Businesses are looking to improve their efforts to mitigate climate change. Companies are setting net-zero targets at a rapid pace and the carbon offset market is growing.
Cartica applauds companies improving their management of climate risks. However, current carbon reduction efforts are often plagued by questionable practices. Some companies have projections that are vague or unreasonably ambitious. Many use questionable accounting practices. And too many rely on carbon offsets while doing very little to limit the carbon emissions produced by their operations.
Cartica understands the mounting pressure investors and other stakeholders have put on companies to reduce their carbon exposure, but this does not mean that companies need to have a rushed or incomplete process for understanding their carbon footprints. We believe that by abiding by a few core principles, companies can create a robust carbon management strategy.
Set a strong science-based foundation using a standardized framework
Companies should start by measuring their Scope 1, 2, & 3 emissions so that they can evaluate the best opportunities to reduce them. Improving a company’s carbon footprint is likely a long-term project that requires multiple departments, so leadership should first assign staff specific roles and identify internal stakeholders. They may decide to contract outside assistance, and a consultant with experience advising companies on measuring and improving carbon footprints could save costs and time.
Companies should adopt science-based targets, aligned with the 1.5◦C warming trajectory set by the Paris Agreement, and select a reporting framework such as SBTi, Project Drawdown, or CDP, which signals an authentic commitment to reducing carbon emissions.
Be comprehensive with your data from the start
Carbon data is segmented into three buckets:
- Scope 1: Direct emissions that occur from sources that are owned or controlled by the company. For example, chemical production from a pharmaceutical company.
- Scope 2: Emissions from the generation of purchased electricity, heating, and cooling consumed by a company. Examples include electricity used at a manufacturing plant or gas used by a company’s vehicle fleet.
- Scope 3: All indirect emissions that occur in the value chain of the reporting company. These emissions often represent the majority of a company's total emissions generated. Most are the result of the activities of the company but occur from sources not owned or controlled by the company. Examples include business travel and transport of goods for sale.
Companies should provide detail on the full extent of their carbon footprint. This should include historical trends and any forward-looking projections. In addition to total carbon emissions, metrics such as carbon intensity (emissions per dollar of revenue) and carbon emissions relative to the industry average are also helpful metrics.
Focus more on carbon reduction than offsets
Cartica urges companies to use carbon offsets only as a complement to real carbon-reduction strategies for several reasons. Carbon credits often include emission removal programs that would have occurred anyway. Moreover, there simply isn’t enough land available for all the net-zero pledges that use offsets. Focusing on reducing a business's own carbon footprint is the best way for it to demonstrate its commitment to mitigating the effects of climate change.
Create reasonable targets and leave room to adjust strategy
While many companies set long-term emissions reductions goals, few set short-term goals needed to start the journey. According to the NewClimate Institute, only 8% of companies with net zero goals have interim targets. Cartica encourages companies to set smaller goals in shorter time frames. Short-term targets allow companies to tweak their carbon strategies and incorporate new technologies that may help lower their carbon emissions.
Align carbon reduction goals with business goals
For a carbon strategy to become a top priority, it needs to be considered core to reducing risk and creating value. Cartica encourages companies to make carbon reduction key performance indicators (KPIs) equally important as other performance metrics. Boards should consider this issue a topic of concern, and every department should become cognizant of carbon emissions outputs. Updates on carbon reduction goals should be included in periodic reports. Company leaders should highlight the business case for reducing carbon emissions.
CARTICA CAN HELP
Cartica has worked with numerous companies on building better practices around benchmarking and mitigating climate risks. Contact us if you’d like to learn more about our climate assessment tool or would like feedback on your sustainability objectives.
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