The

Decarbonization
Part 1:
Closing the
Ambition to
Action Gap

How to effectively harness the

decade’s biggest business opportunity

se.com/ess
Contents

Executive summary. . ......................................................................................... . . . . . . . . . 2

Introduction.. . . . . . . ............................................................................................ . . . . . . . . . 3

The opportunities and threats of climate (in)action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 4

Let’s start with the “what” and the “when”................................................................ . . . . . . . . . 5

Getting “the what and when” right: The Goldilocks of goal-setting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
What climate action targets should companies set—and how public should they be?.. . . . . . . . . . . . . . . . . . . . . . . . . 8
The C-level is setting the targets—but it’s operational teams that must deliver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

The how: crossing the bridge from ambition to action. .................................................. . . . . . . . . 11

It starts with energy management.............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
The “low hanging fruit” of resource efficiency optimization.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 14
Addressing what can’t be optimized............ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Unlocking scope 3: value chain decarbonization.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 19

Jumping the climate action hurdles........... ............................................................. . . . . . . . 20

Influencing outside your own walls......................................................................... . . . . . . . 22

Conclusion.. . . . . . . . ............................... ............................................................. . . . . . . . 23

Life Is On | Schneider Electric 1

Executive summary
Taking climate action—and making the most of it for your •B
 alancing what remains. Address unavoidable emissions
organization—requires commitment, innovation and an that cannot (yet) be reduced or replaced with credible
ability to translate ambition into meaningful action. For EACs and carbon offsets.
many corporate leaders, crossing the bridge from goals to •U
 nlocking Scope 3. Build a program to identify
results can be a formidable mountain to climb. One step opportunities for up and downstream supply chain
forward can feel like two steps back, because the deeper ecosystem engagement and exponentially increase the
you dive into climate change work, the more you realize impact of your company’s climate action efforts.
there is to do. In this paper, we break down the climate
action journey into three fundamental areas: the what and Finally, we explore the four primary action hurdles that
when, the how, and the keys to anticipating the four hurdles prevent climate programs from enduring the test of time—
companies face. and how leaders can get proactive about them. From
the inevitability of competing priorities and demands
Deciding what your goals should be and when you want for resources across an organization to an instinctive
to meet them, is a deceivingly nuanced task. Investor resistance to change that comes at the sake of the
pressure, intra-industry competition and NGO scrutiny transformative power of decarbonization, maintaining the
make finding that sweet spot for your organization tricky. right mindset and leveraging the right tools can get you
Flashy ‘moonshot’ goals can be alluring, but rooting your ahead of these common roadblocks.
tactics and timelines in science, and following proven
standards for efficiency, decarbonization, and renewable Every company with will and endurance has the power
energy goal setting, is a dependable way to balance to be an influencer on sustainability, driving change and
aspirations with achievability. delivering value both inside and outside your organizational
boundaries. Sustainability is now table stakes for
The how, after your goals are set and your cross- companies across all industries and geographies—no
departmental team is in place, is where the real work longer from a reputational perspective alone, but to ensure
begins. Although the decarbonization pathway is relatively the long-term viability of your operation and the value you
straight forward, a successful program requires an bring to the world.
intentional mix of:

• Energy management. Underpinning any decarbonization

program are efforts to reduce a company’s energy
footprint, as the burning of carbon-based fuels is the
largest source of emissions.
• Resource efficiency. The fewer resources needed, the
fewer resources that have to be procured. Make the next
step easier by first reducing net energy use and exploring Learn more about Schneider
circular business models.
Electric’s pragmatic 4-step
• Addressing necessary energy usage. Once optimized,
remaining energy sources can be replaced with lower-
approach to holistic climate action
emission fuels and technologies, like wind or solar in The Decarbonization
for electricity and electrification and/or clean fuels
like renewable natural gas or hydrogen for transport
Challenge Part 2: Getting it Done
and heating.

