Only realistic targets are good targets
A first step is to define an overall strategy and decarbonization targets based on the following question: What level of CO2-reduction can we realistically reach? This can only be answered with an accurate assessment of the company’s emissions baseline through transparent carbon accounting practices. In the case of Scope 3 emissions this means that companies must set up an effective key supplier engagement program, starting with suppliers who have the greatest emissions impact.
Platforms like CDP’s supply chain program, which facilitates Scope 3 emissions data collection and assessment of supplier’s emissions performance, are already in place to help companies within certain industries.17; 18 If the emissions impact is not known, the suppliers who make up a significant portion of the company’s spend is a good starting point. The company can commit those suppliers to engagement targets.19
Committing to both near and long-term reduction targets aligned with scientific benchmarks sets a roadmap for meaningful progress. Another building block on the way forward concerns a company’s governance: How to ensure successful implementation of these targets? Introducing effective climate governance mechanisms is vital for embedding carbon reduction ambitions throughout the organization. This involves introducing structures to integrate decarbonization goals into the business strategy, incentivizing implementation by introducing internal carbon pricing, for example, and linking executive compensation to sustainability performance.
After ensuring that decarbonization is well embedded within the internal governance structure, the following question arises: How to identify, evaluate and implement the most impactful measures and technologies so as to generate both rapid and long-lasting results, while taking a company’s abilities and resources into account? The first step is to analyze, emissions hotspots. The second is to introduce measures and technologies and assess them according to defined KPIs (e.g., a decarbonization index). Doing so ensures that the most efficient emissions reduction and avoidance measures are prioritized. In addition, embracing the latest low-carbon innovations and sustainable procurement practices can yield substantial environmental benefits and operational improvements.
Do good and talk about it – the change story says it all
Finally, communication and clear change management including employee empowerment and qualification are key to getting the most out of these opportunities. Starting with the “why” of decarbonization gives the efforts a purpose, creating a feeling of trust and support among both internal and external stakeholders. A well-designed change story, which shares progress and milestones as well as challenges in a transparent manner can foster engagement and drive behavioral change. Internally, in combination with the empowerment and qualification of employees, the story ensures that a company’s key stakeholders and team members are on board. Externally, positioning the company’s brand in this way attracts eco-conscious consumers, investors, and partners, thus enhancing the company’s reputation and competitiveness.
While it is true that there are burdens and challenges related to decarbonization, focusing only on these aspects can lead the business community down a dangerous path toward failing to fulfill their part of the Paris Agreement. It also risks leaving great business opportunities related to decarbonization on the table. What is required of companies to limit global warming is bold, achievable, and immediate action, but this action does not have to be deleterious to the bottom line. A holistic decarbonization approach as described above not only reduces a company’s environmental impact, it can also result in a real competitive advantage.