As we head into 2023, many will face tough choices on how to navigate the economic uncertainty which lies ahead, while keeping net-zero commitments alive. The long-term solution will be for businesses to take energy consumption into their own hands, investing in renewables to support the shift away from carbon intensive, price-volatile fossil fuels.

However, this may not be possible as an immediate action and, in the interim, an energy efficiency approach is the more feasible option. Having spent the past three decades improving the energy and carbon performance of more than 1 million buildings globally, our experts have developed a four-step plan to help businesses improve their energy management strategy and reduce their carbon impact, while saving costs, improving employee comfort and productivity, and supporting your ESG strategy along the way. You can read more in IES’s free Guide to Reducing Business Energy Costs, but here are our headline tips:

1) Understanding your organisation’s energy consumption

Understanding exactly where and when your business is using energy is the vital first step in getting your buildings on track for net-zero, while supporting better energy management and cost reduction strategies. After all – if you can’t measure it, you can’t improve it. Budgeting for and investing in the latest smart metering and energy monitoring infrastructure now is key to unlocking larger, sustained savings on all fronts – energy, cost and carbon

2) Identify low/no-cost operational improvements

With a better handle on your data you can start to identify the highest emitters and where energy is being wasted. Facilities teams can then adapt how they operate your building(s), implementing low/no-cost control changes, which will lower your carbon impact and help save potentially 20% on operational energy costs.

3) Set up remote energy monitoring

To save time and improve efficiency, consider setting up remote energy monitoring for your buildings, including the heating and cooling systems. This will prevent operational drift, whereby efficiencies are lost over time due to building occupants and managers altering settings, equipment and use patterns.

4) Consider bigger building and renewable investments

Once operational improvements have been implemented, consider bigger netzero investment opportunities. Retrofitting may be the most effective way to set your business on the journey to net-zero, and can also offer opportunities to save money and increase energy resilience.

Technology, such as digital twins, exists to support each of these steps, providing a central digital asset from which to collate and analyse your data, identify and monitor operational improvements, and simulate future scenarios and interventions to support better decision-making. Using such tools can provide confidence that net-zero investments are well-informed, backed by data and will get your business where it needs to be.

edie’s Net-Zero November report

Incorporating exclusive COP27 coverage, high-level interviews, themed podcast episodes and a dedicated Net-Zero Action online event, edie’s Net-Zero November campaign saw us deliver up a bumper month of content designed to help businesses raise their sustainability ambitions and accelerate climate action. And what a month it was…

To summarise all the key developments, announcements and initiatives, as well as capturing the key messages of thought leaders, edie has partnered with IES to create a post-COP business report on how net-zero will evolve moving forward.

Click here to download the report.

To summarise all the key developments, announcements and initiatives, as well as capturing the key messages of thought leaders, edie has partnered with IES to create a post-COP business report on how net-zero will evolve moving forward.

—CLICK HERE TO DOWNLOAD THE REPORT—

This report is designed to summarise all the key announcements and discussion points from Net-Zero November; and to act as a blueprint for business leadership as we begin to move from ambition into action. A special thanks must go to all of the interviewees, bloggers, speakers, partners and supporters who made edie’s Net-Zero November and COP27 coverage such a resounding success.

From the key news stories, to the soundbites from world leaders and climate experts, this report covers all net-zero facets from green policy to innovation, to help businesses turn ambitions and targets into action and progress.

The report features insight from Department for Business, Energy and Industrial Strategy’s (BEIS) net-zero business engagement lead Dan Altman who spoke exclusively at edie’s SPARK event last month.

Altman said: “I think the major theme coming out of this is how net-zero and [responding to] the energy crisis go hand-in-hand. In order for many businesses to address net-zero, they first need to address that. If a business can reduce its energy use, this will benefit its finances and emissions [footprint]. With the dramatic rise in energy prices, many businesses are struggling to stay afloat – let alone having time to have the resource to dedicate to net-zero.

It also features an industry viewpoint from IES’s global sales director Richard Fletcher who states: “As we approach the end of a challenging year on many fronts, it is understandable that some businesses may feel their decarbonisation efforts have been forced to take a back seat of late. Energy costs and resilience of supply have risen to the top of the agenda. However, edie’s Net-Zero November campaign, and a reaffirmed commitment to 1.5C at COP27, have brought net-zero sharply back into focus.”

Click here to download your copy of the Net-Zero November report.

This report is designed to summarise all the key announcements and discussion points from Net-Zero November; and to act as a blueprint for business leadership as we begin to move from ambition into action. A special thanks must go to all of the interviewees, bloggers, speakers, partners and supporters who made edie’s Net-Zero November and COP27 coverage such a resounding success.

From the key news stories, to the soundbites from world leaders and climate experts, this report covers all net-zero facets from green policy to innovation, to help businesses turn ambitions and targets into action and progress.

Click “DOWNLOAD THE REPORT” to access your copy of the Net-Zero November summary report for 2022.

Too many companies are currently delivering little more than business-as-usual, supplemented with incremental change. On current trajectories, most net-zero strategies are going to fail, by a long way.

The fundamental problem concerns the outdated assumptions, underpinning virtually all net-zero strategies; that we can deliver net-zero through incremental changes to our business-as-usual models.

Unfortunately, incrementalism can only lead to the net-zero crunch, where we can’t go any further in reducing carbon emissions within the current framing of our business. We need to get much more strategic.

From this moment, incrementalism is dead. The future is all about developing truly transformational strategies for net-zero enterprise — delivering radical reductions in emissions, while harnessing commercial advantage.

This will involve completely redefining and redesigning our businesses, if we are going to deliver the necessary impact, in time, while continuing to be profitable.

Are we ready?

Very few businesses are currently asking the very big, strategic questions, about what it really takes to become an authentic net-zero enterprise. While there’s certainly a growing consensus on the need for transformation, how many businesses are really gearing up for such radical shifts? Are we ready to do what it takes?

Let’s try a short thought experiment: As you’re reading, just call-out-loud, the names of businesses you know that have already undertaken, or are in the process of undergoing, an authentic transformation. And, when we think about transformation, we should be mindful to avoid tales of large-scale incrementalism; no, we need to keep a laser-focus on genuine transformations, delivering radical changes in both mode and performance.

OK, so how did we get on?  Well, I get three, maybe four good examples. Ørsted. Patagonia. Interface. Unilever, maybe? We have way too many examples, where companies are talking transformation, while walking incremental change. We need many, many more transformational role models, especially in these times of green-hushing. The question for many organisations is, how do we transform to deliver net-zero and beyond? We need help, and fast.

New recipes, missing ingredients

Thankfully, help is at hand. There is an encouraging array of new reports and guidance – from consultancies, universities and industry initiatives — offering a range of new recipes, towards that elusive feast, the net-zero transformation. These good works all have something to offer – although, in the most part, there are some important ingredients missing:

• Genuinely transformational guidance appears to be very light in content.
• Lacking emphasis on developing ideal future-oriented designs for net-zero enterprise and backcasting.
• Limited visibility of opportunities for radical emissions reduction.
• Methodologies and examples are mainly underpinned by incremental thinking and practice.
• Limited scope: the main emphasis is often on product innovation, rather than fundamental business re-design.
• A lack of radical or breakthrough innovations, examples are often tactical or incremental.
• Emphasis on big-name brands, missing the more radical innovations developed by market-disruptors.
• Innovation tends to be focused on technical issues, missing the need to explore how we make net-zero transformations work commercially, without which we are unlikely to motivate whole-scale business transformation.

