There are many benefits of reducing your company’s emissions. For instance, CO2 reductions can minimise your firm’s energy expenses, as well as contribute to national and global climate goals. In this article we illustrate what the road to a CO2-neutral company looks like. The purpose is to give a simple description of a process that is anything but simple. Let’s be honest – it is not a quick-fix to become CO2 -neutral. It requires prudent planning, strategic investments, responsibility and persistent effort. Still, most companies can achieve CO2 -neutrality – broadly outlined in three important steps:
- Create an overview of the company’s emissions through voluntary climate accounting.
- Devise a long-term climate strategy and implement reduction initiatives.
- Compensate for those emissions that cannot be reduced, through efficient CO2-compensation projects.
A climate account provides an overview
The first step towards CO2-neutrality is to understand your company’s carbon footprint. This gives an important overview and foundation for making decisions. Greenhouse gas emissions from companies are generally divided into three scopes:
- Scope 1: Direct emissions stemming from activities within the company’s own control – e.g. from individual heating of company facilities, transportation in the company’s own cars, and direct emissions from processes in the company.
- Scope 2: Indirect emissions from collectively provided energy – meaning emissions from the purchase or production of electricity and district heating, which a company buys and uses for its operation.
- Scope 3: All other indirect emissions that occur as a result of your company’s activities, which it does not own or have control over. This could be the emissions from the company’s suppliers of e.g. materials or raw material, other products or services your company procures, or the CO2 emissions from the use or disposal of your products by end-users.
Creating an overview of your company’s CO2 emissions through this structure provides an insight into your firm’s weaknesses and strengths in terms of a carbon footprint. It also allows you to identify simple fixes. This ensures your ability to focus your business and initiate climate-supportive efforts in the most efficient way.
CO2 reductions on all fronts
Having completed your climate account, you can start reducing your firm’s emissions. Reducing emissions on all possible fronts is key to achieving CO2 neutrality, and it is a prerequisite for justifying compensation for the remaining emissions. There are naturally a lot of different aspects to consider. Some initiatives are ‘cheap’ CO2 reductions, and other reductions are considerably more expensive to achieve. The following examples of green initiatives can guide the reduction of your company’s emissions:
1) Energy optimisation of company facilities
2) Optimisation of production plants
3) Producing your own sustainable energy – e.g. solar panels to make electricity
4) A green procurement strategy
5) Requiring sustainable transportation from suppliers
Before you start making green investments, it is critical that you become familiar with your firm’s CO2 levers. All companies are unique and initiatives that yield cost-efficient reductions for one company, might be less attractive for another. By adhering to this throughout the process, your company can create a goal-oriented and long-term reduction strategy; and commence effective initiatives.
The challenge that all companies face
You are now well on your way in your company’s green development pathway. You know where and which efforts are needed the most, and with the climate account at hand, you now have a long-term strategy for your company’s CO2 reductions. Initiative by initiative your company becomes greener and greener.
But the end goal for many companies is CO2 neutrality. This is where many companies face large challenges. At some point, all of the easy initiatives, often within scope 1 and scope 2, have been implemented. The green investments are slowly becoming more intensive and more expensive – and maybe even also less efficient, when measured relative to the size of the CO2 reduction. In many cases, you won’t be able to make further reductions without impacting the company’s ability to operate.
For Danish companies, this can e.g. be with respect to a dependency on supplied district heating or natural gas for heating. This typically ends with a deficiency of the last 7-15% CO2-emissions, when you look at scope 1 and 2.
CO2 compensation – what are the options?
In the case stated above, CO2 compensation can be a good solution to achieve CO2 neutrality. CO2 compensation – also known as CO2 offsetting – is about finding CO2 reductions or -sequestrations outside your own company. In practice, CO2 compensation means investing in projects that benefit the climate. This could e.g. be through:
- Investing in afforestation projects, where the CO2-sequestration of the trees compensates for your company’s own emissions.
- Investing in rewetting of low-lying soil, where the decreased emissions compensate for your company’s own emissions.
- Investing in international development projects that reduce the emissions in other countries and transfer the reductions to your own company’s CO2 account.
Many CO2 compensation projects have so far taken place internationally. One of the reasons for this is that investments in developing countries can frequently bring larger reductions at a cheaper price and contribute to social-, environmental-, climate-, and economic sustainable development.
'Isn’t it just polluting companies trying to buy their way out of their sins?' The short answer is 'no'.
However, at NIRAS we see an increasing focus from Danish companies on national projects that are both CO2-efficient and benefit the Danish population by, for example, contributing to a richer nature and environment. These types of projects can also support national climate goals, as voluntary projects within the national borders contribute to the Danish, national climate accounts as defined by the UN as part of the Paris Agreement.
Now and then we hear people criticize CO2-compensation: “Isn’t it just polluting companies trying to buy their way out of their sins?” The short answer is no. Most often that is not at all the case. When companies invest millions in CO2 compensation, it is most likely companies that have already been through a considerable green transformation journey, but need the last 7-15% within scope 1 and 2 to reach their ambitious climate goals. With that said, it is important to consider that the investments made by companies are creating legitimate reductions, that CO2 compensation is never just a quick-fix, and that the companies begin with reductions within their own scopes.
Focus areas for when your company wants to CO2-compensate
When you have come to the conclusion that you want to CO2-compensate the last tough – and typically expensive – emissions, it is important to be aware that it is a complicated and often long process. Additionally, there is a list of focus areas that your company needs to keep an eye out for:
- Validation and verification: To ensure the value of CO2 compensation, it is important that your climate project follows the general, international standards; that the project is validated; and that the CO2 savings are verified by an independent third party.
- Additionality: For the CO2 compensation project to be acknowledged, you need to be able to prove/argue that the CO2 reductions are ‘additional’ – meaning that these reductions would not have happened without this specific project.
- Monitoring: Calculating and monitoring CO2- sequestration for e.g. an afforestation project can be very complex, and you should be conservative in your approach to avoid an overestimation of the CO2 savings.
- Leakage: Since new climate projects come with a risk of moving activities with higher emissions elsewhere – either within or outside national borders – it is important to analyse the leakage effect and consider how you will address it.
- Double counting: When your company is preparing its climate accounting, it is important to ensure that the CO2 reductions only count in the climate account of one company. This is typically ensured by registering the reductions at a recognised, international registry.
- Time perspective: CO2-reductions should always be monitored and verified before the actual reductions enter the company’s climate account. Monitoring and verification should therefore be conducted continuously throughout the entire project.
- Cost of CO2-reductions: The price of one ton CO2-reduction largely depends on the project, as well as whether the project contributes to other purposes – such as biodiversity and social sustainability.
Your CO2-neutral company
If you keep all of these steps in mind, beginning the process of reducing your company’s carbon footprint, will be straightforward. Remember, however, that the most important CO2-reductions are those made in your own company. CO2-compensation is a supplement to this, to ensure that your company reaches its green climate goal – either as a CO2-neutral or maybe even a climate positive company!
NIRAS is the leading consultant within CO2-accounting. Every year we help companies, municipalities, regions, and other entities with their climate accounts. We have, for instance, advised Copenhagen Airport and COOP Denmark on climate compensation and CO2-offsetting. In addition, we have developed a CO2 calculator for the Danish Business Authority.