Managing Carbon Emissions During a Pandemic

How Technology Can Enable Near and Long-Term Business Perspective

Since the outbreak of the Covid-19 pandemic, a number of articles [1] have been pointing at the parallels to the climate crisis and calling for urgent and transformative action to avoid the worst impacts of climate change. While near term emissions have declined [2], the drops are not uniform (e.g. New York’s CO2 emissions have decreased by 10% during lockdown while Paris is down 72%). More importantly, there is growing concern that emissions will rise sharply [3] if this round of economic recovery follows in the footsteps of the 2009 recession.

Understandably, for companies that are struggling to survive and respond to these uncertain times—and that’s virtually every organization to varying degrees—it’s easy to dismiss these voices that are pointing to another looming crisis whose worst effects may not be felt as acutely as this immediate Covid-19 pandemic. Companies are thinking about financial solvency, personnel, and their supply chains as well as uncertainty over how the coming weeks and months will shake out. Yet, decision-makers would be remiss if they thought that the coronavirus has wiped out climate action from people’s minds. The latest U.S. survey [4] by Yale University and George Mason University researchers point to the enduringly consistent levels of concern compared to past survey responses, which imply that the climate issue has “matured” and achieved “a durable worry” status in the minds of the American public.  

It may be challenging for some companies to accept but the climate issue is not going away anytime soon. Additionally, these recent months have demonstrated that “business as usual” cannot be taken for granted. Similar to how there is a delay in the data reflecting the impacts of Covid-19 by a few weeks, there is also a lag in measurable impacts from taking (or not taking) climate action. Nevertheless, companies that are willing to be innovative and put in the effort to take progressively bolder actions will come out ahead and demonstrate their value to customers, shareholders, and society. Companies can jump-start their decarbonization journey and get ahead with the help of carbon management software, and focus on using data to inform business sustainability strategies. Again, we can draw on the parallels to managing Covid-19: countries that gather data through effective testing and contact tracing, and that use this data to inform their policies, have been able to best respond to and contain outbreaks in their countries.

Below are the initial stepping stones for organizations that want to understand their carbon impact and manage resources for the greatest impact:

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1. Conduct a preliminary carbon emissions inventory.

There is a common saying that “you manage what you measure” and organizational carbon emissions are no different. Similar to how an organization may have a comprehensive inventory of parts used in its products, an inventory of personnel and facilities, or services its IT department manages, an organization should establish a centralized repository of all of its associated sources of emissions, or its carbon emissions inventory.  It is important to establish an organization’s baseline emissions using high-quality data and established methodologies such as GHG Protocol [5] or ISO 14064-1:2018 [6]. Emissions sources are broadly bucketed into direct (Scope 1) and indirect (Scope 2 and 3) emissions (see image below). Companies just starting out on capturing emissions-related data can focus on Scope 1 and Scope 2 data, and select up to a handful of most relevant Scope 3 categories to get started. Given the breadth and diversity of data sources from different regions, departments or business units, and vendors, companies would benefit from using a data platform to centralize and simplify the data collection process as well as improve data quality through transparency and controls that are available via software platforms.  

2. Understand your organization’s emissions “hot spots”.

Once an organization has established its carbon inventory, it can then proceed to understand the relative opportunities for mitigation projects in different parts of the business. There are many ways to visualize and break up the emissions data such as by operating units, business divisions, and regions and facilities. A good software tool would enable organizations to simply visualize their emissions in all the ways listed above and more. Once organizations are able to grasp their emissions “hot spots”, they can better prioritize strategies and effect change that have the greatest impact. Note that “hot spots” should be areas of operations that drive opportunities for action. These are focus areas that have a clear return-on-investment (ROI) for companies; the focus areas should not only include upgrades to existing technologies used at companies but also incorporate potential technological disruptions to businesses. For example, a company may find that fuel is a significant “hot spot” and source of carbon emissions. It is important to distinguish between potential mitigation options once this “hot spot” is identified. Specifically, purchasing carbon offsets and upgrading equipment to electrified energy sources are both plausible strategies that mitigate emissions from this fuel “hot spot” in an annual report. Yet, of the two strategies listed, only the equipment upgrade option provides measurable operational improvements to reduce this fuel emissions “hot spot” and lower a company’s future operational emissions baseline.

3. Set emissions reduction goals.

The research on goal setting is clear: those who set specific goals with deadlines are more likely to succeed than those with unspecific goals or those with goals but no deadlines. Hundreds of organizations have pledged science-based emissions reduction targets [8] and/or committed to 1.5°C and net-zero [9]. Understandably, some organizations are still only focusing on cost-cutting efficiency measures. Yet the growing consensus from diverse stakeholders including customers, investors, employees, and communities is that these organizations are expected to have to do more. Setting specific, measurable targets, even if they are not science-based to start with, will provide focus internally and serve as a basis for engaging external stakeholders. Organizations should use data-driven strategies to evaluate their emissions reduction goals by modeling different future scenarios and factoring in evolving conditions in the world.

