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The implementation of a comprehensive decarbonisation strategy is a critical requirement for all businesses due to increasing sustainability regulations and immense pressure from stakeholders. Accordingly, the allocation of sustainability officers and sustainability teams to develop and implement a sustainability strategy is vital for businesses that wish to remain competitive.
Yet, such imminent pressure for businesses to place sustainability at the forefront of their strategy comes with an array of barriers which may vary depending on the region, industry and organisation. As such, this article provides a comprehensive guide to developing and implementing a decarbonisation strategy for 2024, whilst denoting the most common barriers to the implementation of decarbonisation agendas, and how sustainability teams can overcome the key obstacles that arise within the implementation of decarbonisation strategies.
What is a decarbonisation strategy?
Decarbonisation refers to the removal or reduction of all human-made carbon emissions into the atmosphere.
The implementation of a decarbonisation strategy involves organisations leveraging cross-cutting measures to reduce or eliminate carbon emissions from their business activities, and across their wider supply chain. In doing so, businesses can positively impact the planet in their contribution to universally recognised climate goals, whilst leveraging an array of strategic opportunities and mitigating vast financial and non-financial sustainability risks.
Decarbonisation differs from climate neutrality because it seeks to reduce absolute carbon emissions and intensity. Meanwhile, climate neutrality does not necessarily include decarbonisation actions, as climate neutrality can be achieved through solely buying carbon credits.
Learn more about what decarbonisation means for companies here.
Why should companies implement a decarbonisation strategy?
Decarbonisation is a global imperative for governments, businesses and society because it plays a crucial role in mitigating climate change. While many companies declared becoming carbon-neutral by 2050, recent estimates by the United Nations (UN) suggest we are not on track to meet the Paris targets - more must be achieved, and at a greater speed.
Beyond positively impacting our planet, decarbonisation strategies enable businesses to unlock a wide range of strategic opportunities, such as:
- Decreased internal costs due to increased energy efficiency.
- Decreased internal costs due to less waste
- Decreased internal costs due to greater supply chain efficiency
- Decreased time and costs relating to emissions calculations
- Greater stakeholder trust
- Greater employee satisfaction, retention, and engagement.
- Increase in brand value
- Enhanced competitiveness
Meanwhile, businesses that join the movement towards net zero will mitigate several key risks, including:
- Decreased employee engagement due to a lack of commitment to sustainability
- Decrease in sales due to damaged consumer perception
- Greater internal costs due to unnecessary waste
- Greater external costs due to carbon taxes
- Fines and administrative costs due to not complying with policies or regulations.
- Increased risks and costs leading to decreased competitiveness
What are the barriers to implementing a decarbonisation strategy?
Inability to communicate the business value of sustainability
To reap the long-term benefits of sustainability, the business value of sustainability must be communicated to key stakeholders and decision-makers across the businesses’ wider supply chain. As a general rule, sustainability messaging must be considered within every aspect of organisational communications and decision-making processes. Companies can achieve this by ensuring that employees are actively involved in the net-zero journey, and that there is clear and open communication with stakeholders surrounding the role of sustainability within the overall company strategy, and the business benefits of a value-chain-wide commitment to sustainability. In doing so, businesses will create value via enhanced investment returns and long-term asset optimisation. Plan A has provided a comprehensive guide to communicating with stakeholders in the net-zero transition.
Lack of clarity on how to tie sustainability to company purpose
Business leaders and teams that do not understand the connection between the company’s purpose and sustainability will be unable to achieve true sustainability success. Business leaders must define their mission by gaining clarity on the purpose of the company beyond profit maximisation and analysing how sustainability aligns with the company’s overall mission. Clarifying this purpose can be achieved through tasks such as setting sustainability targets and integrating sustainability into the organisation’s performance evaluation. Understanding how sustainability ties into the company’s core values and objectives allows businesses to drive meaningful change, whilst ensuring that sustainability is placed at the forefront of their strategy.
Misalignment in organisational structure
A key barrier to the successful implementation of a decarbonisation strategy is misalignment within a company’s organisational structure. Whilst there is no ‘secret formula’ to executing an effective sustainability strategy; the leadership structure utilised is a paramount factor as it dictates reporting lines, cross-functional management and partnerships, thus reflecting how executive leaders value sustainability progress. Ensuring alignment in a company’s organisational structure also ensures that key decision-makers are informed about the requirements to meet the company’s climate goals.
To enact a structure that informs decisions and builds accountability within management, a cross-functional approach which seeks to align all components of a business is vital. As such, for a company or organisation to ensure that sustainability is at the core of their business - appointing a Chief Sustainability Officer (CSO) to oversee the development, implementation and management of a sustainability strategy is highly recommended.
Lack of public policy
Another central barrier to the implementation of an effective sustainability strategy is a weak regulatory landscape. ESG regulations provide clear guidelines for sustainable practice, thus ensuring that businesses are informed of the requirements they must meet to avoid sanctions, what actions they should take to embed sustainable practices, and therefore how businesses can allocate their resources to positively contribute to the global journey towards net-zero. Accordingly, voluntary corporate action is not enough to meet universal climate commitments - such as shifting the world to a 1.5˚C pathway. These commitments can only be met if government action is forthcoming via the implementation of clear ESG policies and regulations. Learn more about the importance of ESG regulations in facilitating business climate action here.
Lack of understanding of current sustainability performance
A key barrier sustainability teams face when attempting to implement a successful decarbonisation agenda is not understanding the company’s sustainability stance, along with their future sustainability needs. To overcome this barrier, sustainability leaders must take action to ensure that organisation-wide and value-chain-wide sustainability assessments are periodically undertaken. Businesses that ensure that sustainability performance data is rigorously measured and analysed will be able to identify, and take action, upon the requirements to meet their sustainability goals.
