Since 2021, the Science Based Targets initiative (SBTi) has recorded exponential growth in the number of companies committing to emission reduction targets. By the end of 2021, more than 2,200 companies were working with the SBTi to develop targets, representing over a third of the global economy’s market capitalization. Today, this number has nearly doubled to above 4,200 companies.
These rates of commitments and target approvals are promising, but setting goals is only the first step in a much larger decarbonization journey. While the act of setting a goal alone may have satisfied stakeholders, including investors, customers, NGOs, and employees in the past, stakeholders today need to see more. This entails setting and communicating a detailed plan around how a company plans to reach its target, interim milestones, and demonstrated progress.
Climate action is complex and there is no one-size-fits-all solution. However, creating a decarbonization roadmap unique to the challenges, strengths, industry, and geographies of an individual organization is a universal requirement to achieve any emissions reduction goal.
Using the terms “roadmap” or “journey” to refer to the process of corporate decarbonization is intentional as it involves both short- and long-term planning and is bound to change along the way. The steps below will support any business in the development of a roadmap designed to achieve targets and the ability to communicate plans with both internal and external stakeholders.
Step 1: Set baselines and benchmarks
Once targets have been set, it may seem like an obvious next step to start putting solutions in place that will begin to reduce emissions. However, until you have a clear idea of where your business stands today and where it aspires to be in the future, it will be difficult to know which actions to take that will be the most cost-effective and impactful. To begin, take a step back and first:
- Determine current GHG emissions and what future projections appear to be, including any anticipated changes in the business (like planned acquisitions or divestitures).
- Identify the emission hotspots in the company or its supply chain.
- Identify where you stand among the leaders and laggards in your industry.
Establishing a clear baseline is crucial in developing a detailed plan aimed at achieving emission reduction targets and implementing solutions at the right time, in an order that will maximize results. For example, if a company has the ambition to use 100% renewable energy, it should first consider how to reduce energy consumption through efficiency and conservation measures, according to the hotspots identified. This avoids procuring more renewable energy than necessary.
Further, for most companies, comparing where you stand today against your peers and competitors can help with ambition-setting for your decarbonization trajectory. Identify those businesses in your space that are excelling in sustainability and analyze their actions. Then, ask: does your team aspire to match these actions or leapfrog them to become a leader in your space? It is also worth performing the same benchmarking exercise against businesses topping the sustainability rankings lists – even outside your direct industry. From there, you should have a good sense of where you stand and where you want to go.
To aid in benchmarking and aligning what actions it will take to get you where you need to go, we developed a tool: frameworks for Basic, Better, and Best-level decarbonization on the path to net-zero. Explore this interactive guide to learn goals to set, action steps to take, and how to make the case for your organization.
Step 2: Identify inhibitors and accelerators
Encountering roadblocks is natural and expected along a decarbonization journey. The complexities of corporate strategy present unique challenges when cutting emissions, transitioning energy sources, or redirecting investments.
An enterprise-wise decarbonization strategy cannot be kept in a silo of “sustainability” practitioners within a business. When making any decision about decarbonization, there is something to be considered at every level of the organization. For instance, consider the scope of how many teams or facilities will have to be evaluated when making decisions on where to cut emissions. While implementation and scope can complicate the process, it is important to anticipate early on where there may be roadblocks that could inhibit progression so there is time to adjust accordingly.
However, there are factors of acceleration or decarbonization levers that businesses can use to maintain momentum. Evaluating what resources already exist or can be put into place within company governance structures, investments, or business models, for example, can help to shape a more successful decarbonization roadmap.
Identifying both potential pitfalls and launchpads early on will result in a purposeful and informed decision-making process throughout the entire journey.
Step 3: Evaluate several decarbonization scenarios
The development of a decarbonization strategy is inherently rooted in change management. There are many moving pieces to consider when it comes to a changing climate, so it is vital for the decarbonization roadmap to also be adaptable, considering a variety of potential climate scenarios.
Building this resilience into the heart of a decarbonization strategy will require an honest inward- and outward-looking assessment of both the risks and opportunities the business may face from climate change. Referencing guidance frameworks, such as the Taskforce on Climate-Related Financial Disclosures (TCFD), can help to put structure to this iterative risk assessment and quantification process. It is not just about knowing what could change; it is about understanding how the changes would affect the decarbonization pathway and what adjustments would need to be made to stay on track.
Step 4: Build a plan to execute
Building an execution plan involves translating strategies into tactics. An effective execution plan is only possible once the starting point, end goals, potential roadblocks, and acceleration tools have been identified. A carefully crafted strategy will support the development of an execution plan that is both tangible and realistic. Though it may be enticing to demonstrate ambition by exploring new and innovative technologies, balancing with practical steps, and addressing low-hanging fruit that lead to marginal gains, will add up to meaningful improvements in performance. A well-executed plan will support timely application of strategies to produce results that deliver on targets and demonstrate commitment to key stakeholders.
Using a decarbonization roadmap to transition from goals to results
The development of a decarbonization plan is complex and requires careful consideration of many moving pieces. But doing so will give both business leaders and external stakeholders confidence that goals will be achieved.
Though a business may know why it wants to decarbonize and may even know by when it desires to reach its targets, taking the next step to know how to get there is where the real work begins. The team at Schneider Electric can help guide you through these steps, evaluate your business’ unique position, and accelerate the evolution of your goals into impactful results.