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The financial benefits of carbon emission reduction for large corporations

Large corporations may be directly or indirectly contributing to a higher carbon footprint within their processes. However, governments across the globe are focusing on reducing carbon and greenhouse gas emissions with a legally binding target of achieving net zero emissions by 2050.

During the Paris Climate Agreement in 2015, nations set a global decarbonisation target to limit global warming to below 2°C. To achieve this target, large corporations must play their role and act swiftly to detect and curtail their carbon emissions.

This article covers what carbon footprint reduction practically looks like and its benefits for large corporations.

What does corporate decarbonisation look like?

According to the Intergovernmental Panel on Climate Change (IPCC), transportation, buildings, and the industrial sector contribute 41% of global CO2 emissions. However, there is a concerning factor in European corporate decarbonisation. Only 37% of total carbon reduction efforts are meeting the current decarbonisation strategies for Scope 3 emissions.

Only 8% of firms have a net-zero goal that covers their entire value chain by 2050. These lacunas demand an integrated approach to decarbonisation that does not impact profitability. Here is how corporations can undertake the decarbonisation journey:

• Data collection: Collect detailed data on aspects that directly or indirectly contribute to carbon emissions. For example, while logistics is a direct contributor, a supplier that does not follow emission norms in manufacturing is an indirect one.
• Account for emissions across scopes: Account for your emissions across Scope 1, 2, and 3. This covers both direct and indirect emissions.
• Reporting: Have a robust reporting system that tracks current emissions and the Environmental, Social, and Governance (ESG) performance of the company.
• Setting targets: Set measurable and Science-Based Targets (SBTs) to reduce the company’s carbon footprint that aligns with the Paris Agreement.
• Implement decarbonisation levers: Identify decarbonisation strategies and technologies to reduce emissions across the operations chain. Consider renewable sources of energy, EV transportation, and alternative/recycled materials.
• Net-zero strategy: Design a comprehensive net-zero carbon strategy that outlines a path with short-term, intermediate, and long-term actions as a part of the business model.
• Annual accounting and reporting: Monitor and report emissions and compare them with set targets to evaluate progress.

Benefits of decarbonisation for large corporations

As the regulations increase, so does the need for companies to show trustworthy sustainability data. Proprietary solutions that handle your unique challenges offer the following benefits throughout your decarbonisation journey:

Direct cost savings

Decarbonisation is a strategic investment that yields direct financial results and operational efficiency. Research predicts up to 40% lower emissions and 15% higher financial performance by 2030. Early adopters can also leverage the financial incentives available. This directly impacts the bottom line and increases profits.

Brand reputation and loyalty

Sustainability is a significant factor based on which customers make their purchasing decisions. Businesses can differentiate themselves in the market and be early starters in the sustainability future. Enhanced brand value brings customers’ trust and a direct increase in product/service sales.

Meet global regulations

Early adoption of carbon reduction strategies puts you at the forefront of the regulatory landscape and mitigates the risks of non-compliance. By following green practices, you stand to gain financial and operational advantages. For example, just by switching to EVs, you reduce monthly transportation bills and carbon emissions, thereby stepping towards global regulations.

Competitive advantage

By switching to low-carbon operations, you attract high-quality, eco-conscious clients that put you in a niche market. For businesses sharing similar values, you become a frontrunner in adopting and practising industry standards, which gives you a direct competitive advantage.

Operational efficiency

Operations with underlying decarbonisation practices bring efficiency, especially in energy consumption. For example, if you have several offices switching to renewable energy and efficient electrical fittings and appliances that automatically save energy during non-working hours can improve profitability and sustainability. You also shield yourself from the volatility of the fossil fuel market for a predictable operational expense.

Attract investment

Large companies also seek investment for research and development and to foray into new lines of business. Net-zero carbon operations may attract investors and shareholders interested in business sustainability strategies. As an investor, they see lesser operational and supply chain volatility, which is attractive for investment.

How can Infosys BPM help with business sustainability strategies?

The Carbon Footprint Analytics solution from Infosys BPM provides a complete overview across the enterprise and at every step within the value chain. It helps you conduct secondary research, data & governance, KPI design, reporting, target setting, and performance review.

Read about carbon emission reduction at Infosys BPM.