Month: June 2023

Consumer goods company builds emissions roadmap to reach targets by 2030

, June 27, 2023

 

On the path to achieving its goal of net zero emissions by 2050, a Fortune 500 consumer goods company with business activities across manufacturing, retail, and e-commerce (Consumer Goods Company) set a near-term emissions reduction target through the Science-Based Target Initiative (SBTi). This near-term science-based target was set across all three scopes of greenhouse gas (GHG) emissions from a 2018 base year.

The stated goal for the year 2030 mandates the following actions:

Achieve a 50% reduction in absolute GHG emissions for scopes 1 and 2 

Decrease GHG emissions intensity per unit revenue by 60% across three scope 3 categories: purchased goods, upstream transportation and distribution, and business travel. This equates to a 6% reduction in absolute emissions from the base year.

The Consumer Goods Company had several emissions reduction projects planned and underway, but needed a more structured plan for achieving their short term goal. The Consumer Goods Company sought assistance from 3Degrees to:

  • Build an emissions reductions roadmap that enhances its ability to accurately quantify, track, and report on its emission reductions and progress against its 2030 climate goal 
  • Gain internal buy-in across leadership and all business units to promote effective climate action

Challenges

With less than a decade remaining to achieve its 2030 goal, the Consumer Goods Company did not have a complete picture of their projects’ emission reduction impact and whether they would achieve their goal. To start, 3Degrees customized its proprietary Emissions Reduction Model based on the Consumer Goods Company’s existing data and identified gaps in the Consumer Goods Company’s reduction efforts. Once these gaps were identified, it became evident that by following its current trajectory the Consumer Goods Company would fall short of its near-term goal.

These findings required the Consumer Goods Company to seek approval and funding for new reduction strategies essential to achieving its climate goal. While the Consumer Goods Company had worked with its executive team on funding for its original climate plan, this strategy change would require a new set of approvals and deeper justification for the additional funding.

As with most organizations, the Consumer Goods Company’s scope 3 emissions account for the majority of its total carbon footprint. Though aware of the overall magnitude of its scope 3 emissions, they lacked specific insights required to build and implement a reduction action plan. To address this, they relied on 3Degrees to conduct a thorough analysis of its supplier spend data to determine emissive activities. Upon completion of the analysis, a new challenge materialized—the Consumer Goods Company became acutely aware of the substantial amount of work required to reach its scope 3 target.

How we helped

The 3Degrees team helped the Consumer Goods Company in three key categories: 

Executive engagement and business case

3Degrees initiated the engagement by analyzing the Consumer Goods Company’s emissions footprint and diving deeply into specific emission categories. Throughout this process, the 3Degrees team actively participated in internal coordination and governance meetings. This not only provided the Consumer Goods Company with greater access to the climate expertise of the 3Degrees team, but also helped reveal its actual emissions.

For instance, by examining the Consumer Goods Company’s scope 3 purchased goods and services spend data, 3Degrees identified an emissions hot spot in advertising emissions. After further investigation, it became apparent that a substantial portion of the Consumer Goods Company’s expenditures flowed through Tier 1 suppliers and eventually reached large digital ad companies. This discovery led 3Degrees to uncover that the primary source of the Consumer Goods Company’s scope 3 advertising emissions was the electricity used to power digital videos and advertisements.

When communicating these findings and other emissions footprint drivers, the 3Degrees team ensured the Consumer Goods Company fully understood and felt comfortable with the information. 3Degrees then developed a business case and emissions reduction roadmap that the Consumer Goods Company could present to its executive stakeholders. This enabled the Consumer Goods Company to demonstrate the importance of this climate work to its executive team, facilitating approval and funding for further reduction strategies.


Emissions Reduction Model

3Degrees used its Emissions Reduction Model to model the Consumer Goods Company’s business as usual emissions and the 2030 target emissions.

The Emissions Reduction Model highlighted gaps in the Consumer Goods Company’s current reduction efforts and identified emissions categories that required focused planning to uncover opportunities for closing these gaps. This prompted the 3Degrees team to expand upon the original objective and delve deeply into the data to determine new reduction levers that the Consumer Goods Company could implement to stay on track to reach its near-term targets. 3Degrees added the proposed projects (and their associated emissions reductions) required to achieve the goal into the Emissions Reduction Model to illustrate how the Company could achieve their goal.

