Building A Credible Decarbonization Plan
So you’ve got a handle on the amount of greenhouse gas emissions you’re responsible for putting in the atmosphere every year.
Now what?
Your next step should be building a credible plan for how and when you will reduce your emissions based on the latest science.
Here’s how to build your decarbonization plan.
Future generations are depending on us.
What is a decarbonization plan?
At a conceptual level, a decarbonization plan is the connective tissue in your enterprise climate management program. In other words, it connects your climate goal(s) with actions designed to reduce your greenhouse gas emissions.
I think of the effective carbon management cycle like this: Measure -> Target -> Plan -> Act -> Advocate -> Disclose [Repeat]
After you have a handle on your carbon footprint (measure) you should set a climate goal (target) that is aligned with what the latest science tells us is necessary to avoid the most dramatic impacts of climate change - something commonly called a “science-based target”.
The idea here is that you’re trying to set a goal that reflects the context, planetary boundaries, and in this case an annual global carbon budget that is necessary to avoid major tipping points.
Now that you have a target, how are you going to achieve that goal in the timeframe needed? That’s where your decarbonization plan comes into play. These plans are also sometimes called “climate transition plans” by financial institutions and investment managers.
A good primer on climate strategy is the Exponential Roadmap.
This fascinating paper on Net Zero Transition Plans helped inform much of this blog post.
Why are decarbonization plans so important?
We like to apply two perspectives when considering why a decarbonization plan is an important part of an enterprise carbon management program: Why do they matter to internal stakeholders vs why do the matter to external stakeholders?
Internal Stakeholders: Provides a roadmap for action & collaboration
Your decarbonization plan should lay out the nature and extent of how your business will transition to net zero economy. This includes what elements of the business activities are covered, metrics, the role of offsetting, how you will govern the plan, who is accountable and how information will be disclosed, among other things.
Notably, it should also include key strategies for how you will reduce emissions, fund those reductions, and engage with your value chain and other stakeholders - these elements in particular provide direction for implementation.
External Stakeholders: Demonstrates commitment to reducing emissions & business model relevance
By crafting and sharing your decarbonization plan your business is signaling to stakeholders including investors and customers that you’re taking your commitment to addressing climate change seriously.
Importantly, it should lay out in broad strategic terms how you've planning to future-proof or remain relevant in a net-zero economy.
From a sustainability claims and greenwashing perspective, it can act as an important indicator and enhance credibility. Since your plan should show the public how you intend to address the materially relevant issue of climate change, the lack of a plan or a plan with major deficiencies will be a red flag.
According to the Carbon Disclosure Project:
Organizations typically set emissions reduction targets, commit to monitoring their progress on climate action and reduce their exposure to climate related risks. A climate transition plan is an encompassing instrument that helps organizations to align their climate ambitions.
This alignment is achieved by establishing specific strategies and clear accountability mechanisms to track progress. While strategic planning for the future is not a new instrument, the extent of climate transition and the hard limits set on such a transition through scientific discoveries mean that climate transition plans are often a critical element in ensuring a future for the organization.
Source: Carbon Disclosure Project. (2023). CDP Technical Note: Reporting on Climate Transition Plans. Retrieved on 11/19/23 from https://cdn.cdp.net/cdp-production/cms/guidance_docs/pdfs/000/003/101/original/CDP_technical_note_-_Climate_transition_plans.pdf?1643994309=
What are the characteristics of credible decarbonization plans?
The credibility of your decarbonization plan will be determined based on a number of characteristics.
Many of these will not be a surprise as they are consistent with the kinds of characteristics or principles used in a number of strategic frameworks and approaches to goal management (e.g. OKRs).
Here’s what they mean in the context of decarbonization plans:
Clear: Roles and responsibilities are defined and intention of the plan is plainly articulated.
Targeted: The plan includes specific absolute emissions reduction goals - any intensity goals are aligned with absolute reductions.
Time-bound: Targets have specific dates by which they shall be met, in an alignment with the timelines detailed in the 1.5 degree scenario.
Science-based: Targets are aligned with the ambition, coverage, and pathway required in the 1.5 degree scenario - they are contextually relevant with planetary boundaries and thresholds.
Accountable: There are appropriate governance mechanisms in place to hold managers and the board accountable for achieving the targets.
Comparable: The elements of the plan including targets are made in such a way that they can be readily compared to industry and regional peers - including yet to be defined required disclosure elements.
Verifiable: The targets and other quantifiable elements of the plan are supported by data (e.g. emissions inventories, financial disclosures, etc.) that allow the plan to be assessed for accuracy and feasibility by independent third parties.
Compatible: Plans should be compatible and in alignment with goals and actions in other critical areas of impact like land use, ecosystems and biodiversity.
Compliant: Ideally these plans should meet the regulatory requirements of existing and emerging frameworks (e.g. EU ESRS).
Source: Bingler, J. et. al. (2023). Net Zero Transition Plans: Red Flag Indicators to Assess Inconsistencies and Greenwashing. University of Zurich & University of Oxford. Retrieved on 11/16/23 from https://wwfint.awsassets.panda.org/downloads/red-flag-indicators-for-transition-plan-inconsistencies-and-greenwashing-26-sept.pdf
How do these characteristics translate into the decarbonization plan itself?
Applying the characteristics described above is where the true complexity lives when it comes to building a credible plan.
There are a number of frameworks and standards that provide guidance on decarbonization planning. The two most comprehensive sources we’ve found come from the Carbon Disclosure Project and the World Wildlife Fund (see the sources referenced below).
Based on the guidance from these two sources we’ve put together a high-level outline of the structure and elements required for a credible decarbonization plan.
Plan Structure & Elements
Target: Climate commitment, ambition, coverage, pathway, offsetting
Strategy: Management, high carbon, low carbon, balance sheet, engagement (value chain), just transition, biosphere
Tracking: Emissions, progress, capex, innovation, revenues, engagement (including public policy)
Governance: Structure, skills, accountability, incentives, transparency
Obviously there is a great deal of detail associated with each of these elements. We’ll plan on unpacking them in a future blog post.
As more companies have their science-cased targets approved by the SBTi we expect to see a growing emphasis on decarbonization plans and their utility for evaluating brand credibility when it comes to climate action.
Sources
Bingler, J. et. al. (2023). Net Zero Transition Plans: Red Flag Indicators to Assess Inconsistencies and Greenwashing. University of Zurich & University of Oxford. Retrieved on 11/16/23 from https://wwfint.awsassets.panda.org/downloads/red-flag-indicators-for-transition-plan-inconsistencies-and-greenwashing-26-sept.pdf
Carbon Disclosure Project. (2023). CDP Technical Note: Reporting on Climate Transition Plans. Retrieved on 11/19/23 from https://cdn.cdp.net/cdp-production/cms/guidance_docs/pdfs/000/003/101/original/CDP_technical_note_-_Climate_transition_plans.pdf?1643994309=
Want help building a credible decarbonization plan? We’re here to help.
This is complicated stuff. But we can help simplify it. Get in touch if you’d like to learn more.