In response to the Intergovernmental Panel on Climate Change (IPCC)’s wake up call report that we must slash greenhouse emissions to avoid a 1.5°C spike in global temperatures, energy transition experts are urging business leaders to take climate action – saying the technology and funding already exist.
The IPCC report states: ‘global net human-caused emissions of carbon dioxide would need to fall about 45 per cent from 2010 levels by 2030, reaching net zero around 2050.
According to research, many businesses have more than 70 per cent of their carbon footprint coming from scope 3 emissions. Energy transition experts at management consulting firm, Partners in Performance, say it’s time for businesses to move past addressing only scope 1 and 2, saying the technology and funding already exists to do so.
“Scope 3 emissions are greenhouse gases caused by supply chain processes, or a result of products, exports or services not controlled directly by the organisation,” explains Julian McCarthy, Partners in Performance Director of Energy Transition in the Australian and New Zealand region.
“This might include emissions arising from investments and leased assets, the use of sold products, or transportation and distribution.”
Inroads have certainly been made. To date, over 2,000 corporations worldwide have made science-backed commitments to emissions reductions through The Science Based Targets initiative (SBTi), with Origin being the first SBTi-endorsed Australian company.
But, while this is promising, progress among major contributors is undeniably lagging. According to global disclosure system CDP’s Global Supply Chain Report 2021, only 38 per cent of the some 11,000 companies who submitted environmental data are engaging with suppliers on climate change.
Inga von Fircks, a Partner at Partners in Performance, and specialist in scope 3 emissions reduction, said: “Reducing one’s carbon footprint should be front of mind for business leaders, and it comes down to more than environmental protection.
“Today, energy transition is a business imperative and there will be winners and losers. Several of our clients have started to experience pressure on their emissions when negotiating local and global contracts,” said von Fircks.
“Reaching 30 per cent reduction by 2030 is technically feasible, and in most cases even financially attractive. For most businesses this requires changes that cannot be implemented overnight.
“From a business perspective, if your main trading partners haven’t made a 2030 emission reduction commitment yet, you need to engage and collaborate with them now before the time to act expires.”
According to von Fircks, today’s main challenge is less about measurement, and more about businesses and their trading partners making commitments that align with one another.
“Energy transition requires corporate agility and cooperation, and it has moved beyond the reduction of purely scope 1 and 2. Leaders must now proactively pursue opportunities to decarbonise within their value chain to keep pace with the market,” said von Fircks.
“Many companies, recognising the need to lower their own scope 3 emissions, are in turn pressuring their suppliers to reduce their emissions. However, in Australia the majority of our clients’ tier 1 suppliers have neither reduction commitments nor emission reporting in place yet.
“As a starting point, organisations should build their scope 3 fact base about supplier and customer energy transition maturity, and action immediate focus areas. Understand that reducing emissions in both suppliers and end users together will take time – which is why it’s important to start now, rather than later.”