimate, long-term target for 2050. There is a growing number of businesses that are pledging to the net zero by 2050 target. You can check the organisation that have pledged? via three initiatives (there are others and these are considered leading the way):

• Business Ambition for 1.5°C
• The Climate Pledge (the pledge is for 2040 time horizon)
• Exponential Roadmap

You will notice that some businesses want to go faster and others are going towards 2050 net zero progressively. There is not one unique way for everyone. You may follow yours depending on the maturity of your investors, customers, suppliers and other stakeholders.

Examples

Organisations that participate in the Climate Pledge are committed to net zero carbon by 2040. The initiative is led by Amazon. Given the extent of its supply chain, Amazon stands a good chance to have a real multiplicator effect. Check Amazon’s approach and reporting in its sustainability report - net zero carbon by 2040 is only one of its targets. Though, there are businesses that want to approach the challenge progressively, especially those that are in energy-intensive industries. These are industries such as steel, cement, food, chemicals, etc. Where energy represents a significant part of production costs, as much as 20-30%. Check Yara, a unique global crop nutrition company that is still working on its 2050 targets. Its ESG investor seminar material provides great direction on what you can do even while you are working on your target setting. Yara seamlessly integrates net zero carbon, environmental and commercial sustainability to create value across its supply chain.?

Yara business model integrating carbon footprint

Finally, in terms of the ultimate authority for target setting, this is a completely unregulated area and hard to navigate by a layman. The ecosystem is still developing. We may have more clarity after the COP26 Conference in November 2021. In the meantime, a safe bet is the Science Based Targets approach which was developed through a partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF) which are all authorities on their own merit. Sciences Based Targets require that ??Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement – limiting global warming to well-below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C.??? If this sounds daunting, get in touch and we can discuss where and how you can start.?

3. Your decarbonisation strategy, rolling out new processes and tools

Developing your decarbonisation strategy will require that you (1) roll out new process and tools which are not directly linked to carbon reduction, (2) start implementing specific carbon reduction initiatives and projects and (3) raise awareness, conduct change management and generally, embrace a new way of communication about your business.?

Rolling out new processes and tools is what will kick off the full transformation of your business and support progressive decarbonisation towards net zero objectives by 2050, or earlier if that is your ambition. Some of the actions you will need to consider are:

• Selecting a CO2 tracking and reporting digital solution that may be easily integrated with your existing or planned systems,
• Setting internal KPIs for people and projects (internal carbon pricing) using CO2 targets as metrics and creating incentive schemes using monetary and non-monetary tools (awards),
• Identifying portfolio of carbon reduction initiatives and projects for five to ten-year time horizon (2025-2030),
• Training your leaders, middle managers and assigned analysts on implications of carbon tracking and carbon reduction projects,
• Planning for research and development activities to explore new technologies that will support your carbon reduction targets beyond 2030, and
• Creating an innovation management program to pilot and scale new solutions in the realm of decarbonisation.

If this sounds like the implementation of a full-blown corporate strategy, you are right. The pursuit of net zero carbon vision is a full transformation of your business. These actions are not producing carbon reduction per se, yet they are creating an environment where carbon reduction will happen and will be sustained over time.

Examples

A great example of how a decarbonisation strategy can transform a company is Orsted, formerly Dong (Danish Oil and Natural Gas) Energy. Dong used to make most of it power and heat production from coal still 13 years ago and yet today, under the new brand of Orsted, it has been identified few years in a row as one of the most sustainable energy companies in Europe. Orsted succeeds to transform by betting on low carbon activities, off-shore wind power production. More on its success story is available here.

The evolution of Orsted’s power assets, Source is here.

4.Your carbon reduction initiatives are Key

Your carbon reduction projects will be delivering actual reduction in CO2 emissions. One of my previous articles provided a merit order based on recent report by the International Energy Agency:?

• Before 2030: Pursuit of immediate, achievable projects for carbon reduction in three areas: Energy efficiency, solar and wind power generation and adoption of electric vehicles.
• Beyond 2030: Investment in one or two moonshot opportunities now so that they can materialise during the period 2030-2050 in areas such as hydrogen, carbon capture and storage, energy storage and nature-based solutions.

