• Climate hub
  • 7 Oct 2021
  • 10 min read

How do you decarbonise a business?

By Chris Mirams

Being carbon neutral by 2050

We know that meeting the challenge of climate change is going to significantly impact the way we work and live if New Zealand is to meet its international commitment to being carbon neutral by 2050. To achieve that, we’re going to have to ‘decarbonise’ businesses, but what does that actually mean and what are business owners going to need to do?

What is decarbonisation?

Decarbonisation is the term used for the process of removing or reducing carbon dioxide (CO2) across the economy and society. CO2 is produced when we burn fossil fuels such as coal, gas, oil, petrol and diesel. Replacing those fuels with power derived from renewable generation – hydro, wind, solar – is crucial. In December 2015, the historic Paris Agreement was adopted by consensus by all members of the United Nations Framework Convention on Climate Change (UNFCCC). To date, 197 countries, including New Zealand, have agreed to gradually reduce the use of fossil fuels and CO2 emissions to reach net carbon neutrality by 2050 and keep global warming below 2°C by the year 2100. To achieve deep decarbonisation, we need to rethink how we produce and consume energy and undertake a radical switch to renewables and low carbon energy sources.

What are carbon emissions?

The first stage of developing a carbon roadmap is to compile a greenhouse gas (GHG) inventory and develop a business carbon footprint. Carbon emissions are broken down into three ‘scopes’.

  • Scope 1: Direct GHG emissions from sources owned or controlled by your company. For example, emissions from combustion of fuel in vehicles owned or controlled by your organisation.
  • Scope 2: Indirect GHG emissions from the generation of purchased energy (in the form of electricity, heat or steam) that your organisation uses.
  • Scope 3: Other indirect GHG emissions occurring due to the activities of your organisation but generated from sources that it does not own or control (eg: air travel). This is broken down into six distinct categories.

Within these scopes are various sources and activities, with each allocated an emission intensity. Establishing a baseline of emissions is fundamental to understanding your footprint and what can be done about it. By collating this data across the breadth of your company’s business the largest sources of carbon emissions can be narrowed down. You will be able to align your company’s focus on the next stages, prioritising time and energy to emission sources which make up the majority of your footprint.

Source: Carbon emission by green
business bureau
Source: Carbon emission by green business bureau

How can I measure the carbon emissions of my business?

You should measure emissions against a common standard (ISO 14064-1 for organisations) so you have a complete list of what should be included in your footprint. Verifying or certifying your inventory against the standard allows you to make confident claims about your carbon work, knowing it is accurate and complete. The Ministry for the Environment has a detailed guide that can serve as a starting point. Toitū can also help with its carbon reductions and Toitū carbon zero certification programmes that give you the guidance, tools, and software to calculate your full carbon footprint in line with international standards. The Climate Action Toolbox put together by the Ministry of Business Innovation and Employment is also a useful resource.

The carbon cycle

What are the benefits of decarbonising?

  • Cost savings – If you need less energy to run your business, it will cost you less to run your business.
  • Future-proofing – Reducing energy requirements now will help mitigate future cost increases.
  • Better for your brand – Pollution is bad for your brand or business reputation. Stakeholders and customers expect businesses to be proactive in reducing their carbon footprint.
  • Better for business – More organisations are putting this front and centre of how they operate, who they partner with and who they do business with. Many tenders are now asking for details on how a business approaches sustainability and emission reduction.
  • Staff retention – People are becoming more conscious of who they work for. They want to know your company’s approach to sustainability and how it’s managing its carbon footprint.

How to develop a business decarbonisation strategy

A decarbonisation roadmap compiles the strategies, policies, and implementation pathways for a business to reduce its carbon footprint to support the country’s goal of being carbon neutral by 2050. Companies of all sizes are setting net-zero emissions targets at a rapid pace, but the strategies, technologies and the knowledge on how to decarbonise are still being developed.

In order for real change and progress to be made within your company there must be a clear mandate that sustainability and carbon reduction are prioritised and integrated within all business plans.

This will involve a variety of actions, including establishing a carbon reduction policy, adjusting the capital project criteria to account for carbon reduction benefits, and including your carbon footprint and goals in your Annual Report. This approach must be consistent as decisions made at management level influence how each action is undertaken, and the ultimate success of the entire process.

How to decarbonize the grid and electrify everything

Carbon strategies, and medium to long-term roadmaps, should guide your emission reduction plans for the next 10 to 30 years. These roadmaps identify the lowest cost options of operating in a future carbon market and provide a clear path for capital investment as equipment falls due for replacement or forward economics make changes economically viable.

Energy audits

The first step is often an energy audit. This identifies where energy costs can be reduced, provides an overview of how to make these savings, and creates a project list ranked in terms of return on investment. An audit can often find around 20% of savings – five percent at no cost to the business owner, about 10% with a payback within three years and five percent with a return that will take longer than three years.

