Author: Scott Martin

Vice President of Business Partnerships, 3Degrees

Navigating the Opportunities and Pitfalls of International Renewable Energy Markets

train europe renewables

Recently, 3Degrees hosted a CDP webinar with two of our clients, Sia Xeros, Environmental Sustainability Lead at Mastercard, and Pat McLaughlin, Sr. Vice President of Corporate Social Responsibility at Verisk, to discuss their experiences with international renewable energy markets. Both of these organizations have demonstrated climate leadership, achieved important firsts, and report to CDP on their progress.

We had an engaging discussion with these two partners, as they shared how they have successfully navigated through some common international market challenges to meet their goals. If you were not able to join us live, you can find the recording here. In the meantime, here’s a quick summary of a few of the key takeaways.

Addressing energy loads on an international scale is complex

Mastercard has 133 offices in 79 countries and Verisk has offices in 30 countries. While the lion’s share of their electricity consumption occurs in a few locations, they need options for addressing the significant number of countries with smaller loads to meet their corporate emissions reduction goals. In addition to geographically dispersed energy loads, another challenge shared by both companies is the large number of leased buildings. Without building ownership, the companies have fewer options for energy procurement, making it harder to address their global electricity consumption footprints.  

Considering the above challenges, both Mastercard and Verisk noted that the proliferation of energy attribute certificate (EAC) markets across the globe has allowed them to take immediate action to address their global energy footprint.

It’s critical to understand the nuances of in-country product options

Understanding which EACs are available in each region is a critical part of the puzzle. The options vary quite a bit between the U.S., U.K, Australia, Japan, Morocco, and Kazakhstan (just to name a few of the countries where our webinar guests have operations). While all EACs convey the environmental attributes of one megawatt-hour (MWh) of renewable electricity generated, there are important differences across products and national markets that can affect claims, impact, and availability. For instance, while the North American Renewable Energy Certificate (REC) and European Guarantees of Origin (GOs) markets were created over a decade ago by governmental entities, I-RECs and TIGRs are relatively new markets that were created by non-governmental entities in collaboration with key stakeholders in each country. Understanding regulatory and market dynamics is critical to successfully navigating the international landscape. 

Another factor to consider is the range of generation and other non-energy attributes included in any EAC.  There are many ways to differentiate product purchasing and support renewable energy projects with specific characteristics. Mastercard and Verisk created a purchasing framework and then used it to make decisions that balance the products available (e.g. project location, technology, commercial operation date) with reporting needs (e.g. CDP, RE100, SBTi) and external factors (e.g. country-specific regulatory constraints).

Companies often express how overwhelming it can be to manage and assess purchasing options across many international markets, especially since regulatory and market conditions are constantly evolving.  Both of our webinar guests highlighted how it can be helpful to partner with an expert who can guide companies through this process, including evaluating each country’s policies to ensure the product meets the quality criteria required for Scope 2 accounting and understand opportunities for impactful purchasing across multiple markets.

Internal goals and stakeholders play an important role

Since 2017, Mastercard has had a goal of 100% renewable energy across all of its global offices and was the first payments industry company to achieve this recognition.

“We have set a 100% renewable energy goal and we continue to hit it every year. We work with them [3Degrees] to find the best country specific methods we could.” Sia Xeros, Mastercard

And the company continues to focus on incremental progress every year, evolving its purchasing strategy to take advantage of new in-country options that have become available.

While setting internal goals is the first step, communicating these actions and the progress on the goals is just as importantBoth Mastercard and Verisk communicate their progress through their global environmental, social and governance (ESG) reporting. 

Additionally, the 8,800 employees at Verisk have been a significant driver for action. In 2017, Verisk’s investments in EACs and carbon offsets helped them become carbon-neutral. Pat McLaughlin explained, “We’ve used this as an opportunity to get our people fairly engaged on the topic.  They know that our investments are spread around the countries where our teams are actually doing business and, in most cases, where they live. We’re able to select certain projects that our employees can identify with. It is an opportunity to bring people together.” 

