Decarbonization Journey: The Road to Net-Zero
Climate change and its associated risks are becoming a pressing concern for businesses across the globe. For many companies, decarbonization — the reduction of carbon emissions — is critical to not only mitigating the environmental impact of their operations, but to also ensuring sustainable and profitable futures. In this article, we will explore the concept of a decarbonization journey, the importance of net-zero, strategies to achieve it, and the role that renewable energy, climate risk frameworks, and international agreements like the Paris Agreement play in achieving decarbonization.
What is a decarbonization journey?
Understanding carbon emissions and the need for decarbonization
Carbon emissions are the result of energy consumption in all forms, from transportation to electricity production. These emissions contribute to climate change; a decarbonization journey is the process of reducing these emissions to prevent catastrophic global warming. Decarbonization is not only a moral imperative to protect our planet, but also a means to future-proof businesses by reducing carbon footprint and earning a competitive edge in the market.
How a decarbonization journey differs from traditional sustainability initiatives
Traditional sustainability initiatives aim to minimize the negative environmental impact of business operations. Decarbonization journeys prioritize carbon reduction, placing a much greater emphasis on climate change mitigation. Coupled with a commitment to sustainability, the result of decarbonization can lead to businesses that truly have a net-positive impact on the environment.
Why businesses should prioritize decarbonization now
As noted by the World Business Council for Sustainable Development (WBCSD), businesses that take action today are more likely to succeed in the future. By taking immediate steps to reduce their carbon footprint, businesses can lower their exposure to environmental market risks and improve the health of the planet. Additionally, setting decarbonization pathways now can provide a roadmap for effective business planning, which is essential to remaining competitive in an ever-changing marketplace.
What is net-zero and why is it important?
Defining net-zero and its role in decarbonization
Net-zero refers to achieving a balance between carbon emissions released and carbon emissions removed from the atmosphere. The ultimate goal of a decarbonization journey is carbon neutrality or net-zero emissions. This means that the amount of carbon released is equivalent to the amount of carbon that the business can securely capture and mitigate. Net-zero is critical to achieving sustainable futures and promoting environmental stewardship.
How net-zero can benefit your business
Net-zero is not just an environmental goal, it is also advantageous for businesses. By committing to a net-zero target, companies can enjoy better reputation and customer loyalty while increasing their access to investment capital. Net-zero can also help companies become more resilient by reducing their exposure to climate-related disasters and market fluctuations.
Strategies to achieve net-zero
There are various strategies businesses can use to achieve net-zero emissions. These include setting decarbonization targets, using renewable energy sources, optimizing energy efficiency, reducing waste, and adopting low-carbon fuel options. Another strategy that has gained traction in recent years is leveraging stakeholder support to drive change.
What are the five pillars to achieving successful decarbonization?
Develop meaningful strategies to achieve net-zero
To develop a successful decarbonization strategy, businesses must first understand their emissions profile and set ambitious, yet achievable targets to achieve net-zero emissions by 2050 with intermediate targets such as decarbonizing their electricity by 2030. These targets must be backed by a robust action plan that outlines specific measures to achieve them, and progress must be monitored and reported regularly.
Begin to act: setting intermediate targets for decarbonization
To make meaningful progress towards net-zero, businesses must also set and act upon intermediate targets for decarbonization. While a robust net-zero strategy may take time to develop and implement, intermediate targets can provide a tangible starting point that demonstrates progress and drives momentum. It also helps businesses set smaller goals, such as reducing emissions from operations or supply chain, encouraging innovation and increasing efficiency.
Leverage stakeholder support to drive change
Stakeholders, including customers, investors, and the wider public, have become more environmentally conscious and supportive of businesses that prioritize decarbonization. Leveraging stakeholder support means that businesses can amplify their voice and influence, access new capital sources, build trust, and drive meaningful change within the industry.
What is the role of renewable energy in decarbonization?
How renewable energy can help reduce carbon emissions
Renewable energy sources, such as solar, wind, and hydro power, generate electricity with negligible greenhouse gas emissions. Investing in renewable energy can therefore significantly reduce carbon emissions in business operations. By reducing the dependence on fossil fuels, companies can also save on energy costs and reduce their exposure to fluctuating energy prices.
What businesses can do to accelerate adoption of renewable energy
There are several ways businesses can accelerate the adoption of renewable energy, including entering power purchase agreements, investing in renewable energy credits or carbon offsets, and implementing on-site renewable energy solutions. Businesses can also work with their suppliers to prioritize renewable energy in their supply chains, innovate towards renewable energy alternatives or future technologies and participate in green tariffs, rebates, or incentives.
Identifying and prioritizing low-carbon fuel options
Another key aspect of decarbonization is the identification and prioritization of low-carbon fuel options. These fuels, such as biofuels, biomethane, and hydrogen, can replace traditional fossil fuels to help reduce carbon emissions. Companies can use decarbonization services and tools, like carbon footprint assessments and lifecycle analyses, to identify the most effective low-carbon fuel options for their operations.
