The Missing Link in Corporate Decarbonization: Effective Tools for Setting Emissions Targets
The task almost always involves addressing the pivotal question: “What will this cost?”
In today’s corporate landscape, the pressure on companies to publicly commit to ambitious greenhouse gas emissions goals is mounting. This pressure is coming not just from regulatory bodies, but increasingly from customers and investors — some of the most critical stakeholders for any business. The Science-Based Targets initiative (SBTi) has provided clear guidelines for setting emissions targets that align with scientific estimates needed to prevent the worst effects of climate change. However, while the guidelines are clear, the journey to taking action is anything but straightforward.
The Reluctance to Commit
Despite the growing external pressures, many executive teams are hesitant to make their emissions goals public. This reluctance often stems from a lack of concrete plans to achieve these targets. Sustainability leaders within organizations are frequently tasked with not only providing guidance but also building consensus among the executive team for setting these targets. This task almost always involves addressing the pivotal question: “What will this cost?”
The Business Case for Targets
Setting emissions targets can be a double-edged sword. On one side, departments like sales, marketing, and public relations see the value in such targets to enhance the company’s reputation among customers, employees, and investors. On the other hand, operations and finance departments may view these targets as potential cost drivers that could divert resources from other critical objectives. Balancing these competing priorities is one of the most challenging aspects of a sustainability manager’s role. It requires a blend of technical and financial acumen, alongside skills in persuasion and consensus building.
The Analytical Challenge
I often hear from sustainability managers that they simply do not have the time to build the detailed business cases necessary to support their target recommendations. This is especially true for organizations setting their first targets. In contrast, larger companies with more experience in setting emissions targets typically have teams dedicated to developing the required business case analytics. These teams engage in forward planning, which includes forecasting the growth or reduction of operations, projecting changes in emissions factors as electricity grids become greener, and aligning emissions reporting with fiscal years to match company budget cycles. These routine but essential analytical steps are often too time-consuming for the smaller teams at many companies to handle.
How Technology Can Help
Given the high quantity of simple analyses needed to support emissions targets, there is an opportunity to leverage software to streamline many of these analytical processes. Most companies working on setting public emissions targets have already completed at least one emissions inventory. These inventories are akin to financial reports but for greenhouse gas emissions instead of income and expenses. Companies typically produce these inventories using carbon accounting software, often with assistance from professional services, and report key facts about their emissions to customers, investors, and regulators annually.
Standardized Data Enables Automated Analysis
Emissions inventories are typically produced according to the GHG Protocol — a GAAP for emissions accounting — and often audited by third-party firms like Deloitte, PwC, and EY. In most cases they provide high-quality, standardized datasets. These datasets enable automated analysis of the actions companies can take to reduce emissions, offering leadership teams quick access to feasibility analyses that present both the emissions and financial returns on investment. This kind of analysis is crucial for supporting the targets that companies wish to communicate to external stakeholders and for ensuring they have a plan to achieve these targets.
Introducing Permilyon
Recognizing the need for streamlined business case development, Permilyon is now offering to select companies the ability to pilot our software designed to automate much of the analysis involved in setting and achieving emissions targets. This tool aims to empower sustainability leaders by reducing the time and effort required to build robust business cases, enabling action on achievable emissions targets.
Setting emissions targets is a multifaceted challenge that requires balancing diverse corporate interests, presenting detailed financial and technical analyses, and engaging in internal negotiation. However, with the right tools and technologies, sustainability leaders can build compelling business cases that align with both environmental goals and corporate objectives, ultimately driving meaningful progress towards a decarbonized economy.