It was a pleasure to serve as the moderator for this webinar and listen to these two corporate leaders in sustainability share their approach to international renewable energy markets. As we heard from both Mastercard and Verisk, a commitment to global renewable energy usage does not come without challenges – but these challenges are not insurmountable, as evidenced by the success of both of these companies. If your organization is considering renewable energy options for your global operations and is interested in the guidance of an experienced partner to help you navigate your options, then I’d love to hear from you.

Respondents

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The Many Dimensions of Climate Action: Takeaways from Companies vs. Climate Change 2018

Companies-vs-climate-change-miami-2018

Last month, my colleague, Dan Kosiak, and I attended Companies vs. Climate Change (CvCC) in Miami, FL. Now in its second year, the conference strives to bring companies together to create business-driven solutions to the climate crisis. 3Degrees had the distinct pleasure of serving as a premiere sponsor of the event.

This year, organizations of all sizes convened to discuss how to work collaboratively to address climate change. The audience was an energizing mix of people from the worlds of corporate and institutional sustainability, policy, consulting, and more, with an interesting blend of perspectives from global, local, governmental and the private sector. One of the most interesting aspects of the conference was the real-world stories and deep-dive examples that attendees from each of these unique groups brought to the table.  Many of the sessions focused on how organizations are tackling climate change from different angles – each sector with its own unique challenges, focuses and potential solutions. Despite the wide range of approaches, the common thread among the organizations was their shared passion to figure out the most impactful way they could address climate change.

On the second day of the conference, Dan and I had the opportunity to lead a session focused primarily on the concept of ‘VPPA Readiness’. The session served as a workshop for renewable energy buyers to determine if a VPPA made sense for their organization, and was centered around a few key areas:

Understanding the renewable energy market landscape and how a VPPA fits in:

  • Current trends in the renewable energy market show that the demand for voluntary VPPAs has more than doubled in recent years. 1  In fact, corporate power purchase agreements now account for about ¼ of total global renewable electricity sourced. 2 In spite of this aggressive growth, it is still important to note that PPAs and VPPAs are not the only tools in the GHG reduction toolkit and are not advisable for all buyers.

The primary benefits, considerations and challenges that face voluntary corporate buyers:

  • There are clear benefits, as well as risks and challenges when executing this type of long-term renewable energy purchase. Corporate buyers must determine their inherent risk tolerance. In the ‘pros’ column, VPPAs require no capital investment and provide a clear and positive environmental impact; however, committing to a 12-15 year investment with fluctuating market value may leave some feeling financially exposed.

Implementation examples, tips and best practices:

  • In an effort to provide real-world examples and practical guidance, Dan and I guided the audience through a recent  VPPA Aggregation supported by 3Degrees and executed by Apple, Akamai, Etsy and Swiss Re. A deal this complex emphasized the need for established leadership, commitment to timelines and a shared idea of goals and success. Each of the participating companies demonstrated key maturity attributes and achieved certain milestones in order to be in the position to execute on the VPPA.

I was inspired by the audience’s very apparent interest in VPPAs and how they can be incorporated into sustainability strategies.  However, the challenges around understanding how these transactions work, their implied benefits, how to define success and why to do it is undeniably real – especially given the many available, and sometimes conflicting, sources of information on the topic. The good news is, as increasing numbers of PPAs are executed and more projects start to come online, the path will become more worn and answers to these difficult questions will become more evident.

As we departed this year’s Companies vs. Climate Change, I left feeling inspired by how effectively corporations can work together, learn from each other, and guide one another toward making real impact in the fight against climate change. Thank you to the team who makes this important conference possible; we’ll be back next year!

Footnotes

1. Business Renewables Center Corporate Renewable Deals 2013 -2018
2. IRENA (International Renewable Energy Agency) 2018 report – Corporate Sourcing of Renewables: Market and Industry Trends

Going beyond: top ways to start addressing your Scope 3 emissions

At a recent Innovation Summit, I had the pleasure of speaking to a group of corporate representatives on the topic of greening the supply chain. This conference was attended mostly by US based companies, so as you might imagine, the topic of addressing Scope 3 emissions was not top of mind for most attendees, as many are still grappling with how do address their Scope 1 and Scope 2 emissions.

