Reimagining Sustainability to Address the Carbon Emission Crisis

It is ‘code red for humanity’—a stark reminder and warning issued by the United Nations in its landmark report earlier this year, stating that some climate changes are now “irreversible” and we are close to the tipping point , beyond which there is no return. The next two decades are evermore crucial as we spiral towards the inevitable, unless corporations step-up to their “net-zero” pledges and actively work to offset their carbon emissions substantially. Frankly, this is overwhelming for the CPG industry with rising carbon prices, stringent national emission policies, full carbon disclosures, and growing awareness in consumers now wanting to track their individual carbon footprint, thus upping the ante on many levels. While promising new trends have emerged on how consumer goods companies can consciously contribute to climate change, conditions are hard because more than 70 percent of total emissions arise out of sources outside organizational control. And so it wouldn’t be surprising to hear environmental data experts who have worked on the GHG Protocol for decades say, “they are not ready for this. ”

Breaking Down the Carbon Emission Crisis - Scope 1, 2 and 3

For the past decade, reporting on Scope 1 and 2 Greenhouse Gas (‘GHG’) emissions has been a familiar exercise, as these are relatively easier to measure with organizations having more direct or indirect control. While it may still pose a formidable challenge, from both a technical and economic standpoint, especially for hard-to-abate sectors, the biggest challenge plaguing all decarbonization efforts across organizations is Scope 3 emissions. As illustrated below, the final frontier of the carbon emission challenge boils down to the second-most sought-after four-letter word—‘data.’

Full Access (Scope 1): Scope 1 emissions arise out of sources under direct control or ownership of the company. Common reduction practices include replacing old equipment with new energy-efficient models, educating staff on conserving power, end-to-end recycling plans, and optimizing transportation practices.

Limited Access (Scope 2): Scope 2 emissions arise indirectly through the purchase of energy from suppliers, even though they may occur within company premises. Common reduction practices include switching to low-carbon energy suppliers, sourcing renewable energy, shifting to a renewable power infrastructure, and optimizing production faculties to ensure peak efficiency.

No Access (Scope 3): Scope 3 emissions are presently beyond organizational control and occur in all upstream and downstream activities, and in some cases, they contribute to anywhere between 65-95% of organizations’ total emission - and the secret to neutralizing them may lie in looking for business opportunities along the value chain. With limited clarity on reduction practices, the core challenges are illustrated below:

1. Low Transparency and Collaboration: Carbon emissions are buried deep within the supply chain, and getting detailed information on emission hotspots throughout the value chain has been frustrating, for it demands full transparency and collaboration with suppliers, and may even require collective action at an industry level . In such a scenario, organizations may request suppliers to measure their own emission and set Science Based Targets, switch to a lower-emission supplier, and/or change product portfolio or material composition that favors lower carbon alternatives.
2. Unreliable Data: The data collection process for actual emission numbers and their subsequent calculation is another daunting challenge, both at micro and macro levels. In such a scenario, organizations may request granular level GHG data from suppliers, use industry-average data which is merely an approximation of all upstream emissions and largely insufficient, leverage spend-based calculation models to arrive at another approximation that is far from the real emission numbers, and/or fall back on a hybrid model of using supplier data, where available, and combine with industry-averages or spend-based models to get closer to the real emission numbers.
3. Gaps in Impact Measurement: If collating real data has been hard, measuring annual emission numbers is even harder, especially with increasing complexities including new economic development, the ongoing pandemic, disruptions in the supply chain, and low reliance on the data available on product life-cycle assessment databases.

Simply put, if companies were able to manage all operations end-to-end, both upstream and downstream, things would be a lot easier. In the meantime, getting access to real-time supplier emission data will be key to staying true to the current wave of ‘net-zero’ commitments.

How Leading Organizations Are Addressing the Carbon Emission Crisis

For collective climate action, every tonne of carbon counts, and organizations across the world are attempting to address the carbon emission crisis in a multitude of ways.

1. Switching to 100% Renewable Energy: Several leading organizations have switched to 100% renewable energy, by either sourcing renewable energy grids, developing their own renewable power infrastructure, or both. Unilever has reduced carbon emissions by over 1 million tonnes in 2021 through a combination of sourcing renewable energy grids, setting up their own renewable power, investing in large-scale solar, wind, hydro and geothermal installations, and small-scale hydropower schemes, phasing out coal-use, and designing low carbon footprint offices.
2. Sourcing Raw Materials Sustainably: Dairy and livestock farming is one of the biggest contributors to climate change, and the FMCG sector is switching to new business models and engaging in R&D that allows them to source all nutritious ingredients sustainably. Key climate actions from large players like Nestlé include reducing methane production and manure management, piloting net zero farms to test out new technologies and economically viable practices, and supporting agripreneurship through training, technology and professional herd management.
3. Alternative Product Portfolios: Besides attempting to reduce carbon footprint across the value chain, many CPG companies have introduced new alternative product portfolios and have committed to growing their sales in the coming years. Carlsberg, for example, has introduced non-alcoholic drinks that have grown by 83% since their launch in 2015 (and 11% in 2020).

In a post-pandemic world, where scope 1 and 2 emissions stand considerably reduced with limited travel, remote work and increased third-party partnerships, all eyes are on addressing scope 3 emissions, which are also in many ways, others’ scope 1 and 2 emissions.?

How Startup Innovations Are Shifting the Carbon Emission Narrative

Nearly every human-led activity is leading to increased carbon footprint, from “building things, moving things, powering things, eating things, computing things,” and more. And it’s not surprising that 21st century tools are being leveraged to solve the most critical 21st century challenge: AI, ML and more. Here’s how startup innovations are shifting the carbon emission narrative:

1. Climate Intelligence: A number of ‘climate intelligence’ startups have emerged that are providing predictive analytics platforms to enable organizations to better anticipate and prepare for extreme weather events, and better account for expected disruptions in their supply chain. One Concern, a California-based startup, is focused on turning risk into resilience by building a platform that simulates community resilience and response to earthquakes, floods and other natural disasters, and has recently raised US $45 million in investment to support its current initiatives in Japan.
2. Carbon Offsetting: Already a US $181 million industry (as of 2020), the carbon offsetting industry has been deemed to be on the brink of explosive growth that seeks to reduce carbon footprint by “directly eliminating emissions from its operations and buying carbon offsets.” Startups such as Pachama and NCX (formerly known as SilviaTerra) are building AI-powered carbon offset marketplaces with a focus on forestation.
3. Carbon Accounting: As discussed above, accounting for emission data across Scope 1, 2 and 3 is the biggest challenge plaguing the CPG industry, and startups such as Watershed, Emitwise, SINAI Technologies, Persefoni and CarbonChain are focused on data wrangling and data quality, and devising “accurate, repeatable, scalable means of collecting carbon emissions data from around the globe and across a product’s lifecycle” that has the potential to be a game changer.

How Organizations Can Address the Carbon Emission Criss

The future of sustainability initiatives that will actually solve the carbon emission crisis is clear: those that rapidly move from determining baseline values and decarbonization targets to implementing a tracking mechanism across business functions and the entire value chain will emerge as heroes. And at the core of it remains the need to acquire actionable data on real carbon emission numbers, both upstream and downstream.

For more insights on how to ramp up sustainability efforts in your organization, reach out to Benori’s Sustainability Desk at [email protected] .