Six steps on the tough road to decarbonization

How to re-orient your organization around decarbonization

When looking at decarbonizing, organizations are really struggling with a path forward. I’ve seen several different flavors, but most commonly there is some activity by a group that does not control a P&L, like a sustainability office, and then it sits. And sits and sits and sits and five years go by and little changes. Here’s our 6-point plan for organizations that want to decarbonize:

1. Focus on continuous improvement

Build decarbonization into your corporate culture, into your strategy and into your annual budgets. Decarbonization should be approached like you approach supply chain or vendor management – comprehensively. A continuous improvement framework removes the judgment from the conversation and allows companies to focus on changing their operations. 

Here’s Google tracking the PUE (Power Usage Effectiveness) of their data centers:

2. Make a dynamic 10-year plan

You need a planning horizon that’s long enough to account for capital planning horizons and short enough to focus and motivate your teams. Additionally, we have a 10-year window to take serious action as a society to address greenhouse gas pollution. The plan should articulate where you believe your business is going, and the opportunity to reduce carbon by making adjustments. It may include disposing of some assets or business lines. Importantly, the plan should be updated every year so that it stays relevant for the organization.  Just as importantly, greenhouse gas emissions should be tracked and reported out to stakeholders so that progress can be measured.

3. Grab a few small, quick wins

We’ve found again and again that once organizations start on one decarbonization project, they immediately started on several others. It’s important to motivate your teams to begin action, as it will tend to snowball from there. Projects can seem small to start, but have a major impact on perception of decarbonization within your organization.

Small projects also help people implementing the projects learn what works well and what risks they have to manage along the way. Examples of quick wins could be:Sign one of your buildings up for a 100% renewable 24/7 power supplierDo an energy efficiency project in one of your small facilitiesIdentify 3 products you sell that can be redesigned to lower Scope 3 (i.e., use phase) emissionsInstall one EV charging station to lower your Scope 3 emissions from commuting

4. Put financing front and center

Financing is the key to a sustainable decarbonization plan. The financial difficulty in decarbonization is that lowering emissions usually requires upfront capital spending to get the benefit of lower emissions down the road. 

Without some sort of financing plan in place, it will be difficult to come up with the capital for projects year after year. Some projects can be financed through utility programs. Others will need to be financed on the balance sheet at the corporate level.Financing should pay attention to how incentives to save energy work on the ground – the On-Bill Financing and On-Bill Repayment programs in California do a good job of squaring the circle in commercial real estate.

Financing means more than just rounding up project capital. It can mean restructuring leases, or working with suppliers. It can also mean influencing the policy process – it’s surprising how rarely regulators hear from business advocates for decarbonization, and when I’ve worked with regulators on behalf of decarbonizing businesses they have welcomed our suggestions.

5. Tie in CapEx plans

There are opportunities to plan out capital expenditures so that the next generation of physical plant is drastically less carbon intensive. Installing solar at the same time as a new roof, or ensuring boilers are replaced with heat pumps is critical. 

We’ve all seen how the inertia of decisionmaking will tend to keep organizations on the same path. Implementing decarbonization requirements, incentives and long-term planning around capital spend will allow organizations to bend their emissions trajectory downward. 

Some of this planning has regulatory implications. The SEC is promulgating new rules that mandate companies take greenhouse gas emissions into account in their planning and risk management. At a more local level, some jurisdictions are banning certain types of carbon intensive equipment, such as gas furnaces. Organizations need to stay ahead and abreast of these regulations in order to ensure capital efficiency. 

6. Incentivize people

Incentivizing people is so important for organizations to succeed. This goes for decarbonization targets the same as it would go for revenue targets. Monetary incentives are important, even for back-of-the-house employees like building engineers or facilities managers. In a serious decarbonization effort, bonuses should be tied to progress toward decarbonization goals.

Just as important are career path incentives. Organizations must build a career path for their people who lead in decarbonization to lead the organization. A pat on the back is not enough – people must see peers advance through the ranks by their decarbonization efforts. 

Incentives permeate organizations – for example, most employees including myself will take a cab home from the airport on a business trip, even when lower-carbon public transit is available. Companies can reconfigure their expense and commuting policies to favor low-carbon transportation methods.