Decarbonisation – Making it a part of an Organisation’s DNA
With so much importance currently placed on embedding ESG values and missions across organisations and promoting progress to net-zero goals, businesses leaders are reaching out for support in designing and implementing decarbonisation strategies. But these strategies are capable of delivering so much more than reducing their impact on the environment.
Key to optimising value from decarbonisation strategies is making it part of everything the business does – from the products it makes to the processes employed, as well as management practices and sourcing strategies. With so many factors to consider, how can business leaders ensure that a decarbonisation mindset is implicit in everything they do?
Decarbonisation is gaining momentum as a buzzword across industries, but with growing regulatory pressure from government, it is something that businesses of all sizes should take seriously. The UK has committed to reaching net-zero by 2050, which will require a collective, cross-industry effort if it is to be achieved. With huge public backing, as well as interest from investors who are looking to value and acquire responsible businesses, there could be opportunities for businesses that start on a programme of decarbonisation ahead of their competitors.
But where should they begin? The most important step is to gain a holistic understanding of the business’ carbon footprint, including its Scope 1, 2 and 3 emissions data. Scope 1 and 2 emissions are those that are directly owned or able to be controlled by the business, while Scope 3 emissions often fall out of the business’ direct control, making them more difficult to influence.
Attempting to meet net-zero goals will be impossible without understanding this data, and a carbon assessment will be crucial to understanding the current lay of the land. A lifecycle carbon assessment of individual products and their production lines will highlight areas that the business should concentrate on. This exercise will help to prioritise resources and deliver a marked reduction in carbon emissions as quickly and cost-effectively as possible. It will also help to flag longer term projects. However, with Scope 3 emissions often accounting for more than 70 per cent of a business’ carbon emissions, it is clear that reducing operational carbon will involve more than ‘in-house’ projects.
While this could seem daunting to businesses setting out on their carbon reduction journey, the best advice is to start by doing what can be done. There are many methods available to reduce carbon emissions within a business’ operations, and industries that implement these sooner could win customer loyalty and secure an advantage over their competitors.
For example, investing in renewable energy systems will make an enormous difference to the company’s overall carbon emissions, and a strategy of electrification will deliver both carbon and cost savings over time. Equally, implementing lean management principles will help to reduce energy consumption and minimise waste, bringing benefits for the environment while simultaneously shoring up the bottom line.
Changing production processes by adopting more efficient technology, for example by working with AI to conduct machinery assessments and reduce unplanned downtime, will serve to optimise processes and improve operational efficiency, and a materials assessment will enable the business to adapt its sourcing strategies and make low-carbon switches.
While there are some risks associated with any change project, such as the risk of operational downtime if new machinery fails or new supply lines are disrupted causing costs to increase, to do nothing is simply no longer viable. This is not only due to the regulatory changes that are coming down the line, but also the risk to their corporate reputation, as customers are increasingly choosing to buy from businesses that share their values – i.e., businesses that are more sustainable and actively taking responsibility for the health and wellbeing of the planet.
However, business leaders should be aware that implementing new technology could bring challenges. For example, it could mean current assets quickly become obsolete, and there should be a strategy in place to ensure that these aren’t simply abandoned, thrown away or sent to landfill – undermining the purpose of the replacement. Equally, switching out a supplier or source could not only bring risks to the product and supply chain, but also the divested businesses and communities that may have relied on the income – for example, if the company is based in a low-cost country (LCC). These risks demonstrate the responsibility that a business has not only to its employees and customers as it pursues a decarbonisation strategy, but also the wider communities that are directly or indirectly linked to it.
With new sustainable technologies and low-carbon materials coming to market all the time, business leaders need to stay abreast of what is available, so they can implement changes that will reduce their carbon footprint and deliver a competitive advantage. When building a business case for such investments, they should look beyond customer relationships and cost reduction opportunities. As many workers now seek out opportunities to work with employers that are socially and environmentally responsible, delivering against decarbonisation goals could also help businesses to attract and retain talented people.
To ensure that decarbonisation strategies remain at the top of every business’ agenda, business leaders should ensure that decarbonisation related KPIs carry the same weight in terms of importance and scrutiny as financial KPIs. Performance against them should be included in all top-level reporting, along with cash, profit margin, market share and other business critical information.
However, it is equally important for business leaders to understand that they are not undertaking these challenges alone. There is a wealth of industry-specific experience and innovation to draw down and experiences are being shared more openly. As the regulatory push to decarbonise intensifies, it will become even more important that businesses share best practice and new ways of working with competitors, industry bodies and suppliers; collaborating to achieve a common goal.
By gaining a detailed understanding of their organisation’s carbon footprint and placing decarbonisation strategies at the top of the corporate agenda, business leaders and boardroom decision-makers will ensure they are ‘lived’ by every function of the business and employees at every level. By sharing and collaborating on best-practice principles, and seeking external consultation where appropriate, businesses and sectors will quickly discover that they are much stronger together; making net-zero attainable for all.
Written by, Alessandra Del Centina, managing consultant at management consultancy, Vendigital.