Life Is On | Schneider Electric 2

Introduction

No one was prepared for the disruption we’ve Climate action, then, becomes not a burden, but an
experienced in the past year as a result of the invitation to respond to crisis while baking resilience into
pandemic. And yet, collectively, we have risen to business. The result is a cleaner, healthier, more efficient,
the challenge, as the crisis has revealed the best of and more prosperous world for all.
our humanity and our ability to evolve in the face of
overwhelming odds. So, why isn’t every business already doing it?

COVID-19 has been called the global “test” of our Our hypothesis is that the barrier isn’t the why, but the
climate preparedness by a variety of sources. Our how. The combination of pressure, expectation, moral
ability to mobilize quickly—and collectively—against imperative, and genuine results that climate action can
the earthquake that was the pandemic will serve us well deliver is compelling—but it’s simply one thing to aspire
as we face the looming tsunami of climate change. But to change and another thing to do it. We call this delta
do we have both the agility and the ability to put these the “ambition gap,” and it’s where a lot of companies
lessons into practice against an even larger, slower get stuck, often leading to rash and reputationally-
moving threat1? damaging actions.

Perhaps the biggest lesson from the pandemic has This paper will explore why the ambition gap exists and
been how fragile our global systems are—and how easily how companies can close it. We’ll explore the pressure
disrupted. It became immediately apparent where we to set climate targets and help to filter out the noise.
had redundancies and resilience—and where we came And then we’ll focus on how to close the gap between
up short. ambition and action through the pragmatic combination
of strategy and execution.
What also materialized in the midst of the health crisis
was human ingenuity. Companies pivoted product We’ll also address head on some of the hurdles
lines and evaluated what was truly “essential” for their executives face when taking climate action and our
business, turning the crisis into opportunity. We face recommendations for how to overcome them. We’ll
similar circumstances with climate change. While it’s lean on our own experience as the world’s most
easy to cast global warming as imperiling—because, sustainable company in 20212, and hear from experts
ultimately, it is—it’s also a turning point for innovation, across our business who have worked with thousands
evolution, and future-proofing. of brands to help them close their own ambition gaps.
Thanks for reading.
Study after study points to the significant increase in
global GDP that could be harnessed from a transition to
an all-electric, all-renewable energy system, to a circular
economic model, and to the massive deployment of
smart and digital technologies.

1
https://www.gatesnotes.com/Energy/Climate-and-COVID-19
2
 ttps://www.corporateknights.com/channels/leadership/top-company-profile-schneider-
h
electric-leads-decarbonizing-megatrend25289-16115328/ Life Is On | Schneider Electric 3
INTRODUCTION

The opportunities and threats

of climate (in)action
Opportunity: Threat:
Stakeholder pressure Physical risk
Stakeholder—and specifically investor—pressure has What has become apparent in the past few years is that
become the number one reason companies today the impact of climate change isn’t something happening
are accelerating their climate ambitions³. The scrutiny in the future: it’s happening now. Hurricanes, nuisance
from shareholders, owners, employees, and customers flooding, extreme temperatures, drought, and wildfires
is fierce, and competition is constantly raising the are among the causes beginning to have material,
stakes4. The good news behind all that pressure? ESG physical impacts on business. In 2019, CDP reported
investment has increased 96% in the past year and that the 200 largest companies in the world together
ESG funds are outperforming the competition. estimated that climate change would collectively cost
their businesses more than $1 trillion, with most of the
Market advantages impact coming before 2025. Climate change is also
While climate action may seem burdensome, in forecast to disrupt supply chains, leading to increased
truth, it creates a number of distinct advantages for consumer costs.
organizations. These include, and aren’t limited to:
Transition risk
• Less carbon = less cost. Whether through
The business world is full of tales of companies that
resource reduction, conservation, innovation, or
didn’t adapt and ultimately didn’t survive. Climate
the implementation of more affordable technologies,
change is the great equalizer when it comes to
companies generally save money when they
business’ license to operate. Companies that don’t
save carbon.
respond now by working to mitigate climate risk to
• Sustainable finance = stronger capital management. protect the long-term viability of their operations, and
The acceleration in ESG investing, and the growth those that ignore the potential consequences of climate
in innovative funding methods (like Energy as a change (ranging from disruption to human health and
Service) means that sustainability can enhance how a justice), will eventually fail.
business manages its capital and plans for disruption.
Ambition isn’t enough. Companies must make real
• Sustainable reputation = better brand. Whether progress on their goals and communicate transparently
catering to investors, owners, or consumers, a and authentically about that progress. New market
company’s responsible reputation translates into expectations on performance and disclosure, as
a better brand. This clout can translate into talent well as legislation coming down the pipeline to foster
attraction, partnerships, value chain engagement, climate action, will only continue to heighten operational
and market influence. pressures and mandate a proactive response.

