At the United Nations climate week at the end of last month, Energy and Climate Change Minister Chris Bowen disclosed that Australia has an ‘enormous’ task moving industry towards a low-carbon future.
The government has put forward a National Reconstruction Fund (NRF) to drive organisations towards decarbonisation, but for that to work there needs to be a shift towards building local capacity with less dependence on overseas technology.
Energy management company Schneider Electric’s Australia Sustainability Index Report 2022: transforming intention to outcomes, released in July 2022, found that climate change is seen as the main threat to business operations by Australian companies.
“Over three quarters [of companies] agree that embracing sustainability transformation gives them a competitive edge,” said Michel Cox, APAC Director, Sustainability at Schneider Electric.
The trouble is, organisations don’t have adequate data to understand how to transform.
“Only 14% are well on their way when it comes to data capture, and the ability to demonstrate the evidence, what to do next and why,” said Cox, who will present a session on accelerating decarbonisation at the upcoming Climate Smart Engineering conference.
“There’s a real opportunity [and] need within the Australian marketplace to invest in decarbonisation, but to do so alongside digitisation so performance can be monitored.”
A step-by-step process
Decarbonising is a race against the clock. The Intergovernmental Panel on Climate Change confirmed that a net zero target must be reached by 2050 to limit global warming to 1.5 degrees Celsius and avoid the catastrophic consequences of climate change.
At this stage, Cox said we’re on a trajectory to reach 3.5–4 degrees Celsius in that timeframe, meaning businesses need to take immediate and bold action now.
To help organisations decarbonise, Schneider Electric uses a three-step process, beginning with strategy.
This entails identifying where an organisation’s emissions come from, what targets they can commit to, where changes can be made to its emissions profile, what strategies and roadmaps over a specific timeline apply to ensure those shifts take place, and the resources and governance frameworks needed to support that.
“Clear targets need to be set that align to a science-based methodology for decarbonisation that will see them hit net zero by 2050,” added Cox.
Next, Cox takes organisations through a digitisation process, creating the ability to capture information about the business’s carbon footprint, monitor progress and report on its performance in line with the set objectives.
The final step is translating intention into outcome.
“We seek four key areas to reduce energy use,” he said. “We want you to generate more business value with less emissions, so we drive efficiency, electrification and adoption of renewable electricity,” he said.
That means buying renewable electricity in the marketplace through power purchase agreements (PPAs), allowing organisations to procure an increasing proportion or their entire electricity consumption from renewable sources.
“That can be from sources like wind, large-scale solar or other technologies that feed renewable energy into the national grid,” said Cox.
“They can also invest independently within the confines of the organisation, which is most commonly in the form of solar panels connected behind the meter.”
Three scopes of emissions
Cutting back on emissions means understanding the three scopes and the majority proportion your business generates.
Operational emissions fall under Scope 1 and 2, with the former relating to on-site fuels, which could be diesel for transport, or natural gas for heating and cooling.
The electricity an organisation buys and what they use it for on site is classified as Scope 2 emissions.
Scope 3 emissions, which are the most challenging to address, are those that occur outside the organisation’s footprint, but in the total value chain of its product or service.
This is anything from business travel to the embedded emissions in the materials used to make the organisation’s products.
“It can even be about the footprint of the manufacturing facility making the products that are shipped to [an organisation],” said Cox.
Retail sector under pressure
The retail sector has been an early adopter of rapid decarbonisation, said Cox.
“There are more carbon intensive sectors out there [for example] manufacturing and mining,” he said.
“But they’re focused on driving decarbonisation through efficiency and bringing in the purchase of renewable energy as a secondary consideration to align their targets.”
Manufacturers of products sold by retailers are somewhat removed from the end-customer audience.
But the customer-facing retail sector is rushing to meet the expectations of the marketplace.
With an emission profile predominantly made up of electricity, transitioning to renewable electricity to reduce Scope 2 emissions is the most common way for retail businesses to decarbonise.
“They buy renewable energy from the grid through a PPA, or another procurement model that suits their consumption,” said Cox.
“Most businesses are seeking to do that on a timeline of either 2025 or 2030, with the aim of getting their Scope 2 emissions down to zero on that timeline.”
If an organisation has a 2030 target, for example, and the aim is to progressively buy renewable energy over five years, a procurement strategy can be implemented, with renewable energy consumption accelerating each year until the target is reached.
“In 2029, when we make the last procurement, we will buy 100% renewable energy for them,” said Cox.
Once businesses begin to decarbonise, they also want to see costs go down.
“Parallel to buying renewable energy, we seek to work with [organisations] on driving efficiency through their operations, so they use less energy and they’re not incurring increasing costs in a volatile energy market,” said Cox.
Because retail emissions are mostly electricity-based, changing operations could mean installing more efficient lighting.
‘Lighting usually makes up between 15–25% of [electricity use] in the retail space,” Cox said. “The rollout of efficient lighting is a very solid case study for paybacks around 3–4 years.”
Then there’s heating and cooling, which makes up between 35–65% of a retail business’s electricity use.
“Because those assets are more expensive and have longer lifespans, we look to utilise them more efficiently and progressively upgrade them over time to more efficient ones,” he said.
In a retail environment, energy management requires a digital solution or software platform that overlays across the business’s equipment. It can control, and efficiently and specifically align, to the needs and operations of the business.
“Having that data and the ability to control is a really important part of being able to sustain the efficiency improvements you make overtime in a business,” said Cox.
The brand benefits of decarbonising
In the strategy phase, Cox asks businesses to establish targets that can be communicated to stakeholders and the marketplace. The reason for this is two-fold.
“Firstly, we want them to commit to [the targets] in the public forum, because that will drive engagement and support by the business at large,” he said.
“Secondly, it gives them the ability to celebrate the achievements they make and strengthen their brand in a marketplace [through] handling climate risk.”
While organisations have been able to focus on Scope 2 emissions in their decarbonisation efforts, the marketplace is growing more savvy, pushing Scope 3 emissions to the fore.
“As a retailer, you might have things sorted out within your operations, but what about the people who supply to you?” Cox asked.
“From our perspective, the purchase of renewable electricity, the role of a PPA, and the collective buying power of organisations within supply chains, is one of the big opportunities associated with decarbonisation of supply chains.”
Cox will be presenting Being bold – how to accelerate decarbonisation at Engineers Australia’s Climate Smart Engineering conference from 22-23 November, along with Lisa Zembrodt. Register now to attend online or in person.