The bottom line: current guidance is way too tactical, often missing the real strategic and commercial agendas.

The strategic imperative

In getting things back on track, we need to completely redesign our net-zero frameworks, and get way more strategic and more commercial, too. This will involve addressing the big strategic questions first, before jumping into operational solutions for incremental change, such as eco-efficiency initiatives and optimising renewable energies. This way, we will be able to deliver a much more radical impact, within more rapid timeframes. We will avoid creating path dependences that will be harder to challenge and change, further down the line. And we will avoid the net-zero crunch.

We’ve identified six strategic steps towards genuine net-zero and commercial success, from reframing the game, to delivering the impact for our customers (handprint), harnessing radical carbon reduction and new commercial opportunities along the way.

1. Reframe the game: Firstly, we need to change the rules of the game, if we want to experience a radically different outcome. This involves redefining our rules for ‘business success’ to enable bold, new thinking and new choices in support of net-zero transformations. This move is vital, enabling us to open-up the dialogue on key issues, including how we might find new ways of delivering sustainable growth within planetary and societal boundaries.

An automotive company, for example, might express a strong desire to reduce emissions towards net-zero, while still aiming to sell lots of new cars. They will need to explore, quite openly, how they might resolve the tension at the heart of this challenge; how to be profitable, as well as sustainable. Are they open-minded to redefine how they make money? Are they ready to explore new commercial models in all parts of the business? What new guiding principles do they need, and what sacred cows can they leave behind?

This process is all about strategic innovation – opening minds towards developing a radically different future. As Anne Pitcher, Managing Director of Selfridges Group, describes in her deeply thoughtful and insightful essay on the future of retail, “We have to disassemble our businesses and rebuild in an entirely new shape.”  She’s absolutely right. We need to be prepared to change everything: our purpose, products, value chains, business models, infrastructure, supply chains and market ecosystems, and our culture. Everything needs to be reconfigured for net-zero and sustainable enterprise.

By allowing ourselves to be open to new ideas and new thinking, we can redefine the parameters for our future success. This will enable us to think more like innovative market disruptors, rather than managerial incumbents. We shift our mindsets from isolated to integrated thinking; from compliance to innovation; from incremental to transformational change; we become open and prepared for what comes next.

2. Reimagine the business: Accepting that transformation is needed, we can leave behind our incremental toolkit and deploy backcasting techniques; envisioning the ideal future state model for our net-zero enterprise, we can then work backwards from this point, developing the key stages and steps in our transformational pathway.

Possibly the most complete example of genuine, large-scale business transformation comes from Ørsted – transforming from DONG Energy, a fossil-intensive utility, to become a global leader in renewable energy in just over a decade.

The company delivered an astounding shift from only 15% renewable energy in 2006 to 75% renewables by 2018, and is projected to be 99% focused on renewables by 2025. Ørsted is now supplying renewable energy to 12 million people each year, avoiding around 6.3 million tonnes carbon emissions annually. A phenomenal journey.

The starting point for the level of transformation is in confronting the reality of our business landscape. Ørsted shares a fundamental lesson from its own green business transformation: “Take an honest view of the long-term viability of your current business model in light of the changing context, even if it is unpleasant and challenges what you do or who you are. Be careful not to explain away the risks of maintaining the status quo and a stable worldview.” We need a totally honest appraisal of where we are, and what needs to be done.

Ørsted has also done a great job in establishing science-based targets, and is aiming to achieve net-zero emissions across its entire value chain by 2040. With robust plans, already in place, to reduce its scope 1 and scope 2 emissions, the biggest challenge the renewable energy pioneer now faces is how to deliver radical reductions in its value chain (scope 3) emissions, the sources which are both technically difficult to abate (in energy and resource intensive sectors) and also hard to influence (external to the organisation).

This represents a huge challenge – in common with many businesses: scope 3 emissions can be worth up to 80% of our total footprint. In some cases, even higher; companies like Electrolux and H&M experience 99% of their emissions within the value chain.

3. Redesign value chains: Delivering the net-zero value chain requires a more strategic approach. Systems thinking applies in spades: we cannot treat scope 3 emissions in isolation; these emissions are inextricably interconnected with what goes on within the business, as well as within our supply chains and within our customers’ activities.

By focusing on isolated parts of the problem, we miss the opportunity for real, integrated value chain solutions. Each player in the value chain will tend to go their own way; measuring their own footprints and developing their own solutions – in not-so-splendid isolation – oblivious to the interconnections, interdependencies involved, they risks becoming trapped in the net-zero crunch. How can this fragmented approach ever deliver net-zero?

Reductionism is the enemy. The apparent simplicity of our scope 1, 2 and 3 silos might be helpful, towards standardised reporting, but this accounting protocol provides little in the way of breadth of vision, or the granularity needed, towards strategic and radical emissions reduction. Effectively, we need to re-design our value chain in parallel with reimagining our business. They really are part of the same story.

And this story is all about ‘interdependency’. We cannot hope to address the scope 3 challenge, without first revisiting our demand profiles for the goods and services we wish to buy: how we define our needs, our specification of requirements, and how we chose to fulfil them, will either enable or hinder our suppliers (and ourselves) from meeting the net-zero challenge.

Of course, if we keep asking our vendors for the same old supplies, in support of our same old products and services, we are missing the strategic opportunity for radical improvements, and we’ll end up with incremental reductions in emissions. We need a two-way dialogue of radical innovation, both up and down the value chain, to redesign a new, net-zero alignment between demand and supply.

For example, there’s lots of talk of net-zero and circular economy in the automotive sector, although the value chain is fragmented, and genuine circularity and re-use are nowhere near achieving their potential, with only 6.6% (on average) of end-of-life vehicle weight currently harvested for re-use.

At present, we can observe two different worlds, not really coming together. On one side, the shiny world of vehicle manufacturers pumping out new cars, with some recycled content; on the other side, the earnest endeavour of vehicle recyclers, harvesting used parts, as best they can within available technologies and demand, but mainly relying on downcycling to sell base resources into commodity markets, or for further processing by others.

A more strategic approach to net-zero would involve bending the entire value chain – bringing these two different worlds together – engaging all actors, including progressive vehicle recyclers and manufacturers, in co-creating a more circular economy; delivering net-zero emissions, along with massive resource savings.

This will require a massive amount of strategic collaboration, and while entirely possible, will require a great deal of commercial innovation. More of this, another time.

4. Explore radical strategic and circular economy opportunities: Many organisations have yet to connect the dots between climate-change mitigation and the circular economy. Going circular can provide up to 45% of the carbon emissions reduction opportunity: by designing out waste, and keeping assets at their highest level of use and re-use, we reduce the pressure to extract new resources and, therefore, enable major savings in embedded carbon emissions.

Mindful of this potential, the circular economy is, arguably, the single most powerful instrument we might include within our net-zero strategies. The opportunity will be greatest for businesses which are highly dependent on non-renewable resources and involving energy intensive processes; they will find they are unlikely to be successful in delivering net-zero emissions without fully engaging with the circular economy.

The retail sector has a massive impact on consumption of resources and, therefore, on embedded emissions – so, it’s not surprising that a number of major retailers are moving towards selling more circular products and services.

Selfridges is accelerating on pledges and plans for circular and low carbon retail, and is now committed to making circular offerings “the backbone of the business”, accounting for 45% of transactions by 2030. This shift will have profound implications for how the retailer will generate profit.

IKEA appears to be aiming even higher, with its ambition to become a fully circular business by 2030. The intention is to design all their products with ‘circular capabilities’ – meaning, they will use only renewable or recycled materials, and provide new solutions for customers to prolong the life of products and materials.