Lack of decarbonisation targets
Companies that do not set clear, science-based decarbonisation targets will ultimately forgo the ability to implement an effective decarbonisation strategy. Companies who set reduction targets for their company and value chain via the utilisation of expert guidance will be able to ascertain a deep understanding of the different decarbonisation pathways and reduction levers that they can leverage to achieve net zero. Furthermore, companies which set clear net-zero targets will ultimately score higher on ESG reporting and improve their brand reputation; with 79% of corporate executives surveyed by the SBTi finding a strengthened brand reputation following the implementation of science-based targets.
Meanwhile, a survey of business executives in the APAC region found that 60% of companies in the region had not set decarbonisation targets and those that had faced a range of obstacles to meeting them. As such, utilising comprehensive sustainability software will allow companies to receive expert advice and guidance on target-setting, along with the actions required to meet decarbonisation targets.
Lack of clarity regarding how to get started, and which technologies to use
Last but not least, sustainability decision-makers are often overwhelmed when it comes to choosing the most effective strategies and technologies necessary for decarbonisation. To overcome this barrier to decarbonisation success, it is highly recommended that companies evaluate the opportunities associated with using sustainability software, such as a comprehensive carbon accounting and decarbonisation platform, to assist in the development of a dynamic and innovative decarbonisation strategy.
Best practices for implementing a decarbonisation strategy
Collect
Collecting emissions data is a necessary first step to your net-zero journey. The data collection phase is defined by sourcing data required for carbon accounting and ESG reporting, which means coordinating data from various departments and stakeholders. This can include everything from employee commute information, building electricity use, and the weight of waste produced in your business office.
Measure
Now that your organisation has collected its carbon and ESG data, it is time to measure your corporate carbon footprint - which ultimately acts as the prerequisite to your sustainability journey. Measuring greenhouse gas emissions is defined by calculating all relevant emissions across scopes 1, 2 and 3. This step is crucial, as this calculation will define the baseline year you will compare all your reduction efforts. Bringing awareness to the total corporate carbon footprint and value chain emissions of a business enables all efforts of energy savings, cost savings, and overall environmental impact reductions to commence.
Set targets
Setting decarbonisation targets is a critical aspect of any climate or decarbonisation strategy. Companies must align their specific greenhouse gas emissions reduction targets with the globally agreed 1.5°C limit, as outlined by the Paris Agreement. To set these targets, companies need to collect and analyse data for at least one year to establish their ‘baseline year of emissions’. Having an emissions baseline is essential for setting science-based targets. According to the Science Based Targets Initiative (SBTi), over 2,253 companies have committed to setting science-based targets as of 2022. Setting company-wide decarbonisation targets is a complex process, necessitating a thorough understanding of various decarbonisation pathways and target-setting options. This process also involves engaging and persuading a range of stakeholders to ensure their support for implementing changes during the subsequent stages of emissions reduction.
Reduce
Climate actions speak louder than words. It is not enough to make pledges, it is important to act on your climate targets and demonstrate your commitment to your shareholders, stakeholders and the outside world. Reducing emissions is about translating climate targets and net-zero pledges into concrete actions. Making pledges is not enough so it is important to act on decarbonisation targets to demonstrate a credible sustainable commitment to your shareholders, stakeholders and the rest of the world. Accordingly, businesses must prioritise the following to ensure emissions are reduced efficiently and effectively:
- Understand your emissions hotspots
- Secure budget and internal support
- Secure staff resources and guidance
- Identify and implement decarbonisation levers
- Avoid the belief that offsetting all carbon emissions is needed to reach net zero
- Avoid a ‘one-size-fits-all’ strategy
Report
Sustainability reporting and climate risk disclosure are defined by converting measured emissions or ESG questionnaire results into a communicable format that is compliant with legislations, regulations, or frameworks that companies need to report on. Sustainability reporting is no longer a ‘nice-to-have’, and is now an essential practice that provides stakeholders with valuable information on a company’s environmental, social, and governance (ESG) performance. As corporations embark on their decarbonisation journey, transparency and communication are crucial elements; thus, reporting must be made a central focus.
Read more on the 6 key steps to ESG reporting here.
Improve
As companies embark on their decarbonisation journey, it is crucial they continuously evaluate and refine their sustainability strategy in order to improve. This entails assessing the effectiveness of implemented carbon reduction measures and making data-driven decisions to deepen decarbonisation efforts. With an array of digital, material, and decarbonisation technologies available, it is vital to develop a plan that enables large-scale impact while maximising value. Engaging and involving stakeholders, investors, employees, and the broader ecosystem is crucial for the continuous improvement of your sustainability strategy.
Use decarbonisation software
Utilising cutting-edge tools and technologies is fundamental to implementing a comprehensive decarbonisation strategy, whilst overcoming the array of barriers that individuals, teams and businesses face when implementing sustainability strategies. Plan A hosts a data-driven SaaS platform that is underpinned by the latest scientific standards and methodologies (TÜV Rheinland certified and GHG Protocol compliant). The software automates CO2 emissions calculation, and carbon reduction planning, as well as regulation and audit-proof ESG reporting, empowering businesses to seamlessly manage their entire net-zero journey.
Sustainability leaders must utilise leading tools when attempting to implement a decarbonisation strategy and overcoming the aforementioned decarbonisation barriers. As a first step, organisations should assess their current stance on sustainability, which will enable them to develop a clear strategy. Next, sustainability leaders should use sustainability software from leading experts, such as Plan A. Their decarbonisation solution allows companies to collect and streamline emissions data, measure and analyse scope 1, 2, and 3 emissions, and report on sustainability and ESG performance to ensure businesses can reap the long-term benefits of a decarbonisation strategy.
Looking to future-proof your business via decarbonisation? Book a demo with Plan A today.
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