4. Establish resources and track progress.

All successful businesses understand the importance of staffing appropriately and providing adequate funding if they want initiatives to succeed. Effective organizations also have systems and processes for tracking and communicating progress against their goals. Ongoing data collection is a key part of making informed decisions and providing useful feedback towards larger goals. Depending on the source of carbon emissions, organizations may have automatic data collection and integration on a daily basis (from data sources such as building management systems and energy collection devices) or monthly (such as data from third-party vendors, subsidiaries, or highly decentralized business units). An effective data platform provides a centralized repository of up-to-date information and key stakeholders can efficiently analyze the latest data to adjust their strategies and identify areas where greater attention is needed to reach their targets. Strategies involving carbon reduction projects are often cross-cutting opportunities that involve multiple departments or business units and require effective collaboration to succeed. When executed well, climate mitigation projects have the added benefit of connecting employees and departments that may not normally work together, and thus uncover and enable future cross-function collaboration opportunities.

To conclude:

The strategies described above involve many steps and most organizations may not be approaching sustainability and carbon reduction projects in such a linear fashion. The reality is that businesses are always thinking about efficiency to some degree, and most, if not all, organizations have implemented some carbon reduction projects in the form of energy, water, resource efficiency, and/or waste management. All these efficiencies should be accounted for in the carbon reduction target and guide investment decisions towards the most cost-effective solutions from a financial and environmental (carbon) perspective. Nevertheless, the scale and persistence of climate risks mean that organizations that have not looked at sustainability holistically will benefit from making the mental shift to viewing sustainability as a competitive advantage and recognize that now is the time for ambitious actions.

Kicking off a carbon inventory and the climate risk mitigation strategies listed above are not simply enabling long-term competitive advantages but also near-term business survival.  Let’s consider again how the global Covid-19 pandemic has demonstrated that the economic status quo can very immediately change with abrupt, large scale events. Similar to how businesses are rapidly evolving operations to function in the “new normal”, so too are financial institutions taking this opportunity to re-evaluate their portfolio and investment risks. As businesses think about buffering their cash reserves and raising capital, they should also keep in mind that an increasing number of financial institutions are factoring in climate change risks to their investment portfolios and the cost of lending to businesses. Businesses need to be able to demonstrate to potential financiers and investors that they are already thinking about, and taking action on, the next potential crisis (aka, climate change) in order to raise capital and survive the current Covid-19 impacts.

For help with the strategies discussed above or to learn more about modeling an organization’s low carbon future, schedule a demo with Sinai Technologies [10].

References

1. Segalov, Michael. (May 4, 2020). “The parallels between coronavirus and climate crisis are obvious”. The Guardian. Retrieved from https://www.theguardian.com/environment/2020/may/04/parallels-climate-coronavirus-obvious-emily-atkin-pandemic.

2. McGrath, Matt. (May 6, 2020). “Climate change and coronavirus: Five charts about the biggest carbon crash”. BBC. Retrieved from https://www.bbc.com/news/science-environment-52485712.

3. Nature Climate Change. (2011). “Rapid growth in CO2 emissions after the 2008–2009 global financial crisis”. Retrieved from https://www.globalcarbonproject.org/global/pdf/pep/Peters_2011_Budget2010.pdf.

4. Schwartz, John. (May 19, 2020). “Americans see Climate as a Concern, Even Amid Coronavirus Crisis”. The New York Times. Retrieved from https://www.nytimes.com/2020/05/19/climate/coronavirus-climate-change-survey.html.

5. Greenhouse Gas Protocol: Standards. Retrieved from https://ghgprotocol.org/standards.

6. ISO-14064-1:2018 (December 2018). Retrieved from https://www.iso.org/standard/66453.html.

7. GRI. Retrieved from https://www.globalreporting.org/SiteCollectionDocuments/Materiality.pdf.

8. Science-based targets. “Step-by-Step Guide”. Retrieved from https://sciencebasedtargets.org/step-by-step-guide-2/.

9. Science-based targets. (June 5, 2020). “Corporate Commitments to 1.5°C and net-zero ramp up on World Environment Day”. Retrieved from https://sciencebasedtargets.org/2020/06/04/corporate-commitments-to-1-5c-and-net-zero-ramp-up-on-world-environment-day/.

Sinai Technologies Inc. is helping companies to mitigate climate change by enabling more intelligent carbon emission measurement, monitoring and trading. We are building the world’s first platform-as-a-service to measure, price and evaluate carbon risk, using science-based methodologies and artificial intelligence. For more information and to schedule a demo, visit https://www.sinaitechnologies.com/request-a-demo.