Demystifying common carbon-related initiatives

Organisations taking their first step toward reducing their carbon footprint can find the available frameworks, methodologies and definitions overwhelming. Some of the most common examples include:

  • Reporting frameworks (TCFD, CDP etc)
  • Carbon targets and methods (SBTi, net zero, 100% renewable)
  • Carbon neutral certifications (Climate Active)

It can be daunting to figure out which approach suits the needs of your company. This can be largely dependent on where the company is at in terms of their carbon reduction journey, their level of desired ambition as well as their overall readiness and alignment to customer and stakeholder expectations. Furthermore, the cost and resources required to action each approach can be difficult to ascertain from the start.

To help demystify some of the common approaches we see across the market, our Climate and Carbon Resilience team reviewed the advantages and disadvantages of popular frameworks, methods and definitions.

Understanding the different approaches can be helpful in

(1) defining ambition within your own company,

(2) benchmarking against others, both within your industry as well as across industries and

(3) understanding the ambition and alignment of those organisations within your supply chain.

Here are the team’s key findings to help you better understand the nuances of some of the most commonly applied approaches. For a more detailed list of the pros and cons, click here.


Science Based Targets

An initiative and method for organisations to set carbon reduction targets

The Science-Based Targets (SBTs) initiative champions science-based target setting as a way of transitioning to a low-carbon economy. It is a collaboration between the CDP, United Nations Global Compact, World Resources Institute, We Mean Business and the WWF (World Wildlife Fund). Over 1,000 companies around the world have signed up to the initiative. This means these companies have committed to set targets to reduce their carbon emissions in line with the latest climate science and the Paris Agreement.

ProsCons
3rd party verified, internationally recognised and applies best practice based on latest climate scienceCan be difficult to communicate to stakeholders and the public due to limited understanding and political bias  around the term “science-based”
Aside from rare occasions, applies to the majority of a company’s carbon footprint 
Allows for easy comparison within and across industriesAs a voluntary initiative, it relies on the ongoing commitment by companies and self-reporting. If they do not, they suffer being removed from the list and reputational damage
Sets the level of ambition on what’s necessary from each organisation, rather than what the organisation internally decides to commit to.Includes different level of ambitions (1.5 degrees and well below 2 degrees – all can be SBT verified)
Cannot use offsets to achieve target* 

*From a carbon management best practice perspective, this is a pro as we want to see companies making actual carbon reductions rather than relying on offsets. However, it is recognised that for some companies, the inability to use offsets to achieve a target may be negative.


Carbon Neutrality

Where all emissions have been eliminated or offset

An accessible option is being verified by a 3rd party as carbon neutral. Being carbon neutral means the carbon emissions of a company are balanced through carbon emission removals for the time period in question (typically annual).

In Australia, Climate Active is the federal government’s carbon neutral certification for organisations, products and services, buildings, precincts and events where all emissions have been eliminated or offset through balancing carbon emissions with removal or elimination of an equal amount. It was launched 12 months ago in 2019, previously known as NCOS (and before that Greenhouse Friendly). Climate Active certifies businesses that have met their requirements to reach carbon neutrality with a certificate (badge). This means there are on-going fees and reporting requirements for the certification.

ProsCons
3rd party verifiedTargets not necessarily aligned to climate science
It is straight forward to communicate Offsets can be used to achieve target
Broadly recognisedPublic scepticism about the validity / additionality of carbon offsets and credits

Net Zero

Where all emissions have been eliminated without offsets

The term net zero focusses on achieving a balance between carbon emitted and removed from the atmosphere. Ratified in the Paris Agreement, 195 countries committed to aiming to limit emissions to net zero globally by 2050. Net zero typically signifies a commitment to eliminate or reduce emissions as much as possible prior to neutralising any residual emissions through the use of offsets. In contrast, a carbon neutral certification may have a stronger emphasis on the use of offsets to achieve the target. However, it is important to note, that typically there is no third-party verification associated with net zero claims. As such, a company’s alignment to the carbon mitigation hierarchy is unknown.

ProsCons
Internationally-recognisedNo 3rd party verification and target pathway to net zero is not necessarily aligned to climate science (e.g. significant reductions between now and 2030)
Offsets can be used neutralise residual emissions if reduction or elimination to zero is not possibleDifficult to compare level of ambition across industries or competitors due to inconsistency of application, such as range of emissions for inclusion and the timeline and strategy to achieve net zero (e.g. no reduction until 2049)
 Commitment can lack detail and meaning if it is too far in the future (e.g. net zero by 2050)

100% Renewable Energy Use

Where all energy used comes from renewable sources

A 100% renewable energy claim means a company sources only renewable energy as its source of purchased electricity (i.e. removing dependence on fossil fuels for the supply of electricity). A common approach is to source 100% renewable energy through purchase power agreements. RE100[JB1]  is a great example of a third-party verified global initiative bringing together businesses committed to 100% renewable electricity.

ProsCons
Internationally recognisedLimited to purchased electricity only (i.e. excludes scope 1 and scope 3) and therefore the overall level of ambition and / or alignment to climate science is unknown
Can be third party verified if desired (e.g. RE100 or similar)In many instances, energy may only be a small percentage of a company’s overall emissions
Scope 2 emissions aligned to the climate scienceLimited to ‘influential’ companies (specifically for RE100)

Task Force on Climate-related Financial Disclosures (TCFD)

A framework for communicating organisational climate risk to investors

The Taskforce for Climate-related Financial Disclosures (TCFD) launched in 2017, is a voluntary set of guidance for companies to disclose the financial impact of climate change to investors, lenders, insurers and other stakeholders. It considers climate-related risks and opportunities and sets out recommended disclosures across four parameters including governance, strategy, risk management and metrics and targets.

ProsCons
Internationally recognised and adoptable by all organisations.Can be difficult to communicate to stakeholders and the public due to limited understanding.
Requires transparency on holistic climate action, beyond carbon, through a tailored approach.Does not require immediate action or strictly align to climate science or that emissions are reduced sufficiently to meet expectations in a low carbon economy.  

Carbon Disclosure Project (CDP)

Providing consistent and comparable emissions reports

Carbon disclosure relates to the reporting of the amount of greenhouse gas emissions resulting from an organisations activities. CDP is the global disclosure system most commonly used by organisations. Their focus is enabling voluntary measurement and transparency of the environmental impact of greenhouse gas emissions in order to be able to reduce it.

ProsCons
International reporting and disclosure initiativeScope of footprint can be voluntarily set, significant emissions outside the organisation can be omitted  
Often used by investors, and therefore effective in driving internal engagement, measurement and monitoringDoes not require action or alignment to climate science, targets may be weak or insufficient  

Not every approach fits every organisation, nor are they mutually exclusive. Your organisation’s goals and capacity may determine the best fit.

The companies that your organisation engages with may use a different approach to yours. This is fine, so long as you can understand what their approach means in terms of ambition and alignment to your own.

Some larger organisations use a combination of the above depending on their strategy, reporting or regulatory requirements which can be country/jurisdiction dependent. For example, an organisation can adopt carbon neutrality as an action towards their SBTs which are then reported on more extensively through TCFD reporting to stakeholders. As there are some crossovers between CDP and TCFD, some organisations find themselves reporting on both.

If you’re not sure where to start or would like some help finding the right approach for your organisation, get in touch with Maisie Auld, our Head of Carbon & Climate Resilience at Edge Environment, (maisie@edgeenvironment.com).


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