3
In his 2021 letter, BlackRock’s CEO Larry Fink wielded the company’s status as the largest
asset manager in the world to proclaim that companies that embrace ESG will attract
investors and drive better returns—an action that has come to be known in our industry
as “the BlackRock effect.”
4 
In 2020, Schneider Electric issued the first-ever sustainability-linked convertible bond.
Life Is On | Schneider Electric 4
Learn more.
 Let’s start with the
“what” and the “when”
In November, 2020, the Financial Times published an article titled The Problem
with Net Zero Carbon Pledges, a commentary on ambitious climate action targets
that ultimately ring hollow. In the piece, author Matthew Vincent calls out that what
companies need to be ready to share when communicating their climate action
goals is how much (the what), how soon (the when), and how. Vincent’s specific
column advice was that these are questions any investor should be asking to
ensure that where they’re putting their money is the right place.

Life Is On | Schneider Electric 5

WHAT AND WHEN

The article is indicative of the increasing pressure from the

investment community, in particular, for businesses to take
action on climate—and to be seen as taking action. This
pressure has ratcheted up over the last several years, and
companies are responding in kind. Commercial leaders
on climate action, like Microsoft and Walmart, have made
“moonshot” commitments—backed up by significant
action—to climate positivity or to avoiding significant
Some recent
volumes of carbon in their wider value chains. It has
become commonplace for investors to expect to see at
! cautionary tales:
least baseline data on a company’s environment, social,
• British Petroleum (BP) announced in 2020 that
and governance (ESG) metrics, regardless of size or
the company would reach net zero emissions
industry. The result is that sustainability has gone from an
in both its operations and its production, but
optional nice-to-have to essential operational table stakes.
provided little substance about how. The
company—along with other oil and gas majors—
Vincent’s point is that these pressures are spurring
has since been accused of greenwashing.
companies to set targets that are either ill-advised or
unachievable, and to post progress and make public •H
 SBC Europe’s second largest financier of fossil
declarations that are clearly greenwashing. While being a fuel interestsannounced in the fall that it would
sustainability laggard has become hazardous, so is being achieve net zero emissions in its own operations
seen as either false or contrary, with real reputational and and with customers, but the announcement was
financial ramifications. derided by critics who called out that the bank’s
financial interests are in direct competition with
This new spate of greenwashing claims is prompting its public targets.
action. In the U.S., the SEC has announced a new task
force dedicated to rooting out and addressing false •N
 ikola Motor Company, which manufactures
or invalid ESG and climate claims and misconduct. electric vehicles and their components, came
The European Commission is also cracking down under fire last year for deceiving investors by
on greenwashing claims on websites in an effort to faking footage of one of its vehicles in operation
protect consumers from fraud. Moreover, the new EU as a proof-point for its commitments to product
taxonomy is aiming to establish a classification system timelines and delivery. The claim of fraud caused
for environmentally sustainable economic activities. the company’s shares to plunge 14% in a single
Providing appropriate definitions to companies, investors, trading day.
and policymakers on which economic activities can be
considered environmentally sustainable is expected to
have widespread impact on Europe’s economic system.

