For Efficiently Managing Corporate Emissions
Happy birthday MHP! We can be proud of what we’ve achieved over the last 25 years at MHP.
Looking ahead, it’s clear that society as a whole faces a huge challenge: climate change. We see this challenge as an opportunity, and we are ready to influence the sustainable transformation in line with our corporate philosophy “enabling you to shape a better tomorrow.” First, let’s look at why a sustainable transformation is necessary. We will also briefly explore what opportunities it offers.
According to Berkeley Earth, the world’s current greenhouse gas emissions level is equivalent to 51,000,000,000 tons of CO2 per year. Based on the current global population of around 7.8 billion people, this level equates to around 6.5 tons of CO2 per person. The target for 2050 is a maximum of one ton for every person on earth. Climate change is a global challenge that we must face and overcome together, and the Paris Agreement provides guidance on how we can do it: The aim is to limit global warming to 1.5 degrees Celsius compared to pre-industrial levels. To achieve this 1.5-degree target, the “carbon law” developed by the Stockholm Resilience Center stipulates that an emissions reduction of 50 per cent is required every decade until 2050. The climate scientists behind “Project Drawdown” have identified 80 solutions that will achieve the necessary reduction when applied on a global scale. They also calculated the financial impact of implementing these solutions: Global investment of approximately USD 28 trillion could result in business opportunities worth USD 145 trillion – that’s a return on investment of 5 to 1! It is up to us to harness this potential together.
Let’s look at how we can achieve this via five ideas for reducing greenhouse gas emissions.
1. Efficiently measuring and controlling your company’s emissions
Just a few weeks ago, the European Council and the European Parliament made a provisional agreement for a European Climate Law. This legislation aims to reduce net greenhouse gas emissions by at least 55 per cent by 2030. In Germany, the Federal Climate Change Act was recently reissued following a landmark ruling by the Federal Constitutional Court. The draft law envisages an increase in the interim reduction target for 2030 from 55 per cent to 65 per cent, an 88-per-cent reduction in emissions as the new interim target for 2040, and for the country to be climate neutral by 2045. Political pressure is therefore mounting, and for businesses this means taking the first step to analyze and measure your current corporate emissions levels. According to a recent article in German business magazine WirtschaftsWoche, only 24 per cent of German companies measure their carbon footprint. The key thing to remember is that you cannot control anything that you cannot measure.
The Greenhouse Gas Protocol provides general accounting standards to help companies determine their emissions level. There are standards for calculating total corporate emissions (corporate carbon footprint) and product-specific emissions (product carbon footprint). Determining your corporate carbon footprint is generally the first step. Doing so gives you the chance to offset your emissions and work toward net zero through climate protection projects run by the Gold Standard or the Verified Carbon Standard. However, you can’t stop there because a genuinely sustainable transformation requires a three-part approach based on measuring, reducing and offsetting emissions. You will therefore need to establish a management system that aims to achieve a clear reduction in your corporate emissions. An internal CO2 price could be a good place to start as a means of controlling and reducing your company’s emissions. Effective emissions management is fundamentally important to the success of your sustainable transformation.
2. Identify emissions hotspots and develop a clear roadmap for reducing emissions within your company
Once you have calculated your current corporate emissions level, you will need to look in more detail at where the emissions are being generated. The Greenhouse Gas Protocol distinguishes between scope 1 (direct corporate emissions), scope 2 (indirect corporate emissions), and scope 3 (upstream and downstream corporate emissions). Using these three categories, you can easily identify emissions hotspots within your company. Many hotspots can be classed as scope-3 emissions since a supply chain alone can account for up to 80 per cent of greenhouse gas emissions and IT emissions are responsible for around 2 per cent of greenhouse gas emissions worldwide (Blog-Article "Enabling you to shape better value networks"). Other activities to consider include how employees travel to work and the emissions generated by end customers when using your products (see Idea 4 of this blog for more information on this topic).