3Degrees used the information from the Emissions Reduction Model to develop a emissions reduction roadmap, which provided the Consumer Goods Company with tangible ways to incorporate climate action into their everyday business streams. The roadmap outlined all the required projects and action items, their projected emissions, assigned specific ownership of both emissions and reduction projects, the performance metrics against which each project would be measured, and conveyed important business integration themes.

Upon completing the engagement, 3Degrees shared the finalized Emissions Reduction Model and roadmap with the Consumer Goods Company. The comprehensive model incorporated all current and future reduction interventions necessary to reach its 2030 target across all three scopes of emissions, enabling the Consumer Goods Company to continue its work autonomously. 


Scope 3

Both teams were aware of the enormity of work required to achieve the Consumer Goods Company’s scope 3 targets. Instead of being overwhelmed by the data, the 3Degrees team helped organize it into manageable action items using the Emissions Reduction Model. As a result, they identified that the bulk of the necessary scope 3 reductions could be accomplished through three work streams and fewer than 10 reduction initiatives. These insights helped get the Consumer Goods Company on track to reach its near-term scope 3 goal.

Results

Upon completion of of the engagement, the Consumer Goods Company achieved the following outcomes:

“This company is an impressive example of bold corporate climate action. They set an ambitious science-based target, even while understanding the immensity of their scope 3 footprint. 3Degrees is proud to have been a partner on their climate action journey to enable the completion of their climate roadmap and gain executive approval.”

— Terese Decker, Director, Energy & Climate Practice, Strategy

Scope 3 in the financial sector (video)

, June 15, 2023

Maureen Bray, Senior Director, Energy & Climate Practice – Strategy, Europe, met with CeFPro at the ESG Europe event to discuss scope 3 in the financial sector. She went over the importance of understanding your scope 3, key challenges, important messages, and more.

Learn more below.

WATCH THE VIDEO

Maureen Bray interview ESG Europe from CeFPro on Vimeo.

What every company needs to know about climate risk assessment

, June 12, 2023

It is valuable for every company to have familiarity with the framework set out by the Task Force on Climate-Related Financial Disclosures (TCFD), and with climate-related risks and opportunities more generally. In this article, we’ll explain why. 

The cascading effect of climate reporting

Over the past few years, we have been witnessing voluntary sustainability reporting frameworks becoming increasingly mandatory in markets where regulation did not previously exist. Governments and regulators all over the world have been responding to investor-led demands for climate risks to be disclosed and quantified, with TCFD rapidly becoming the disclosure framework of choice in the EU, US, and UK (to name just a few jurisdictions), along with global standard-setters such as the International Financial Reporting Standards (IFRS) Foundation. 

For a company monitoring these developments, the intuition is to start by asking a simple question – are we in the scope of these rules? And while that is a logical question to ask, we should begin with investigating the drivers. Regulators such as the U.S. Securities and Exchange Commission (SEC) and the EU Commission1 are mainly responding to the wider demands of investors. 

At 3Degrees, we’ve been calling this view of starting at the top, “the cascading effect of reporting,” which is currently underway and at this point, irreversible.

Every time another bank or financial institution makes a decision to report its climate risks and opportunities in response to regulatory changes, the next step is to start scanning the asset portfolio for its climate risks and opportunities, as well as existing mitigation actions or opportunities. Investors are also asking for the total financial impact, which is leading to more concerted integrated reporting with more than 2,500 companies across the globe having issued integrated reports to date2.

A lot of companies are still understandably weary of disclosing the potential price tag associated with their climate risks in their main financial statements. However, it’s clear that the risks of climate change come at a significant cost, with some companies’ CDP reports revealing eye-watering estimates. One insurer has estimated that losses from nature-related catastrophes could increase its annual exposure by almost $3BN, and that the cost of response (reinsurance) was likely to be in the order of $0.5BN.  

