Over the past three decades, carbon emissions have increased by approximately 90%, requiring global climate action at an unprecedented pace and scale. The world's opportunity to avert catastrophic climate change is rapidly closing, while the cost of inaction will only continue to increase. However, it can be difficult for individual actors to identify how best to pursue climate action, how much effort is required, and when they should act.
Companies have a critical role in driving decarbonization, and this challenge also presents opportunities. Stakeholder and investor pressure for action is increasing, and the cost of inaction may be financial losses or risks to brand reputation. However, as corporations announce ambitious decarbonization plans, they must prepare for claims to be scrutinized by those same stakeholders and investors. Fortunately, rigorous frameworks and guidelines—as well as blueprints from early sustainability movers—are providing organizations with a roadmap to success.
Science-based emissions reduction targets (SBTs) are an important first step for companies on the race to net zero. The adoption of science-based targets has nearly tripled over the past two years alone, with over 1,200 companies now committing to SBTi. According to an ENGIE Impact Analysis, within eight months (July 2020 - March 2021), Fortune 500 companies setting net zero targets increased by a whopping 450%.
The Science Based Targets Initiative (SBTi) provides a framework to align decarbonization goals with findings of climate scientists and commitments countries have made under the Paris Agreement – limiting warming to well below 2°C or, preferably, no more than 1.5°C above pre-industrial levels.
Yet, despite the surge in commitments, few are on track to achieve their goals. Companies must go beyond goal setting, carefully defining the decarbonization pathways to meet their targets. To build these pathways, organizations need a deep understanding of their current state, a projection of future scenarios, and the necessary information and resources to make informed decarbonization investment decisions. With so much complexity and so little time, how can companies move quickly but with rigor? Immediate action can help companies amplify their climate impact.
As a company committed to carbon neutrality, our objective was to align with a globally accepted framework like SBTi to ensure that our efforts were credible, data-based and legitimate and would stand up to third-party analysis. In approaching our science-based target setting, we first defined guiding principles (see Figure 1) to keep us on track when difficult questions and decisions arose.
In 2019, ENGIE Impact was purpose-built to enable accelerated sustainability transformation at speed at scale. In line with our mission, we quickly set a goal for Carbon Neutrality in 2020 and Carbon Negative for 2021 and beyond. Mitigating climate change requires immediate action, so we have set short timelines to achieve our ambitious goals. We are emboldened by the ambition of our parent, ENGIE, the world's largest independent power producer, already committed to the SBTi and carbon neutrality, making strides to mitigate emissions and leading the way in the Utilities industry—standing in first place for emission reduction progress against goals aligned with the Paris Agreement.
ENGIE Impact is purely a professional services company, so we had to tailor our sustainability strategy to fit our material environmental impacts. To follow best practices of achieving Carbon Neutrality goals, we prioritize credible, ambitious emissions reduction goals aligned to SBTi's methodology and invest in high-impact offset projects.
The following table provides a summary of the best practices we are adhering to for setting our science-based targets:
Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in a company’s value chain. (Source: Carbon Trust)
As a global company, ENGIE Impact set a science-based target for Scope 1 & 2 emissions just one year after we were established. These are the emissions most within our operational control, including heat, AC refrigerants, and electricity usage in our offices and combustion of fuels in corporate fleet vehicles. While we do not have full control over some aspects of our leased office spaces—particularly the technology and refrigerants used in HVAC systems—we do have control over our standards on choosing leased spaces and the ability to influence our building stakeholders over time.
We did not have all systems and processes in place to have adequate data and visibility into all our potential Scope 3 emissions categories. Nevertheless, our purpose of "Make Sustainability Happen Today" guided us to explore how we can proactively address our Scope 3, such as emissions from commuting and business travel, while building new systems, processes and stakeholder alignment. In alignment with Greenhouse Gas Protocol Standards, we are using available tools to progressively measure and address other Scope 3 categories (e.g., procurement policy and procedures, supplier and employee engagement, and testing carbon budgeting alongside our financial processes).
Our next question was one of ambition. To best align with recommendations from climate science, we have set a reduction target aligned to a 1.5⁰ C pathway for Scopes 1 and 2 and will continue to source 100% of our electricity from renewable sources through 2030.
For any sustainability strategy, broad employee engagement is key. Our C-suite and business leaders were first involved to align on an ambition—the kind of commitment that is critical to set the stage for success. Executives and departmental leaders worked together to co-design guiding principles, define the mission, and identify opportunities to shape sustainability into our core business model and operating procedures.