Once you have identified your company’s hotspots, we recommend that you establish a clear roadmap that sets out your potential for reductions and your reduction targets. Then start implementing actions consistently. Numerous frameworks and guidelines are now available to support you as you move toward net-zero greenhouse gas emissions. One to consider is the Science-Based Targets Initiative, which requires a clear commitment to sustainable transformation targets and transparent reporting on your progress. Whether or not you sign up for initiatives like this one, it is still important to develop a clear roadmap for your reduction targets. The aim of your roadmap must be to achieve an initial rapid reduction of emissions at your company. It is essential to start by identifying opportunities for improving the efficiency of your business processes and then build on this potential. Taking this approach reduces not only your emissions but also your costs, giving you twice the benefits.
3. Hotspot: Managing emissions from business-related mobility
Business-related mobility is a very common hotspot that is useful as an example. In addition to transportation along supply chains and at your sites, and business travel, business-related mobility includes how your employees travel between home and work. As things stand, all methods of transporting people and goods on roads are responsible for around ten per cent of global emissions. A holistic approach to managing business-related mobility offers both financial and environmental opportunities for making a direct impact on reducing emissions. Including a strategy for switching to electric vehicles is another way to make an impact on the lifecycle emissions of your corporate fleet. We recommend implementing a holistic approach to managing business-related mobility and electrifying your fleet as soon as you can.
4. Analyze the entire lifecycle of your products
Up to 80 per cent of a product’s impact on the environment is decided as early as the design phase. With this in mind, we recommend that you look at the entire product lifecycle at the outset and consider all aspects of product design: What raw materials are required? How are they produced and delivered? How will the product be manufactured? And what impact will this product have during use and when recycled? While you are calculating a product’s carbon footprint, it is also worth doing an individual lifecycle assessment in order to properly analyze the entire lifecycle and the true impact of products from a cradle-to-cradle perspective. We have a different blog that looks at the additional opportunities that arise from switching to a circular economy (Blogpost: Enabling you to shape better value networks). Let’s continue focusing on emissions for now: Scope-3 corporate emissions as defined by the Greenhouse Gas Protocol accounting standard also include emissions generated during the use phase of a product. For a normal petrol or diesel mid-range car, around two thirds of emissions occur in this phase. No doubt you have already thought about these types of emissions. A variant management system can help you analyze scope-3 emissions. These systems digitally map the full complexity of a product range, factoring in financial aspects of the products and environmental considerations for individual product components into product logistics that include the customer. Managing product variants based on environmental and financial factors can help you to identify opportunities to reduce emissions within your product portfolio and ensure that it is sustainable. This form of variant management offers another advantage: Increasing demand from consumers for sustainability and transparency means that this approach will impress your customers and give you a competitive edge. Incidentally, integrating the findings from your lifecycle assessment and customer feedback into your design processes are key steps for transitioning to a circular design model.
5. Analyze the use phase of your products and help your customers to use your products in a sustainable way
There is also potential to reduce the emissions that customers generate when they use your products. The keyword here is nudging, i.e. influencing behavior through positive incentives. Studies show that it’s possible to influence over 80 per cent of purchasing decisions and encourage sustainable behavior through nudges. Transparency and direct interaction with individual customer groups – or even better co-creation – are essential in this scenario. When you actively include information about using your products into your communications with individual customer groups, you immediately gain leverage for encouraging sustainable consumption and thus reducing emissions. Doing this may also open up new revenue channels and service opportunities. So what incentives can you offer to customers for buying your sustainable products or using your products in a sustainable way? And what are the benefits from your perspective? The right nudges definitely have the potential to support and accelerate your company’s sustainable transformation, and strengthen your relationship with customers.
These five ideas are designed to help you reduce your company’s emissions and guide your business toward a sustainable transformation. Sustainable transformation is a challenge, but also a great opportunity. It is up to us to seize this opportunity together!