Climate risk is a risk like any other

What is Enterprise Risk Management (ERM)?

ERM involves assessment of risks facing the organization, classifying them by their impact and probability, and determining which actions to take to mitigate, transfer, avoid or accept them.

With such potentially high costs on the line, every company, whether impacted by the recent and upcoming regulation or not, should develop the internal capability to understand and assess climate-related risks. Evaluation of climate risks that your company faces is an important part of its overall corporate governance. TCFD advocates for such an evaluation to be included in each company’s Enterprise Risk Management (ERM) framework. 

ERM has been around for decades, but, until recently, climate risks did not make their way into this valuable risk management tool due to a perception that they were too remote in the future. It is abundantly clear now that this is no longer the case as climate risks have been materializing within investable timeframes.  

What are some of the benefits of including climate risks in the ERM? 

  • Promote a common understanding of climate issues between the Board, senior management, and managers of key risks and opportunities
  • Encourage a culture of transparency where risks are openly discussed and not swept under the carpet (and hence, reduce chances of surprises)
  • Serve as a basis for the organization’s climate mitigation and adaptation strategy/roadmap
  • Help prioritize financial and human resources

Climate is as much about opportunities as it is about risks

Before you get the impression that it’s all doom and gloom, let’s remind ourselves that climate assessments can highlight climate opportunities as well as risks. One tech company pinpointed in its CDP report that the likely introduction of carbon taxation would lead to demand for its carbon-neutral products and could add up to 1% of its global revenue; another tech company reported it could equal to 1% of its market cap. These are significant numbers. 

Opportunities abound in the areas of energy and resource efficiency, energy cost savings, and supply chain resilience. Identifying climate risks can help companies turn them into opportunities, e.g., by diversifying their sourcing to include jurisdictions less likely to be impacted by climate change in the future. Climate risk analysis should capture both mitigation and adaptation opportunities.

Value of climate-related risk and opportunities according to reporting to CDP3

The recently passed Infrastructure Investment and Jobs Act and the Inflation Reduction Act, as well as local tax incentives can help both soften the blow of costs involved in the energy transition along with helping organizations to capitalize on those energy efficiency, electrification, renewable energy adoption, opportunities. 

Back to school

The rise of integrated reporting is leading to more cross-functional cooperation. If organizations are going to make the best of what’s inevitable and chart the course for their risk mitigation and adaptation initiatives, there will need to be comprehensive level-setting around the concept of climate risks and opportunities paired with the corporate governance required to monitor them. Sustainability teams who have to date focused on assessing their company’s impact on the environment (“impact materiality”) will need to become familiar with the concept of financial materiality (impact of the environment on the company).

As part of this process, multiple transfers of knowledge will need to take place in organizations over the next few years as both voluntary and mandatory frameworks get embedded: 

  • Sustainability departments will need to educate finance teams on the process involved in identifying climate risks and opportunities
  • Finance teams will need to educate their sustainability colleagues on the principles of financial reporting 
  • Both will need to work together to quantify and disclose risks
  • Risk management groups will need to educate Sustainability teams on ERMs, and 
  • Sustainability will need to educate risk management and internal auditors on how to incorporate climate risks into the ERM

Once the initial knowledge transfer has happened, sustainability, renewable energy procurement, finance and tax professionals will need to continue coming together on a regular basis to provide input into on-going monitoring and mitigation of risks as well as identification and leveraging of opportunities.

If you have questions about your organization’s climate-related risks and opportunities, please get in touch.   

 

Sources

1 The Corporate Sustainability Reporting Directive will impact not only EU-headquartered companies but also US companies with EU revenue of €150M

2 IFRS Foundation

3  CDP article September 20, 2022

Get together and move forward: our presence and takeaways from E-World

, June 1, 2023

We were happy to join E-World, Europe’s biggest energy trade show, in Essen, Germany on 23-25 May. Since last year’s conference, the landscape of the energy sector has continued to change. The second half of last year was marked by roaring energy prices that started to cool off after some months. In addition, there were regulatory changes with state interventions and pan-European initiatives (i.e., the new market design proposal of the European Commission) that have spurred a lot of discussion. In this ever-evolving landscape, the need to accelerate down the path of decarbonisation and sustainability remains critical. 

