Building your climate actions from “zero” to “net zero”

In this guide, you’ll learn the basics of implementing emission reductions at your company. But before we get started, here are a few points to consider.

A decarbonization plan should be driven by setting and achieving a science-based target for your emissions. Setting the target is easy, but the reality is that 93% of companies will miss their emission targets if they don’t at least double the pace of emissions reduction by 2030, according to a new report from Accenture. A successful decarbonization plan requires an action and implementation plan.

That leads to the second basic fact about decarbonization: you cannot do it alone. As you get deeper into your decarbonization journey, reducing emissions will get more complex. You will need help from your suppliers. You must get them on board and help them in their decarbonization journey.

Finally, staying on track requires tracking your emissions by collecting the right data at the right level of granularity. This will help you measure your progress toward targets and have clear insights into making decisions and implementing actions to reduce emissions. A program backed by data will provide transparency and verifiability and avoid any risks of greenwashing.

I hope that this guide is helpful to you. We are here to help and answer any questions. Please get in touch and book your free 30-minute free assessment consultation.

1. What is decarbonization all about?

Human-induced greenhouse gas emissions are accelerating global warming, disrupting the Earth’s climate equilibrium, and causing extreme weather events worldwide.

To limit climate disruption, 196 countries signed the “The Paris Agreement” to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.”

The most recent Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report warns that global warming is more likely than not to reach 1.5°C.

Decarbonization refers to reducing greenhouse gas emissions using science-based targets aligned with the Paris Agreement.

In Oct 2023, 985 of the largest 2000 publicly traded companies had net-zero targets, but numerous analyses have found that actions are lagging ambitions. This action gap will require decarbonization strategies tailored to each corporation’s circumstances.

This guide examines all the elements necessary for a strong decarbonization strategy.

2. Start by learning

What are greenhouse gas emissions?

The six main greenhouse gases are Carbon dioxide (CO2), Methane (CH4), Nitrous oxide (N2O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs), Sulfur hexafluoride (SF6). Each GHG has a “global warming potential,” or “GWP,” which refers to its heat-trapping ability relative to that of carbon dioxide (CO2). Greenhouse gas emissions are usually reported as CO2-equivalents (CO2e).

What is a science-based target?

A science-based target is an emissions target that aligns with what climate science deems necessary to meet the goals of the Paris Agreement, limiting global warming to 1.5°C above pre-industrial levels.

3. Understand your company context – Identify your GHG Inventory

To create an inventory of all emission sources, an organization needs to identify all entities, assets, and operations and select Scope 3 categories to include in the inventory.

To identify the entities, assets, and operations, the GHG protocol defines methods for setting boundaries for greenhouse gas (GHG) inventory in its Corporate Accounting and Reporting Standard and Corporate Value Chain (Scope 3) Accounting and Reporting Standard.

Additional Resources: GHG Emissions Accounting: Creating a GHG Inventory List

4. Know your emissions

Emissions are categorized into three types based on their source: Scope 1, Scope 2, and Scope 3.

What are Scope 1 Emissions?

Scope 1 refers to direct GHG emissions that occur from sources owned or controlled by the company, such as emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc., and emissions from chemical production in owned or controlled process equipment.

Additional Resources: Carbon Footprint 101: Answers to all your Scope 1 Questions

What are Scope 2 Emissions?

Scope 2 refers to emissions from acquired and consumed electricity, steam, heating, and cooling. These emissions are a consequence of activities of the reporting organization but occur at sources owned or controlled by another organization (for example, they are owned or controlled by an electricity generator or utility).

Additional Resources: Carbon Footprint 101: Scope 2 Emissions

What are Scope 3 Emissions?

Scope 3 emissions are a consequence of the activities that occur from sources not owned or controlled by the company. Some examples of scope 3 activities are extraction and production of purchased materials; transportation of purchased fuels; and use of sold products and services. Scope 3 activities also include waste disposal, employee business travel, and outsourced operations.

Additional Resources: Scope 3 Emissions

See GHG Protocol terms for a reference to GHG definitions.

5. Create a Data Strategy

Your decarbonization strategy should be based on your emissions data and integrated into your business strategy.

The first step is collecting and analyzing your emissions data at the right level of granularity so that you can take actions that reduce your emissions, cut costs, and even generate profits for your company. The data might be spread throughout your organization, in numerous locations, and in various departments.

For Scope 1 and Scope 2 data, use your GHG inventory to establish a data collection process.

For Scope 3 data, review the 15 categories of Scope 3 data and identify the categories relevant to your business. Certain Scope 3 categories, like Category 1: Purchased Goods and Services and Category 2: Capital Goods, will require data from your suppliers. If you have a product business, Categories 10,11 & 12: Processing, Use, and End-of-life treatment of sold products will require working with your product design team and users to understand emissions associated with these categories. Similarly, the remaining Scope 3 categories will require working with your employees (Employee Commuting), and other business partners (Transportation & Distribution or Leased Assets). Each Scope 3 category will require a different data strategy.

Keep the following principles in mind:

As much as possible, avoid using estimates and plan to collect actual data.
Prepare for data audits; have established processes and methods to track the accuracy and transparency of the data.

