Companies face the challenge of reducing emissions

Over the past few years, numerous scientific studies published by different international organizations have made it clear that the current production model is not compatible with the proper conservation of the planet. The main cause of this situation is climate warming caused by excess greenhouse gas (GHG) emissions.

To face this challenge, governments around the world committed themselves at COP21 in 2015 to reduce their emissions so that the planet's temperature rises below 2ºC (preferably 1.5ºC) in 2100 compared to pre-industrial times.

This commitment required a generalized reduction in greenhouse gas emissions.

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Types of Greenhouse Gases (GHGs) 

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Greenhouse gases are gases that trap heat in the atmosphere and that cause global warming. Today, the main gases are:

• El Carbon Dioxide (CO2): It represents the vast majority of GHG emissions (almost 80%) since they are generated whenever a material burns, something very common in our daily lives due to the dependence on fossil fuels that our economy presents.
• El Methane (CH4): It causes 11% of the GHGs spread in the atmosphere and is caused by the decomposition of organic matter.
• El Nitrous Oxide (N2O): It represents 7% of total GHG emissions caused by human beings, and can be emitted through the burning of some fuels, the manufacture and use of synthetic fertilizers, etc.

To combat global warming and reduce greenhouse gases, companies need to set themselves objectives and develop action plans that will make it possible to achieve these objectives.

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Types of carbon footprint that a company produces depending on the scope

• Reach Footprint 1: direct emissions caused by the company's production process. It is, for example, the CO2 generated by a factory or a transport vehicle. To reduce these emissions, companies can take measures such as the optimization of certain production processes, the purchase of less polluting vehicles, etc.
• Reach Footprint 2: indirect emissions caused by the production of energy consumed by the company in order to carry out its activity. It's relatively easy to measure. All you have to do is multiply the company's energy consumption by the power generation emission factor of the supplier or country.
  The reduction of indirect emissions can be achieved through the implementation of energy efficiency measures. For example: hiring PPAs renewables (long-term energy purchase agreement); acquisition of RECs (Renewable Energy Certificates). These represent transferable proof that one MWh of electricity has been produced from renewable energy sources and has been added to an electrical grid.
• Reach Footprint 3: emissions indirectly caused by a company's value chain. For example, GHGs generated by the production and transport of fixed capital and raw materials needed for production. These emissions are the most difficult to quantify and reduce, since they do not depend on the company. If a company wanted to reduce its CO2 generation associated with supply, it could change suppliers to closer ones or pressure them to have more sustainable practices.

More and more European companies are measuring their footprint and they set goals for reducing their emissions. They have the dual objective of addressing present and future regulatory obligations. They also aim to reinforce their competitive advantage and improve their positioning vis-a-vis the market, investors or customers.

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SBTi: the initiative to reduce corporate emissions

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What type of framework do companies use to align with established objectives? How do you know if what the company is doing is enough?

It is in this context that the Science Based Targets Initiative (SBTi), an initiative developed by CDP, the United Nations, the World Resources Institute (WRI) and the World Wide Fund for Nature (WWF), which allows companies - of any size and sector - to set emission reduction objectives compatible with an increase in the planet's temperature of +1.5ºC in 2100.

To this end, SBTi allows companies to align themselves with two complementary reduction initiatives starting from a base year:

• Near-term science-based targets: these are objectives for the reduction of GHG emissions of scope 1, 2 and 3 that must be achieved within 5 to 10 years. Companies will not need to set such objectives for scope 3 if it is less than 40% of the sum of their emissions from the three scopes or if they have fewer than 500 employees. However, companies will be required to commit to measuring these emissions and reducing their scope footprint 3.
• Net-zero targets: these are reduction objectives to eliminate all emissions from scope 1, 2 and 3 in the long term and which must be met no later than 2050. In order to set these objectives, companies must have Near-Term targets validated by SBTi. In addition, companies are required to commit to neutralizing residual emissions that could not have been eliminated in 2050 despite having followed the Net Zero plan.

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The benefits of setting objectives in SBTi for a company 

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The main benefit of SBTi is that it provides a rigorous roadmap based on scientific studies that allows us to determine the level of emissions that a company must reduce to achieve the objectives of Paris Agreement. In addition, for those sectors that are the most polluting, SBTi defines sectoral guidelines and reduction methodologies aligned with their specific challenges.

In addition, starting to take measures to reduce GHG generation before such regulation comes into force will allow companies to increase the confidence of their investors, and, in some cases, to gain an advantage over their competitors. Finally, certain measures to reduce emissions also promote greater efficiency, helping to lower companies' operating costs.

How does joining SBTi work? To join SBTi, companies must communicate their commitment to reducing emissions to the organization. From the moment it is announced, companies have 24 months to prepare a reduction plan aligned with the science-based criteria that define the organization, and which must then be approved by the organization.

Once this process has been completed, companies will appear on the SBTi website as companies with approved objectives and will have 6 months to make them public. After approval, companies must disclose their emissions annually and monitor their progress to achieve previously established objectives.

A transparent, demanding, rigorous process that makes it possible to homogenize the degree of compliance with environmental objectives by companies, as well as reinforcing the real commitment of companies in their climate change and sustainability strategies. Quite a challenge, but with enormous returns for those who know how to face it with rigor and determination.