As we stand at the crossroads of history, understanding and embracing decarbonisation could mark the difference between a thriving planet and a precarious future. Explore the pivotal role of decarbonisation in sculpting a sustainable, net-zero world.
What is decarbonisation?
Decarbonisation is the removal or reduction of all human-made carbon emissions into the atmosphere. Decarbonisation is achieved through cross-cutting measures to reduce or eliminate carbon emissions from an organisation's or individual's activities. Decarbonisation differs from climate neutrality because it seeks to reduce absolute carbon emissions and intensity. Climate neutrality does not necessarily include decarbonisation actions, as climate neutrality can be achieved through solely buying carbon credits.
When was the term decarbonisation coined?
The concept of decarbonisation rose in prominence following the 2015 Paris Climate Agreement. The 2015 Paris Agreement set decarbonisation targets to limit global warming to well below 2°C above pre-industrial levels with the ambition for the global economy to reach net-zero by 2050. To reach this ambitious goal, countries have to cut greenhouse gases (GHGs) rapidly and reach net-zero emissions by 2050. The moment when GHGs stop rising and begin to decrease steadily is called drawdown. At this point, humanity is not on track to achieve the levels of decarbonisation laid out in the Paris Agreement.
Our common goal is simple: reducing carbon dioxide (CO2) emissions worldwide as soon as possible. This process requires both sweeping change and incremental steps: from sector to sector, from industry to industry. Even if the energy sector is the most scrutinised, other emission sources of paramount importance include food waste, cement, steel, and agriculture.
Why does decarbonisation matter?
The urgency for decarbonisation stems from the incontrovertible evidence of climate change, driven by escalating concentrations of GHGs in our atmosphere. These gases, primarily CO2 from burning fossil fuels, trap heat and lead to a myriad of global climate disruptions.
The impacts of climate change are far-reaching and increasingly evident. Rising global temperatures have intensified the occurrence of extreme weather events, including devastating droughts, floods, wildfires, and powerful hurricanes. Such events not only wreak havoc on the natural environment but also pose significant threats to human life, property, and livelihoods. The melting of ice caps and glaciers contributes to rising sea levels, endangering coastal communities and ecosystems.
Beyond the environmental toll, the consequences of unchecked GHGs have profound economic and social implications. Supply chains, agricultural productivity, and water resources are under strain, leading to food insecurity, displacement of populations, and increased competition for scarce resources. These disruptions threaten to undermine decades of economic progress and exacerbate global inequalities.
Decarbonisation matters because it represents a viable path toward mitigating these challenges. By transitioning to a low-carbon global economy, we aim to reduce the concentration of GHGs in the atmosphere, thereby slowing the pace of global warming and limiting its most severe effects. This transition involves adopting renewable energy sources, enhancing energy efficiency, and exploring innovation in carbon capture and storage (CCS) technologies.
Moreover, decarbonisation is not solely about averting disaster, it presents an opportunity to drive economic growth through the development of green technologies and sustainable industries. Investing in renewable energy, for example, not only reduces carbon emissions but also creates jobs, stimulates technological innovation, and can lead to energy independence.
The significance of decarbonisation transcends environmental preservation. It is a comprehensive approach that addresses the multifaceted challenges posed by climate change. By committing to decarbonisation, we can protect our planet for future generations, promote economic resilience, and foster a more equitable world. The time to act is now- the longer we delay, the more severe and irreversible the consequences become.
Credit: Plan A
Why do businesses need to decarbonise?
The decarbonisation of the business sector is an integral part of reaching drawdown, or the point at which the amount of GHGs in the atmosphere begins to decrease. There are tremendous opportunities for businesses that act as early adaptors for emissions reductions. It is already proven that climate leaders in the private sector can benefit in many ways from a net-zero transition.
Studies have shown that companies with lower carbon emissions are more attractive to investors and have improved talent retention, higher financial performance, cost savings, lower regulatory risks, and access to cheaper capital. Early adaptors to low-carbon business models generate higher value for shareholders and stakeholders.
In addition, lower emissions are an integral part of Environmental Social Governance (ESG). Integrating ESG gives businesses a clear competitive advantage as studies have found that investors and consumers prefer sustainable and ethical brands. Being a low-carbon company also lowers risk, as businesses can avoid greenwashing and its negative repercussions while also getting ahead of the curve and being prepared for upcoming reporting and regulations.
What does good decarbonisation look like?
The advantages of decarbonising your business are clear and multifold. But how do you achieve true decarbonisation? For businesses to set science-based targets (SBTs) and strategically lower their emissions, they must first understand where and how they are emitting GHGs along their entire supply chain.
