This week’s blog is a summary of the McKinsey Report called “On target: How to succeed with carbon-reduction initiatives” found at:

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/on-target-how-to-succeed-with-carbon-reduction-initiatives

The report is based on a survey of 450 global companies. The data suggests several things for companies seeking to set targets for GHG-emission reduction:

  1. Don’t forget targets that seek to reduce Scope 3 emissions, as alongside Scope 1 and Scope 2 emissions, they too make up a big part of the total carbon footprint of an organization.
  2. Recognize that success today in hitting emission-reduction targets is a good predictor of future success.
  3. Businesses that set bold targets are more likely to make more headway against them.

The very exercise of setting carbon-reduction targets can be an important step for organizations. It presents both risks and opportunities to create value from decarbonization. Throughout this exercise, then, executives should consider how or whether the company’s carbon-reduction efforts can help differentiate it from competitors. They should be intentional about shorter-term targets for 2025 and 2030, as those targets will be critical for mobilizing the organization to act.

The analysis shows that 44 percent of the organizations that are currently disclosing their GHG emissions are focused on short-term targets—that is, they are aiming for emissions reductions by 2025. Twenty-seven percent of the disclosing companies are focused on medium-term targets (with reductions by 2026 to 2040), while 2 percent are focused on long-term goals (with reductions by 2031 to 2050 or later). The remaining 27 percent of organizations have set targets across all three time horizons.

Most of the disclosed targets (74 percent) are from companies trying to reduce GHG emissions that are closer to the core—that is, from sources they own or control (Scope 1 emissions) and from the generation of the electricity, heat, or steam that they purchase (Scope 2).

By contrast, only 26 percent of the targets are aimed at reducing Scope 3 emissions, which are not directly owned by the business but are related to its activities. That is likely because Scope 3 emissions are much more challenging for companies to track and control. It is worth noting here that scope 3 emissions, including upstream and downstream emissions usually represent between 70 and 80 percent of the total carbon footprint.

For most industries, at least 50 percent of their emissions-reduction targets are on track, according to our research. But a closer look at target time frames reveals that industries that are on track with their short-term targets (2020–25) tend to stay on the rails and, in many cases, are projected to perform well with their targets over the longer term.

Four industries proved to be the exception, facing relatively more challenges with meeting their long-term targets even when performing well in the short term: transportation, fossil fuels, hospitality, and healthcare and biopharmaceuticals. A key factor in these industries is the role of technology in reducing GHG emissions. Long-term decarbonization efforts in both transportation and fossil fuels, for instance, will require significant technological breakthroughs—alternative fuels, electrification of heavy-duty vehicles and commercial aviation, carbon-capture-and-storage technologies—as well as a commitment to execution. Of course, tech­nologies to reduce carbon emissions are generally available to companies in hospitality and healthcare and biopharmaceuticals, but here a commitment to execution will be critical.

Additionally, the research found a positive correlation between companies’ average targeted percentage reduction of emissions (relative to the base year) and their progress at the time of reporting. In other words, companies with more aggressive targets appeared to overperform on the path toward achieving those targets. This trend holds true even for carbon-intensive industries such as materials, manufacturing, and power generation.

CTI courses hosted by Ecoprofit

As climate change events increase in number and ferocity, so does climate change risk for businesses and organisations. To remove or control this risk, organisations need to be equipped with the right practical knowledge.

Carbon Training International (CTI) offers courses that give clear direction to understand how to deal with climate change risk, including a comprehensive understanding of the term net zero.

CTI courses include Strategic Carbon Management, Carbon Accounting, Carbon Offsetting, Carbon Accounting/Offsetting combined, Applied Energy Efficiency and Reducing Fleet Emissions.

You can easily enrol in one of CTI’s online webinar courses at:

https://ecoprofit.com.au/online-courses/.

Just choose your preferred course and course start date. Extra course dates can be arranged.

The good news: carbon emissions and business costs are linked. The more an organisation reduces its carbon emissions the more it reduces its costs.