The problem has become so pervasive that the Harvard

Business Review recently published an article entitled
An ESG Reckoning is Coming. The solution to the
greenwashing problem is, of course, to define the right
targets and timelines5, with a specific and actionable
business case behind it that can hold up
to any scrutiny.

5
Access our Define Success Toolkit here.

Life Is On | Schneider Electric 6

WHAT AND WHEN

Getting “the what and when” right: Basing climate action commitments on science isn’t
The Goldilocks of goal-setting the only consideration, either. When setting targets, it’s
essential that a company first understand how it will define
In the children’s story of Goldilocks and the Three
success. Not all climate action paths are right for all
Bears, the eponymous main character is looking for a
companies and defining success can help an organization
middle ground of “just right.” The metaphor can be
“right-size” its ambitions for what it seeks to accomplish.
applied to the process of corporate climate goal setting,
This is also an opportunity to align internally and externally
too. Entities must make commitments that are ambitious
to ensure that stakeholders agree on the organization’s
enough to satisfy stakeholders but which are also
definition of success—and that that definition is both
achievable—and, most importantly, they must be
ambitious and achievable6.
science-based or science-aligned.

Today, best practice is to ensure that sustainability “Significant organizational and operational
and climate action targets are informed by scientific
changes are needed to achieve the ambitious
standards like those issued by the Science-Based
Targets Initiative. These standards are driven by climate energy and sustainability goals being set by
science, which clearly outlines the trajectories needed CEOs today.”
for us to avoid the worst of global warming’s impacts. — Dominic Barbato, Director of Strategy, Schneider Electric
The standards are also rigorous, requiring companies
to take meaningful and material action in order to
be validated.

There’s a path to leadership for companies at

all stages of target-setting:
• If your company is setting goals for the first time, set yourself up for long-term results by starting
with SBTs.

• If your company already has climate goals that are not science-based, reassess how your current goals can be
adapted to the SBT framework. If your goals are short-term in nature, consider showing ambition by setting longer-term
SBTs in parallel.

• If you already set an SBT under the original 2°C warming scenario, consider reviewing (and, if necessary,
re-validating) your target to bring it in line with the most recent climate science.

• Setting a net zero target is the next level-up for companies looking to rise above the already ambitious realm
of SBTs.

6
Want to learn more about goal-setting? Check out our guide.

Life Is On | Schneider Electric 7

WHAT AND WHEN

What climate action targets should companies The analysis will also consider what is most material to
set—and how public should they be? an organization and its maturity. While companies should
set bold targets in order to propel climate action, not
In the midst of the pressure to act, it can be challenging
every company is ready for a moonshot. The reason
to arrive at the proper Goldilocks goal. To make matters
that Walmart and Microsoft can declare such significant
more confusing, our 2020 research found that companies
and ambitious targets is because they have a 10+ year
that set ambitious goals feel more confident they will
track record of progressive sustainability action. As
reach them. Still other research has found that companies
shared above, it’s more important to set realistic and
are inconsistent between the public goals they set and
achievable goals. Not only does this mean that a company
the actions taken.
takes meaningful and real action, but it also keeps its
reputation intact.
Our clients often ask us to share our advice on the
“basic, better, and best” goals they should consider.
What’s not up for debate is whether to share targets
An adequate goal-setting program must include rigorous
publicly. Our research over the past several years
analysis to determine where a company is today and
has shown that the public sharing of goals results in
whether it can realistically get where it wants to go. Some
companies moving faster and more purposefully toward
of this analysis is to identify funding opportunities, which
the achievement of those goals, ultimately making them
can be a potential barrier to getting decarbonization
more successful.
projects approved.

Life Is On | Schneider Electric 8

 WHAT AND WHEN

Climate Action Goals

While climate action targets differ for every company—and we strongly recommend an analysis and
roadmapping exercise to choose the right goals for your organization before setting and announcing
them—this chart provides indicative guidance.

