The carbon footprint, an essential tool for business strategy

Climate change is changing our lives. It is also changing economic models and the daily lives of companies: extreme climate events are multiplying and disrupting supply chains, most economic players are seeking to turn away from CO2, consumers prefer responsible products and regulations on these subjects are tightening year by year.

‍

How can we evolve in a world where the carbon constraint is becoming stronger and stronger? How to adapt your business model? What risks and what opportunities? There are many answers to these questions, but one prerequisite: carrying out a carbon footprint. Because it makes it possible to assess one's dependence on carbon, to identify greenhouse gas (GHG) emissions and then to reduce them, the carbon footprint is now an essential management tool.

‍

The 4 main reasons to do your carbon footprint

‍

An ethical issue

‍

Divide global CO2 emissions by 2 by 2030. This is the objective mentioned in the latest IPCC report in order to limit the rise in temperatures to 1.5 degrees at the end of the century. The impacts of global warming are accelerating, we see it every year, but emissions are not falling fast enough. At the current rate, 1.5 degrees will be exceeded during the next decade, 2 degrees around 2050 to reach 3 degrees in 2100, causing devastating, widespread, sometimes irreversible impacts.

‍

‍

But this worst-case scenario is still avoidable. The solutions exist, they are numerous. And companies have a key role to play.

‍

This role is to do its part in the face of climate change. It means succeeding in reducing greenhouse gas emissions through ambitious action plans. The Science Based Targets Initiative (SBTi) thus indicates a trajectory of reduction in GHG emissions of 4.2% per year for businesses in order to meet the objective of the Paris Agreement, namely to limit the rise in temperatures to 1.5 degrees.

What are the most emittering activities? Which product, which raw material, which subcontractor emits the most? Without a complete carbon footprint (scope 1, 2 and 3), these questions remain unanswered. It is therefore very complicated to develop a strategy to reduce GHG emissions. The carbon footprint is the management tool that will make it possible to direct the company's financial and human resources towards the most effective reduction actions. We only reduce what we know.

‍

A strong competitive challenge

‍

Risks to economic performance

‍

In a world where GHG emissions are no longer welcome, not integrating it into your strategy creates a threat to the economic performance of the company. “Making a carbon footprint is a first step in managing the climate-related risks to which a company is exposed”, explains Guillaume Colin, Head of Climate Expertise at Sami. And there are a lot of them.

‍

• Stakeholder risks

This is the case in particular for the company's customers, consumers or economic partners. More and more consumers are paying attention to the carbon and environmental footprint of the products they buy. In this study on responsible consumption published in 2021 by ObsoCo, the Society and Consumption Observatory, 61% of French people considered the environmental situation very worrying, to the point of calling for radical changes in order to produce and consume less but better.

‍

In addition, a growing number of companies are asking their suppliers to produce at least the carbon footprint of their activity. The carbon footprint is becoming a criterion in more and more public or private tenders. Let's mention SNCF, which since this year has included a price per ton carbon in its tenders for its 55 largest suppliers in order to monetize their GHG emissions.

61% of the purchasing departments of large companies (more than 5000 employees) had objectives related to sustainable development or CSR in 2022.

‍

• Funding risks

Investment funds are more and more likely to require companies in their portfolio to at least calculate their carbon footprint, for others to implement a strategy to reduce emissions. This is the case of our client, Founders Future but also for example from Meaning Capital Partners or Serena Capital.

Many other financial players now exclude companies operating in high-carbon sectors. That's what just announced The Bank of France which will exclude from its portfolios by 2024 any company that develops new fossil fuel extraction projects.

‍

• Market risks

“Carbon prices are increasing,” explains Guillaume Colin. If a company wants to know its exposure to this financial carbon risk, again, the starting point is to know its emissions. If it does not know to what extent its value chain is carbon intensive, it risks paying much more for its raw materials or being less competitive downstream because these carbon taxes will hit the margins.”

‍

Technological risks are added, with numerous low-carbon innovations emerging. Again, there is the risk of being late and losing market shares.

‍

• Physical risks

49% of CEOs surveyed in this study by Accenture and the UN Global Compact recognize that their businesses are already experiencing the impacts of extreme weather events, in particular through interruptions in their supply chain. The examples in the world are multiplying.

