In the first blog in our Journey to Zero series, we discussed how a growing number of organizations are setting climate goals, such as net zero, carbon neutrality, or goals approved by the Science Based Targets initiative (SBTi). We also reviewed the first two of four key action areas to help companies get started on their journey to net zero emissions: Business Strategy Integration and Operational Reductions. There was some important groundwork laid in that article, so I encourage you to go back and give it a quick read if you missed it.
In this second and final blog of the series, we’ll be diving into the next two action areas, Value Chain Reductions and Remaining Emissions, and wrapping up with some thoughts on prioritizing your company’s net zero efforts.
Value chain reductions
Most companies will find that their value chain — or Scope 3 — emissions constitute the majority of their GHG emissions. Value chain emissions are derived from sources upstream or downstream of your organization’s operational boundary but are still within your scope of influence. More specifically, supply chain emissions within the value chain commonly represent the biggest share of a company’s emissions footprint.
For example, a consumer packaged goods company might discover that a significant amount of its emissions are generated by fertilizer used during the manufacturing of its food products, since the fertilizer emits the powerful warming gas nitrous oxide.
Tackling value chain emissions can be complex and requires robust planning — and the carbon reduction impact is typically significant. For this reason, a plan to address Scope 3 value chain emissions is a critical component to any climate strategy. Common steps in a value chain action plan include:
- Conducting a Scope 3 emissions screen and hotspot analysis or a product-level life cycle analysis (LCA) that maps all sources of emissions from a specific product
- Engaging suppliers to obtain primary emissions data
- Developing a strategy to engage suppliers in carbon reduction initiatives, such as converting to renewable energy use
- Creating a system of recognition and/or rewards for suppliers that are successful in their GHG reduction efforts
Last but not least, an organization’s net zero strategy is not complete without a plan to address the emissions that remain after all other internal reduction measures have been implemented.
Even companies that are highly successful in reducing their GHG footprint across all three emissions scopes will have some remaining emissions that need to be addressed in order to reach their climate goal. This is where carbon credits — also known as carbon offsets or verified emissions reductions or removals (VERs) — come in. Incorporating carbon credits into a larger GHG reduction effort enables organizations to compensate for unabated Scope 1 and 3 emissions today, while making progress towards longer-term goals like net zero.
It’s not always easy for companies to determine the best path forward with respect to carbon credits. The carbon market is evolving quickly, and there is not yet a standard for exactly how carbon removals will be used to meet long-term net zero goals (though one is currently being developed). While there are differing opinions on the role of carbon credits in achieving climate goals, there’s common consensus that a corporate-level net zero claim must balance all residual emissions with removals from the atmosphere or ocean.
As a result, many buyers are starting to shift towards carbon removal versus avoided emissions projects, and removals tend to be front and center in the dialogue around the future state of net zero. That said, carbon removal technology is still relatively nascent, and there is a fair bit of uncertainty: What will be considered an appropriate carbon removal credit to meet the still-being-crafted standard? How should organizations think about projects that offer short-term versus long-term durability?
Given this evolving landscape, a company can begin to integrate investments in carbon removal projects today as a small part of its current portfolio, alongside carbon avoidance projects. It’s important to recognize that implementing a carbon credit strategy is not a replacement for doing the hard work of emissions reductions but should be a complement to a longer-term internal reduction strategy. Support for high-quality, third-party verified carbon projects that avoid emissions in the near term is an important tool in guiding an organization’s path towards longer-term climate goals.
Prioritizing net zero efforts
Together, these four action areas form a comprehensive framework of corporate action. Keep in mind that these efforts should overlay with bigger-picture thinking about understanding the climate crisis and the role your company can play in shaping and supporting a net zero economy on a global scale. Which brings us full circle to the original question: What’s your company’s climate opportunity?
If you’re interested in learning more about how you can support your company’s journey to net zero, I encourage you to visit our new Net Zero Resource Center to download an infographic that covers all four action areas, watch a quick video, and view other helpful resources.