Energy Efficiency Decarbonization Renewable Energy

Procurement

• Alignment with existing • Annual tracking and disclosure • Procurement of verified,

efficiency regulations across and total greenhouse gas high-quality green electricity
all facilities (GHG) footprint in alignment with and/or Energy Attribute Certificates
BASIC

• Regular energy audit(s) GHG Protocol (EACs) via bundled, unbundled, or

and compliance • Emissions reduction aspiration green tariff purchase for 100% of
based on absolute (total) or Scope 2 emissions
• Track energy consumption on site
level on at least monthly basis intensity (by product) basis

• Advanced energy monitoring •P

 ublicly announced, short-term • Public commitment to 100%
tracking consumption carbon neutrality aspiration (may renewable energy
with submetering include use of carbon offsets) • Procurement of renewable
• Development of centralized •A
 nnual reporting on both location- power from onsite and/or offsite
efficiency program and budget and market-based emissions solutions (such as power
• Specific, targeted reductions in •L
 ong-term, science-aligned purchase agreements) with direct
BETTER

energy consumption by facility reduction target for Scope 1 retirement of associated EACs for
or process and Scope 2 emissions 100% of Scope 2 emissions

• Replacement of energy- •S
 cope 3 emissions assessment • Procurement of verified
intensive equipment with with identified material categories carbon offsets for 100% of
efficient technology Scope 1 emissions

• Disclosure of efforts and results

via reporting mechanism,
like CDP

• Active energy efficiency •P

 ublicly announced, long-term • Achieve 100% renewable energy
optimization based on real-time net zero aspiration (without use • Use electrification, clean
energy monitoring of carbon offsets) technologies, and/or fuel
• Public commitment to and •A
 pproved SBT and committed switching to reduce Scope 1
achievement of energy efficiency to science-based reduction target emissions and eliminate use of
standards, like EP100 and/or for Scope 1/Scope 2/Scope 3 carbon offsets
ISO 50001 emissions in line with 1.5 °C • Engage value chain in carbon
BEST

• Move from consumer to prosumer (net zero pathway) reduction and renewable energy
with innovative on-site solutions •A
 ctively engaging supply & value procurement efforts
integrating EV, microgrid, chain on decarbonization
renewable heat, etc. •D
 evelop low-carbon products &
• Extension and enablement services, redefine business models
of efficient processes,
methodologies, and technologies
into value chain

Life Is On | Schneider Electric 9

WHAT AND WHEN

The C-level is setting the targets—but it’s operational teams that must deliver
Another critical consideration when shaping climate targets—and why thorough
analysis is so important— is who will deliver on those targets. More frequently,
targets are being set at the C-level, or even at the board level, yet it remains the
responsibility of operational teams, often across multiple geographies, to deliver on
these commitments. Do you have the right team in place to do what must be done, by
the timeline you’ve announced?

The role of the executive champion in this scenario is critical. Organizations without
top-down support struggle to make the ambitious changes required to take substantive
climate action. However, equally important is not getting stalled at the top. Any strategy—
especially those publicly announced—must be supported with an implementation plan.

But, underpinning any plan are three important elements for its success:

• Robust data: Easily managed, enterprise-level data on resource consumption and waste
(including emissions) is the cornerstone of any climate action program. The plan starts
with baseline data, its success is measured with data, and, ultimately, the disclosure of
data is what gives the program validity. For many of our clients, getting comprehensive
data management in place is the very first step we recommend.

• An integrated team: Climate action doesn’t happen in a vacuum; it can’t be managed
by one department or level of the organization alone. Instead, the best programs use
an integrated, cross-functional transformation team to ensure successful development
and execution. This team generally includes representation from procurement, energy,
sustainability, and operations, and may also include supply chain, legal, investor relations,
and communications—and it always has C-level executive sponsorship, enabled by clear
mandates and resources.