How can businesses navigate the climate risk framework?
Understanding the implications of climate risk for businesses
Climate risk refers to the potential financial, operational, and reputational risks associated with climate change. As climate change continues to affect our planet, these risks become more acute, and businesses must learn how to navigate them effectively. It is expected from business leaders to make effective decisions while accounting for climate risk, towards decarbonisation.
How to manage and report on climate risk
Businesses can manage climate risk by conducting risk assessments, setting risk mitigation strategies, and monitoring and reporting on their progress. As part of this process, companies can also develop human capital and training programs to ensure that employees have an understanding of the risks associated with climate change and mitigation strategies.
Incorporating climate risk into business strategy
In addition to managing climate risk, it is also important for businesses to incorporate climate risk into their business strategy. Businesses can consider the direct and indirect effects of climate change on their industry and find new opportunities to mitigate or reduce these risks while advancing decarbonization practices.
What is the role of international agreements like the Paris Agreement in decarbonization?
Overview of the Paris Agreement and its goals
The Paris Agreement, signed in 2015, is an internationally recognized agreement to combat climate change. The agreement aims to limit global warming to below 2°C and encourage countries to strive towards limiting warming to 1.5°C. The agreement seeks to achieve this goal by setting out various strategies and goals for countries, including the decarbonization of their economies.
How businesses can align with the Paris Agreement
Businesses can align with the Paris Agreement by setting their decarbonization pathways, reporting on their carbon emissions, and showing how they are reducing their carbon emissions in line with the science-based targets. By working together, the business community and stakeholders can make meaningful progress towards achieving decarbonization goals and aligning with this important agreement.
Why international cooperation is critical for achieving net-zero
International cooperation is essential to combat the global challenge of reducing greenhouse gas emissions. It requires a coordinated effort between governments, businesses, and stakeholders, to accelerate the energy transition towards low-carbon economies. International collaboration in the form of knowledge sharing, experience and best practices can raise awareness, drive innovation, and scale up financing lines for carbon reductions.
In conclusion, many companies around the world have recognized that decarbonization is a priority to create a sustainable future. The road toward reducing carbon emissions is paved with an array of strategies including setting decarbonization targets, leveraging stakeholder support, and investing in renewable energy sources. As businesses navigate the climate risk framework and align with international agreements like the Paris Agreement, continued investment and action towards successful decarbonization efforts have never been more critical for the long-term well-being of the planet and profitability of the companies.
Q: What is decarbonization journey?
A: Decarbonization journey is a process of reducing greenhouse gas (GHG) emissions to net zero in order to limit global warming and avoid the worst impacts of climate change.
Q: Why is decarbonization necessary?
A: Decarbonization is necessary to reduce the risk of catastrophic climate change, which can have devastating consequences for people, economies, and the planet.
Q: What is the meaning of net zero?
A: Net zero means achieving a balance between GHG emissions produced and GHG emissions removed from the atmosphere. It involves reducing emissions as much as possible and offsetting the remaining emissions through activities like carbon capture or investing in nature-based solutions.
Q: How can businesses develop meaningful strategies to achieve net zero?
A: Businesses can develop meaningful strategies to achieve net zero by leveraging a decarbonization roadmap, which is a set of steps toward net zero that can be customized to a company’s specific needs and goals. These roadmaps may consider actions like reducing energy use, increasing the use of renewable energy, and electrifying vehicles and equipment.
Q: Why should businesses begin to act on decarbonization now?
A: Decarbonization is necessary for risk mitigation, regulatory compliance, and stakeholder expectations. By beginning the journey to net-zero now, businesses can reduce their emissions, create new opportunities for growth, and demonstrate their commitment to climate action.
Q: What is the role of industry leaders in the decarbonization journey?
A: Industry leaders mean that every industry, from big to small, should transition to net-zero carbon. By leading the way, industry leaders can inspire other companies to take action, create new markets for low-carbon solutions, and accelerate the transition to net zero.
Q: Are there any benefits to decarbonization?
A: Decarbonization can lead to a host of benefits, including a more resilient business, cost reductions from efficiency gains, access to new markets, and improved reputation with stakeholders.
Q: Can businesses start their green journey immediately without any capital investment?
A: Yes, there are many actions businesses can take to begin their decarbonization journey immediately without any capital investment. For example, companies can conduct energy audits, implement energy-efficient practices, and engage suppliers in sustainable practices.
Q: What is KPMG’s role in the decarbonization journey?
A: KPMG is a global professional services firm that helps organizations develop and implement decarbonization strategies. KPMG’s experts can provide insights, tools, and guidance to help businesses transition to net zero.
Q: What is carbon capture?
A: Carbon capture is a technique for trapping carbon dioxide (CO2) emissions from power plants, factories, or other industrial processes before they are released into the atmosphere. The captured CO2 can then be either stored underground or used for enhanced oil recovery.
