By early 2021, over 1,000 companies in 60 countries, representing nearly 20% of global market capitalisation, had committed to ambitious Science-Based Targets. More than 25% of the world’s largest 2,000 companies had set Net Zero targets. Manufacturing and industrial companies, representing 22% of global emissions, have a particularly important role to play over the coming decade.
Yet, reducing carbon emissions across a manufacturing business is complex. While individual projects may have introduced energy efficiency and green electricity, companies now require more coordinated and structural changes, demanding greater stakeholder alignment. Organisations with large manufacturing footprints will need to build and implement roadmaps for their facilities that not only reduce emissions, but also deliver on their operational and financial targets.
Reducing Factory Emissions Through Complex Structural Change
Shifting to a more coordinated, structural emissions reductions approach requires factories to contend with several interconnected and often competing considerations.
When building an emissions reduction pathway, operational leaders need to: optimise long-term assets to reduce future emissions; embrace emerging technologies and invest to maintain flexibility as they evolve; maintain cost-competitiveness by keeping operational costs as low as possible; anticipate evolving market factors such as regulations, carbon taxes and subsidies; weigh sourcing requirements in view of availability, quality, price and impact on factory emissions.
With so much complexity and uncertainty, planning a long-term Net Zero factory strategy will inevitably come with tradeoffs. Without buy-in from the right stakeholders, the complexity of the undertaking can overwhelm even the most dedicated efforts, delaying decision-making and leading to inaction.
Growing Shareholder and Regulatory Demands are Driving Accelerated Action
Companies are increasingly pressured by new government regulations, investor demands and NGO initiatives to act faster to achieve their goals. For example:
- The European Union has committed to a 55% emissions reduction target by 2030.
- The United States pledged to slash emissions by 50-52% by 2030 from 2005 levels.
- Numerous countries are implementing carbon tax schemes. EU carbon prices have hit record highs in recent months.
- Asset managers have increased accountability for climate commitments and performance. The Net Zero Asset Managers Initiative now has 73 signatories and $32 trillion in assets.
The Way Forward: Fostering Stakeholder Alignment
Faced with increasing pressure to reconcile operational performance, financial performance, and emissions reduction, companies must ensure their investment decisions result in the most impactful and cost-effective roadmap to reach their goals. These decisions require aligning diverse internal stakeholders, each with their own perspectives and priorities.
Four Steps To Drive Alignment On The Optimal Emissions Reduction Pathway
1. Build Consensus On The Need For Change
The first step in any transformative process is to reach an agreement on the need for structural change. Organisations should build a common understanding, define a shared purpose and, above all, communicate effectively to motivate employees and drive innovation.
2. Show It’s Possible
To build alignment, leaders should directly address stakeholder reservations with tangible evidence. Identify efforts already undertaken, progress made, and best practices involved. When communicating progress, highlight cost savings, efficiency gains and business benefits alongside carbon reduction.
3. Set Boundaries Early On
It’s important to identify constraints and non-negotiables early in the process to tailor solutions and technologies to the specific needs of each site. This builds stakeholder alignment from the beginning. Involve a diverse group of local and corporate decision makers to discuss potential emissions reduction levers. Document participant feedback and ensure that any tradeoffs are discussed and agreed upon. Then conduct a detailed analysis to develop a least-cost pathway that addresses the site-specific parameters.
4. Create The Conditions To Sustain Alignment And Achieve Goals
Once your roadmap is developed, it’s critical to maintain stakeholder alignment and buy-in to ensure follow-through and progress. Successful companies will go beyond simply communicating emissions reduction targets by translating the roadmap into an actionable plan with clearly-defined roles and responsibilities, formalising clear KPIs, embedding accountability across the business and funding additional steps as needed.
As more organisations transition their operations to achieve Net Zero factory emissions, accelerated timelines will demand swift, coordinated action. Those that effectively build consensus, document tradeoffs and enable engagement and action of all stakeholders will dramatically improve the speed and scale of their transition.