Additional Resources: GHG Accounting – Inventory Management Plan

6. Calculate your Greenhouse Gas Emissions (Carbon Footprint)

Once you have your emissions data, you can compute your carbon footprint. Your carbon footprint for each Scope and each category in Scope 3 will be the drivers for integrating your decarbonization plan into your business strategy. The data is the basis for identifying your climate impact, the risks you face, and opportunities for your business to participate in climate action.

Additional Resources: GHG Emissions Accounting: Activity Data and Emission Factors

7. Know Your Actions!

Collecting data and computing your carbon footprint is only worth it if you use them to plan and execute actions that will help reduce your emissions.

The actions you plan depend on the hotspots identified in your emission profile.

There are three levers available to reduce emissions: eliminating or reducing the activity that requires fossil fuel, reducing emissions by using an alternative to fossil fuel or reducing the emission intensity by making the activity more energy efficient.

Here is a list of actions you can take depending on the high emissions type.

Scope 1 – Improve the energy efficiency of buildings by improving building insulation and replacing equipment that uses fossil fuels with electric equipment like heat pumps, electric water heaters, and cook stoves. Move to electric vehicles, use more fuel-efficient equipment, and reduce the number of miles traveled by vehicles.

Scope 2 – There are several ways to reduce Scope 2:

More efficient equipment will reduce the use of electricity. LED lighting and sensors to shut off lights when they are not being used automatically are easy ways to reduce electricity use.
On-site renewable electricity generation can also be used to reduce purchased electricity.
Purchasing electricity produced from renewable sources like wind, solar, and hydro is another way to reduce Scope 2 emissions.

Scope 3 – For Scope 3 emissions, the reduction actions are specific to each category. Some categories require that you work with suppliers (Category 1 and 2), and some require that you work with your employees to reduce business travel and employee commuting (Category 6 and 7). Energy efficiency helps address Category 3 emissions. Product design teams can help design energy-efficient products and use circularity principles to reduce emissions in Category 5, 10, 11, and 12. Work with logistics teams to reduce emissions in Category 4 and 9 to reduce emissions in upstream and downstream transportation and distribution. Partnerships between lessors and lessees can help reduce emissions in Category 8 and 13 – upstream and downstream leased assets. Work with franchisees and portfolio companies to reduce Category 14 and 15 emissions.

Check out our article on Scope 3 categories and climate actions available in each category – Scope 3 Emissions.

Beyond focusing on specific emission categories, companies can implement holistic programs that encourage employees to lower emissions. Some organizational program examples are:

Internal carbon pricing on emissions to incentivize emission reductions
Directly linking employee incentives, like bonuses, goals, and targets, to sustainability goals.
Providing training and encouraging employees to adopt sustainability practices.
Creating policies aimed at reducing or eliminating emissions. For example, limiting business travel and adding sustainability requirements to supplier contracts, leasing contracts, and procurement practices.
Supporting customer emission reduction goals by developing products and services with lower negative environmental impacts.
Incorporating sustainability into the overall business strategy, transforming the business model to achieve decarbonization.

Finally, after considering all the available options to reduce emissions, companies can use carbon credits or carbon offsets to offset any remaining emissions to achieve net-zero emissions.

8. Execute – Create and Implement Roadmaps

Congratulations on collecting your data, computing your carbon footprint, and identifying possible actions. Now, it’s time to create a roadmap for your decarbonization journey. Roadmaps contain budgets, roles, training needs and the time line for deploying solutions. Decarbonization requires investments in innovation, technology, tools, and a holistic approach. Creating the roadmap must be a team effort with short-term and long-term goals. Roadmaps should also include the business case and get buy-in and support from management.

Programs must address double materiality, the impact of climate change on the company, and the impact of the company on the environment and society, clearly identifying the risks and the opportunities. Reviewing the data strategy and climate actions will reveal that the data and action must be integrated into the business. This necessitates the creation of a cross-functional team. A successful sustainability program has buy-in from management and the board and adoption by every employee. This requires many discussions, training, and understanding of the roles and needs of all the cross-functional team members contributing to the sustainability program.

Our article on 9 ESG Initiatives for 2024 ESG Programs provides initiatives that help with decarbonization, from initiatives in the company to working with suppliers, joining industry consortiums to investing in climate innovation, and supporting the UN Sustainability Development Goals.

It’s in the solution deployment stage where organizations take the bulk of the decarbonization pathway steps. These steps not only reduce emissions, but they also drive resource efficiency, resiliency, and innovation, thereby boosting positive bottom-line impact.

9. Measure, Track, and Adjust

You’ve created a roadmap, designed programs, and trained employees to implement them. As you progress through your initiatives, you must measure and track emissions to analyze your efforts and adjust as needed. Establish metrics/indicators to measure progress relative to the organization’s targets and assess performance in relation to the management of relevant climate-related risks and opportunities.

Develop a clear and transparent process for aligning the purpose and strategy of decarbonization efforts with the overall corporate business strategy. Define success and measure and report progress to key stakeholders.

10. Communicate and Celebrate Your Results

The final step is communicating your results to your internal and external stakeholders. Publish them in Sustainability Reports. Respond to questionnaires and get rankings and ratings from third-party organizations like CDP, MSCI or Ecovadis.

Additional Resources: A Guide to Crafting an Effective Sustainability Report and A Survey of ESG Rating Providers