Climate Solutions Group

6 Steps of an Effective Carbon Reduction Program

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May 2017

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Is your company prepared for a low carbon future? Carbon reduction programs ensure that your efforts – whether compliance or voluntary – effectively minimize risks and costs, and align with your corporate culture. These six steps highlight how to effectively move your business towards a low carbon economy.

1. Understand Your Company’s Corporate Social Responsibility (CSR) and Carbon Emission Reduction Priorities

Before developing a carbon reduction strategy, management needs to understand the business’s CSR strategy and priorities around greenhouse emission reductions. Who are the core stakeholders that have the most power, legitimacy, and urgency? Think about the impacts of your company and its supply chain on these core stakeholders. Where can you make cost effective GHG reductions that provide benefits and improve relationships with these stakeholders? How can you influence corporate culture to get behind your CSR and carbon emission reduction priorities? Aligning your CSR strategy and carbon reduction strategy will keep your business’s goals consistent and clear to both internal and external stakeholders.

Do you want to go carbon neutral? Or net positive? Your answer might depend on how you measure your carbon footprint.

2. Measure Your Carbon Footprint and Compliance Exposure

You can only manage what you can measure. Measuring your business’s carbon footprint will allow you to establish a benchmark and understand where opportunities and challenges lie for reducing your carbon risk and compliance exposure.  A few important considerations must be made before measuring your carbon footprint.

These include:

  • Defining the goals of your carbon measurement/accounting
  • Establishing the scope, boundaries and validation requirements
  • Aligning with the relevant protocols, frameworks, and standards such as the Greenhouse Gas Protocol, ISO 14064, Greenhouse Gas Accounting & Reporting Principles
  • Analyzing data collected to identify carbon risks, challenges, opportunities and compliance exposure

Once you understand your benchmark, you’ll be able to make specific, measurable, attainable, realistic and time-based (SMART) goals.

3. Set Carbon Reduction Targets, Risks, Costs, and Options

Keep in mind that the best in class climate performers can financially outperform their peers (CDP, 2015). Setting strong emission reduction targets will establish the credibility that businesses require in a low carbon economy and will add legitimacy to your CSR strategy. How will your business determine possibilities and weigh tradeoffs? Do you spend more now to save later? How will the development of carbon markets affect future risks and costs?

Your business will need to decide whether to establish absolute or intensity targets or both, and whether to set short and/or long term goals. Identifying potential risks, future potential costs, and disruptive innovation that can affect your business should be considered in your targets.

4. Make Internal Carbon Reductions

This is where the rubber hits the road. There are often internal “low-hanging fruit” opportunities to reduce carbon emissions with very short payback periods. These might include re-use, recycling, organics diversion, switching to LED lighting, smart technology, and incentivizing employee’s use of public or active transportation. These are examples of simple and inexpensive, yet effective opportunities to reduce your company’s internal carbon footprint. Activities like these can also help to foster a corporate culture that values sustainability.

After your company has taken advantage of “low-hanging fruit” options, you may consider more significant investments options such as efficient heating and cooling systems, energy efficiency retrofits, recommissioning, and fuel switching. The internal carbon reductions you make can have significant value in a sustainability or CSR report, and improve your company’s environmental, social, and governance (ESG) performance. Investors will take notice.

5. Invest in Carbon Reduction Projects (Insetting)

What if you want to go beyond internal carbon reductions but still want to reduce the carbon emissions associated with your business? Insetting is an emerging concept where companies are influencing and investing within their own supply chain to reduce carbon emissions. Insetting can be a great opportunity to engage with suppliers, a key stakeholder in any business. For example, your suppliers may have limited access to capital. Engaging with these suppliers on ways to reduce their own emissions and providing low cost capital could result in significant mutual benefits including cost savings, risk mitigation, CSR benefits, and enhanced business relationships through collaboration. Insetting is worth considering. It can be an investment rather than a cost line and it strengthens your own supply chain.

6. Offset Remaining Exposure Through Emissions Trading

Emissions trading within cap and trade programs is an established market based approach. Cap and trade systems allocate resources to companies and offset projects that can reduce emissions at the lowest price. Two compliance instruments – emission allowances and carbon offsets – represent one tonne of CO2 equivalent emissions and are used by companies to cover their remaining carbon exposure after internal reductions are made. Emission allowances are sold in auctions and/or allocated to regulated companies by governments. If these companies reduce emissions below their regulated “cap” they can sell their surplus emission allowances in carbon markets. Purchasing carbon offsets, on the other hand, is a way of reducing your own emissions by proxy – paying someone else to do what you cannot.

Specialized knowledge and experience is required to guide companies through the complexity of carbon markets and emissions trading. Companies and individuals that are aware of the inevitable transition to a low carbon future can be confident that carbon markets and emissions trading will develop into major sources of revenue and cost savings. Savvy, forward-thinking investors and organizations on the forefront of the transition to a low carbon future will recognize that offset projects and emissions trading will become a significant opportunity for carbon negative revenue generation.

Photo Courtesy of Sheila Sund

References:
CDP (2015) CDP Climate Change Report 2015: The mainstreaming of low-carbon on Wall Street. Climate Disclosure Project. Retrieved from: http://www.wyndhamworldwide.com/sites/pdfs/green/CDP-Climate-Change-Report-2015.pdf

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