Business as usual is no longer an option, the first results of a new initiativeby CDP and ADEME, the French Environment and Energy Management Agency, have revealed. By looking at the future implications of a company’s current business activity in order to accurately assess its readiness for the transition to a low-carbon economy, the Assessing low-Carbon Transition (ACT) pilot project has revealed stark differences between companies that, on the surface, may look very similar today.
Companies must evaluate how to successfully transition to the low-carbon economy in a way that is not only connected to today’s emissions, but also to all relevant choices made in the past that will continue to impact future emissions; whether that be fossil fuel power stations with years left to run of their technical lifespan or plans to continue producing road vehicles which will emit CO2 for many years into the future.
The ACT initiative completed a successful pilot over the last year, to develop methodologies which measure whether companies are transitioning quickly enough to achieve a below 2 degree world by 2050 and provides companies with the tools they need to decarbonize their business by transforming their business models. Decathlon, Enel, Renault, SSE and Toyota are some of the companies that took part in the pilot and are using ACT to change their business models and strategic plans with the requirements of a below 2-degree world.
The pilot results are released in today’s report, which focuses on three sectors with a heavy environmental impact: Electric Utilities, Automotive and Retail.
Key findings from the report include:
- For the electric utilities sector, maintaining a business as usual approach to emissions reductions means that almost all companies in the research would have no way of meeting their 2050 carbon budget within 5 to 15 years.
- For the auto sector to achieve total or near total decarbonisation by 2050 requires the most important changes to have been made by 2025-2035; yet most companies’ plans only stretch five years into the future;
- Shared accountability, where stakeholders go beyond collaboration to hold each other accountable for progress made, will be critical to successful decarbonisation in the retail sector. With complex supply chains, companies rely on each other to take action to reduce emissions quickly enough.
- Retailers will be a critical actor in the development of a circular, low-carbon economy as they can exert influence throughout the length of complex supply chains, shifting both supplier and customer choices and behavior;
- Making public commitments such as setting science-based targets are a good first step to aid the transition to a more efficient and renewably powered low-carbon economy are compatible with long-term economic growth, by driving innovation, reducing costs and enhancing profitability;
- Public commitments need to be supported by real actions at the level of R&D investments in new technology and low-carbon products; investment in low-carbon infrastructure avoiding future stranded assets; engagement with supply chain to promote its decarbonisation; and re-thinking business models;
- Examples of leading practice exist from those companies already changing their business models and strategic plans to align with the requirements of a below 2-degree world. Renault is an example of a company with strong science-based targets to reduce its scope 1, 2 and 3 emissions. It has rapidly increasing electric vehicle sales which are far above the level of growth in low-carbon vehicle sales that would be expected of a company with its market share.
“The creation of strong plans to transition to the low-carbon economy can no longer be delayed,” said Pedro Faria, Technical Director CDP. “Given the long lead times to shift strategy and make low-carbon investments, companies need to start moving to develop a long-term vision coupled with a clear step-by-step trajectory that ensures they are on the right path to the low-carbon economy in 5, 10 and ultimately 33 years from now.”
“According to the Paris Agreement, the private sector is part of the journey to a low-carbon economy, and lots of commitments are already taken by companies. Things are moving forward. That is why stakeholders should have access to assessment of the credibility of such commitments. By developing robust and transparent methodologies, the ACT initiative gives the opportunity to transform commitments from companies into real accountability” said Marie-Christine Premartin, Programs Executive Director at ADEME.
With rising global emissions and more international consensus to tackle the problem than ever before, it is clear that efforts to mitigate climate change will transform the global economy. There will be winners and losers from these transformations, both among companies and from those who invest in them. While many large companies readily state that they will continue to profit in the low-carbon economy, robust ways to check to what extent companies are truly ready for the transition have been lacking. This is the gap that the ACT initiative is working to close.
The sector methodologies developed by ACT have undergone a robust quality assurance process and ensure that investors are able to identify which companies are ready for the low-carbon transition; they will allow companies to benchmark their own progress and identify what actions they need to take; and they enable the identification of those companies worthy of recognition for their emissions reduction activity as the world focuses on the implementation of the Paris Agreement.
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For more information or for exclusive interviews, please contact:
- Ashleigh Lezard CDP t: +44 (0)7920510065 | e: [email protected]
- ADEME press department t: +33 (0)1 58 47 81 28 | e: [email protected]
About the report
ADEME and CDP partnered with 2DII, EIB and ClimateCHECK for the ACT pilot project, which from launch at COP21 in Paris developed 3 methodologies to assess alignment with low-carbon transition in the Electric Utilities, Auto Manufacturers and Retail sectors. Methodology development was done in consultation with companies and experts in these sectors, and pilot companies reported against the methodologies and received an ACT pilot assessment and rating in confidence. Feedback received during the course of the pilot influenced the development of the methodologies and will be fed in to future methodology development. A quality assurance process informed the methodology production and further enhanced its robustness.
ACT methodologies are sector specific, because the contributions different sectors make to global emissions differ greatly, and different actions will be required of different sectors as they play their part in the transition to the low-carbon economy. The three sectors chosen for the pilot typify a range of challenges companies will face during the transition to the low-carbon economy. The approaches developed for these sectors during the pilot will be applicable to other sector methodologies in future.
About CDP
CDP is an international non-profit that drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources and protect forests. Voted number one climate research provider by investors and working with institutional investors with assets of US$100 trillion, we leverage investor and buyer power to motivate companies to disclose and manage their environmental impacts. Over 5,800 companies with some 60% of global market capitalization disclosed environmental data through CDP in 2016. This is in addition to the over 500 cities and 100 states and regions who disclosed, making CDP’s platform one of the richest sources of information globally on how companies and governments are driving environmental change. CDP, formerly Carbon Disclosure Project, is a founding member of the We Mean Business Coalition. Please visit www.cdp.net or follow us @CDP to find out more.
About ADEME
The French Environment and Energy Management Agency (ADEME) is a public agency under the joint authority of the Ministry of Environment, Energy and the Sea, and the Ministry for National Education, Higher Education and Research. The agency is active in the implementation of public policy in the areas of the environment, energy and sustainable development.
ADEME provides expertise and advisory services to businesses, local authorities and communities, government bodies and the public at large, to enable them to establish and consolidate their environmental action. As part of this work the agency helps finance projects, from research to implementation, in the areas of waste management, soil conservation, energy efficiency and renewable energy, air quality and noise abatement. www.ademe.fr