With a clear vision established, it was critical to engage a broad network of stakeholders to identify opportunities, take action and track progress. To best leverage our internal expertise and generate diverse insights and ideas, we engaged a broad set of employees—from our client services experts in carbon accounting, sustainability consulting, and data analytics to exceptional leaders across our finance, human resources, executive assistance, and facilities management departments.
While our leaders were aligned on the importance of ambitious climate goals, we still needed to understand how we could feasibly achieve them. In particular, emissions from office use are difficult to address as we do not have full control over our leased office space. To tackle the challenge, we engaged operational leaders to uncover opportunities we can bring to reality with our target setting.
We identified several impactful levers to achieve our Scope 1 reduction target, including transitioning our office space to more sustainable buildings as our leases expire, transitioning our corporate leased vehicles to zero-emissions vehicles and creating policy changes. These levers are essential to ensure new offices or fleet vehicles do not add new emissions that counteract our reduction efforts. We will achieve our reduction target by sourcing 100% electricity from renewable sources. Energy efficiency improvement initiatives in the buildings we own are also critical to minimize growth in energy consumption.
Amidst the COVID-19 pandemic, our experts worked with the ENGIE Impact leadership team to evolve our ways of working and offer employees a flex-working schedule, simultaneously reducing office square footage—and Scope 1 & 2 emissions. Our experts crafted a survey that was sent out to all employees and the feedback collected was a key driving factor in our move to flex.
To build a resilient business for decades to come, business leaders must quantify the potential business risks and opportunities of climate change. Our recent Global Executive Survey found that 75% of sustainability leaders prioritized scenario analysis to quantify climate risks and opportunities. In designing our own actionable roadmap, we modeled the emissions reduction pathways we could take, projected our emissions if business continued as usual, and identified and quantified emissions reduction opportunities to align with a net zero trajectory. This process was critical.
As we began to model the size, scale, and phasing of potential decarbonization opportunities, we understood there was little room for small actions, especially considering our trajectory as a new, rapidly growing business starting with fewer emissions from which to reduce. Our actions had to be just as ambitious as our reduction target. See the example below.
A robust analysis of our baseline and business-as-usual trajectory (Figure 2) revealed that most of our emissions exist within Scope 3, with business travel accounting for nearly half (47%) of this category. As a services company, this did not come as a shock. Furthermore, our experts project these emissions to grow by an average of 15% per year, forcing us to ask ourselves, "How do we deliver great client service with less reliance on business travel?" We recognized the value of a clear, strategic and actionable roadmap to guide us along our sustainability journey. Leveraging digital tools and technical expertise, we found 25% of employees represent 100% of our air travel footprint. With that insight, we engaged frequent flyers on potential strategies and designed a solution using our travel platform that creates transparency around travel options and incentivizes travelers to select lower carbon flights. We are also tracking progress and creating incentives using our employee engagement platform. As COVID restrictions gradually subside worldwide, we will pilot this new process and continuously evolve it as our experts unravel deeper insights from accurate and robust data.
Figure 2: A sample illustration to depict our modeling process, the different levers that must be pulled, and to what extent, to drive accelerated decarbonization and meet science-based targets.
Companies must have systems and processes in place to continually learn what is working or not and iterate their roadmap to achieve their goals. Following our best practice, we have designed our analysis and processes to continue after setting our targets.
For many organizations, a major proportion of overall carbon emissions lies in their supply chain—known as Scope 3 emissions. When accounting rules are precise, emissions data from suppliers is the most accurate way to estimate Scope 3 emissions from products and services procured, but companies often have little control over reducing these emissions. This challenge can be solved through communication, collaboration and sharing of best practices with key suppliers. Many companies encourage suppliers to set or commit to their own science-based targets and set their own goals around the percentage of suppliers that have made this commitment. Some sustainability leaders go even further to conduct supplier summits on sustainability to share knowledge and best practices on emissions reduction strategies. Through such programs, suppliers throughout the value chain foster a greater understanding of how their actions affect themselves and other organizations.
While achieving science-based targets remains an ambitious endeavor, these goals are increasingly within reach. The infrastructure to switch from brown to renewable energy is now in place and can increasingly be done at a cost savings. Transitioning to electric fleets is financially feasible for light-duty vehicles today and heavier-duty vehicles in the next few years. The technologies to aid in the net zero transformation are evolving rapidly, bringing not only greater efficiency at lower costs, but also bolstering resilience. Many of the solutions we need are here today and the economics are rapidly shifting in our favor. Those that can effectively navigate this complexity will emerge from the next decade with a more resilient, low-carbon business and a healthy bottom line.
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