Three questions to inform your decarbonisation strategy

Climate change is at the core of the world's efforts to decarbonise. Identifying better ways of living, working and doing business through lowering fossil-fuel-producing greenhouse gas (GHG) emissions is a high priority for forward-thinking organisations. Leaders that address decarbonisation beyond just a policy, regulation and compliance are the ones who will adapt and thrive in a net zero world. Effective climate change strategy focuses on assessing your baseline carbon emissions, embedding mitigating programs into your plan and adapting your business model towards a low carbon economy. This article discusses where to begin and offers best practice guides on moving forward.

It's not only regulatory bodies, non-governmental organisations and broader society putting pressure on organisations to decarbonise. Investors are firmly looking to businesses for meaningful decarbonisation strategies, alongside a demonstrable roadmap on how to decouple growth from emissions while minimising risk. Decarbonisation efforts must align with the organisation's purpose, beliefs and values to gain real impact. Achieving this requires transformative thinking and a seismic shift that pulls in the entire business – a whole ecosystem approach. Where to start? Consider the following three questions.

Start by deeply understanding your baseline GHG emissions profile and broader consumption across every possible output. Gather your scope 1, 2 and 3 emissions by identifying carbon sources throughout the organisation. Digital solutions provide an efficient and convenient way to collect accurate emissions assessments. Gaining clear visibility of your baseline emissions maps the effectiveness of future targets and measures the success of your strategy. Embedding the correct reporting and metrics to track current and future status sets a strong measure of progress.

As part of this first question, gathering a systematic inventory of your emissions, energy spending, energy-using assets, utility contracts, and metered systems is critical. Do you know the carbon intensity of your electricity sources and whether the grid currently supplies or is planning to switch to green energy? The approach is more complex for carbon-intensive organisations. Transitioning to greener energy and fuel sources requires more integrated planning and risk analysis. More often, these organisations are implementing sophisticated energy and GHG management technology tools and platforms to gain visibility of emissions monitoring and improve planning.

The simplest way to introduce emission reduction into your organisation is to develop an energy management program to drive operational efficiencies through cost-effective lighting, mechanical upgrades and retrofits. Outside of this, organisations must focus on the energy sources representing the most significant risk to their operational and commercial models. For example, energy sources that are inefficient or have outdated infrastructure. Get on the front foot by prioritising the riskiest, most polluting, most hazardous and most costly energy sources from the outset – as the lead time to transition is longer and planning more cumbersome.

Another critical consideration to prioritise early in the planning phase is understanding the viability and durability of your energy sources and supply. Connecting back to the holistic approach, energy purchasing decisions should consider more than costs and extend to long-term emissions reduction goals, ensuring energy sources are scalable, sustainable and resilient.

Future-ready organisations recognise and embrace the opportunities of a net zero future. Others view it through a lens of compliance and regulation, motivated solely by risk. The business case for decarbonisation is increasingly evident, and competitive advantages are up for the taking. Spending time determining the financial opportunities from decarbonising often leads to transformative conversations. It allows new ideas about business models, products, solutions, and processes to emerge. Part of this discussion is assessing the economic costs of decarbonisation and the overall impact on operations. Many of the models we use that inform strategy detail the barriers and obstacles to decarbonising and take into consideration a broad range of transitional risks. These include ageing assets and infrastructure, regulatory and policy, consequences of non-adherence and reputational risks.

• Working through the above three areas within a structured, impactful framework is a strong starting point to inform your sustainability decision-making. Once emission reduction, mitigation and new opportunity pathways are explored and assessed, roadmaps and implementation plans demonstrate response and progress to maximise the commercial value to the organisation.
• Decarbonisation efforts must align with the organisation's sustainability beliefs, values and goals. Stakeholder involvement and engagement in decarbonisation shouldn't be an afterthought. Focusing on what we know now, we understand where clients are on their journey and where to fill in the gaps.
• Showing leadership and ambition means establishing a decarbonisation strategy that thoroughly captures and understands climate change impacts and vulnerabilities across the business. Having data-based tools and methodologies to accurately assess your current state of play to inform thinking and decisions sets the groundwork. Identifying energy conservation programs forms part of the ongoing roadmap.
• Organisations can reduce their carbon footprint while advancing their business strategy and profit margins by exploring new products and services that reduce emissions while enabling growth.
• It's not a case of if but when climate-disclosure regulations will become mandatory. Proactively report and communicate your decarbonisation plans to avoid last-minute scrambling.

Learn more about how GHD Advisory can help you deliver on sustainability goals including program visioning and governance, stakeholder engagement, materiality assessment and ESG programming.