3Degrees was well represented with 12 colleagues from various business units, including our consulting and trading teams. We all had the chance to connect with current and prospective clients, enjoy talks with market players, gather market intel, and get intrigued by new ideas. 

3Degrees booth conversations at E-World.

PPA Markets at the Epicenter 

The PPA market was heavily impacted by the recent energy crisis. In most countries, volatility was the main characteristic with developers and buyers being faced with numerous unknowns. From all our discussions we gathered some very interesting observations: 

  • PPA availability has increased, prices have stabilised, and PPA interest remains strong.
  • Permitting and interconnection continue to cause delays and pose risks to new project development.
  • Accounting issues related to International Financial Reporting Standards (IFRS) are leading corporate buyers to consider physical PPAs over virtual ones.
  • Interest is picking up for countries in Southern and Eastern Europe.

While demand and availability are high, closing deals is still not always a smooth process. On one hand, project developers face moving parts in their permitting and financing. On the other hand, corporate buyers need to have a good understanding of the energy and PPA market landscape to ensure fast decision-making. Experienced advisors with technical knowledge and expertise can help both corporate buyers navigate through the challenges and find solutions to close a deal and achieve their climate targets. 

The Landscape for Guarantees of Origin (GOs)

Market participants for the European GO market are quite confident due to a number of factors: 

  • Demand for GOs continues to increase. 
  • Long-term GO offtake from new wind and solar projects is seen as an alternative to PPAs, but lack additionality. 
  • High GO prices do not seem to scare buyers away, but rather underline the need for better market insights and increased transparency. 

New Ideas Gaining Attention

3Degrees teammates who attended the 2023 E-World Conference.

Innovation was also very well represented at E-World:

  • Many companies were showcasing their offerings in hydrogen, a technology that remains in the spotlight with many unknowns to answer for while scaling up. 
  • When it comes to biogas/biomethane, there are a variety of voluntary and compliance standards gaining further attention, which is expected to solidify in the coming years. 
  • Some corporate buyers are moving into biomethane procurement via Gas Purchase Agreements (GPAs) and other structures, as they see limited alternatives to natural gas in order to meet their Net Zero targets.

Looking Toward the Future 

E-World offers a unique opportunity to meet and connect with key market players, catch up on recent developments, listen and understand the challenges everyone is facing in the market, and, most importantly, identify paths to common solutions. 3Degrees remains committed to its mission to help take urgent action on climate change worldwide. 

Look out for upcoming insights on the European energy landscape by signing up for our newsletter. And if you want to work together, let’s not wait for next year’s E-world–get in touch!

Uncovering solutions: Carbon Project Basics – Landfill Gas Capture

, June 22, 2023

What is landfill gas capture?

Landfill gas capture, also known as landfill gas recovery or landfill gas management, refers to the process of collecting and utilizing the gas that is produced by the decomposition of organic waste in landfills. As the waste decomposes, it generates a mixture of gasses known as landfill gas (LFG), which consists of methane (CH4) and carbon dioxide (CO2), with small amounts of other gasses, such as nitrogen, oxygen, and trace volatile organic compounds. Methane by itself is an extremely potent greenhouse gas (GHG), which is over 25 times as powerful as CO2 and a major catalyst in ozone pollution.

How does landfill gas capture work?

  • Collection and extraction:
    A network of strategically-placed wellheads and piping systems are installed throughout the landfill site to collect the gas as it is produced. Blowers or vacuum induction systems are used to draw the gas from the landfill to a nearby processing station.
  • Processing and flaring:
    In many basic landfill gas capture sites, the captured methane is sent through a processing center to remove moisture, so it can later be destroyed by way of an onsite flare.
  • Utilization:
    An alternative to flaring is to burn the methane to generate energy. Depending on the end use, the methane will typically require additional processing to remove any compounds, such as siloxanes or hydrogen sulfide, before it is sent to a compressor and generator set where the gas can be utilized as an energy source.

What are the benefits of landfill gas capture?