‍

• The floods in Thailand in 2011 shut down many factories of international car manufacturers; the manufacture of hard drives or electronic chips was interrupted.
• In 2018, the chemical giant BASF had to stop the activity of one of its factories in Germany which was no longer receiving enough raw materials, as river traffic on the Rhine was slowed down by the very low level of the river.
• Last example, in 2021, Taiwan experienced its worst drought in 56 years, leading the government to restrict access to water for many manufacturers including TSMC, the world's largest semiconductor manufacturer. He had to reduce water consumption by 10%. Last March, a new wave of drought, TSMC has activated its crisis plan again in order to limit the impact of water restrictions on production.

‍

Businesses can materialize these various risks financially based on their carbon footprint. “Thanks to the carbon footprint, a company can create models in order to financially estimate how much it is likely to lose if companies align themselves with trajectories compatible with the 1.5 degree objective”, analyzes Guillaume Colin.

‍

The opportunities

‍

For the same reasons that not engaging in a transition process exposes the company to numerous risks, doing so offers prospects for economic benefits: gaining market shares; access to finance; competitive advantage in tenders; etc... It also allows be able to benefit from CSR labels or certifications, such as Ecovadis or B-Corp.

‍

In addition, by identifying the company's main sources of emissions, the company is in a position to act quickly on controlling associated costs, in some cases resulting in rapid savings. This is particularly the case with regard to energy consumption. ADEME indicates, for example, that lighting represents 20% of a building's electricity consumption and that it is possible to reduce them by 40 to 66%.

In addition to controlling energy consumption, the more global approach to eco-design of products leads to better economic performances for a company. It is the result of a study by ADEME, published last year. The French energy transition agency notes a systematic increase in the turnover of the companies concerned thanks to new markets and a greater volume of sales. The reputational benefit is also high.

‍

Competitive advantage, cost control, risk management. In a study published in 2022, Ernst and Young interviewed more than 500 business leaders. 69% say they get more financial value than expected from their climate initiatives. Financial value but not only that. They also observe the creation of “customer value”, on customers, brand image, and “employee value” on employee satisfaction and recruitment.

‍

Employer brand and legal risk

‍

Again, the perspective of engaging in a carbon footprint and, more generally, a strategy to reduce greenhouse gas emissions can be analyzed under the heading of Risk/Opportunities. This is particularly the case for the image of its current or future collaborators.

‍

According to this study published by Unedic in April last year, 84% of French workers indeed want a job in line with the climate challenge and ¼ of working people plan to change jobs or businesses to bring their professional life in line with their ecological concerns. More and more graduates of Grandes Écoles are refusing to work for companies whose actions are considered harmful to the climate.

‍

The risk is also legal. Legal actions against companies accused of not implementing a realistic emissions reduction strategy are increasing. BNP Paribas has thus just been sued by three NGOs and Total is under attack from all sides for its role in the climate crisis.. In this regard, the European text on due diligence provides for the mandatory implementation of transition plans for businesses. They would be civilly liable if this is not done.

‍

Regulatory

‍

An increasing number of companies will be subject to the mandatory completion of a carbon footprint. The European directive on CSRD in particular, integrates climate issues into the extra-financial reporting of all companies with more than 250 employees.

‍

Obstacles and our answers

‍

“It's a significant cost”

‍

It's true, calculating your carbon footprint and implementing a strategy represents a cost. But for all the reasons stated above, this cost is an investment.

‍

“We don't have time”

‍

Financial and human resources are valuable and valuable. This is also why carrying out a carbon footprint is essential: it allows resources to be efficiently allocated to the most emissive sectors of the company. But before that, carrying out a carbon footprint does indeed take time. The solution developed by Sami precisely offers support and a platform designed to facilitate and accelerate the measurement of the carbon footprint and the co-construction of the action plan.

‍

Industrial, hydrocarbon and transport companies are not the only ones to emit greenhouse gases! All economic activity generates emissions, in the digital sector, purchases, travel. And in the face of the climate crisis and the urgency to reduce emissions, every ton of CO2 avoided counts.

‍

The direct impacts of climate change and the low-carbon transition pose numerous risks to the economic model of businesses. But this transition also represents opportunities. For companies, engaging in a carbon footprint and then an approach to reducing their GHG emissions is a competitive advantage, in the short term for some, in the medium or long term for all others.

‍

{{newsletter-blog-3}}