It will be interesting to see how far this goes in practice: will all products really become fully circular, including a greater emphasis on reuse rather than recycling, delivering multiple useful product lives, and enabled by new, viable commercial models (making money, while selling less new stuff)? This move could be hugely significant in closing IKEA’s carbon action gap.

It’s worth dwelling on this point, a moment longer: the emphasis on reuse over recycling is an important issue, because every time a product is downcycled into base resources, there will still be a significant loss in the potential for savings in embodied carbon emissions, along with an attendant loss in asset value and utility.

For example, each time a customer buys a used car door on eBay UK, they will enable double the embodied emissions savings, compared with a recycling option. Downcycling the door also leads to a reduction in asset value by 98.6%, in comparison with the selling price of a reused car door. Of course, this makes sense; smashing-up products into base resources will result in a major loss of utility and value.

Mindful of the carbon downcycling gap, we’re definitely better-off in keeping assets at their highest level of use, for as long as practicable. Without a much greater focus on the re-use of product, retailers are unlikely to achieve either their net-zero targets, or meet the circular economy challenge, in any meaningful way. We have to go fully circular to maximise the carbon opportunity.

But, in taking this route, we inevitably change how companies make money – we need to find new sweet-spot for profitable net-zero business models.

5. Rethinking business models: Business models are certainly at the very heart of the circular, net-zero challenge. Ultimately, our pathway towards becoming a sustainable, net-zero enterprise, will still need to work commercially, delivering fair returns, while also delivering radical improvements in carbon emissions and wider sustainability impacts.

How we make money is, quite simply, the problem to the answer: on the one hand a barrier to change, as we resist something that which is a potential threat to our conventional commercial sensibilities; and on the other hand, rethinking the business model can provide the fundamental key to unlock new solutions that work sustainably and commercially.

According to a new study by Capgemini Research Institute, 45% of corporate executives still do not believe there is a clear business case for improving environmental sustainability. If we don’t deliver both sustainability and commercial performance, the business world will lack any real drive for radical change, remaining sceptical, or stuck in the realms of denial or greenwashing.

As many enterprises have discovered, through some trial and much error, it can be hard to balance these apparently competing interests. This experience is even more acute, when we start engaging with the circular economy – business success is no longer defined by our ability to sell lots of new products – we are compelled towards completely reinventing the blueprint for how we make money.

Beleco, an international online furniture retailer, presents a great example of holistic business model innovation, integrating commercial as well as technical innovation. The market disruptor has developed an innovative circular economy business model for both commercial and home furniture markets, and one that has the potential to challenge many incumbents.

Beleco’s business model is all about renting-out high-quality, long-life circular furniture products, designed and manufactured within an entirely new circular market ecosystem and industry infrastructure, incorporating key sustainability considerations and total product lifecycle management.

It’s hard to find anything as ambitious as this, out there. Beleco aims to transform the furniture industry and help create a more sustainable society at the same time as generating long-term value. How is the business able to reconcile these aims?

Starting with the product, Beleco has greatly extended the design-life towards fifty years, which is around four times the duration of many conventional linear economy furniture products. For every single, circular economy sofa it manufactures, Beleco can displace the production required for four linear sofas.

As this model scales up, it can drive a radical savings in the exploitation of virgin resources and energy, as well as generating a 75% reduction in embedded emissions, when compared with the manufacture of four standard linear sofas. By extension, there are also major savings in production waste, as well as the waste associated with discarded end-of-life products.

Beleco then manages to couple this technical product innovation with commercial innovation. While long-life, circular products will attract higher initial production costs, these costs don’t necessarily have to be recovered at the initial point-of-sale; instead, costs can be spread and recouped across multiple rental contracts, throughout the circular asset’s total useful life. Quite simply, a longer asset life provides more touch points for extracting commercial value.

Of course, there are additional repair and refurbishment costs incurred at key points along the journey, but the total asset cost of one multi-life-rental-sofa is much lower than the total cost of producing four short-life linear economy products.

But, the combination of lower total assets costs, and the ability to generate more value-touch-points through multiple product lives, means that more ‘value’ can be captured and shared between customers, Beleco and furniture producing suppliers. This is all about decoupling financial value from resource use.

For the customer, this means a very attractive price point – paying around 25% less than the cost of buying an equivalent linear-sofa, over the full rental term.  And, with further benefits experienced from flexible lifestyle options, and no longer having to worry about the responsibility of product disposal.

This level of technical and commercial innovation demonstrates how companies can resolve the commercial tension between apparently competing goals of minimising our footprint, while maximising our business goals of growth and profitability. We can make money from ‘producing nothing’.

6. Think handprint, not just footprint: The drive for net-zero and sustainable business is not just about reducing ecological and carbon footprints, and becoming ‘less bad’ at what we do. Leading players are also finding significant opportunities to amplify their efforts by improving customer sustainability impacts – helping each and every customer in this way delivers a much greater, aggregate impact – known as the ‘handprint’.

The Make My Money Matter campaign shares a startling statistic for pension schemes, “investing sustainably can have 27 times as much impact on a personal carbon footprint as eating less meat, using public transport, reducing water use and flying less.”  This insight raises a hugely important opportunity, particularly for service companies, like accountants, software providers, asset managers and others, to think about; what we do within our own business will either enable or constrain the strategic pathway towards net-zero transformations for our customers and the entire value chain.

Businesses and suppliers need to respond accordingly – developing new strategies, products and services to help customers improve their own sustainability impacts. The circular economy is for all businesses, whether directly participating in product design remanufacturing and retail, or whether through enabling services, including banks and investors.

Through its Recommerce model, eBay UK enables embedded emissions savings for buyers of used and refurbished vehicle parts, one-hundred-and-twenty times greater than the associated value chain footprint. In other words, for every tonne of value chain emissions expended, eBay enables a saving of 120 tonnes for customers. A significant handprint impact.

Net-zero and beyond

OK, so we’ve come a long way in developing our understanding of the eco-effective enterprise and the steps we can take towards net-zero and commercial success.  We’ve put the horse well and truly back in front of the cart. This will enable us to harness a range of strategic opportunities, delivering radical reductions in emissions and wider sustainability impacts, along with commercial benefits, too. We should certainly aim to match, or even exceed, Beleco’s 75% reduction in embedded emissions and 25% lower price point. If we fully integrate commercial and technical innovation, why not?

We should also be mindful of the range of important enabling strategies in support of the above six steps of net-zero and commercial success. Perhaps, the ultimate enabler will be new mindsets and new skills. Until we engage in developing radically different approaches, we can expect more of the same, drifting inexorably towards the net zero-crunch. More than ever, we need system-architects and solutions-integrators, to communicate and coordinate designing the art-of-the-possible, and to join-up-the-dots in sourcing and integrating new ways of working. We need to turn systems thinking into systems action. More of this, another time.

We’re now ready to jump-in and pick up the operational agenda, the point at which where most net-zero strategies start. Armed with our eco-effective enterprise, we can then develop our further tactical emissions reduction initiatives, further optimising the radically low-carbon organisation we have created. Offsetting is, of course, the bottom of the pile – to counteract any residual footprint. SBTi currently allows for only 5-10% of maximum emissions for offsetting. Rightly so, with less than 5% of offsets actually remove carbon emissions from the atmosphere.  Definitely, a last resort.