  • Greenhouse gas emissions reduction:
    Landfills are the third largest source of human-made methane emissions, making them one of the most obvious sources to direct our attention to in our fight against global warming. This carbon reduction project type often stands above the rest because landfill gas projects can utilize the captured methane in fuel alternatives or to produce electricity.
  • Health and safety:
    Landfill gas is a harmful pollutant, so capturing the gas directly impacts health conditions and air quality in the surrounding area. Quite often landfills are the source of unpleasant odors to the surrounding communities, which landfill gas capture and combustion all but eliminates.
  • Energy generation:
    The captured methane gas can be used as a renewable energy source to produce electricity, heat, or renewable natural gas, oftentimes utilized by the surrounding communities. This power generation method is another great way to limit our dependencies on fossil fuels.

By the numbers:

  • There are more than 2,000 active landfills in the United States alone. 
  • The most recent calculations by the Inventory Report, U.S. landfills release an estimated 122.6 million metric tons of carbon dioxide equivalent (MMTCO2e) of methane into the atmosphere annually, representing nearly 17 percent of the total U.S. anthropogenic methane emissions across all sectors.*
  • Methane itself is 25 times more potent than CO2 over a 20-year period.  
  • On average, one million tons of landfill waste will emit nearly 430,000 cubic feet of landfill gas a day, enough to generate 780 kWh of electricity or 216 MMBtu of heat.  
  • Landfill gas capture technology will abate emissions from upwards of 90 percent of the methane generated at the landfill. 

View other project profiles or contact us.

*epa.gov

 

How to Tackle Financed Emissions Measurement

, June 26, 2023

According to CDP, portfolio emissions of global financial institutions are about 700 times larger than their direct emissions. In order to make significant progress on their climate journeys, financial institutions need to understand the full scope of these financed emissions through greenhouse gas (GHG) measurement. But how do you measure the carbon impact of something like investments and lending?

In this webinar, 3Degrees’ Energy and Climate Practice Consultants Amanda Spinner and Katherine Markova, and Manager, Karlina Wu, walk the audience through how to measure financed emissions with an overview of GHG accounting and the general methodology of the Partnership for Carbon Accounting Financials (PCAF). Sweeps’ VP of Climate Finance, Marie-Anne Vincent, also provides a demonstration of how Sweep can help measure your financed emissions, the challenges that might arise with measurement, and how Sweep can support in overcoming those hurdles.

REGISTER TO WATCH

 

Vida Mejor – Improved Cookstoves

, June 6, 2023

Honduran woman cooking over a stove

Vida Mejor Honduras Improved Cookstoves Project 

In rural Honduras, the reliance on firewood for cooking food has harmful effects on human health, the economy, and the environment. The Honduran President warned that the country is one of the top five most vulnerable countries in the world in terms of deforestation risk. Not only are traditional wood-burning stoves inefficient, requiring excessive amounts of wood to fuel, but they also have highly detrimental effects on health including eye and respiratory   damage. Furthermore, operating traditional stoves requires either the time-consuming task of gathering  and chopping wood or purchasing it at a significant cost. Since 2011, social enterprise Envirofit International has been working with the Honduran government to provide clean cookstoves to the nation’s poorest families. 

Envirofit’s improved cookstoves are more efficient than conventional firewood stoves, as they reduce heat loss, improve heat transfer, and increase combustion efficiency. The program provides affordable, high-performing stoves to communities that have historically had very limited access to energy. Local communities are seeing economic growth through job creation in the sale, marketing, and distribution of the cookstoves.

 

CO-BENEFITS:

Environmental:

This project promotes biodiversity and decreases the rate of deforestation by eliminating the need for biomass in domestic cooking. Decreasing the use of inefficient stoves reduces greenhouse gas emissions generated from fuel combustion, thus improving air quality. 

 

Social:

To date, about 200 direct and 3,000 indirect jobs have been created as a result of the project. The project empowers women by giving them access to clean household cooking solutions that reduce money and time expenditure. With less time spent gathering biomass, beneficiaries have more of an opportunity to generate income, and enjoy other activities. 

