_{You asked, we delivered. Here’s Sumday’s Guide to Supporting An Emissions Reduction Strategy}

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Introduction

You’ve calculated the emissions for your client. It’s generated a nice dashboard, organised into scope 1, 2 and 3. The Carbon General Ledger is looking sweet. 

But chances are, now your client is asking “So what?”, “What are we meant to do next?”, “How can we reduce our emissions?”

You may even be fielding these questions before you get the green light to start carbon accounting.

With all the hype, you’d be forgiven for thinking there’s an enormous amount of dark magic in preparing such a strategy and you might even be questioning whether you have the skills to do it. Spoiler: You have the opportunity to make a huge impact on this. 

You can take the lead and prepare an emission reduction strategy blueprint that can, and should, be drilled into by other stakeholders. As emission reduction projects pass through various stage gates, your clients may need input from other technical specialists like engineers for example. Gathering those facts and insights to weigh up both the financial return and carbon return on investments, or process changes, becomes critical.

This important part of an emissions reduction strategy is firmly in your wheelhouse.

Steps for preparing an emission reduction strategy 

Highlight limitations, based on the data you are using  

Nine times out of ten, your accounting will show the majority of emissions come from the value chain (typically ~90% of emissions from most businesses come from this source). And nine times out of ten, the emissions won’t be based on your client’s actual suppliers. Without primary data from suppliers, you have to rely on industry averages to do the accounting. Therefore, even if your client’s top 10 suppliers spend time and big money reducing their impact this year, if they’re not carbon accounting themselves, you won’t be able to account for that reduction and your client can’t realise it in their own reporting. That’s right...big problem. 

No primary data from suppliers = no verifiable emission reduction in your client’s Scope 3 accounting, it’s that simple.

It’s an uncomfortable truth and you might be asking “Well, how has everyone gone and set a net zero target without knowing this, there must be something we don’t get”...nope, you get it. It’s just glossed over far too often. Nobody is doing anything magical, and whether it’s Amazon or Google, they’re all just measuring supply chain emissions using averages right now. [Note: Amazon has just made this huge announcement]

So in summary, managing your client’s expectations and educating them up front on the limitations of their emission reduction strategy is key. Their ability to measure reduction hinges on the quality of their scope 3 data. They’ll then probably ask you, “What are we supposed to do about that then?”, which brings us to step two. 

Prepare a Carbon Report with focus areas for data quality improvement and tangible next steps 

Sumday’s Carbon Report template has an important section for outlining the gaps and limitations with the data you’ve had to rely on. 

In cases where Scope 3 data has been entirely based on averages, and if your client’s suppliers chose not to take up the 10 weeks of free Sumday support and training you passed on to to get them started, there’s still ways to improve your client’s data. Here’s how:

Procurement Policies or Contract Terms

Update procurement policies and contracts to state that suppliers providing goods and services above a certain threshold must provide their emission data or a date by when they commit to doing so (clients may be concerned about introducing this and depending on how sassy you’re feeling that day, feel free to respond to them with this: ‘Dear Client, Who cares if there is no legal obligation for them to provide this, you can still ask, as many organisation are, and it's common sense to do so when your emissions will otherwise be based on averages until time immemorial with no verifiable reduction to account for in sight. Yours with love and despair, [Insert Name]). 

To help speed up the conversation on what this could look like, check out the resources of the Chancery Lane Project. They have written 100+ climate clauses, glossary terms and tools to help businesses decarbonise their contracts. You could send this on to your client’s legal or procurement team for some inspiration.

‍Lead with Support - Your Own Campaign 

Run a stronger campaign to encourage suppliers to start carbon accounting. With Sumday, any business in your client’s value chain can gain 10 weeks of free training, support and software to get started. Consider weaving this into a company ESG/community/educational/marketing campaign that highlights why this is important and the potential benefits available the company for engaging.

Speaking of benefits... 

‍Offer Incentives

Depending on the organisation and its goals, some companies are exploring rewarding suppliers, borrowers or portfolio companies who provide this data and can demonstrate annual reductions. This may be done through contract prices or other beneficial terms. You could also offer exposure and marketing benefits depending on your own platform. Suppliers who engage could be part of a spotlight series that promotes their work to your customers. 

