Sustainability is a relatively new concept with its development in the late 20th century defined by McGill University as "meeting our own needs without compromising the ability of future generations to meet their own needs." But in recent years, the concept has become a movement in its own right, targeting large corporations to alter their practices by implementing greener technologies while limiting their environmental footprint. With all this in mind, more and more companies are hopping on the bandwagon.
If you're a C-suite executive, especially a chief sustainability officer, you hold a powerful position when it comes to enacting sustainable practices, and as the movement continues to generate attention and support, it's no longer just a "good option" to prioritize. Sustainability is now mainstream with 5,234 companies taking action and 2,114 committing to becoming net zero. But there remains a grey area: Where do these large corporations even start? And how do they avoid risks along the way?
There's pressure now for large companies to join in on the sustainability movement. But as a result, they are setting targets without realizing, or before doing thorough research, the amount of data needed to track emissions, specifically scope three emissions. These emissions are not produced by the company itself but by those to whom it's indirectly responsible. And this is where the challenge lies.
Understanding the Black Box
To further unearth this dilemma, I sat down with Yann Risz, co-founder and CEO of Aligned Incentives, a SaaS provider helping organizations reduce societal impacts, costs, and risks. The company works with a wide array of big-name clients from retail to agricultural to tech. You may not have heard of it before, and there's a reason for that. The company has been operating in stealth mode for seven years, but by chance, or fate, I uncovered it. And what it provides is a key piece of software, AITrack, to help large corporations reach their net zero carbon emission targets.
Currently, there's a massive gray area with large corporations setting net zero or science-based targets while being blind as to where their emissions are actually coming from, something Risz refers to as black boxes. Chances are, the bulk of these emissions are occurring in supply chains, but companies have virtually zero understanding of how to affect these. And without proper technology to gather analytics in a company's supply chain, it makes it seemingly impossible to obtain data that highlights key levers or emission hotspots. But why is this happening in the first place?
The Surge Toward Sustainability
If you're a business owner or C-suite executive, more likely than not you're focused on sustainability for a few reasons: B2C consumers and B2B clients are calling for it, investors prioritize sustainability, it's beneficial for the planet, and regulatory bodies necessitate detailed sustainability reporting. In the U.S., the Securities and Exchange Commission proposed a climate disclosure rule back in March 2022 that would require U.S. publicly traded companies to disclose annually how their businesses are assessing, measuring, and managing climate-related risks.
Sustainability has not only become the right thing to do but will soon be a requirement on a national level. This has left companies feeling pressured to set targets, but in the same stride, are setting themselves up for failure to ever reach them.
"Ninety percent of these targets are black boxes," Risz emphasizes. Uncovering emission hotspots is far from easy, and gleaning from Risz's expertise, I realized just how intricate the process is, especially when attempting to become net zero.
Net Zero's Big Problem
It's one thing to make it a goal to become net zero and a completely different beast to tackle it. The looming dark cloud that weighs on many large companies is scope three emissions. You need to include these emissions once they reach 40 percent or more of your emissions by Greenhouse Gas Protocol, but the how is often left undiscussed.
"You need a surgical approach that starts with an initial understanding," Risz says, and "unless you have good scope free data, for most companies, there's no way you can achieve your target's full scope."
To get scope three emission information, companies have to either ask their suppliers or model emissions using life cycle assessment (LCA) models. But the problem with these two options is that suppliers usually lack the necessary information and there's no software solution to generate a large number of high-quality LCA models efficiently and quickly -- until now, that is.
Moving Forward With Sustainability
Before committing to becoming net zero, you have to understand if it's a possibility in the first place. That's where granular scope three data comes into play. With scalable software like Risz's AITrack, it helps demystify net zero, making the concept less overwhelming. The solution is simple: Attain accurate and granular visibility on cradle-to-grave emissions and integrate financial and sustainability analysis to achieve such net-zero targets.
My advice to C-suite executives everywhere? Start thinking about the logistics for sustainable practices if you haven't already, and invest in effective technologies to get your company on a greener path.
Photo credit: Getty Images.