 

3DEGREES + CARBON OFFSETS

 

View other project profiles or contact us.

Green Valley Dairy – Methane Reduction

, June 6, 2023

Green Valley Dairy Methane Reduction Project

In 2020, the agriculture sector was responsible for nearly 10% of total U.S. greenhouse gas emissions.   Dairy cattle accounted for roughly 25% of agriculture’s overall methane emissions that year. Introducing advanced manure management practices is a highly effective method for mitigating the environmental impact of dairy farming. It was this opportunity that caught the attention of Wisconsin-based Green Valley Dairy. Prior to installing their three anaerobic digesters in 2006, the dairy was storing manure from its 3,000 milking cows, 300 dry cows and 300 heifers in open lagoons. Without a cover, this manure decomposed under anaerobic conditions, releasing methane gas into the atmosphere. With the new system, the Green Valley Dairy sends manure through an underground pipe network to its digesters. Methane gas is then captured and destroyed in two 1.2 MW generators to produce electricity and heat, thus displacing fossil fuel use. Aside from their ability to reduce harmful GHG emissions, dairy digester projects also improve air quality, add diversity to the fuel supply, and increase energy security with a cost-effective renewable resource. Digester projects range from $5-20 million to implement. Carbon credits from avoided methane emissions provide the dairy with an important stream of revenue to help make these projects economically viable. 

 

CO-BENEFITS:

Environmental:

Installing anaerobic digester equipment eliminates the environmental degradation and climate pollutant emissions associated with the standard method of manure disposal into open lagoons. The liquid from the manure was recycled into fertilizer for Green Valley’s fields, which benefitted from its nutrients. 

Economic:

The anaerobic digesters produce effluent that can be used as organic fertilizer or animal bedding. Biosolid bedding produced by the digester saves $245,000 in sand bedding costs annually and reduces emissions created by hauling bedding to and from the dairy. Green Valley Dairy provided cost savings to nearby dairies and landscaping companies by selling them recycled bedding for significantly less than the cost of alternatives. 

Health:

Digesters reduce manure odor in the local community, which can be significant in areas with large concentrations of dairy cows. Animal manure is useful as a natural fertilizer due to the presence of nutrients like nitrogen and potassium; however, an overabundance of these nutrients can cause harmful ecological imbalances in soil and waterways. Digester projects help dairy farms better manage and apply these nutrients to farmland and avoid accidental runoff. 

 

3Degrees + carbon offsets

 

View other project profiles or contact us.

Giriraj Solar Photovoltaic Project – Renewable Energy

, June 6, 2023

Solar Photovoltaic Project By Giriraj Renewables Private Limited 

Currently over 70% of India’s electricity is generated from fossil fuels like coal.  Projects like the Solar Photovoltaic Giriraj Project are an important piece in displacing the country’s reliance on fossil fuels. The project includes a group of 591 MW solar photovoltaic arrays in numerous Indian states (including Karnataka, Maharashtra and Uttar Pradesh), adding up to a total capacity of 225 MW. Over the course of its first decade, the project will displace an estimated 1,087,203 MWh of grid-connected power, which primarily comes from fossil-based power plants. The Solar Photovoltaic Project by Giriraj Renewables increases the local energy supply and reduces the amount of fossil fuels being consumed in India. 

 

CO-BENEFITS:

Environmental:

The project reduces the power grid’s dependence on fossil fuels. A zero emission power source, the solar project activity contributes to tackling climate change and boosts the supply of renewables energy in the region. This project reduce an estimated 234,677 tCO2e of GHG emissions annually. 

Social:

The project initiated a quality education program through investments in technological resources for education, including the acquisition of teaching and learning materials, the donation of laptops and adapted sports material, and the installation of smart board and e-learning classrooms. Around 875 students have benefitted from these resources to improve their learning. 

Economic:

The project creates safe jobs and preferentially selects hires from the local communities. Over the project’s lifetime so far, 21 recent graduates in engineering, commerce or science have been hired, and a mentoring program was developed to enhance their skills. 

 

3Degrees + carbon offsets

View other project profiles or contact us.