By implementing decarbonization strategies, businesses can play a pivotal role in the transition to a low-carbon economy. Decarbonization not only mitigates climate change but also fosters innovation, resilience and long-term sustainability.

What are Decarbonization?

Decarbonization is the process of reducing carbon emissions into the atmosphere with the goal of achieving a low-emission circular economy. This is also an important structural change to remove carbon from the production process.

In recent years, decarbonization in businesses plays an increasingly important role in the journey towards a net zero future. 

Decarbonization strategies are not only an option, but an absolute necessity to meet regulatory requirements and grow successfully. Human emissions of CO2 and other greenhouse gases are a primary driver of climate change. Climate change can lead to environmental disasters that cause damage to people and property, as well as disrupt economic activity. Therefore, climate risk is also a financial risk. Decarbonization strategies help to reduce it.

The Challenges of Decarbonization Companies in the World

Economic difficulties hinder businesses’ decarbonization efforts. Heavy industry companies worldwide acknowledge the challenging macroeconomic landscape. This decline affects their decarbonization efforts.

A new Accenture (UK) report shows nearly 40% of heavy industry companies can’t invest more in decarbonization due to economic instability. Nearly two-thirds say major carbon reduction efforts won’t be economically attractive until the decade’s end. However, over half see revenue growth as a key driver to make decarbonization more appealing.

A separate report from November 16, 2023, reveals only 18% of the world’s 2,000 largest companies are on track to achieve net-zero emissions by mid-century. However, 37% are committed to this goal, up from 34% last year.

Europe leads in decarbonization efforts, with 61% of companies aiming for net zero, compared to 28% in North America and 30% globally. Yet, only 24% of European companies can realistically achieve this by 2050, according to Accenture’s analysis.

The Process of Building Decarbonization Strategies

1. Assessment of direct and indirect emissions

This is done through a Scope 1, 2 and 3 inventory and a detailed analysis of the organization’s current emissions profile. This includes the identification of direct and indirect sources of emissions. This information helps organizations understand where hotspots exist and where efforts need to be focused to reduce emissions. 

2. Prioritize emission reduction measures

Based on the analysis, mitigation measures are further analyzed across material types to address climate change hotspots. Priorities include a customer-informed approach based on feasibility, leadership and innovation aspirations, decarbonization potential, risk management and cost analysis.

3. Set short-term and long-term goals

Set specific, measurable, achievable, relevant, and time-bound (SMART) targets to reduce emissions for both the short and long term. The goal setting step is a highly informed process by analyzing and prioritizing the scope of mitigation measures, understanding the feasibility of different scenarios, and ensuring the goals are achievable.

4. Develop roadmaps and implement action plans

SMART targets require a detailed roadmap to come up with an overall emissions reduction strategy over a limited period of time, maybe 10 or 25 years. The roadmap and action plan include milestones and detailed actions related to the initiatives, programs and mitigation measures that will be implemented during the target phase.

5. Track and report progress over time

Businesses or organizations need to monitor and report decarbonization strategies transparently throughout the target period. This process is undertaken annually with any Science-Based Targets. 

Some Common Decarbonization Strategies for Businesses

In the fight against climate change, businesses play a crucial role in reducing carbon emissions. Here are some key strategies for companies to cut carbon and contribute to a more sustainable future:

1. Increase energy efficiency

One of the simplest yet most effective ways to decarbonize is by consuming less energy. Implementing some measures such as LED lighting, building automation systems, and HVAC upgrades can significantly reduce energy consumption by 50-75%.

2. Electrify operations

Electrifying heating, cooling and other operations can have a profound impact on emissions reduction. By replacing fossil fuel-powered appliances with electric substitutes, businesses can improve efficiency and indoor air quality while cutting emissions.

3. Embrace renewable energy

Transitioning to renewable energy sources like solar and wind power further reduces carbon footprints. Companies can install onsite renewable energy systems or opt for virtual power purchase agreements to access clean power.

4. Reduce emissions from refrigeration and transportation

By electrifying vehicles and refrigeration units, companies can mitigate and improve emissions across the cold chain. Innovations such as all-electric solutions and alternative fuels like Hydrotreated Vegetable Oil (HVO) offer promising avenues for decarbonization.

5. Leverage digital technologies

Digital tools such as sensors, AI algorithms, and building management systems optimize energy usage and enable predictive maintenance, leading to greater efficiency and cost savings.

In addition to the above tactics, using carbon offsets and carbon capture, utilization, and storage (CCUS) are also options to offset the balance of emissions that cannot be eliminated through operational changes.

Why Should Companies Implement Decarbonization Strategies?

Companies should focus on decarbonization strategies to stay ahead of reporting mandates. This builds trust with customers, investors, and stakeholders. It also helps combat global warming.

Tracking carbon emissions now is crucial. Carbon disclosure mandates are becoming more common. Soon, most companies will need to disclose their emissions. This includes climate risk disclosures for investors and federal mandates for Scope 1, 2, and 3 emissions.

Investors, customers, employees, and other stakeholders also want to know a company’s emissions and management plans. Companies must have this information ready for the public or face consequences.

Therefore, implementing decarbonization strategies is quite necessary for businesses, especially large businesses.

See more: The Difficulties of Decarbonization Companies in the World