Global carbon dioxide emissions fell 7% to 34 billion tonnes in 2020, but the temporary decrease caused by the pandemic is expected to be only temporary and will start to rise again. At the current rate, the world will exhaust its global carbon budget – its sustainable annual emissions – by 2030.
The need for action is growing, and the political climate reflects this. Recent climate change summits highlighted the willingness of the US and UK to make firm commitments, and the importance of the US working together with countries such as China to achieve targets and drive transformation – transformation that goes beyond meeting anticipated regulatory requirements; it also meets the demands of investors, customers and employees to ensure continuity and long-term profitability.
However, political ambitions have yet to be translated into corporate action. Progress requires more than vague promises. Emissions targets need to be factored into current strategies and business plans from 2025 through to 2050, the global deadline for limiting global warming. Yet currently, only 45% of FTSE companies have committed to being net zero by 2050, and 84% do not have a solid strategy for reaching the global target.
To get you started, or to move forward faster, here are six considerations to help you succeed.
1. Seeing decarbonization as a business opportunity
Investing in decarbonization doesn't have to be a cost center. You can rethink your products to use less raw materials or use carbon as an input to enable product development. For example, Coty has introduced sustainable ethanol made from captured carbon emissions into its fragrance products, Air Vodka uses CO2 and water to produce spirits, and Unilever has introduced laundry capsules made from CO2. Or you can look for ways to reduce waste or extract value from it. Treasure8 helps reduce emissions from food waste by turning surplus food into affordable, high-quality nutritional food.
Companies are also embracing the business opportunities of carbon credits: Tesla made $1.4 billion from selling carbon credits in 2020; Rabobank is turning carbon into currency with a new revenue model, Carbon Banking; and meatless manufacturer Quorn is providing carbon footprint information for all its products to win business from conscious consumers. Decarbonization can add value to your organization, and the opportunities are truly endless.
2. Understand your organization’s actual carbon footprint
According to the Ellen MacArthur Foundation, switching to renewable energy reduces only 55% of greenhouse gas emissions, while the remaining 45% of emissions come from the production and use of products and how food is produced.
By understanding the carbon footprint of your entire business, You can identify your energy use, production intensity, transportation needs, and the biggest sources of waste generated throughout your processes. You can use this information to identify key opportunities to save money and reduce your carbon footprint. For many organizations, diving beyond their own operations into the Scope 3 emissions of their supply chains leads to even greater opportunities to reduce carbon and costs.
From there, you can use open data sets to compare your performance against your peers to strengthen your efforts. We worked with a global manufacturing company to reduce energy generation by 20% and energy consumption by 30% across its European production sites. After implementation, the manufacturer reduced carbon emissions by 200,000 tonnes per year.
3. Promote decarbonization throughout the value chain
We will embed carbon removal into our product strategy, supply chain and operations across our value chain, and consider how we can be accountable, particularly around emissions and science-based targets.
Switching to renewable energies, electrifying systems and increasing efficiency can reduce a large part of carbon emissions. For example, in terms of energy sources, hydrogen can be used to decarbonize industries such as steel, shipping, buses and coal.
But materials and systems also contain carbon. The carbon inherent in primarily built assets means organizations must reconsider the extraction, manufacturing, transport, and assembly of all the products and elements that go into producing the asset, as well as the maintenance and decommissioning of buildings, systems, and infrastructure over their lifespan. For example, the aviation industry uses carbon fiber, which has a waste rate of 30 percent. Finding ways to reuse carbon fiber not only reduces waste but also new demand.
Even the good sector needs help. The wind energy industry uses blades reinforced with carbon fiber reinforced polymers that need to be recycled. Electric buses and trucks reduce carbon emissions but have batteries that need to be recycled to keep toxic waste out of landfills.
4. Determine the technologies needed to achieve carbon reductions
Once you understand your carbon footprint and have a plan, the question becomes how to achieve your goal. With a range of digital, new materials and decarbonisation technologies available, you need to develop a strategy that enables impact at scale and realises the greatest value.
When considering accountability and transparency across the value chain, digital technologies like blockchain, digital fingerprinting, artificial intelligence and machine learning can help capture the data needed, increase transparency and drive improvements over time. We worked with a nuclear operator to create an operational excellence machine using a digital twin, significantly reducing costs across the site and contributing to their mission of reducing CO2 emissions.
Innovative carbon technology solutions can convert carbon-based feedstocks (waste) such as methane, agricultural residues, and municipal solid waste into products. For example, Lanzatech has invented technology to convert waste carbon emissions into new products. UBQ uses landfill waste to manufacture products. For every tonne used and manufactured, approximately 1.3 tonnes of landfill waste are diverted, saving up to 15 tonnes of carbon dioxide equivalent in current pilot commercial operations.
Materials will play an equally important role: The Henry Royce Institute is developing a range of energy materials to replace fossil-fuel-based energy technologies, while ExxonMobil has discovered new materials to power carbon capture technologies.
5. Build partnerships and work together to make an impact at scale
Organizations have set ambitious goals to become carbon net zero or even carbon negative. In addition to the steps outlined here, organizations should work with regulators to fast-track change and leverage investment incentives in renewable energy sources. Cross-industry partnerships can help drive and accelerate innovation and borrow best practices from other industries, while allowing start-ups and innovators to bring novel technologies and solutions.
For example, Water UK, which represents the UK's major water companies, is leveraging the power of partners to reach net zero 20 years sooner than the UK's legally binding target of 2050. The consortium has already halved its emissions from operations over the past decade, no small feat. Brewdog, the Scottish multinational brewery and pub chain, is already carbon negative. The company achieved this goal by buying and reforesting forests and restoring peatlands, working with carbon offset partners all the while. Certain industries, such as agriculture and livestock, need to become carbon negative before they can fully offset the emissions they produce, so alignment and collaboration with partners is essential.
6. Measure progress and provide appropriate incentives
If you've implemented some or all of these strategies, congratulations! You're already on the path to success. Now it's time to dig deeper and measure your progress with the right metrics.
Consider introducing new pricing and measurement mechanisms to influence decision-making. Barclays has introduced a carbon pricing methodology to track the emissions it finances, and uses this information to influence investment decisions and work with utilities and energy companies to reduce emissions over the long term. Tesco has taken a different approach, creating sustainability-linked bonds that will pay shareholders a premium if the company fails to meet its targets. And BP has developed a Low Carbon Advancing Certification programme to motivate and reward staff with innovative ideas and recognise activities that significantly reduce carbon and introduce new practices.
Investors and insurers will increasingly consider an organization's decarbonization strategy and climate risks in their decision-making. For example, an organization may be denied financing, favorable credit terms, and adequate insurance if it uses “dirty” processes, generates excessive emissions, or experiences claims related to outdated processes, such as oil spills or chemical leaks due to poorly maintained infrastructure. Similarly, organizations that move forward and achieve early results will not only receive better financial terms, but also enhance their brand reputation in the marketplace with the media, shareholders, and consumers.
Conclusion
If the race to carbon net zero or carbon negative seems daunting, it's important to remember that you can start small and achieve results quickly. One way to do this is with a sprint process. Sprints allow you to quickly identify possible solutions to achieve your client's goals, and then prioritize, working first on solutions that provide the most value with the least amount of effort. Many organizations may focus their early sprints on winning government incentives before expanding to other opportunities to capture value.
We have worked with organizations around the world to achieve their sustainability goals, from decarbonizing to embedding circular economy thinking into the core of their operations. With our collective future at stake, it is important for leaders to recognize that action is needed, that today is the day to act, and that even small steps can be scaled up to achieve the desired impact.