There’s real benefit in advisory work that outlines potential changes that would improve data quality over time, so clients can make well informed decisions around how they tackle this challenge (or opportunity perhaps). 

Initial Emissions Reduction Plan - Potential Projects based on Hot Spots 

In Sumday’s template Carbon Reduction Report, there’s a place to highlight the initial projects or ideas that could move the needle based on the hot spots evident from your carbon accounting. 

Common examples include fuel reduction, electricity consumption reduction, transportation changes and packaging changes. A lot of software providers will say “we identify hot spots'' but that’s not rocket science and you’ll be more than capable of identifying where emissions are coming from. 

The first step is using those hot spots to identify the potential projects that could reduce emissions for your specific client and are therefore worthy of further review. The second step is working out if they’re possible for your client to execute, based on normal considerations like resourcing, financial implications and technology restraints. You can also think outside of the box, considering what would have to change for these projects to stack up, even if they initially don’t from a financial perspective. 

Build the Business Case

Sumday provides you with excel based template business cases and tutorials so you can get specific on the inputs relevant to your clients and add real value. You can download the files, insert your own data and present high level business cases for the projects you identify, with the aim of helping your client understand what to consider and the potential financial and carbon benefit. 

If your client has a logistics focus, you’re going to have to go bigger than asking them to use less fuel for their Scope 1 emissions to improve. 

Instead, use the report to position your insights in a way that introduces key considerations, for example:

“Your assessment shows there are significant reductions to be achieved if you reduce fuel consumption across the fleet. This could possibly come from reducing miles travelled or transitioning the fleet to electric over time as that becomes viable. You would need to engage procurement and engineering for input on the practical considerations, but if you begin to transition your fleet over the next ten years, here is the forecast emission reduction and the estimated financial costs of doing so, based on X.  Your ROI could be achieved quicker if pricing was increased by X%, on the basis you are a low carbon alternative that has transparent data. We believe your customers will value this, and we suggest testing with your Top 10 customers to understand their appetite for this…” 

This is just a micro look and how as Emissions Reduction Strategy could begin, and hopefully you start to see the value of being involved in the process. As an advisor, the clue is in the name. You’re best placed to advise the business on what is relevant, taking into account financial considerations, which is just a reality for nearly every organisation. So leverage your skills and insights. 

Identifying projects, relevant stages and managing the process to firm up the business case for change is a key part of any emission reduction strategy and one you can get started on with our template Carbon Reduction Report.

Detailed Emissions Reduction Strategy 

Once you have baseline data, and have identified projects that may result in emission reductions (exploring the feasibility and value of those further), you may then prepare an emission reduction strategy with graphs or dashboards to help visualise the potential reductions, assuming that like any project, they pass through the milestones from idea to execution. 

This will basically be a more detailed breakdown of the previous report that involves deeper consultation across the business and relevant experts as needed (designers, engineers, metallurgists, procurement, legal etc as required). This report may also set out who in the business is responsible for reporting against what metrics, to ensure the overall strategy is on track. It may also go deeper on the milestones for each project and agreed target dates.

Set a Science Based Target 

Some clients may want to take things a step further and set a Science Based Target, approved by the Science Based Targets initiative (Sbti). We’re witnessing large organisations asking suppliers to do this more and more. To be considered science based targets, they must be in line with the latest climate science expectations to meet the goals of the Paris Agreement [limiting global warming to well-below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C.]

To apply follow the guidance from the SBTi and the work you’ve done above is essential to the process. The baseline emissions assessment and initial emissions reduction plan is the first step to applying. 

If your client has less than 500 employees, run your eyes over their FAQ page here for context. It costs around $2,000 USD to apply. You can help ensure stakeholders within the business are engaged and doing their due diligence on the proposed strategy for hitting those targets, before starting this process.

To Sum up 

As advisors, you are well placed to support your clients with their carbon accounting and emission reduction strategies. The process will benefit from the input of others, as you would when setting up a financial budget, but the reward is well worth the work. 

Don’t get lost in the hype of net zero strategies being something intangible, too complex and difficult. It’s not that hard to start. We understand it can seem overwhelming, but you’ve got this. 

You can bring rigour, transparency and trust to this work.

The Sumday accounting support team loves chatting about business cases for reduction, so we’re here to help when you need it.

So…let’s get on with it.