Navigating The Climate Action Maze
Toolkit helps businesses get to grips with sustainability requirements, writes Emily Styles
Corporate sustainability has taken on new meaning and importance in recent years. Once largely a matter of environmental compliance and good public image, it now encompasses a wide array of environmental, social and governance (ESG) risks, and has become a question of business value and survival.
Irish businesses are taking steps in the right direction by committing to important initiatives, but many companies are grappling with how they are going to achieve their ambitious targets. This task is made even harder by the labyrinth of target setting frameworks, climate pledges, policy initiatives, and commercial offerings jostling for attention.
To help clarify matters, business lobby group Ibec, in collaboration with Accenture, has developed Climate Action: A toolkit for business. The aim is to provide businesses with the information they need for their climate action journey.
Danny McCoy, Ibec CEO, believes that forward thinking businesses are embracing sustainability and making it a mainstream strategic priority for their organisation.
“These businesses recognise that a business-as-usual approach and a failure to end bad ESG practices like environmental mismanagement, could create financial risks, regulatory burdens, and liabilities in the coming years,” says McCoy. “No business can claim to be sustainable if they are not taking meaningful action to address their climate impacts.”
Hilary O’Meara, country managing
director at Accenture, says that businesses need to move beyond target setting and focus on how to operationalise targets, how to implement carbon reduction initiatives at scale, how to measure and track carbon performance, and how to mobilise teams to achieve this.
“Decarbonisation touches every part of the value chain including warehousing, manufacturing, distribution, and post-consumer disposal,” O’Meara adds. “Reducing emissions across the value chain requires radical collaboration between suppliers, manufacturers, retailers, and customers. The journey to decarbonisation touches every part of business, from sales and marketing to operations, finance, R&D, and investor relations. Therefore, every business leader needs to understand how they can accelerate their own journey to decarbonisation.”
GREENHOUSE GASES
Global warming, and the resulting climate change, is caused by the buildup of manmade heat-trapping GHGs. There are ten GHGs, each with their own chemical and physical properties.
The most important GHGs are carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O).
To set a carbon footprint is to measure the total GHGs caused by an individual, event, region, product, or organisation. For accounting purposes, the tonnage of each GHG is translated into a carbon dioxide equivalent tonnage (tCO2e). The Ibec Toolkit advises that carbon foot-printing is not easy, as emissions are created in many ways, from fossil fuel combustion and certain chemical processes, to farming, food production and changes in land use.
However, new standards for carbon measurement have been created along with new ways of classifying emissions. The gold standard for carbon footprint measurement is the GHG Protocol Corporate Accounting and Reporting Standard, also known as the GHG Protocol.
When assessing the carbon footprint or emission inventory of an organisation, GHG emissions can be divided into three broad categories: Scope 1 emissions are directly created from sources owned or controlled by the company, such as boilers, furnaces, vehicles, or from equipment used in processes like chemical production.
Scope 2 emissions are indirectly created from purchased electricity, heat, cooling, or steam that is consumed by the company. Scope 3 emissions are indirectly created as a consequence of the activities of the company but occur from sources associated with suppliers and/or customers, hence not owned or controlled by the company.
CLIMATE ACTION STRATEGY
When developing a best-practice climate action strategy, Ibec recommends businesses follow the cyclical five-step process. The process is deemed cyclical because the policy environment and businesses (and their emissions profile) change over time. Calculate Establish a carbon footprint for your business. An organisation’s emissions baseline refers to the emissions produced by all relevant activities at a certain point in time, and is the starting point against which progress can be measured. Mobilise Secure buy-in and prioritise. The journey ahead will likely require change to the organisation’s corporate strategy, growth and investment plans, company culture, supply chains, and day-to-day operations.
Commit Set emissions reduction targets, as effective GHG management requires target setting. According to the Toolkit: “Externally, targets help communicate the business commitment and ambition to tackling climate change. Internally they help drive the transformation of the business and ensure decision making and growth plans align with emissions reduction trajectories.” Implement Develop an emissions reduction roadmap setting out all the interventions the business intends to take to achieve their targets within the specified timeline. Measure & Communicate A robust monitoring and measurement system enables regular oversight of progress and the early identification of problems. Regular reporting is
also important to the integrity of the organisation’s approach. Reporting can be done through a pre-existing framework like the SBTi or through an annual report.
MEASUREMENT KPIs
Ibec and Accenture advise that if an organisation is subject to a mandatory disclosure obligation or is participating in a voluntary framework, they will need to follow very specific rules on measurement and reporting. If this is not the case, businesses will have some flexibility in deciding what to measure and how to communicate their progress with stakeholders.
Organisations must develop an internal measurement and internal reporting system that captures relevant, accurate, and auditable data regarding the implementation of their climate strategy. Key Performance Indicators (KPI) and metrics will form an important part of this process.
The Toolkit states that KPIs selected must be relevant to the business and reflect the emissions drivers and decarbonisation opportunities identified. When selecting KPIs and setting up the data capture system, organisations must remember that the data may need to be audited by thirdparty verifiers.
The Ibec Toolkit advises: “To ensure the quality and accessibility of the data, organisations should involve personnel familiar with financial reporting and/or other forms of non-financial reporting. If a Green Team has been set up, it can play a key role in guiding the selection of KPIs and in securing the necessary data from different parts of the organisation. Setting up this system, selecting and collecting relevant KPIs across the business typically requires considerable work. However, once set up and understood by employees, the regular capture and updating of data should become straightforward and normal business practice.”
Ibec’s view is that the public disclosure of company emissions and the reporting of progress is critical to the credibility and integrity of the organisation’s approach. The suggested best practice is to publish this information yearly in the form of an annual sustainability report along with other material ESG matters.
Businesses can also choose to disclose their emissions and progress through a pre-existing framework or initiative like the SBTi or the GRI (see panel). When selecting a framework, businesses are advised to consider its materiality and relevance, the target audience, stakeholder demands, and in-house capacity.