Corporate Decarbonisation: Key Takeaways from Our Latest Webinar

The escalating climate crisis has ignited a global call to action, particularly for corporations. As businesses recognise their role in mitigating climate change, decarbonisation has emerged as a strategic imperative.

In this blog, Vishnu Aggarwal, Deputy VP of Renewable Trading and Origination and host of our recent ‘Decarbonisation for Corporates’ webinar, delves into the intricacies of corporate decarbonisation, sharing key insights surrounding the regulatory landscape, carbon credit markets, and practical strategies for businesses.

Insight One: Navigating the Complex Regulatory Landscape

Sharing her expertise on the rapidly evolving regulatory landscape surrounding decarbonisation, Katya de Vere Walker, Head of Net Zero Policy, provided a comprehensive overview of key changes in the regulatory environment.

Katya outlined four aspects of the regulatory landscape which are of key prominence in the fight against climate change:

• International Commitments: The Paris Agreement and subsequent global accords have set ambitious targets for reducing greenhouse gas (GHG) emissions. Yet an accelerating global ambition (e.g. the upward review and target setting in Nationally Determined Contributions (NDCs)) as well as more stringent and coordinated policies are transforming global pledges into actionable plans. Nations across the globe are making efforts to meet rising standards of excellence in sustainability..
• National-Level Regulations: At a national level, countries continue expanding policies and regulations to achieve tangible GHG reductions in a wider range of sectors and products including carbon pricing mechanisms, emissions standards and corporate disclosure requirements, to drive decarbonisation.
• Corporate Disclosure: Companies, especially large and public enterprises, are already subject to comprehensive mandatory disclosure requirements, encompassing both direct and indirect emissions. Moving forward there is a clear trend towards more granular disclosure and broader application (to include value chain emissions, new sectors and small-and-medium enterprises). Stronger integration between sustainability and financial reporting, as well stringent assurance and verification of emissions data   necessitate the rollout of robust transition plans capable of achieving meaningful GHG reductions to withstand scrutiny from auditors and regulators.
• Voluntary Initiatives: Whilst mandatory regulatory frameworks are crucial to controlling and reducing GHG emissions in key polluting sectors and by major actors, they fall short in addressing the global warming crisis. Voluntary action and carbon offsetting are seen as essential and flexible in addressing the climate crisis by tackling residual and unavoidable emissions, allowing businesses to take proactive steps towards long-term sustainability. Organisation and country-led standards, guidance and procedures direct projects’ origination. They help achieve measurable avoidance, removal or reduction of GHG emissions. Once seen as a cost-effective way for reaching corporate emissions targets, they have become credible means for accelerating domestic and international efforts in tackling climate change and biodiversity loss (e.g., Article 6.4 resolution; newly published UK VCM integrity principles).

Insight 2: A Deeper Dive into Carbon Credits

Carbon credits represent verified avoidance, reduction or removal of carbon emissions. They can be generated from a variety of projects, including renewable energy, reforestation and energy efficiency initiatives. Akira Katsuyama, Head of Carbon Trading, delved into the intricacies of carbon credits, providing valuable insights for businesses seeking to reduce their environmental impact. Four key takeaways included:

• Carbon Credits vs. Carbon Allowances: Carbon credits and carbon allowances are distinct mechanisms for managing greenhouse gas emissions. Carbon credits represent specific emission reduction projects, enabling direct investment in climate solutions. In contrast, carbon allowances are issued by governments to limit emissions within a specific region or sector.
• How different businesses can utilise carbon credits: Akira shared how businesses across three sectors are leveraging carbon credits to achieve their sustainability goals. Purchasing carbon credits for renewable energy and reforestation projects has enabled the tech sector to offset their operational emissions. Meanwhile, corporates within the airline sector offer carbon offset options to passengers, allowing them to contribute to climate mitigation efforts, and automotives invest in carbon credit projects to offset emissions from manufacturing processes or vehicle production.
• Key Considerations When Purchasing Carbon Credits: When businesses purchase carbon credits, Akira cited four key considerations they should factor into their decision-making process:

Project Quality: It's crucial to select high-quality carbon credits from reputable projects.
Additionality: Ensure that the emission reductions would not have occurred without the carbon credit project.
Permanence: For projects involving carbon removal, consider the long-term permanence of the stored carbon.
Transparency: Choose projects with transparent reporting and verification processes.

• Navigating the Evolving Carbon Credit Market: Akira's final point highlighted how technological advancements, independent assessments, and standardisation efforts are driving the evolution of the carbon credit market.
  
  Satellite monitoring enhances the accuracy of tracking and verifying emission reductions, while rating agencies provide independent assessments to guide businesses in making informed decisions about carbon credit projects. The standardisation of carbon credit methodologies and quality criteria further improves transparency and accountability, fostering trust and confidence in the market.
  
  These factors collectively contribute to a more robust and reliable carbon credit market, facilitating effective climate action and sustainable business practices. Carbon credits play a vital role in the global effort to combat climate change. By understanding their nuances and making informed choices, businesses can contribute to a more sustainable future. As the carbon market continues to evolve, it's essential to stay updated on the latest regulations, technologies, and industry best practices.

Insight 3: Moving from Awareness to Action - Practical Strategies for Decarbonisation

The urgency of climate change has translated into clear regulations and market trends, and whilst it’s crucial to understand these, the real challenge lies in translating this awareness into effective climate action.

To help businesses to effectively reduce their carbon footprint and build a sustainable future, the webinar concluded with the following action points:

1. Conduct a Comprehensive Carbon Assessment:
• Identify and quantify direct and indirect emissions sources.
• Prioritise reduction opportunities based on cost-effectiveness and impact.
2. Set Ambitious Targets:
• Establish clear, measurable, and time-bound decarbonisation targets aligned with science-based goals.
• Consider setting interim targets to track progress and maintain momentum.
3. Invest in Energy Efficiency:
• Implement energy-efficient technologies and practices to reduce energy consumption and associated emissions.
• Conduct regular energy audits to identify potential savings.
4. Transition to Renewable Energy:
• Explore opportunities to procure renewable energy through power purchase agreements (PPAs) or on-site generation.
• Consider investing in renewable energy projects to generate additional revenue and environmental benefits.
5. Optimise Supply Chains:
• Engage with suppliers to reduce their carbon footprint and promote sustainable practices.
• Explore opportunities for supply chain optimisation and consolidation to minimise emissions.
6. Utilise Carbon Offsets:
• Consider high-quality carbon offsets to compensate for residual emissions that cannot be eliminated through other measures.
7. Engage with Stakeholders:
• Foster collaboration with employees, customers, investors and policymakers to build support for decarbonisation initiatives.
• Transparent communication about climate goals and progress can enhance brand reputation and attract sustainable investors.

By implementing these strategies and staying informed about the evolving regulatory landscape, corporations can effectively reduce their carbon footprint, mitigate climate risks and contribute to a sustainable future.

Are you ready to take the first step towards decarbonising? We know it is a daunting process and can be complicated. Our team of experts at SmartestEnergy are always ready to help. Please contact us at [email protected] or find out more information on our website https://www.smartestenergy.com/en_gb.