Of course, taking the opportunity to address the big strategic questions and take bold steps forward aligns very closely with what Paul Polman and Andrew Winston are advocating with their Net Positive business agenda. Our six strategic steps, outlined here, could be readily assimilated into Polman and Winston’s five core principles for net the positive enterprise, improving “well-being for everyone it impacts and at all scales—every product, every operation, every region and country, and for every stakeholder, including employees, suppliers, communities, customers, and even future generations and the planet itself.”

At this point, we might question whether net-zero is the right ambition in the first place? As Polman argues, “In a world that has overshot its planetary boundaries, net zero is the wrong target and will quickly become obsolete.” We need to think much more holistically, and much more deeply: “What needs to be embraced is a regenerative model that embraces net positivity.”

And, if we’re going to trouble of fixing net-zero, by addressing the big strategic issues, then we might as well raise our sights, and re-focus on becoming a net positive business, instead? The mechanics of net-zero plans will then take care of themselves.

Ten takeaways for net-zero and beyond – delivering radical reductions in emissions, while harnessing commercial advantage:

1. Transform: Incrementalism is dead, it’s time to put transformation at the heart of our net-zero strategies. We can’t expect a radically different outcome without taking a radically different approach.
2. Get strategic: Integrate six strategic steps at the front-end of our net-zero frameworks and strategies to harness opportunities for radical carbon reduction and commercial advantage, before jumping into operational and tactical initiatives.
3. Reframe: Develop integrated mindsets, redefine success, and change the rules of the game to enable new possibilities for radically different outcomes. Be open and prepared for what comes next.
4. Reimagine: Deploy backcasting techniques, envision the ideal future state model for our net-zero enterprise, and develop key stages and steps in our transformational pathway.
5. Redesign: Develop comprehensive value chain models, for greater accuracy and visibility of emissions sources and interdependencies – along with enhancing our ability to explore broader opportunities for solutions and benefits, towards complete industry transformations.
6. Get radical: Harness strategic and circular economy solutions, emphasising re-use over recycling to maximise embedded emissions savings and avoid the carbon downcycling gap. Integrate these radical strategies within value chain redesign (above).
7. Remodel: Redesign business models, finding new ways to make money through non-consumption and reusing existing assets – decoupling financial activity from resource extraction and emissions production. The new sweet spot for net-zero enterprise – resolving tensions between sustainability and profitability.
8. Think handprint: Amplify our efforts by leveraging improvements in customer sustainability impacts –known as the ‘handprint’. This can be particularly important for service companies: looking beyond our own footprints, it’s what we can do to help our customers towards net-zero that really makes the difference.
9. Eco-efficiency: Armed with our eco-effective enterprise, we’re now ready to develop our further tactical emissions reduction initiatives. We’ve avoided the net-zero crunch.
10. Net positive: Integrate our net-zero strategies into a wider vision for Net Positive enterprise – to enable deeper transformations and a greater positive impact.

This article is based on extracts from the forthcoming Earthshine Group white paper, Delivering Net-zero Transformations.

Mike Townsend is founder and chief executive of Earthshine Group and the author of The Quiet Revolution.

— CLICK HERE TO WATCH THE ONLINE EVENT —

Full details of the four webinar sessions are as follows:

1) The Big Net-Zero Debate: Delivering decarbonisation in a time of crisis
(13:00 – 14:00)

Kicking off our Net-Zero Action Sessions, a selection of business leaders and climate experts will discuss the impacts of the ongoing energy crisis on the net-zero movement, along with other key drivers, challenges and opportunities when it comes to decarbonising business.

Discussion points:

• Is net-zero the solution to the energy crisis?
• For business leadership, is net-zero alone enough?
• How will COP27 affect the net-zero transition?

Speakers:

• Matt Mace, Content Editor, edie (chair)
• Kaya Axelsson, Net-Zero Policy Engagement Fellow, University of Oxford
• Erin Meezan, Chief Sustainability Officer, JLL
• George Richards, Director, JRP Solutions
• Elisa Moscolin, Executive Vice President Sustainability, SAGE

2) In Action Case Study: Creating and implementing your net-zero strategy
(14:15 – 15:00)

Our second session of the afternoon will see KFC UK & Ireland and the University of Liverpool deliver a case study presentation and Q&A focused on how the fast food giant shaped its strategy to be net-zero by 2040, including plans to develop a net-zero restaurant in that timeframe.

Discussion points:

• Developing a credible and ambitious net-zero strategy: Where to start
• Case study: Leading the industry with a ‘zero-carbon’ restaurant
• Accounting for direct and indirect emissions on your net-zero journey
• The crucial role of partnerships in making net-zero happen

Speakers:

• Sarah George, Senior Reporter, edie (chair)
• Jenny Packwood, Chief Corporate Affairs and Sustainability Officer, KFC UK & Ireland
• Dr Stephen Finnegan, Associate Professor and Director of the Zero Carbon Research Initiative, University of Liverpool

3) Action Masterclass: Optimising onsite generation for your business
(15:15 – 15:45)

Our third Net-Zero Action Session will help viewers explore the range of onsite solutions available to assist with their decarbonisation and energy efficiency needs. From looking at traditional solutions like onsite solar to more innovative, cutting-edge options like battery storage – this session has it covered.

Discussion points:

• Identifying which decarbonisation technologies work for your business?
• No silver bullet: What combinations of onsite solutions can work?
• Creating the business pitch for net-zero solutions during an economic slump

Speakers:

• Sarah George, Senior Reporter, edie (chair)
• Dr Jean-Yves Cherruault, Head of Solutions Development and Net Zero Pathways, Centrica Business Solutions

4) Action Masterclass: The energy and emissions data deep dive
(16:00 – 16:30)

Our fourth and final Action Session focuses on the critical topic of energy and emissions data. The masterclass-style session will offer up specific tools and insights when it comes to collecting better data – including for the notoriously difficult Scope 3 emissions – in order to turn net-zero ambitions into actions.

Discussion points:

• Data collection: Where and when to start?
• How to engage suppliers on your net-zero journey
• Measuring progress: What to do with your data?

 Speakers:

• Sarah George, Senior Reporter, edie (chair)
• Fenella Dodson, ESG Manager, Inspired PLC

Registrants can still gain access to all four sessions, as well as a recording of all events, which can be watched back on demand. Click here to watch.

That is the opening of MSC Cruises’ “planet” section of its annual report, which details how the organisation plans to meet an ambitious target to decarbonise and reach net-zero by 2050, a feat that is far beyond the current International Maritime Organization (IMO) target of a 50% reduction in emissions by 2050.

It is universally understood that a net-zero world will be different from today. Eating habits will be different, consumerism and consumption will evolve to embrace reuse and some sectors, such as oil and gas, will either need to adapt or die.

Transport will also be subject to a disruptive net-zero transition. Much has been made about a need for a “frequent flyer” tax to cut down on climate-wrecking plane journeys, but what of global cruise liners? Can these behemoths, a combination of ship and settlement, ever be part of a net-zero future?

MSC Cruises is the largest privately held cruise company globally and the company’s sustainability director Linden Coppell believes the company, and the sector, can step up to the net-zero challenge.

“I’ve really seen a transition within the industry from ‘this is all too hard and difficult for us’ because it is a unique industry, to, ‘how can we apply new technologies and solutions to really drive change?’” Coppell tells edie.

“At the senior management level, they’re feeling more comfortable about setting these ambitious targets because we can see there’s a light at the end of the tunnel and that net-zero is worth striving for.”

Cruises fall into the shipping sector, but their impact on the planet is much more nuanced and niched than what many businesses will need to deal with.