At the centre of an audit are energy insights that help you understand how your business is consuming energy, where machines or equipment are using energy inefficiently and peak usage times. Genesis can provide non-invasive clip-on units that measure the energy of each machine or piece of equipment. Data is transmitted every 10 seconds to a software programme that displays your energy use via an easy-to-read dashboard. The programme can also deliver daily, weekly and monthly energy consumption reports.

How can companies manage and reduce scope 1,2,3 emissions?

Each business is unique and has its own opportunities to manage and reduce emissions. These may include:

Scope 1: Direct emissions from the activities of your business or under your direct control. These include fuel combustion on-site such as gas boilers, fleet vehicles and air-conditioning:

  • Control the loss of energy from your business locations through air conditioning and heating loss. Air leaks around windows, doors, and garages should be sealed. Correct installation of eco-friendly insulation can also reduce energy loss.
  • Purchase energy efficient appliances and equipment. An investment in the latest, most energy efficient appliances will not only lower your emissions output, but also save you money. Energy Star offers free return calculators on its website, including the Cash Flow Opportunity Calculator which can ease financial concerns when making large investments in boilers, water heaters, air conditioning and commercial equipment.
  • Use electric or hybrid vehicles in your transport fleet. Electric vehicles can produce a favourable ROI on fuel and other vehicle maintenance costs. In fact, electric vehicles are far more energy efficient with only a 15-20% energy loss compared to a 64-75% energy loss in petrol vehicles.  

Scope 2: Indirect emissions from electricity purchased and used by the business. Emissions are created during the production of the energy and in its consumption by your company: Choose an energy provider that generates from renewable sources (wind, solar or geothermal) and is involved in the development of new renewable generation. This will reduce the amount of carbon emissions your business is responsible for.

  • Purchase carbon off-sets. To counter emissions your business must emit or cannot control, a purchase of renewable energy credits or carbon off-sets will help you reduce your carbon footprint.

Scope 3: All other indirect emissions from activities of your business, occurring from sources you do not own or control. These often comprise the greatest share of your carbon footprint, covering emissions associated with business travel, procurement, waste and water:

  • Cut back on travel. Due to the COVID-19 pandemic, many companies have made the switch to remote work and are continuing to hold meetings online instead of in-person.
  • Use transport methods that produce fewer GHG emissions. If you and your employees must travel, some ways are better than others. For instance, travelling by train produces a fraction of the carbon emissions per traveller than those who travel by car, bus or plane. Encourage employees to cut back their commute emissions. Maybe organise a carpooling programme for employees or offer carshare options like Zilch. Additionally, adding bicycle spaces and somewhere for staff to shower and change can encourage them to bike, run or walk to work.
  • Create a sustainability purchasing policy for your business. Procurement can be one of the main expenses of a company and, subsequently, a big contributor to your greenhouse gas emissions. Buying locally or from sources that have sustainability initiatives can cut the emissions surrounding your business purchases.

Decarbonisation grants

NZ businesses can apply for GDI Funding & LETF to support projects that reduce carbon emissions. Find out if your business qualifies & how to get started.

Find out about decarbonisation grants.

Reporting and setting a carbon footprint target

The reporting of your carbon footprint is an essential part of the carbon roadmap, especially for larger businesses. The Climate Leaders Coalition (CLC) is a group of New Zealand organisations who collectively account for 60% of the country’s gross emissions and make up a third of private sector GDP. To join, four actions are required – measuring your carbon emissions, publicly reporting on them, setting an emissions reduction target aligned to the Paris Agreement, and working with suppliers to reduce emissions.

Public statements are powerful when year to year your emissions are published to the same standard (namely ISO 14064 -1:2018) and often reviewed and verified by an independent professional. Identifying your footprint and announcing a reduction target is an important first step in developing a roadmap. Subsequent reporting makes it known where your business stands and what it is doing to reduce emissions.

Continuous improvement – monitoring your carbon reduction plan

A key element of a carbon reduction plan is iteration and creating continuous improvement. It is a living and breathing document that will need to be amended to reflect changes in your business, to technology, or to the operational environment. Undertaking an annual strategic review may reveal that some opportunities produced more savings than expected and others less so, there may be a change in the way you decide to run your business or a change in your target markets. Make the most of the improved data collection methods when you update and report on your carbon reduction plan each year.

Additionally, large investments in renewable technology across many industries may alter what best practice looks like for your business.

All these factors should be considered and accounted for in your carbon reduction plan in order to produce the best results from an emissions reduction perspective and, just as importantly, financially. It is now not only possible to run your business more sustainably, it’s expected, and could even give you a competitive advantage.

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