The race to becoming emissions neutral: how to get to the start line

Sustainability has been a buzzword for many years amongst organisations and individuals alike, and since Al Gore released his 2006 documentary “An Inconvenient Truth” we have seen a steady and more persistent demand for sustainable products and processes. More recently, activists such as Greta Thunberg have become household names and are sharpening the focus on sustainability and climate issues, this, combined with the current COVID-19 pandemic, is not only driving the agenda amongst the general public, but for all organisations as well. Sustainability is no longer an ‘if’ or ‘when’ for organisations, but a topic which is at the heart of many business strategies. The question now is ‘how’, with multiple factors, including emissions tracking, that organisations must consider. 

Legislation

In December 2020, in light of the need to increase climate ambition, also as required by the Paris Agreement, the European Council endorsed a new 2030 target for emission reduction. EU leaders agreed on a binding EU target for a net domestic reduction of at least 55% in greenhouse gas emissions by 2030 compared to 1990 [1].

As an EU member, Ireland has a significant role to play to ensure these climate change goals are achieved. The Irish Government has published a new climate law which commits Ireland to net-zero carbon emissions by 2050. The governance framework sets out how Ireland will reduce our greenhouse gas emissions by, on average, at least 7% per annum for the next ten years [2].

To meet these emissions targets, activity must increase, and regulation will become more stringent. Auditable reporting and product labelling, both of which will require a high level of accuracy in terms of reporting and management, are two activities which are not a thing of the distant future anymore. Organisations must understand how they can react to these changes and meet the emissions targets.

Consumers

The demand for sustainable solutions is increasing as consumers are seeking products and brands that align with their values. Whilst factors such as cost and ease of purchase remain the main drivers of purchase decisions, there is an accumulating amount of evidence that shows an increasing number of consumers who are willing to pay more for sustainable products[3].  

A recent study conducted on 19,000 consumers across 28 countries revealed that 56% of consumers are willing to pay up to 35% more for sustainable brands[4]. This shift has been a long time coming as 47% of participants said they had already switched to a different product or service because a company violated their personal values[5].

Consumer trends are everchanging and it is key that organisations develop a deeper understanding of their current customer base, with these insights allowing for more tailored products, pricing, and promotion to better meet their specific needs. Detailed analysis that reveals the emission contribution of an individual products entire supply chain has the potential to drive sales and increase customer satisfaction.

Competitors

Companies are realising how sustainable operations can contribute to increased attractiveness in the marketplace and are outlining ambitious emissions targets as a result. This serves multiple purposes; not only will this allow for companies to continue to offer products and services which speak to today’s consumers, but it will also allow them to stay ahead of the increasing legislative pressures. A recent study revealed that 82% of organisations will be more committed to sustainability in 2020[6], a prime example of this is the Science Based Target Initiative (SCBT). More than 150 corporate heavyweights with a combined market share of $2.4trn have signed a statement that urges governments to increase their support and focus on climate science[7]. Major organisations such as Coca-Cola, Colgate Palmolive, Nestle, Unilever, and H&M have all committed to be a part of the transition from a grey to a green economy, but it is evident that some companies have already made significant progress in this area.

Forward thinking companies such as H&M are consistently at the forefront when it comes to sustainability. They have made it a priority to establish a Green Supply Chain and made it their overall aim to be climate positive throughout the entire business by 2040 at the latest[8]. H&M leads the ranking in the use of organic cotton and are also transitioning away from single-use plastics by increasing their use of recycled material. Green initiatives have also made their way into all stores and since 2013, customers are now encouraged to trade a bag of old clothes for vouchers[9].

In 2010, Unilever was the first company to set significant sustainability objectives. They outlined 50 time-bound targets, these included 100% agricultural sourcing to come from sustainable sources, asking consumers to consume less, and making the transition to recycled plastics[10]. Since then, they have achieved zero waste landfill across all their factories, reduced greenhouse gas emissions from manufacturing by 50%, and transitioned to 100% renewable energy across their sites. Not only have these changes made the world a better place, they have also achieved savings more than €1bn[11]. In addition to the cost savings benefits, the publicity from positive media coverage will enhance consumers’ perception of their brand.

Although some competitors may have the ‘first mover advantage’, by looking at what other organisations are doing – or not doing – organisations can quickly align to best practice activities and accelerate their sustainability mission. 

Sustainability as part of the day to day

Becoming completely sustainable is a very large goal for most organisations, and frankly, a daunting one. However, there are steps which can be taken to make the journey more manageable. The first step towards sustainability is to understand your current emissions baseline. Whilst it is beneficial to conduct a complete end-to-end assessment for emissions and environmental reporting across the entire supply chain, a more pragmatic and manageable approach could be to start by measuring a small part of the business, e.g. downstream supply chain to stores and customers’ homes. As carbon reduction also equates to cost reduction, the financial benefits of emissions tracking can be realised in stages and will eventually lead to full transparency and insight into what emissions are most prominent and which levers to pull for maximum effect. The key focus areas should include categories such as raw materials, production, waste management and transportation. Analysing these on a granular level to understand which products and processes account for the highest amount of emissions provides valuable input to the sustainability journey ahead.

Determining one’s own footprint is a challenge for many companies. In addition to the uncertainty involved, common tools reach their limits when it comes to integration into existing data landscapes, continuous reporting, or compliance with existing legal requirements. A live reporting tool which includes factors such as transport mode, temperature regime, vehicle type and fuel composition would provide the details required to draw actionable conclusions.

Next steps

There is an old business adage that ‘If you can’t measure it, you can’t improve it'.

By having a clear view of the emissions footprint across the company, multiple scenarios can be assessed and reviewed before proceeding to phased implementation. The ability to simulate various emissions reduction initiatives can provide understanding in what the strategy going forward should be, and potential changes could include the use of alternative fuels, a change in production processes, or the optimisation of the supply chain network or sourcing network.

The establishment of effective reporting tools and processes is key to success and to the delivery of continuous improvements. A cockpit enabled by technologies such as Digital Twins, Internet of Things, and Artificial Intelligence can track emissions within operations and show the progress of each emission reduction initiative to reveal what the real-life impact of each change is. Continuous tracking and measurements will expose the success stories within the business and best practices will start to emerge.

Legislators, consumers, and competitors are speaking and are making the incentives clear for having an environmentally sustainable business. The journey towards this goal will be challenging but having a clear starting position and with access to today’s technology and methodologies, the end-goal is moving closer and closer.

Lao Tzo famously stated that ‘a journey of a thousand miles begins with a single step’. In the case of Emissions reduction, that step is the implementation of a proprietary emissions reporting tool as a means of establishing your baseline emissions across your operations through production, logistics and office activities, embedding the results to enable you to select the best change initiatives and to measure their impact through ongoing reporting.