Ships need to meet the wastewater and freshwater needs of passengers, have a robust waste collection and disposal process in place, using and retaining heat, reducing air, water and noise pollution as the ships carry out their journeys. Cruise ships are not just boats, they’re small settlements – a cluster of hotels – out at sea and sustainability means fitting vessels with the technology and trained staff to account for all of these intricacies.

Coppell and MSC are trying to step up to this multi-layered approach to decarbonisation.

The company spent much of last year conducting advanced energy efficiency trials on its flagship ship, MSC Grandiosa. The trials, which combine on-board ship commands and behaviours with shore-based advice and expertise, have delivered an 8% reduction in emissions intensity compared to its design performance.

MSC has turned to the low-hanging fruit, such as LEDs and electrical improvements, alongside more advanced optimisation of hydrodynamic performance through propeller re-blading and drag reduction measures to further reduce energy demand.

Between 2008 and 2019, the company’s carbon intensity has been reduced by 28%, but the pandemic has meant it has been unable to track further improvements across its existing fleet. The company’s sustainability report does suggest that it will meet the IMO intensity ambition of a 40% reduction by 2027 – three years earlier than the industry target date of 2030 set by the IMO and adopted as a goal by the Cruise Lines International Association (CLIA).

“These ships have got to last us for at least 30 years,” Coppell adds. “So we’ve got to make sure that they’re fit for purpose, and one way to do that is to really drive the energy efficiency piece. It’s going to be much harder when we’re talking about the transition to zero-emission fuels, so we’ve got to marry the technologies with those that are readily available.

“We’ve got a fairly sizable hotel sitting on top of our vessels, so there are extra solutions to consider. There’s nothing off the table right now when it comes to looking at different technologies.”

Ambitions and action

Questions will be asked as to whether the sector’s targets are ambitious enough to coincide with the need to meet net-zero, especially as passenger demand bursts past pre-pandemic levels.

The CLIA states that the industry will eventually surpass pre-pandemic levels of passengers and revenue in 2023, with a 12% growth above those levels estimated by 2026. Companies operating within the sector will need to try and balance this short-term passenger boost with immediate decarbonisation actions, rather than pointing towards that long-term North Star of net-zero by 2050.

Luckily, there is plenty for the sector to sink its teeth into in the short term. The Marine Pollution Bulletin found that a large cruise ship’s carbon footprint is equivalent to around 12,000 cars. The same study also found that some cruises can produce emissions across a seven-day voyage that is equal to an average European citizen’s entire annual carbon footprint.

Coppell states that there is “very much a growing confidence” internally that net-zero emissions can be reached by 2050, but that short-term reductions in emissions will be crucial if cruising is to be seen as a “viable industry”.

“We’re looking at biofuels for our existing ships and LNG as a transitional fuel,” Coppell adds. “But whatever we do it’s got to have a much lower carbon profile so that in the coming years, even as new ships come in, we’ll be able to reach a steady state of emissions that then go down across the sector.

“We don’t know when that date is going to be, but we know we have to act now to do that and in order to be a viable industry.”

Coppell lists numerous collaborative efforts that MSC has embarked on to try and deliver groundbreaking projects focused on decarbonisation.

In 2020, for example, the company collaborated with energy solutions provider SNAM and ship builder Fincantieri on hydrogen supply and bunkering requirements. The aim of the project was to create a green hydrogen-powered cruise ship. MSC is facing huge technical challenges to make this vision a reality, namely safely accommodating hydrogen on board and creating a reliable supply for maritime use, but the company remains committed to a target of operating a hydrogen-fuelled cruise ship before 2030.

Additionally, MSC launched a Decarbonisation Strategic Partnership with Shell to focus on shipboard technology for energy efficiency, digital solutions, future fuels and fuel cell technologies.

While Coppell notes the internal desire in both setting and meeting the net-zero goal, the MSC sustainability lead also notes that the sector is upping its requirements that is forcing many to focus on energy efficiency.

The IMO has set more stringent requirements through its Energy Efficiency eXisting ship Index (EEXI) and Carbon Intensity Index (CII) standards. EEXI is a one-off measure of design performance for existing vessels, and CII is an annual operational efficiency measurement, which becomes increasingly stringent over the years. It comes into force in 2023.

Coppell reveals that MSC’s newest ship, including the Seashore and Virtuosa are “expected to be approximately 15-25% lower than the targets set by the IMO,” and that all new ships are expected to meet the IMO Energy Efficiency Design Index (EEDI) which increases in stringency every five years. Indeed, the Virtuosa – an LNG-powered cruise ship – has a design performance that is 40% more efficient than the EEDI requirements.

The Virtuosa is fitted with hybrid exhaust gas cleaning systems (EGCS) and catalytic reduction systems (SCR) that, according to MSC, can achieve a 98% reduction of sulphur oxide (SOx) emissions and a 90% reduction in nitrogen oxide (NOx) emissions.

Doubts persist as to the ability of both gas cleaning systems and LNG, even as a transition fuel while companies focus on longer-term solutions like hydrogen. The CLIA, for example, claims the EGCS are used by 76% of global cruise ships, while the use of LNG is growing and can cut emissions by around 25%. However, the International Council on Clean Transportation warned that while LNGs can cut emissions, they can actually have a worse impact on the planet, due to methane leakage.

For Coppell, this is just another example that there are no one-size-fits-all solutions to the sector’s challenge. But one thing is clear, policy will help push the sector towards decarbonisation.

“I think we’re seeing a lot more pressure on the industry and it will be regional regulations that are going to start driving more to move towards cleaner and more efficient ships,” Coppell says. “We are considering the expectation of our guests, of course, but the regulatory environment is really driving change.

“But, we need to be careful that we are treated fairly compared to other industries, because otherwise you get a competitive distortion issue where some fuels and solutions aren’t being made available for the sector, so it is important to engage too.”

So the future is likely to be turbulent. At COP26, the shipping industry created a joint voice that showcased its willingness to decarbonise and reach net-zero by 2050. However, the IMO’s Marine Environmental Protection Committee (MEPC 77) has failed to create progress across its 175 member states. With no agreement in place to increase ambitions beyond a 50% reduction in emissions by 2050, or to introduce a ringfence R&D fund, how will companies within the sector respond?

“The solutions we invest in now are going to have a cost, but it is going to be a greater cost the less we act,” Coppell adds. “So the more we can drive the efficiency piece now, the easier the journey is going to be in the long run. So we’re going to be reviewing every opportunity for our new and existing fleet.

“We need to make sure that we make ourselves viable for the future and the main way of doing that is making sure that we can find solutions that work for us, both now and in the long-term.”

Fast-forward one year and one of the first signatories of the Declaration, Iberostar, made good on the Declaration’s requirement for signatories to deliver a detailed climate strategy. The business used its platform at COP27 in Egypt to unveil a roadmap to carbon neutrality across all emissions scopes this decade.

Crucially, the global director of Iberostar’s sustainability office Dr Megan Morikawa tells edie, the roadmap entails cutting emissions in line with science. The business has achieved verification for its targets in line with 1.5C from the Science-Based Targets Initiative (SBTi) and has also applied for the SBTi’s Net-Zero Standard.

Dr Morikawa tells edie that, when Iberostar conducted a materiality assessment in 2018, climate exposure was perceived as a “relatively low priority”, largely due to “confusion around how a business in our space should be taking action”. This quickly changed as climate science evolved and policymakers began legislating for net-zero targets. In 2020, the business completed its first full measurement of Scope 1 (direct) and 2 (power-related) emissions, but “still didn’t have a sense – nor did the industry as a whole – of what Scope 3 should look like”.