This being said, I did have a few engaging conversations with some attendees who were beginning to think about how to move from a focus exclusively on Scope 1 and 2 emissions to incorporating efforts to address indirect operational (or Scope 3) emissions. As a reminder, Scope 3 emissions are GHG emissions that are a consequence of an organization’s activities but not owned or controlled by them. Think of air travel for business trips, emissions associated with the production of purchased goods, shipping emissions, etc. It is the indirect environmental cost of doing business.

You may be asking yourself ‘why are Scope 3 emissions so important?’  CDP reports that on average, Scope 3 emissions are four times the size of Scope 1 and Scope 2 combined. As a result, a growing number of companies (the majority being based outside the US) are measuring Scope 3 emissions, reporting those emissions, and in many cases, scoring their supply chain based on those emissions as well. Furthermore, if your organization is interested in setting a Science Based Target (SBT) and your Scope 3 emissions are 40% or more of your total carbon load, then you are actually required to set a Scope 3 target.

What remains unclear is what, if anything, is being done to reduce supply chain emissions? How would your organization even begin to address supply chain emissions reduction? What major challenges stand in the way of taking meaningful action to address Scope 3 emissions?

Tips to get you started:

Start with data

In order to set yourself up for long-term success, it’s important to start by understanding the magnitude and sources of your Scope 3 load. Comprehensive supply chain emissions data collection will have a direct influence over strategy, stakeholder alignment and the ability to measure success.  You will want to get a good understanding of carbon footprints and contributing factors such as, level of spend and supplier and facility locations in order to be able to heat-map your earliest and best opportunities.

Stakeholder engagement and alignment

Another important preliminary step is building internal alignment, particularly between procurement and sustainability teams. In a recent article published by GreenBiz, it states that according to the 2017 State of Sustainable Business Report, “The procurement function was the most commonly cited functional partner to sustainability – outranking the CEO’s office, operations, product development, risk management or any other part of the company.” Creating a corporate structure that sets clear guidelines for individual roles and responsibilities will help ensure a more seamless execution of sustainability efforts and approvals.

Educate and Support

Reporting and setting targets is not  enough. Find your internal champions, both internally and externally, and connect them. Ensure that you have senior level execs involved and on-board. Utilize both internal staff and retained consultants who can facilitate and educate to ensure the program(s) are supported properly with data, expertise, and resources.

Don’t try to boil the ocean

Getting started, even in the way of internal alignment or identifying low hanging fruit,  creates momentum…and that is a good thing! You don’t have to, and shouldn’t, do everything at once. Early wins are important, however. You  can share progress with suppliers in an effort to catalyze collaboration and motivation to build on initial success. The best place to start is to identify and engage with supply partners who are easy to work with, close to your business, and have expressed similar sustainability interests, in order to build vital collaboration and consensus on approach.

Leverage Tech and Tools

The CDP Supplier questionnaire is a great tool for collecting data. There are also third-party scorecard platforms, like Ecovadis, that can be utilized to collect data and score the supply chain. The development and distribution of purchasing guides and case studies can help arm suppliers with best practices and real world examples. And investment in online portals for suppliers to access can be beneficial for documenting goals and progress and, further, serves as a valuable communication tool.

Co-Benefits and Incentives

Reward your suppliers! Offer incentives to spur action. Things like public recognition, preferred supplier status, competitive advantage and brand enhancement can go a long way in motivating action. By including sustainability criteria in your procurement specs and then providing incentives via rankings based on sustainability scoring, you are providing proper motivation.

Breaking the inertia

In order to make any significant impact in stunting climate change we must acknowledge and address all sources of emission, both direct and indirect. So as your organization strives to take urgent action to reduce its carbon footprint and pushes forward by addressing Scope 1 and 2 emissions, don’t forget about Scope 3.

As President John F. Kennedy once stated, “There are risks and costs to action. But they are far less than the long range risks of comfortable inaction.” This sentiment certainly holds true for action on climate. It starts by getting the ball rolling, and there is no better time to act than now.