Climate action is the need of the hour, with the planet already 1.1° Celsius warmer than pre-industrial times. Given the climate emergency we find ourselves in, it is imperative that we focus our collective energies on finding an urgent solution to an existential problem.
Large corporations have a fiduciary responsibility towards their primary stakeholders – customers, investors and employees – all of whom prioritise environmental impact more than ever before. This is further catalysed by impending regulation and voluntary efforts among businesses to be climate stewards within their industries. Several companies have made net-zero commitments across the globe, but the pathway to achieving it continues to remain unclear.
Slashing emissions cannot be achieved overnight. An effective climate action strategy takes a comprehensive assessment, coupled with short-, medium- and long-term plans to incrementally reduce emission intensities across any given business.
What gets measured gets done: Measurable emissions reduction is a key indicator of the progress made towards a carbon-neutral future. Measurement entails deeper analysis of operations, including an assessment of emissions profiles of different parts of the value chain to identify those that significantly contribute towards organisation-level emissions.
Organisational emissions come from three categories – scope 1, which refers to direct emissions from company facilities; scope 2, which refers to indirect emissions (including purchased resources such as electricity consumption); and scope 3 emissions that involve emissions from suppliers that are a result of the company’s operations, from customers using the company’s product/services and the broader enabling ecosystem.
Today, businesses that disclose their sustainability initiatives measure and report Scope 1 & 2 easily, while beginning to map out Scope 3 emissions too. Besides this, companies are investing in measuring climate-risks to test the vulnerability of their business operations to unexpected climate events. A business’s ability to de-risk its operations from the material impact of climate disasters and insulate itself through a robust climate risk management strategy has the potential to save it significant financial resources.
Defining one’s climate strategy: The next step after measuring business-level emissions is to set targets for transitioning to more climate-friendly operations. These include commitments to achieve net-zero emissions in the coming two-three decades. Multi-decadal plans are important for lending direction and steering organisational climate action, but tangible results can only be built through real-time monitoring of progress in the short term.
Companies that are serious about executing their climate strategy, report their performance through mechanisms like the ‘carbon disclosure project’ (CDP) and ‘task force on climate-related financial disclosure’ (TCFD). While these are business-level metrics, carbon labelling allows businesses to fragment and report emissions at a product-level. Just like food products have calorie labels to help understand nutrition information, carbon labels showcase the environmental impact of the product.
Executing one’s climate strategy: Identifying carbon-intensive emission hotspots in their operations continuously and forming strategies to lower emissions is critical to building momentum in business climate action. Most companies first tap into cleaner alternatives for their energy requirements (renewables). The switch to renewables is not only a greener option, but is also more cost-effective at higher utilisation levels than fossil fuels. Coupling this with waste reduction and energy efficiency strategies through equipment upgrades, etc, will make a significant dent on overall emissions.
Business climate action has to follow a simple four-step approach – measure, manage, reduce and remove
Reaching carbon neutrality: Despite the best efforts to reduce emissions, some amount of residual emissions will exist. To achieve net-zero, organisations will have to include an offset plan through carbon credits. Carbon offsets have received criticism in the past. However, when executed transparently, they will help channel necessary capital to operationalise high-quality climate solutions that reduce emissions on the ground.
Nature-based solutions such as afforestation, regenerative agriculture and biochar have 20-100 year removal cycles. Given the urgency of the climate crisis, financing them via carbon credits to offset residual emissions is critical to achieving net-zero targets.
In summary, business climate action has to follow a simple four-step approach – measure, manage, reduce and remove. The corporate world has shown enormous responsibility in pledging to achieve net-zero emissions. India is not too far behind with the advent of the BRSR (business responsibility & sustainability reporting) coming to fruition.
We are stepping into a critical decade of collective climate action. There is no better time for all climate actors, including businesses, to actively disclose and transparently make progress towards adopting and financing sustainable solutions. Acting on this yesterday would have been ideal, but today is as good a time as any.