This is why the first step to lowering a business’s footprint is monitoring its scope 1, 2, and 3 with carbon accounting. Accurate carbon accounting gives companies an overview of where they emit the most and where reduction efforts would have the most significant impact. When it comes to environmental impact, the more you know, the more effectively you can take action.
Examples of successful decarbonisation efforts
An illustrative example of successful decarbonisation is the case of Ørsted, a Danish multinational power company. Ørsted has undergone a profound transformation from being one of Europe's most coal-intensive energy companies to becoming a global leader in offshore wind power. As part of its commitment to decarbonisation, Ørsted has reduced its carbon emissions by 87% from 2006 to 2019 and aims to become carbon neutral in energy generation and operations by 2025, with a target to reach net-zero emissions across the entire carbon footprint by 2040.
Ørsted's approach included divesting its fossil fuel assets, significantly investing in offshore wind farms, and innovating in green energy solutions. This transition not only dramatically reduced the company's GHG emissions but also proved to be a successful business strategy, with Ørsted reporting a significant growth in revenue and profitability as it tapped into the expanding renewable energy market.
Good decarbonisation is characterised by a strategic, informed, and committed approach to reducing carbon emissions across all aspects of business operations. These efforts not only contribute significantly to contribute to a decarbonised economy but also offer compelling evidence of the economic viability and growth potential for businesses that embrace decarbonisation. Through diligent carbon accounting, setting ambitious yet achievable SBTs, and investing in clean technologies, companies can lead the way in building a sustainable and low-carbon future.
How to set decarbonisation targets?
Setting decarbonisation targets is a nuanced process that demands thoughtful consideration and strategic planning. It encompasses several key steps and definitions, each critical to ensuring that a business's efforts are both ambitious and achievable, aligning with broader climate goals. Here's a more detailed exploration:
1. Choosing a baseline year: The baseline year is the reference point against which emission reductions are measured. It should be a recent year where reliable data is available, serving as the foundation for target setting.
2. Target years: Targets are set for specific future years, with near-term targets typically within a 5-15 year range focusing on immediate reductions, and long-term targets aiming for net-zero emissions by 2050.
3. Scope of emissions:
- Scope 1: Direct emissions from owned or controlled sources.
- Scope 2: Indirect emissions from the generation of purchased electricity, steam, heating, and cooling.
- Scope 3: All other indirect emissions that occur in a company's value chain.
4. Science-Based Targets (SBTs): SBTs are reduction targets in line with the level of decarbonisation required to keep global temperature increase below 2°C above pre-industrial temperatures, as specified by the Paris Agreement. They provide a clear, scientifically backed pathway for companies to contribute to global climate action.
5. Implementation strategies: After setting targets, businesses need to develop clear strategies for implementation. This involves identifying the most effective reduction levers, investing in renewable energy, enhancing energy efficiency, and engaging the entire value chain in emission reduction efforts.
6. Monitoring and reporting: Regular monitoring and reporting against targets ensure transparency and accountability. It allows businesses to track their progress, make informed adjustments to their strategies, and communicate their achievements to stakeholders.
7. Engagement and collaboration: Achieving ambitious decarbonisation targets requires collaboration across all levels of the organisation and with external partners, including suppliers, customers, and industry peers. Collective action amplifies impact and drives broader industry shifts towards sustainability.
Why does scope 3 matter when it comes to decarbonisation?
For most industries, up to 90% of a company’s emissions come from Scope 3 (indirect emissions). Scope 1 and 2 often account for only 8% of a company’s GHGs. The data is clear: for companies to reduce their emissions, they must set their efforts on Scope 3 emissions and their entire supply chain. But companies do not control suppliers, so how can they measure their supplier’s emissions to then be able to reduce them?
Learn more about strategies to reduce your company's Scope 3 emissions.
What is the private sector's role in decarbonisation?
Unfortunately, the world is not on track to meet the decarbonisation goals laid out in the Paris Agreement. However, there is growing momentum to transform our economy and governments are increasing the pressure on the private sector to transform.
Government regulations are rising to the challenge of decarbonisation by setting increasingly ambitious regulations and reporting requirements for businesses, such as the EU's Non-Financial Reporting Directive (NFRD), the Corporate Sustainability Reporting Directive (CSRD), and the entity-level disclosure for reporting on the EU's Sustainable Finance Disclosure Regulation (SFRD). These reporting frameworks make it mandatory for companies to reduce their carbon emissions and help drive innovation and advances in low-carbon technologies.
