Becoming a sustainable business is now an essential requirement for organizations across all sectors. The growing demands from customers, regulators, and shareholders to decrease carbon emissions are influencing the course of action for procurement, distribution, and utilization of resources.
Globally, electricity and heat production are the largest contributors to global emissions, followed by transport, manufacturing, construction (including cement and similar materials), and agriculture.
In 2023, there was a significant development in corporate climate disclosure regulations as regulators globally either introduced or strengthened their disclosure requirements for registered companies, with a specific focus on sustainability and financial risks associated with climate change.
The transformation of energy systems, industry operations, and food systems, through technological advancements and political change also aligns with the Net Zero goals set for the next decades. While this represents a substantial change, it is also achievable, as evidenced by several countries that have already reduced emissions through technological and business enablement approaches.
Since these new paradigms imply costs, Chief Financial Officers (CFOs) are playing a major role in shaping the direction of business transformation into adopting more sustainable and environmentally friendly practices. However, slow actions in this regard can pose significant business and financial risks.
To bridge the gap between commitment and action many organizations have begun their decarbonization journey by looking to cut emissions from operations and supply chains, where decarbonization can also bring opportunities for new business models and growth: Carbon accounting, Carbon capture, utilization and storage (CCUS) and carbon conversion are evolving as key dimensions.
Carbon accounting
Similar to financial accounting, carbon accounting measures the consequences of a company's operations, but instead of financial repercussions, it monitors their environmental footprint on the climate.
It has become an essential tool to identify potential improvement areas in a company’s business/supply value chain. It also enables sustainability reports for governments and stakeholders, implementation of carbon reduction and removal, and eventually contributes to brand equity building.
Carbon capture, utilization, and storage
CCUS technology has been available for several decades, dating back to the 1970s. It is extracting carbon from factory emissions and directly from the atmosphere.
Carbon capturing from factories or directly from the air has an associated cost, even if capturing technologies continue to evolve. Fortunately, there is potential to derive value from carbon dioxide by focusing on industries involved in fuel production, carbon dioxide-derived polymers like polycarbonate plastics, chemical manufacturing, and construction materials.
Holding the promise of a rapid scaling-up investment, deployment and accelerated innovation, the evolving CCUS landscape of technologies, combined with supportive policies and innovative deployment strategies, offers various avenues for businesses to invest in and contribute to the growth of carbon capture and utilization initiatives.
There is an increasing number of Carbon Capture, Utilization, and Storage (CCUS) facilities being developed, especially in the United States, where this growth can be attributed to policies like the 45Q tax credit and the California Low Carbon Fuel Standard (LCFS), which have incentivized investments in CCUS projects. Also in Europe, policy incentives such as EU Innovation Fund support schemes in countries like the Netherlands and the UK, encouraging businesses to get involved in CCUS projects and clean energy technologies.
Further, the concept of Carbon hubs, integrated industrial operation centers that share CO2 transport and storage infrastructure, is gaining momentum. This approach offers new investment opportunities and improves the economics of CCUS by capitalizing on economies of scale, reducing commercial risk, and lowering costs.
Carbon conversion
Transforming CO2 into products of economic value, including chemicals, fuels, construction materials, plastics, and bioproducts, offers a solution for addressing CO2 emissions from dispersed or hard-to-capture sources. This is particularly relevant in areas where suitable storage sites for captured CO2 are scarce.
Several CO2 conversion techniques are available, such as biological uptake, catalytic pathway and mineralization. These methods present tangible business opportunities, primarily in the energy and materials sectors. To minimize the negative impact on the climate, it's important to focus efforts on developing and using materials that have a shorter or more controlled CO2 re-release timeframe and energy sources with lower carbon footprint.
Currently polymers re-release carbon dioxide after around 100 years, and construction materials, such as cement or cement derivatives in which carbon dioxide replaces water, re-release carbon dioxide after an estimated 1 million years. The development of plastics and construction materials that are based on carbon dioxide could potentially help reduce the long-term carbon footprint associated with these materials compared to traditional ones. By upcycling CO2 to replace cement as the binding agent in concrete, it becomes possible to both avoid CO2 emissions and remove CO2 from the atmosphere simultaneously.
Establishing a recycling process that has a “zero” or even “negative” carbon footprint could be possible using carbon dioxide-derived organic catalysts and tools already at our disposal. By leveraging various conversion technologies such as biological uptake, catalytic pathways, and mineralization, businesses are able to monetize CO2 emissions that would otherwise contribute to climate change. This approach not only helps companies reduce their carbon footprint but also creates economic value by repurposing CO2, opening new markets, and contributing to sustainability goals.
Capitalizing on Low-Carbon Initiatives
In general, the corporate sector has struggled to fulfill their climate commitments, which includes reducing greenhouse gas emissions and adopting sustainable practices. Consequently, regulators are intensifying their efforts to strengthen their measures and regulations, ensuring that companies are held accountable for their climate-related actions or lack of them. Aiming for greater transparency in corporate practices, companies must disclose their environmental impact, sustainability efforts, and compliance with climate commitments. As an example, the key compliance points about the CSDDD are that:
- Under the EU's current CSDDD position, eligible businesses will be required to calculate and report of their Scope 3 greenhouse gas emissions.
- CSDDD rules need companies with more than 1,000 employees to link performance on their plan’s targets with directors’ variable compensation.
Investing in technologies and processes that capture carbon emissions and convert them into valuable products or materials can be a lucrative avenue. For instance, companies can explore the development of carbon-negative building materials, chemicals, or fuels that have a market demand while reducing overall emissions. Companies that excel in environmental compliance can leverage their strong track record to attract investors and customers who value sustainability.
Embracing a comprehensive carbon emissions management strategy that integrates sustainability business operations, boost companies to not only meet environmental goals but also unlock new revenue streams and enhances their long-term competitiveness. Capitalizing on carbon emissions can be a win-win situation for both businesses and the environment, fostering a sustainable future while generating financial gains.
Sustainable Energy Solutions or Green Fuels are emerging at a high pace. Technologies and applications are evolving rapidly – in both the segments “Molecule to Molecule Green Fuels and “Electron to Molecule Green fuels. As the green fuel sector expands, its adoption in business operations will lead to a sustainable future.
Every business needs to initiate this journey by following these four critical steps:
- Impact Materiality Assessment
- Climate Scenario Evaluation
- Sustainability Reporting across relevant regulations such as CSRD, EU Taxonomy, CSDDD, California Climate Risk and GHG Reporting Disclosure Laws, and ISSB
- ROI-enabled action plan to address emission reduction and sustainability improvements – Aim, Execute, Measure and Report.
Looking for a partnership to enable this journey, please contact our Specialist and Author for an introductory meeting at Tarun.bhatia@evalueserve.com
