Countdown to Cop27: Emphasis on Climate Transition Plans

/

This November 6th through 18th, the 27th UN Conference of the Parties (COP) will be held in Sharm El-Sheikh, Egypt. COP27 will build on the outcomes of COP26, with a particular focus on strengthening adaptation and resilience, mitigating emissions, facilitating a just transition, and increasing funding and collaboration for essential climate solutions.

COP is the formal meeting amongst the parties of The United Nations Framework Convention on Climate Change (UNFCCC), an international treaty addressing climate change that took place 30 years ago. COP27 will bring together Heads of State, world leaders, CEOs, politicians, scientists, economists, mayors, activists, and other interested parties to accelerate the global movement to confront the climate crisis. Faced with a growing energy crisis, geo-political unrest, record emissions of GHG, and increasing extreme weather events with catastrophic results, COP27 seeks renewed solidarity amongst countries, to deliver on the landmark Paris Agreement, for people and the planet.

Each day of COP27 will center around one or two themes: Finance | Science | Youth & Future Generations | Decarbonization | Adaptation & Agriculture | Gender | Water | Ace & Civil Society | Energy | Biodiversity | Solutions.

Net Zero vs. Real Zero

Importantly, companies, cities, and nations will be asked to develop and report on Decarbonization Strategies toward their net-zero, or most importantly, their real-zero, targets. COP27 is sure to put the spotlight on actionable Decarbonization Plans that rely on verifiable data.

Few companies have developed, or are developing, Decarbonization Plans which rely on strategies embracing new technologies and operational actions used to slash GHG emissions close to zero. These are referred to as the “Real Zero” plans. That is in contrast to the Decarbonization Plans referred to as “Net Zero,” embraced by most companies today, which are pledging to reduce GHG emissions partially via operational changes and use carbon credits to offset their remaining emissions.

As a decarbonization strategy, a “Net Zero” plan may not be the most desirable corporate strategy as it ignores the expected rising costs of carbon credits and their impact on profitability, the problematic sources of many credits which may bring assurance challenges, and the overall need to truly transform our industrial society if we are to combat climate change. The companies, cities, and nations who embrace “Real Zero” plans, may be the ones who will thrive in a changing world.

Likewise, the rise of stakeholder capitalism creates the incentive, if not the need, for companies to develop and report on Decarbonization Strategies with teeth. Initiatives like the Race to Zero send a clear signal that businesses, cities, and investors are aligning to drastically reduce GHG emissions.

How do you develop a Climate Transition Plan?

Decarbonization involves strategic planning, application of technological innovations, and commitment to continuous improvement and re-evaluation of where a corporation stands, where it wants to go, and what innovation can get it there.

A Climate Transition Plan (or Climate Action Plan) is a strategy and means by which a company or city can achieve its emissions reduction target. Target setting is an important aspect of Transition Planning; the Science Based Target Initiative (SBTi) helps organizations align Transition targets with the goals of the Paris Climate Agreement, which was ratified at COP21. You can have a Climate Transition Plan without participating in the Science Based Target Initiative (SBTi), but the SBTi requires a Climate Transition Plan.

Despite the pressure companies may feel to put out a Transition Plan, it is important that the plan be credible – a company will be held accountable if not done correctly. Aligning a Transition Plan with the leading disclosure platforms and frameworks will allow an organization to ensure credibility while also easing the yearly reporting process. Both CDP and the Task Force on Climate Related Financial Disclosure (TCFD), ask companies to demonstrate:

  • Board-level oversight on the Climate Transition Plan and that there are defined governance mechanisms in place to ensure the delivery of the Plan’s targets

  • Strategy in response to different climate scenarios – (when done thoroughly, a Climate Scenario Analysis identifies adaptive responses to capitalize on climate-related risks)

  • Financial planning of a company’s strategy to achieve its GHG reduction goals

  • Identification of time-bound actions to decarbonize business processes, and those of a company’s value chain, with time-bound KPIs

  • Alignment between a company’s public policy and its climate ambitions and strategy

  • Inclusion of a company’s process for minimizing identified climate-related risks and maximizing climate-related opportunities

  • Time-bound targets, in line with the latest climate science

  • Annual Scope 1, 2, and 3 emission inventories, preferably verified by a third party

Lessons Learned from Successful Climate Transition Plans

Lesson 1: Understand the business and motivation

KERAMIDA has extensive experience supporting companies and cities to achieve GHG reductions through Climate Transition Planning. From our experience, a Transition Plan will only be successful if it fits within the context of a company’s overall operations and strategy. Understanding the motivation behind a Transition Plan is critical to the process and outcome.

Lesson 2: Determine GHG baseline year (ideally the most favorable and accurate)

An accurate inventory of Scope 1, Scope 2, and Scope 3 GHG emissions data provides an understanding of the distribution of a company’s emission sources and provides the baseline from which a company develops its reduction goal and strategy. It is best to have an emissions inventory for several years to understand its stability and consistency. Additionally, GHG Inventories should be verified by a third-party expert before Transition Planning begins. The GHG inventory is the base from which the entire plan is built and benchmarked; it is critical to have an accurate inventory.

Lesson 3: Engagement is needed to accurately project business growth and major capital projects

Transition Plans need to align with future business scenarios due to their length. Most organizations set target dates between 2030 and 2050; therefore, Transition Plans must incorporate projected organizational changes like business growth, acquisitions, and large capital projects. Failing to incorporate accurate forecasts will lead to an inaccurate plan, disrupting any area of business associated with planning. KERAMIDA advises on engaging across operations and/or departments to accurately develop this future business scenario.

Lesson 4: Reduce. Innovate. Repeat.   

Based on GHG emission distributions, companies target specific sources for GHG reductions. KERAMIDA strongly advises reducing current energy use and improving facilities’ efficiencies while exploring options to transition away from fossil fuel-sourced energy. Organizations should always be evaluating currently available technological developments and known emerging technologies for applicability and appropriateness to the company’s product/services and then considering the limitations that would prevent or encourage the implementation of a reduction strategy.

 Lesson 5: Update models annually

Project out GHG emissions in absence of GHG reduction strategies and in the presence of GHG reduction strategies to determine short, medium, and long-term GHG reduction goals based on modeled projections. Models should be updated at least annually. Climate Science is rapidly evolving, making models more accurate. Additionally, new technology emerges every day to support mitigation goals.

Lesson 6: Seek stakeholder approval for GHG emission reduction plan

Stakeholders should be involved throughout the entire planning process, and stakeholders must agree on final Transition Planning elements. Involve those at the facilities level (Head of Operations, Engineering, Maintenance, EHS, etc.) since they are the ones who will be integrating, implementing, and tracking progress. We have found it is critical to obtain a corporate cost/benefit impact assessment and get Board/Executive approval. Cost benefits assessments will demonstrate the financial benefits of Transition Planning.

COP 27 will surely highlight that progress toward climate change mitigation targets is lagging, and the risks of climate change pose an increasing threat to global markets. We have already experienced economic loss due to climate change, which has fueled financial incentives and support for companies to shift away from fossil fuel dependence. There are numerous cost-effective decarbonization strategies across industries. If you would like to discuss what is best for your company or city, please contact us through our rapid response form or speak with one of our professionals at (800) 508-8034.

Blog Authors

Becky Twohey, Ph.D.
Vice President
ESG Strategy, Planning and Reporting
KERAMIDA Inc.

Contact Becky at btwohey@keramida.com.