To that end, Iberostar and others in the sector are looking to the Sustainability Hospitality Alliance methodologies to help better define the boundaries of Scope 3 emissions. It applied these frameworks and discovered that Scope 3 emissions accounted for 77% of its total carbon footprint.

All of this, Dr Morikawa says, amounted to “catalytic” changes to the business’s overall strategy in the name of climate and nature action.

“One of the messages we wanted to send is that bold ambition and action can actually happen relatively quickly,” she summarises.

Renewable energy acceleration

Iberostar’s 2030 targets are set against a 2019 baseline and include delivering an 85% reduction in Scope 1 and 2 emissions.

Dr Morikawa points out several “levers” that the business must pull to achieve this level of decarbonisation, including improving energy efficiency, switching to refrigerants with a lower global warming potential, electrifying machinery, and procuring renewable electricity to power those electrified systems.

“Above all, the most important lever in terms of our ability to decarbonise is having access to renewable energy in our destinations,” she explains, noting that delivering up to 66% of the target is contingent on sourcing renewable electricity for electrified machinery.

She adds: “This is absolutely not something we can achieve by ourselves. The renewable energy transition must be done in partnership with local governments, energy providers and other key stakeholders at our destinations.”

To that end, Iberostar is looking to go beyond tariffs and certificates where markets allow. It will install onsite solar in some locations and also seek out “gold standard” power purchase agreements (PPAs) which contribute to the development of additional generation capacity.

Dr Morikawa also emphasises that improving energy efficiency is the cornerstone of “any business case for decarbonisation” and helps to maximise the benefits of clean energy procurement. To that end, Iberostar is aiming to consume 35% less energy in operations in 2030 than it did in 2019. Here, she says, there is a “direct savings potential that can offset some of the investment required to update machinery”.

She’s also keen to highlight that switching energy supply and improving technologies should be coupled with procedural changes and employee engagement that results in behaviour change. She explains: “Big energy contributions come from our kitchens and industrial services – things that are back-of-house. We need the right protocols to make sure that staff are turning things like coffee machines off and on at the right time to save energy without impacting the quality of guest services.”

Supply chain engagement

As noted above, most of Iberostar’s carbon footprint is accounted for by Scope 3 sources. The firm has pledged to halve Scope 3 emissions by 2030, again against a 2019 baseline. Dr Morikawa says this target is “just a little more ambitious than being 1.5C aligned”.

Purchased goods and services alone account for almost half of Iberostar’s absolute carbon, making engagement with those suppliers key. Hotels procure a wide range of goods and services, including food and drink, beverages, towels, furniture and energy. Dr Morikawa argues that supplier engagement “is the essence of what any industry that isn’t hard-to-abate should be thinking about” and a “catalyst for decarbonisation” beyond the industry’s value chain.

Iberostar is at the stage of requesting more detailed information on emissions from suppliers in most cases, she explains. The hope, moving forward, is that suppliers will have enough information to make their own emissions targets matching the ambition of their key clients and that they can collaborate within their

Other sources of Scope 3 emissions covered by Iberostar’s targets include construction, capital goods, downstream assets, waste management, employee commuting, business travel and fuels not included in Scope 2. Flights taken by customers to and from destinations are not in scope, per the Sustainable Hospitality Alliance’s guidance on applying the Greenhouse Gas Protocol to accommodation providers.

Dr Morikawa notes that some suppliers may not be able to decarbonise as rapidly as others, but maintains that setting ambitions and expectations could help to accelerate innovation: “If your Scope 3 emissions include emissions from hard-to-abate sectors… you can’t wish away those sectors and the goods and services they provide you with. You can set an ambition greater than the one these industries are working towards, and it will take time for those segments of Scope 3 to decarbonise. I think it’s important for businesses to be realistic in understanding what it is possible to decarbonise from supply chains and how best to put pressure on those sectors that will really determine when the world will be able to reach net-zero.

“If there was any message we wanted to deliver at COP27, it’s that if you are excited about the level of ambition shown in our roadmap, you must know that none of this is possible to deliver independently.

“What we want to do as an organisation is to work as quickly as possible to not be the bottleneck within the sector.”

Global pledge, local action

edie has previously spoken with Iberostar about its emphasis on nature-based solutions. Dr Morikawa is notably a marine biologist, which may seem rare for a corporate sustainability role, but makes sense when you see how many of Iberostar’s 100+ hotels are in coastal locations across the world.

We ask whether the fact that Iberostar wants all ecosystems surrounding its tourist locations to be in improving health by the end of the decade will unlock opportunities for carbon insetting (unlike offsetting, insetting happens within an organisation’s value chain).

The short answer from Dr Morikawa is yes. She outlines how, if the business delivers its 2030 goals for reducing emissions, its carbon footprint will decrease from one million metric tonnes to 430,000 metric tonnes. It believes it can address all of this carbon using nature-based solutions on and around its sites. It is targeting 500,000 metric tonnes of carbon removal capacity from nature-based solutions.

Dr Morikawa notes that huge strides are being made in defining which emissions removals can and cannot be used in net-zero accounting. Earlier this year, the SBTi launched its first comprehensive guidance for companies using land-based emission reductions and removals figures. WWF played a key role in developing this guidance. More movement in this space is expected next year, as science-based targets for nature and nature-related financial and risk disclosures take shape, and as the UN firms up its own guidance on net-zero target credibility.

Whether it is action regarding nature-based solutions, supplier engagement or renewable energy procurement, Dr Morikawa emphasizes how important it is to interpret a global corporate pledge through changes and collaborations that make sense in the context of a particular destination. Is this location suitable for onsite solar, for example? What is the nation’s renewable energy infrastructure like and will that change as it delivers its Paris Agreement commitment? Which nature-based solutions are best suited to the local ecosystems? And which organisations are already working locally for the benefit of the environment?

To that end, Iberostar’s dedicated sustainability team is set to “grow substantially in the coming year” from 27 people at present.

Dr Morikawa says: “One of the areas we’re most excited about is establishing ‘destination stewards’. These professionals will integrate local regulations and transitions for renewable energy and supply chains, they will voice the needs of the destination, they will help us to adjust our strategy to deliver net-positive in the context of the locations where we operate.

“Global strategy needs to be realised in ways that make the most sense for the people and communities that we’re inviting others to visit. It is a critical component.”

Now, #SustyTalk is evolving from a video format to an audio-only format. This episode sees edie’s senior reporter Sarah George in discussion with packaging giant Ball Corporation’s vice president and chief sustainability officer Ramon Arratia. This episode has been recorded as part of edie’s month-long Net-Zero November editorial campaign which is running until Wednesday (30 November).

Ramon is on hand to reflect on Climate Week NYC 2022, including the collaborative work from the aluminum arm of the First Movers Coalition. Launched last year in a joint effort overseen by the World Economic Forum and US Climate Envoy John Kerry, the Coalition brings together corporates across the value chains of hard-to-abate, high-emission sectors to help scale innovative technologies and processes to drive deep decarbonisation.

Ramon also argues the case for companies to adopt circular economy principles as they work towards newly ambitious climate targets including long-term net-zero, outlining why he believes most will need to rethink their products and processes to deliver the transformative change needed.

Click here to see our catalogue of #SustyTalk interviews.

Click here to see all of our Net-Zero November content and events.

Want to be featured on a future episode of #SustyTalk? Email [email protected]. Please bear in mind that our interview calendar is typically booked several weeks in advance. We are now fully booked until the new year 2023.

On a worldwide level, the majority of the United Nation’s Sustainable Development Goals adopted globally in 2015 are people-focused and include reducing inequality and bringing social value. For example, achieving gender equality by empowering all women and girls, promoting inclusive and sustainable growth, and achieving full and productive employment and decent work for all, are all encompassed in the UN’s plan.

