Strategies Businesses Can Embrace for Carbon Reduction:
Rewritten Article:
Hey there! Let's talk about the low-carbon economy and how businesses can navigate the uncertain regulatory landscape, as explained by Romain Pison, CEO of NoviCarbon - an expert in decarbonization and ESG.
The rapid shift towards a low-carbon economy is undoubtedly happening, but the ever-changing regulatory climate causes headaches for businesses. Shifting U.S. climate policies, economic pressures on Europe's Green Deal, and diverging global climate regulations create a fog of uncertainty for companies.
But don't let uncertainty blind you, dear business owner! Pison stresses the importance of pushing forward with decarbonization policies despite the tumultuous policy landscape.
The Risks of Dilly-dallying
With two decades of experience in green infrastructure and sustainability, Pison has witnessed the consequences of businesses dragging their feet on decarbonization. These consequences are:
• Losing money on stranded assets as fossil fuel-dependent investments become useless.
• Increased costs as investors wize up to climate risks and integrate them into decision-making.
• Supply chain woes due to shifting regulations and resource constraints.
Investors are growing impatient. Over $30 trillion in assets under management are now aligned with sustainability goals, and financial institutions are increasingly linking capital access to climate-conscious strategies.
At the same time, governments are pushing forward with climate policies, despite political pushback. The European Union's Corporate Sustainability Reporting Directive (CSRD) will force more than 50,000 companies to disclose climate-related risks, regardless of regional political flip-flops.
How to Decarbonize Despite Uncertainty
By taking a proactive approach to decarbonization, businesses can reduce risks and establish themselves as leaders in the low-carbon economy. Here's what's working for industry leaders:
1. Make climate risk a financial priority.
Pison recommends using The Task Force on Climate-related Financial Disclosures (TCFD) for structuring climate risk into corporate decision-making.
A nifty tool is internal carbon pricing - where companies put a price on emissions to guide investment decisions. Companies using shadow carbon pricing have cut emissions by 15% to 35%, while preserving profits, according to McKinsey.
2. Set science-based targets for emissions reduction.
Although policy clarity may be lacking, long-term climate commitments should not be delayed. The Science Based Targets initiative (SBTi) offers globally recognized guidelines for corporate decarbonization.
Businesses with validated SBTi targets are reducing emissions at an average rate of 6.4% annually, surpassing the 4.2% needed under the Paris Agreement. Aligning with science-based decarbonization pathways can improve regulatory preparedness and investor trust.
3. Diversify energy sources to protect against volatility.
Energy market volatility poses a significant financial risk for businesses overly reliant on fossil fuels. By investing in renewable energy contracts - such as power purchase agreements (PPAs) - companies can stabilize energy costs while cutting emissions.
According to BloombergNEF, corporate clean energy procurement hit a record 41 gigawatts in 2023, and renewables are now cost-competitive or cheaper than fossil fuels in most markets. Securing renewable energy contracts today can insulate your business from future price shocks while supporting sustainability goals.
4. Green your supply chain to decrease emissions and maximize efficiencies.
Most companies' Scope 3 emissions - those generated by suppliers and logistics - account for 70% or more of their total carbon footprint. Best practices for supply chain decarbonization include:
• Transparency across suppliers.
• Collaborating on emissions reduction goals.
• Embedding circular economy principles in product design.
Overall, a sustainable supply chain can reduce your exposure to carbon pricing and enhance long-term resilience.
5. Take part in shaping policy instead of just reacting to it.
Leading companies don't simply adapt to regulations; they actively engage in shaping them. Industry alliances like the We Mean Business Coalition demonstrate how corporate collaboration fosters policy clarity.
Pison has observed how companies that proactively participate in policy discussions experience fewer regulatory surprises and quicker adaptation to new climate laws. Get involved in policy discussions to secure long-term regulatory predictability and business stability.
6. Make carbon accounting a strategic asset.
Carbon accounting is no longer just a compliance box-ticker; it's a key driver of investor confidence and operational efficiency. Using standardized frameworks like the Greenhouse Gas Protocol, companies can build credibility with stakeholders and prepare for evolving regulations. Businesses with advanced carbon accounting systems can slash compliance costs by up to 40% when new policies emerge.
Wrapping Up: Decarbonization Can't Wait
Regulatory uncertainty might be a hassle for now, but businesses that act today can emerge stronger and more competitive. Pison sees companies prioritizing decarbonization consistently achieving greater financial resilience, stronger consumer trust, investor confidence, and increased operational efficiencies.
Studies consistently show that businesses with strong ESG performance outperform their peers financially. Therefore, the case for corporate action is straightforward. Whether driven by investor expectations, consumer demand, or regulatory risks, decarbonization is now a core business strategy; waiting for regulatory certainty is no longer an option.
Pison's expert advice aligns with the Forbes Business Council - the premier growth and networking organization for business leaders and owners. Are you up for the challenge?
- Romain Pison, the CEO of NoviCarbon, emphasizes the importance of businesses pushing forward with decarbonization, despite the ever-changing regulatory landscape, to avoid the consequences of stranded assets, increased costs, and supply chain issues.
- At present, over $30 trillion in assets under management are aligned with sustainability goals, and financial institutions are linking capital access to climate-conscious strategies, making it crucial for businesses to address climate risks proactively.
- Adhering to the science-based targets for emissions reduction, as advocated by the Science Based Targets initiative (SBTi), can help businesses reduce emissions at an average rate of 6.4% annually and boost investor trust.
- By investing in renewable energy contracts like power purchase agreements (PPAs), companies can stabilize energy costs while cutting emissions and insulate their businesses from future price shocks.
- Romain Pison advises businesses to engage actively in shaping policy discussions, as companies that do so experience fewer regulatory surprises and quicker adaptation to new climate laws, ensuring long-term regulatory predictability and business stability.
