The road to net-zero: How to begin your decarbonization journey
It is critical to develop meaningful strategies to achieve net-zero targets and to begin to act now.
The transition to net-zero is now in high gear following the COP26 conference in Glasgow where countries, municipalities and businesses raised the bar in their decarbonization commitments. The ambitious promises made by global and business leaders mean that every industry from big to small will be affected by the shift to a carbon-free world.
In his annual letter to CEOs, BlackRock Chairman Larry Fink addressed this disruption waiting on the horizon, asking company leaders whether they will go the way of the dodo or be a phoenix as their industry gets transformed by the energy transition.
The good news is that we not only have the technology to reach net zero, but it is also affordable. In fact, more often than not renewable energy is even cheaper than fossil fuels, giving all the more reason for sectors to accelerate their transition to carbon neutrality.
A quick glimpse at a diverse set of industries highlights how their success in an evolving landscape is dependent on decarbonization. For instance, for public and private educational institutions customer related pressure is mounting from students, donors and Boards of Trustees that institutions deliver on their climate pledges.
For enterprises, decarbonization is necessary for risk management as shareholder pressure to meet climate targets is growing while emerging legislation from regulatory bodies also looms. Meanwhile, for commercial real estate companies, access to capital is restrained by their sustainability profile. Without a net-zero goal, real estate investment trusts (REITs) will not get the financing they need to gather new assets.
Of course, shifting to net-zero will not happen overnight. It will take decades for institutions, companies and municipalities to become carbon-free. That’s why it’s imperative that they get an early start now.
Developing an action plan for decarbonization
Deciding how to begin the journey to net-zero can feel overwhelming. A good place to start is by assessing the company’s current situation and its readiness to begin decarbonizing. This should include analyzing the existing carbon footprint, the organization’s commitments, plans and activities.
An evaluation of the risks and opportunities associated with both action and inaction should then be carried out. By conducting a materiality assessment, employers can then identify and determine the issues impacting their business and stakeholders, which allows for the development of an actionable carbon reduction glidepath that is aligned with the organizational goals and stakeholder expectations.
Decarbonization is a journey, and taking a holistic view is critical, identifying the range of levers to success, including energy efficiency, producing energy on-site, transition to electrification and procuring clean energy. Any implementation planning must consider how an organization manages, finances and values project and initiatives to reduce carbon emissions.
Throughout the process, it’s important to put in place a strong data foundation that can be leveraged to quantify the impact on initiatives, which then allows someone to refine their KPIs and action plans according to performance.
It’s also important to remember that although transitioning to net-zero may seem like a Herculean task at the beginning, options such as Energy-as-a-service (EaaS) solutions can simplify the process of slashing emissions. With predefined service payments, budgeting is made easy since energy is made an operating expenditure more closely aligned to production. So, once there is an action plan developed, financing options, such as EaaS, make it possible to start one’s green journey immediately without any capital expenditures required.
There are a handful of innovative financial structures to choose from all with their own advantages. For instance, Power Purchase Agreements (PPAs) can offer long term price security by locking in a fixed electricity rate, while a Design Build Own Operate Maintain (DBOOM) structure allows improved efficiency and cost savings by combining responsibility for several functions under a single entity while also relieving that person of responsibility for maintenance and repairs. Or, by using performance-based financing (PBF), people can rest assured that their desired results are achieved and that they keep close to their timelines for reaching these targets.
Trusted turnkey solutions
Addressing the climate crisis is both a challenge and an opportunity for all sectors of our economy. While many organizations have made 2050 net-zero carbon commitments, industry leaders are taking a more aggressive approach, typically looking at 2030 to decarbonize their own operations. With commitments in place, it is critical to develop meaningful strategies to achieve these targets, and to begin to act now.