However, while there has been progress to acknowledge the important relationship between inclusion and sustainability, there is still a clear need for many businesses to move from intent to actively creating inclusive environments where sustainability objectives can be achieved. As more people look at green credentials, ethical stance and diversity intentions when choosing their employer, and stakeholder expectations for businesses to contribute to net zero grows, there are steps organisations can take now to benefit their people, the planet and productivity.

Increase accountability across the business

Inclusion sits at the heart of a thriving organisation. When colleagues feel that they belong and are welcomed, appreciated and connected to their peers, they will feel more confident to contribute new ideas and perspectives that can drive business success. As new challenges emerge on the road to net zero, every organisation is going to need the best people to identify new actions and solutions that can ensure their sustainability efforts do not stall.

Leaders must reinforce that inclusion is everyone’s responsibility and empower their people to feel that they can take action and achieve change. Whether this is modelling everyday inclusive behaviours, encouraging everyone to have DEI woven through personal development plans or running a campaign to encourage colleagues to showcase inclusion, increasing accountability is key to embedding an inclusive culture.

Stretch DEI targets and metrics

Diversity targets have been put in place in many businesses as companies look to demonstrate their commitment to equity to create a level playing field. Having these metrics in place to improve representation can shift organisations away from legacy hiring and outdated promotion habits, and towards thinking about the skills and talent they need to meet challenges in the years ahead.

But these can’t just be numbers on a page, they must be accompanied by tangible actions. According to a Deloitte survey, 80 percent of over 1,300 respondents said inclusion efforts were an important factor when choosing an employer. Diversity figures need to be ambitious and drive real cultural change, and this change needs to be visible both internally and externally if businesses want to retain and attract the best people.

Leverage diverse perspectives to strengthen sustainability strategies

Achieving long-term sustainability goals across different sectors and industries will require input from people with diverse backgrounds and experiences. This will ensure those whole sectors will be better at taking decisions with a range of perspectives automatically built in.

Harnessing knowledge from different people is critical when designing innovative solutions for reducing a business’ carbon footprint. A diverse workforce is more likely to be aware of how environmental issues affect different areas and communities, which can enable the business to introduce sustainability strategies that reflect local needs and achieve long-term, meaningful progress.

The clock is ticking

To embed diversity, equity and inclusion into a business, and to reap the benefits in terms of sustainability goals, there needs to be continued efforts and actions across organisations – this isn’t something that can be achieved overnight. With climate change at the forefront of businesses and employees’ minds, extreme weather events and a pressing need to reach net zero, businesses need to take steps that will create a working environment in which creating an inclusive culture and delivering on their sustainability agenda go hand in hand.

The new net-zero ambition is set for 2040 and is supported by a pre-existing science-based target of reducing operational emissions by 37.8% by 2025. Kingfisher has already reduced emissions by 24.5% through measures such as switching to 100% renewable electricity, rolling out alternative fuels for delivery fleets and investing in energy efficiency measures.

Speaking to edie as part of Net-Zero November, the company’s climate change lead Chris Guest confirmed that the company is aligning its net-zero journey with the Science Based Targets initiative (SBTi) Net-Zero Standard.

The SBTi has clarified that science-based net-zero targets will require companies to achieve deep decarbonisation of 90-95% before 2050. From that point companies should neutralise unavoidable emissions through offsets and removals. Crucially, the SBTi states that carbon offsetting and removals cannot exceed 5-10% of a company’s emissions, although this is sector-dependent.

Whereas many firms with net-zero targets in place are choosing to offset emissions now, Guest confirmed that Kingfisher will not offset its emissions until it has reached that 90% threshold and is only left with unavoidable, residual emissions.

“Our five-point plan recognises that there is no one silver bullet for decarbonisation post-2025,” Guest tells edie. “As a retailer, we have challenges around decarbonising heat and power in our stores, but also how we fuel our delivery fleets. But only once we’ve delivered our required emissions reductions set out by the SBTi will we look to neutralise our impact and residual emissions.

“In terms of what happens between now and 2040, it’s something that we still have to work on and if there’s the option to undertake high-quality compensation beyond our only value chain through those initiatives then we’ll explore it. But currently, we’re not using carbon credits to claim progress on our targets. There’s a lot of fragmentation in the net-zero landscape and what actually is credible, but we’re going to be guided by reputable standards that focus on decarbonisation over compensation.”

Five-point planning

The 24% reduction in carbon emissions recorded so far builds towards the company’s science-based targets, and scope 3 emissions have also been reduced by almost 20% against a 40% target for 2025. Emissions did increase year-on-year as a result of the coronavirus forcing the company to shutdown stores.

With more than 1,470 stores across eight European countries, Guest admits that there is no silver bullet for decarbonisation and that different regions will have different suitability for potential solutions. However, the net-zero target is already supported by various investments in low-carbon solutions.

Over the last 12 months, Kingfisher has invested £19.6m in energy efficiency projects ranging from LED lighting installations, building energy management systems and insulation and heating improvements. The company’s Responsible Business Report states that this will reduce energy consumption by 41GWh a year, saving 3,800 tonnes of carbon a year and £4.1m. Indeed, total energy consumption for the company is 6.4% lower than in 2016 and in a time when energy costs are spiralling, this is providing a much-needed business case for further low-carbon investments.

The five-point plan aims to address the twin challenges of heat and energy demand. The company wants to make its stores “all-electric” and has installed all electric heating using air source heat pumps at 102 locations this year. This is now a specification for all new Screwfix stores.

Solar PV has also been installed at 29 stores, offices and distribution centres, while biomass boilers are supplying two distribution centres and one head office building. Total investments into renewables have helped generate 9.5 million kWh per year and delivering more than £1.3m in financial benefit per year.

For Guest, this multi-faceted approach to low-carbon integration is crucial to trial and explore what solutions work in what situation and, importantly, how suitable they are based on region.

“One of the challenges we face is that we operate across Europe, so we have to account for the various levels of policy support and the various sophistications in infrastructure across different geographies,” Guest adds.

“What might work for us in reducing emissions in the UK might not work for us in Poland, so we need a differentiated approach. It adds a level of complexity to our planning that we have to be alive to. We have to be pretty agile, but it keeps the organisation invested in what is happening and what solutions may work.”

Financial North Star

Kingfisher is reaping the benefits of being proactive in its low-carbon spending, with research suggesting that businesses are planning to cut back on investments into decarbonisation as part of short-term measures to respond to the energy crisis.

Last year, the company confirmed that it had signed a £550m revolving credit facility agreement (RCF) with interest rates linked to environmental and community targets.

Under the loan agreement, Kingfisher will benefit from lower interest rates if it achieves KPIs aligned with its Responsible Business Plan, covering climate change, forestry and housing. The firm has been targeting a ‘net positive’ impact for people and the planet since 2015 and the updated Responsible Business Plan translates this long-term target into short and mid-term milestones.

Guest notes the importance of the RCF in creating an internal focus on sustainability within the organisation, but also how the company has moved to integrate its public net-zero target into financial planning.

“They [the RCF and net-zero target] have given us a North Star to aim for from a financial perspective. It keeps our emissions targets front of mind and has helped integrate them into planning,” Guests says. “But it’s more granular than that; it is ensuring that we have an ongoing three-year planning process and it’s ensuring that when we’re going through our planning process for say, capital investments, that it is fully aligned with our plans to achieve net-zero.

