Growing calls for mandatory emissions reporting means businesses need to be prepared to show progress to their customers.
Businesses are being required to track their emissions, both from internal operations as well as from customers and suppliers.
Up to 90 percent of a business’ emissions can come from its supply chain, but many smaller firms don’t have reduction plans in place.
Companies risk missing out on contracts as customers look to build sustainable supply chains.
Businesses have been pledging to reduce their carbon footprints for years. Adhering to these pledges has been largely voluntary, with few if any binding rules.
That said, sticking to these commitments is becoming a legal responsibility, with the rise of mandatory environmental due diligence legislation.
Failure to comply means losing contracts to more sustainable competitors. Does your business have an emissions reduction plan in place?
Climate reporting is increasingly required
Legislation obligating companies to disclose their emissions and declare their climate risks is being adopted around the world. These regulations fall under Environmental, Social, and Corporate Governance (ESG) standards that public firms must follow. Doing so supports the transition to a net-zero economy and efforts to limit global warming to 1.5 degrees Celsius.
As of late 2021, 68 percent of the global economy was covered by net-zero commitments.
Brazil, Switzerland, Singapore, and New Zealand already require or are in the process of requiring emissions disclosures. The UK and Japan will start requiring large companies to disclose emissions as of April, while the EU and U.S. are looking into similar legislation.
For instance, proposed EU rules would require large EU companies (and firms earning revenue in the EU) to disclose their emissions data. This makes disclosure a prerequisite for smaller businesses looking to access these markets.
Similarly, the U.S. Securities and Exchange Commission (SEC) is proposing that all publicly-traded companies be required to disclose their emissions and climate risks. If adopted, this requirement would be phased-in by 2023.
“Supply chain decarbonization will be a game-changer for the impact of corporate climate action” — World Economic Forum
While many companies already disclose such information voluntarily, they do so to different degrees. This lack of standardization makes it difficult for customers and investors to compare businesses.
Until recently, most disclosures focused on what are known as Scope 1 and 2 greenhouse gas (GHG) emissions. The first refers to emissions from sources directly controlled by a business, such as vehicles or furnaces. Scope 2 deals with indirect emissions from the purchase of electricity, heat, or cooling.
Despite this focus, the vast majority of a company’s emissions are Scope 3 . This category deals with supply chain emissions, which account for up to 90 percent of a firm’s carbon footprint.
On average, GHG emissions from a company’s supply chain are over 11 times higher than those from its internal operations.
For example, the 200-plus members of Carbon Disclosure Project’s (CDP) global disclosure system engage over 15,000 suppliers in their push for supply chain disclosures. In 2021, CDP members reported reducing 1.8 billion tonnes of carbon dioxide equivalent (CO2e), while saving over $29 billion.
So while legislation focuses on the largest private sector emitters, small and medium enterprises (SMEs) will also be increasingly impacted.
SMEs will soon need to demonstrate that they are reducing and disclosing emissions if they want to keep contracts.
Companies can’t afford to drag their heels on ESG
The challenge facing small and medium businesses (SMBs) is that many are ill-equipped to report on emissions. The prevailing focus on large companies means many smaller firms haven’t felt it necessary to act.
Accurate emissions reporting requires detailed energy profile insights. Obtaining this data and making sense of it is difficult and time-consuming.
Most SMBs lack the resources for in-house sustainability reporting. For example, many SMBs do not have dedicated energy managers or sustainability teams.
Identifying the scale and nature of your emissions is only the first step. After designing an emissions-reduction plan, you’ll need to implement it. This means purchasing energy efficiency and clean technology solutions.
In a crowded solutions marketplace, it’s difficult to distinguish between competing offers. And capital concerns often stall purchasing decisions as firms worry whether their chosen solution is worth the cost.
The cost of waiting is significant, as delays only hamper your sustainability efforts. Waiting for ideal funding conditions means holding off on due diligence, putting your firm at a disadvantage.
Competitors that have already begun reducing emissions have an edge, as enterprise clients favor suppliers that improve their energy profile.
For example, Honeywell has implemented a total overhaul of its supply chain. This ongoing process has seen Honeywell reduce its emissions by 90 percent since 2004.
Supply chain decarbonization goes beyond sustainability to improved customer relations, explains Torsten Pilz, Honeywell’s Chief Supply Chain Officer. “We’re not only a consumer of sustainability technology; we’re also a manufacturer of sustainability technology.”
This is just one example of how the largest enterprises (and supply chains) are seeking vendors that can help slash Scope 3 emissions. Without buy-in from business partners, drastic emission cuts aren’t feasible.
Failing to show progress on emissions reduction puts your existing and future contracts in jeopardy. Ignoring the issue will only compound it, as reduced capital makes it riskier to commit to clean technology.
To avoid these losses, your company should seek out and partner with innovative energy technology providers.
EnPowered can jumpstart your sustainability projects
More and more companies are facing mandatory reporting standards. In order to comply, firms need to start their energy transitions, set a plan, and track their progress.
EnPowered can help your business get started right away. With EnPowered Payments, your firm can jumpstart its energy transition, and showcase its progress to customers. Embracing sustainability not only benefits the planet, but will make your business more competitive.
Adopting clean technology solutions will make you a preferred supplier for customers that must comply with emissions standards. This will help you expand your total addressable market, attract (and retain) talent, and mitigate climate risk.
Moreover, implementing clean technology solutions will enable you to take charge of your energy profile.
EnPowered’s on-bill Payments platform will allow you to pay for your cleantech solutions through a portion of your energy savings — with no upfront costs. Once the asset has been paid in full, you enjoy 100 percent of your savings, and even lower energy bills.
All you have to decide is how much you want to start saving right away.
Ready to learn more? Contact us today to discover how EnPowered Payments can support your sustainability efforts, reduce emissions, and your energy bill.