Credit: Climate action tracker
What is net-zero and how can decarbonisation efforts get us there?
The hard truth is that there is already a dangerous accumulation of GHGs that will warm the planet for decades to come. Humanity must reach net-zero emissions.
Net-zero means cutting GHGs to as close to zero as possible, with any remaining emissions re-absorbed from the atmosphere by oceans and forests, for instance. Net-zero is reached when a business has eliminated all the carbon emissions it could and then compensated the remaining emissions with beyond value chain mitigation. The net-zero process starts with calculating emissions across Scope 1, 2, and 3, setting science-based targets, developing decarbonisation pathways until 2030, and gradually moving towards long-term carbon capture, storage, and sequestration for those emissions which cannot be reduced.
To understand decarbonisation and net-zero, it is helpful to think of an overflowing bathtub. Decarbonisation allows us to turn off the tap, stopping the flow of new carbon into the atmosphere. We reach net-zero when we “drain the tub” using carbon removal techniques to draw excess carbon out of the atmosphere and store it safely in what are called carbon sinks.
Credit: Made with AI
Not all climate removal approaches are equally effective. For instance, although planting trees is often touted as a way to offset GHGs, a tree can take decades to reach its full carbon capture potential. Trees are also susceptible to wildfire. When a forest burns, it releases carbon into the atmosphere. As climate change accelerates forest fires, this poses a real problem for the efficacy of trees as effective carbon sinks.
But exciting new developments are being made in carbon removal. Innovations in ocean-based carbon sequestration, carbon mineralisation, and biochar all hold promise, although these approaches to carbon sequestration need to be invested in and scaled. Direct air capture is still in its infancy with significant doubts about its ability to operate at the necessary scale to make a substantial impact on global carbon levels.
Moreover, even with the current carbon capture technologies capable of netting 2 billion tonnes of CO2 each year, this effort falls short of the requirements to keep global warming within manageable limits. A correction in a Nature article highlights that to meet climate goals, an additional 0.96 billion tonnes of carbon dioxide need to be removed from the atmosphere each year, underscoring the gap between current capabilities and what is required to achieve significant decarbonisation.
In essence, while innovations in carbon sequestration are crucial, they represent only one piece of the broader puzzle in the global effort to decarbonise. The path to a sustainable, low-carbon future will require a comprehensive strategy that combines carbon sequestration with aggressive emissions reductions, renewable energy expansion, and significant policy and behavioural changes.
The future of decarbonisation for businesses
Scientists, governments, business leaders, policy-makers, and individuals now understand the necessity for our systems to shift towards a decarbonised and resource-efficient economy to mitigate and adapt to climate change. Decarbonisation is the pathway to a climate-resilient future.
While many companies declared becoming net-zero by 2050, recent estimates suggest we are not on track to meet the Paris targets – more must be achieved, and at a greater speed. In addition, many companies’ pledges do not include Scope 3 emissions. And when we remember that up to 90% of a business’s emissions are in Scope 3, it is clear that there is still much work to be done to decarbonise our economy.
Decarbonisation is not an easy path and will require billions of investments – but with global companies' active involvement, we will get there.
The benefits of a business starting a decarbonisation strategy are:
- Lower financial risk
- Protection against the rising cost of carbon
- Avoiding potential greenwashing allegations
- Complying with a rapidly changing regulatory landscape
How can businesses decarbonise and reach net-zero?
Companies can achieve true decarbonisation through the following steps:
1. Data collection
2. Emission accounting across all (relevant) scopes
3. Emission (and ESG) reporting - for baseline year or otherwise
4. Target Setting (ideally science-based)
5. Review of potential decarbonisation levers (and subsequent costs)
6. Implementation of selected levers (within and outside the value chain)
7. Development of corporate net-zero strategy
8. Annual emission accounting and reporting
9. Neutralisation of excess emissions on an annual basis
10. Implementing a net-zero pathway after achieving planned decarbonisation goals
By meticulously these steps, businesses can transition from carbon-intensive operations to pioneers of sustainability, setting a benchmark for responsible corporate citizenship in mitigating climate change. The journey towards decarbonisation is not just a compliance pathway but a strategic move towards resilience, innovation, and long-term value creation in a rapidly changing world.
Read more about how to reduce your company's emissions.
Plan A knows that every greenhouse gas that is not released into the atmosphere makes a difference. That is why we work with companies to track, measure, and lower their emissions. Your business can be part of the solution. Sign up for a free demo today and learn how you can bring your business to net-zero.
