The Paris Agreement, established during COP21 in 2015, seeks to limit global temperature rise to well below 2°C and to pursue efforts to limit the temperature increase to a maximum of 1.5°C above pre-industrial levels. To achieve this, companies typically need to achieve net zero emissions by 2050. Achieving net zero will often require companies to undergo significant changes, including transforming how they conduct business.
A collective failure to decarbonise will lead to increased global warming and extensive climate damage. Global warming is proportional to cumulative CO2e emissions, so climate damage will continue to escalate for as long as emissions persist. Failure of an entity to decarbonise and achieve net zero may expose them to brand risk, compliance issues, and potential future carbon tax liabilities. The following section explains how companies and funds can get started on the route to net zero and mitigate these risks.
Key elements of a successful net zero decarbonisation plan
- Measure baseline and establish targets
It is essential to first assess what makes up an entity's emissions profile. This involves conducting a detailed carbon assessment aligned with the Greenhouse Gas (“GHG”) protocol. The gap to net zero carbon is then measured from a baseline year, typically a recent year where high-quality and comprehensive carbon data is available. - Define a net zero strategy
A net zero strategy is unique to each entity, and the exact actions required will depend on the business model and industry in question. It is important to assess the strategy's viability across various factors to ensure it is feasible and that implementation risks are understood. The following factors are important to consider for each reduction project: - Carbon reduction potential
- Capital required to deliver the project
- Effort and resources required for implementation
- Operational cost changes
- Emission reduction
The first step in reducing emissions involves identifying carbon hotspots and quantifying reduction opportunities. An example project in this step would be updating incandescent lighting to LED to use less energy, reduce electricity costs, and mitigate emissions. It is important to focus on reduction opportunities identified in this step, as they are typically the easiest to achieve and can provide operational cost savings . - Implement low-carbon alternatives
This step requires a review of operations to identify opportunities to replace fossil fuel use with low-carbon technologies. An example would be switching fossil-fuel burning vehicles to electric ones or electrifying heating systems using heat pumps. Typically, in this step, fossil fuels are being switched with green alternatives such as electricity or low/zero carbon fuels. These projects are generally longer-term and require significantly more resources to implement successfully. - Sustainable procurement
Typically, a large proportion of emissions are related to the procurement of goods and services. Within an entity, this pertains to the procurement of energy, which should be sourced in zero-carbon manner. In the supply chain, this also relates to the procurement of other goods and services, which must also be assessed to understand where high-emission areas exist. Often a few items or services will account for the majority of emissions. These items can then be investigated to determine the main actions that can be taken to reduce related emissions. For example, this could include purchasing green steel instead of conventional steel or switching to a product that lasts longer and is more recyclable. - Low-carbon business models
It is important to consider how an entity’s product or service is used by the end consumer and the carbon implications of this. Low-carbon or circular business models need to have a low end-of-life (waste) footprint as well as a low use of product or service emissions. - Carbon removal offsets
Typically, not all emissions can be eliminated by the above steps and the remainder must be eliminated through high-quality carbon removal offsets. Where possible, offsetting should always be kept to an absolute minimum. - Implementation and ongoing monitoring
It is crucial to track implementation progress and measure performance against the net zero decarbonisation pathway at least annually. This will also help to track the implementation and success of the various reduction projects. One way to ensure progress is to set a net zero target, such as those recommended by the Science Based Target initiative. Holtara has extensive experience in creating strategies to achieve net zero and reduce carbon emissions. If you are interested in learning more, please reach out to our Carbon and Climate team for additional information.
