Approach on Indian companies’ climate pledges
As the global climate meeting (www.cop21paris.org) got underway today in Paris, no media is untouched by the global climate change impacts and what world is trying to mitigate the climate change impacts. Also, most in the corporate world would be aware of the national voluntary pledges, national commitments submitted as part of the ‘Intended Nationally Determined Contribution (INDC)’. Recently, major global companies’ CEOs also wrote an open letter on the World Economic Forum’s platform to urge countries and the leaders meeting in Paris to encourage accepting the established climate science and take appropriate steps to control the GHG emissions (https://agenda.weforum.org/2015/11/open-letter-from-ceos-to-world-leaders-urging-climate-action/).
Now most of the responsible corporates are already doing GHG emission / carbon footprint assessment as part of their CDP, Sustainability Reports. Some of these companies also have short and long term targets for the emission / emission intensity reduction. Going further, most companies, especially ones with the products for the export market and suppliers of the large multinational companies will need to be prepared for the global carbon constrained economy (either by regulation or by voluntary pledges).
How companies can set climate targets and declare commitment to global efforts on climate change mitigation?
The first steps in this can be preparing comprehensive GHG emission / carbon footprint for the current or chosen base year. This, then can be projected for the short (minimum five years) to long term (15-25 years) appropriately with corporate expansion plans, market growth rates etc.
Approach 1)As a minimum target, the companies emission intensity / reduction target should be in line with the country’s INDC. For example, the Indian INDC pledges
1) To reduce the emissions intensity of its GDP by 33 to 35 percent by 2030 from 2005 level.
2) To achieve about 40 percent cumulative electric power installed capacity from non-fossil fuel based energy resources by 2030
The company’s revenue (for simplicity) or contribution to GDP can be calculated and translated into appropriate emission intensity reduction based on chosen base year and the target year. The emission intensity target of about 1.4% annual can be set to be in line with the Indian INDC.
However, as the industry can contribute much more compared to the Agriculture and Service sectors in India and also the fact that other sectors do not have much emission reduction potential), the emission reduction burden on the industry should be higher. This further needs to have detailed sectoral study from INDC, India’s low carbon group report and National Communication to arrive at the appropriate emission reduction pledge / commitment. These additional references may have further sectoral assumptions / benchmarks to refine the climate pledge appropriately.
Approach 2) Science Based Targets (SBT)
The global scientific community has agreed on limiting the global temperature rise within 2°Ccompared to pre-industrial temperatures. The target was also accepted as global need in the 2009 meeting of UNFCCC in Copenhagen. Thus, there are no two ways about the most appropriate climate target for the global companies. At last, there is no planet B.
There is an international initiative on science-based target setting for companies initiated by CDP, United National Global Compact (UN Global Compact), the World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). The joint work by these has also given ways to set the climate / GHG emission targets for companies to be in lie with the 2°C goal or the SBT (http://sciencebasedtargets.org/methods/).
Absolute emissions compression
Climate Stabilization Intensity Targets (CSI)
Context-based Carbon Metric (CSO)
Corporate Finance Approach to Climate-stabilizing Targets (C-FACT)
Greenhouse Gas Emissions per Value Added (GEVA)
Sectoral Decarbonization Approach (SDA)
The manual for SBT target setting was recently in public comments phase and the models suggested such as SDA and C-FACT are online for companies to try. The manual also has a call for action “The Science Based Targets initiative encourages companies to set a minimum 56% reduction in order to more likely avoid the future carbon debt issue and to adjust for other potential influences on the global carbon budget”. More than 100 global companies have already pledged science based targets (http://sciencebasedtargets.org/companies-taking-action/).
RSM GC can help companies interested in their detailed sectoral analysis and appropriate target setting to declare as part of company’s climate stewardship or any other voluntary pledge platforms.