You will also need to consider few other actions to ensure that you are firmly on the net zero carbon trajectory:

• Securing carbon offsets in case you are not able to eliminate CO2 emissions completely or within your planned time horizon. This could be a good opportunity to contribute to carbon reduction in a different geography or industry.?
• Develop partnerships where you are not able to pursue carbon reduction alone. This could be an opportunity to collaborate with your suppliers or customers and create new business opportunities or cost reductions.

In terms of types of carbon reduction projects, you will need to cover each of your scope areas.

Scope 1: The focus will be on your facilities and operations. You will need to phase out any fossil fuels from your operations in order to reduce your carbon footprint. There are several routes that you can take depending on the nature of your business: Energy efficiency, including addressing waste and the related fugitive emissions (e.g. from leaks) , switching to lower carbon fuels (e.g. biofuels, hydrogen), electrification combined with procurement of zero carbon (renewable) power and adoption of electric or low carbon (hydrogen) vehicles.?

Scope 2: The focus will be on your procurement of electricity, heat, cooling and steam. Switching to renewable power is what you will focus on under Scope 2. You may explore several routes, through your utility provider, develop on-site renewable power generation or power purchase agreements. If you are purchasing heat, steam or cooling, you will need to identify renewable-based options which could be harder to achieve, depending on where your facilities are located (some geographies have for example renewable energy-based heating options with e.g. biomass).

Scope 3: The focus will be on your supply chain. Scope 3 is the most complex because it will involve engaging with your employees, suppliers and customers in carbon reduction projects. Mapping emissions and energy intensity of your supply chain will be a very informative exercise that can lead to optimisation and cost-cutting, as well as improving your relations with those partners that share your net zero vision.?

Some of the projects that you will need to undertake are:

• Changes to your procurement practices using carbon metrics,
• Changes to travel and commuting policy for your employees (COVID-19 definitely helped here),
• Waste management practices,
• Engaging with your customers on how they use your products,
• Changing mode of transport and distribution to lower carbon options (hybrids, EVs, etc),
• Changing investment, leasing and franchising decisions because they may impact your carbon footprint,
• Eliminating deforestation from your supply chain (if relevant for your business),
• Investing in carbon removal projects by restoring land.

Examples

Engaging your supply chain may be an opportunity to build an ecosystem that encourages more sustainable standards and innovation with resulting carbon reduction. Sustainable Apparel Coalition is a good example. The SAC works in fashion industry and uses the Higg Index as a suite of tools for the standardized measurement of value chain sustainability. Carbon footprint is one of the measurements the Facility Environmental Module and reports specifically GHG emissions.?

Higgs Index Overview. The source is here .

While many are starting their net zero journeys, Autodesk, a software company, has already announced that its net?zero greenhouse gas (GHG) emissions objective was achieved across its business and value chain. This means that whatever remaining GHG emissions are emitted by the company, they are offset via carbon credits. Autodesk continues to work on reducing Scope 1, 2 and 3 emissions directly within the parameters of its control and its commitments are outlined in the graphic below.

Autodesk Net Zero Overview. The source is here .

5. The hardest part, managing the change

Implementation of net zero strategy requires a change of thinking across the whole organisation: The Board (I have already covered in one of my previous articles where Boards can contribute. Access it here) , Executive and Middle management as well as among the employees running the day to day operational tasks. Net zero is therefore really a change management project. In the next article, I will be looking into the details of the net zero implementation. In the meantime, reach out with questions.

You can reach out to me on Linkedin or contact me directly at? Katarina Uherova Hasbani, [email protected] , +971586934035

About Enrupt

Building our road to net zero carbon is not easy. COVID-19 taught us that our systems are fragile and we need a more sustainable way of managing our today and the future. Enrupt brings together innovators in the energy sector to accelerate our path towards net zero carbon. Enrupt offers leadership advisory, implementation support and innovation services in the field of decarbonisation. We don’t dream of a better world. We create it. Together.?

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