“There are also external developments that are strengthening the ties between sustainability and finance. I think developments such as implementation or the introduction of TCFD reporting has really highlighted the need for sustainability and finance teams to work together to understand how climate may impact the financial plans both now and in the future.

“So the relationship is still one which is evolving. We’re developing ways of working and the appropriate governance mechanisms. But also I think there’s a huge mutual education point, because both sustainability and finance need to cut through the jargon when they engage with each other.”

To support the delivery of the net-zero target, Kingfisher will develop a Climate Transition Plan in line with the UK Government’s new Sustainability Disclosure Requirements, and Guest believes that future legislative and reporting requirements will only strengthen the company’s approach to reaching net-zero.

Forest positive

There is a growing awareness amongst the sustainability profession that responding to the climate crisis will not be delivered solely through net-zero targets; nature also has to be considered.

Biodiversity and nature is something that is enshrined into the way Kingfisher does business. The company is working in partnership with the Rainforest Alliance to help the corporate become “forest positive” by 2025.

It is a founding member of the Rainforest Alliance’s Forest Allies initiative. Through the partnership, Kingfisher will support efforts to protect, restore, and enable responsible management of tropical forests, all while building stronger local economies for those that manage the surrounding land.

The partnership will also assist Kingfisher in meeting its commitment to become “forest positive” by creating more forests than it uses by 2025 – a target that was unveiled in 2020. As a result, Kingfisher will transition to 100% responsibly sourced wood and paper – the largest natural resources it uses.

Guest claims that the company’s net-zero target will be delivered “in unison” with nature. He cites the SBTi’s new guidance for companies to set targets that account for land-based emission reductions and removals, as something that Kingfisher will explore.

With support from WWF, the SBTi launched the Forest, Land and Agriculture (FLAG) Guidance, which will enable companies within those sectors to set science-based targets that include land-based emissions and removals. This includes emissions associated with biomass and soil losses, deforestation and degradation, peatland burning and emissions from land management including fertiliser use and emissions from relevant machinery and manufacturing.

“I think we’ve seen in the last two COPs that there is increasing recognition of the interrelationship between climate and nature and biodiversity,” Guest adds. “I think this recognition is slightly belated and we at Kingfisher are approaching both in unison.

“The relationship is complex and I’m not going to lie and say it’s easy to use nature as part of net-zero. We need to make sure that any action we take in one area is not to the detriment of the other, or will compensate for the other. That’s why we’re working with the likes of the Rainforest Alliance to better understand this work and how protecting forests can also deliver positive climate outcomes.”

Arcus FM has also stated that it will set emissions reduction targets through to 2030 across all scopes and seek to have them verified in line with a 1.5C temperature pathway by the SBTi.

It is proposing a 42% reduction in Scope 1 (direct), Scope 2 (power-related) and Scope 3 (indirect) emissions by 2030, again against a 2021/22 baseline. 67% of Arcus FM’s Scope 3 emissions would be covered by the proposed target.

It bears noting that around 46% of Arcus FM’s total emissions footprint lies in Scope 1 and around 54% lies in Scope 3. The remainder of emissions are from Scope 2 sources. The company has emphasised that, as it provides B2B services, it is important for it to address its own Scope 1 emissions as they form the Scope 3 emissions for clients.

The main sources of Scope 1 emissions for Arcus FM are gas use, refrigerant use, power generators and company vehicles.

Plans for addressing vehicle emissions include transitioning vans and company cars to zero-emission alternatives including electric vehicles (EVs); encouraging staff to travel fewer business miles in personal cars and improving virtual meeting technology to prevent unnecessary journeys.

Regarding energy use across estates, Arcus FM has stated that energy efficiency improvements are a priority action area. This will be built upon by procuring more renewable energy and ensuring it provides additionality; fitting low-carbon heating systems; upgrading refrigerants and reducing water use.

To address Scope 3 emissions, Arcus FM has stated that it will develop a framework to assess how far each of its suppliers are on their own net-zero journey. It will also develop and deliver a new supplier engagement framework on emissions, coupled with new support for suppliers that may lack sustainability expertise or be pressed for resources. Suppliers will, crucially, be educated on the interconnections between the circular economy and reducing emissions.

Arcus FM has not yet confirmed its approach to offsetting. It has stated that it needs more time to make “careful considerations” around the most effective approach while avoiding potential greenwashing pitfalls and unintended negative consequences in fields such as food security and land rights.

In a statement sent to media, Arcus FM wrote: “The topic of environment and sustainability is nothing new in the facilities management sector and has been a hot topic for many years with companies launching a plethora of initiatives. [But] the UN is now describing the climate crisis as a ‘code red for humanity’, and the universal aim to not allow temperatures to rise to more than 1.5°C above pre-industrial levels is being described as “still possible, but we are dangerously close to that threshold” by the Intergovernmental Panel on Climate Change.

“More concerted and all-encompassing actions are needed by all businesses to answer this call.”

The companies assessed in the scorecard are American Eagle; Gap Inc; H&M; Kering; Levi’s; Lululemon; Nike; VF Corp (parent company to Timberland, Vans, The North Face and more); Inditex (parent company to Zara) and Fast Retailing (parent company to Uniqlo).

All of these brands have stated a top-line net-zero ambition and have targets in place to at least halve their direct (Scope 1) and power-related (Scope 2) emissions by 2030. Stand.earth is concerned that half of the brands listed have not received verification from the Science Based Targets Initiative (SBTi) for their emissions goals, and half have not published interim goals before 2030.

Additionally, many of these brands’ targets have loopholes for the supply chain, despite the fact that most large fashion firms will see the majority of their emissions footprint being upstream. Some key findings in this respect include:

– Just two of the companies, H&M and Kering, have pledged to at least halve their Scope 3 (indirect) emissions this decade.

– These same two companies are the only two committed to 100% renewable energy across the supply chain by 2030.

– Only half of the brands assessed have set independent targets to phase-out thermal coal in supply chains. None share baseline data on coal use in supply chains.

– None of the companies have emissions targets that cover the entirety of their supply chains with no exclusions.

Material world

Stand.earth has also sounded the alarm over the fact that the fashion sector, by and large, is failing to measure and reduce the emissions and environmental impact of its growing use of synthetic materials.It found that none of the ten companies have public targets to reduce fossil-fuel-derived material use this decade. This is despite the fact that these materials represent around 15-20% of the fashion sector’s emissions footprint.

A report published by the Changing Markets Foundation last year revealed that polyester is now found in more than half of all textiles globally. That report also stated that the global, overall production of synthetic textiles based on fossil fuels has doubled within two decades and is due to expand further.

Stand.earth has concluded that the net-zero plans of fashion brands “still vary widely” and commonly “lack consistency in commitments, detail in transition plans and any real accountability on supply chains”.

At COP27 in Egypt earlier this month, the UN pushed for a crackdown on greenwashing amid the net-zero transition. Net-Zero Tracker subsequently published its latest big global stocktake, evidencing precious little progress in nations and non-state actors backing up long-term goals with science-based, interim ambitions.

The High-Level Expert Group on Net Zero Emissions Commitments of Non-State Entities used the UN summit to publish a new set of recommendations on setting short, mid and long-term commitments. These include prioritising deep emissions reductions, in line with science, over offsetting, and ensuring that any offsets which are used are robust.

Also at COP27, the International Organisation for Standardisation (ISO) published a net-zero ‘Guidelines’ paper. The paper is intended to be a “single core reference text” for any organisation wishing to credibly use terminology relating to net-zero emissions and create meaningful targets. It is available for free.

Related read: Blog: Fashion must embrace science-based targets