Analyst Insight: Decarbonization is a non-negotiable requirement for long-term business success. Consumers, investors and business partners are putting significant pressure on companies to reduce their carbon output. At the same time, environmental changes threaten supply chains and business models. To overcome these challenges, organizations must go beyond reporting, and commit to aggressive climate initiatives. Achieving climate and business goals will require quality data and true carbon management, not just carbon accounting.

Decarbonization drives business value. Failure to reduce emissions could put 20% of a company’s profits at risk by 2030. On the other hand, achieving reductions could generate more than $9 trillion in revenue opportunities globally, due to shifting customer and investor demands. To be successful, companies must think bigger than regulatory compliance and operational emissions reductions.

Carbon Management Becomes Imperative.

Companies that get bogged down in checking regulatory reporting boxes will miss a critical opportunity to drive business value through decarbonization. Many organizations are investing in carbon accounting, which focuses on quantifying emissions. This is effective for reporting, but won’t move the needle on carbon output. Successful companies will use carbon data to inform strategic decisions. With accurate and actionable data, companies can prioritize decarbonization initiatives that align with both their environmental goals and business objectives. Those that invest in comprehensive carbon management, not just accounting, will gain a competitive advantage.

Actionable Scope 3 Data Drives Reductions.

Supply chain emissions present the biggest challenge — and opportunity — for carbon management. These outputs, known as scope 3 emissions, are generated by supply chain partners and product usage, which can account for more than 75% of an organization's total emissions. Many companies struggle to accurately measure scope 3. Ivalua found that more than 60% of organizations characterize their reporting as a "best guess.” Companies must engage with their suppliers to gather actionable supplier- and product-level data, set realistic goals, and track progress. The objective of engagement programs will evolve. What begins with gathering first-party data from suppliers will transition to collaborative reduction efforts or decarbonization incentives.

Suppliers Will be Responsible for Carbon Management.

In the coming years, suppliers will assume full responsibility for managing their own carbon reductions. Previously, some big-brand customers and suppliers collectively contributed money toward decarbonization activities such as renewable energy, but financial pressures and regulatory demands are forcing companies to scale back their financial support. However, this shift won’t alter expectations for supplier sustainability efforts. Self-driven decarbonization progress will become mandatory for suppliers, in order to maintain partnerships and attract new business. 

The Goal is Sustainability.

With new leadership entering the White House, U.S. reporting requirements may become less stringent, but companies shouldn’t lose sight of the ultimate goal: building a thriving business that is sustainable for the long haul. A change in regulations will not alter the trajectory of the market. Consumers and investors want a low-carbon economy, and the impact of climate change on supply chains will grow. Companies that embrace decarbonization will come out ahead.

Outlook: The next five years are critical to the future of our planet. We must quickly transition to a low-carbon economy, or endure irreversible environmental consequences. Businesses have significant influence — and responsibility — to drive meaningful carbon reductions. Adopting carbon management practices will make the difference between success and disaster, for both business and the environment. 

Resource Link: https://opteraclimate.com/