• Change management incentives: At its core, climate action is change management.

And change management is hard. One strategy that has helped many of our clients
make meaningful progress—and which we use at Schneider Electric ourselves—is
financial incentives that are linked to sustainability targets for everyone from the shop
floor to the top floor. Tying compensation to climate action motivates employees to feel
a sense of ownership over the program, which drives success.

“By mapping out our company footprint and

gaining a global view of resource data, we
Learn more are now able to scale our initiatives and
about Schneider’s continue elevating our role in environmental
actions toward a and climate leadership.”
— Ann-Katrine S. Friis, Head of CSR, Nilfisk
sustainable future.

Life Is On | Schneider Electric 10

The how: crossing the bridge
from ambition to action
For many companies, the reality of climate action becomes apparent once they’re
committed to building and implementing science-aligned, decarbonization
strategies at scale—and, further, outside their own walls and into their value
chains. This may mean digging deeper into existing initiatives, or it may require
total reinvention of the company and its products. Either way, it is a long road that
requires vision, perseverance, and intellectual curiosity.

Life Is On | Schneider Electric 11

THE HOW

The decarbonization pathway is relatively straightforward; there are only so many levers an
organization can pull to reach its goals. However, the alignment of these levers to deliver
material and timely impact requires technological, financial, organizational, and governance
capacity. It also calls for an innovative mindset and the acknowledgement that the same
processes that created the situation we’re in today aren’t going to work to get us out of it.

Speed of delivery is the key for many of our clients to close this ambition gap. Climate action,
like many transition processes, happens on an S-curve: progress is hard at the beginning but
becomes exponential after a certain breakthrough. Early achievements across decarbonization
levers can create loops of ambition to fuel future innovations. It’s key to keep agile, growing
successful initiatives rapidly when market conditions are favorable, and failing fast with ideas
that underperform.

Moreover, many solutions that exist today, or are in development, have the potential to create
significant opportunity for companies to rethink their approaches to decarbonization. For
example, the continuously falling price of clean technologies means that organizations have
the potential to make money using renewables. Distributed energy resources like microgrids,
batteries, and EVs support the prosumer model, where companies can become both a
consumer and a generator of energy, stabilizing energy demand in their communities and
creating resilience for their business.

“Organizations that want to stay ahead will need to begin thinking

about their strategy around technologies that do not yet exist
or markets that are still emerging. To meet the longest-term
climate goals, companies will almost certainly need to plan to
implement products and solutions that are not yet viable7.”
— Elin Olson, Senior Sustainability Consultant, Schneider Electric

7
How the new decade calls for new climate leadership. Read more.

Life Is On | Schneider Electric 12

THE HOW

It starts with energy management

Ultimately, when we’re talking about decarbonizing
to abate climate change, we’re talking about energy
management. Anthropogenic global warming is
primarily caused by the emissions generated from the
production, distribution, combustion, decomposition,
and destruction of carbon-based materials. While some
of these emissions are the result of secondary energy
processes—such as animal digestion—the largest
sources are still the burning of carbon-based fuels.

Understanding the scale, scope, and make-up of a

company’s energy footprint—from all sources—is the
essential first step in knowing which decarbonization
levers to pull, and how difficult it might be to ultimately
move those levers.

Proactive energy management can also give

organizations an advantage when it comes to disruption.
Understanding the sources of energy generation and
the operational assets tied to that generation can help
companies manage those assets more effectively when
energy supply is jeopardized. Given the general expense
of energy for companies, the ability to manage its risks
is essential for resilience. It’s no wonder that 87% of the
respondents to our 2020 research survey agreed
that energy management has risen to be a valued
and core business function.

“Energy management is about

understanding your assets and your
operations. If you know what you’ve got
to manage, you can develop a responsive
plan, especially when faced with an
emergency like an extreme weather
event, when it’s essential to use your
assets effectively.”
— Jeremy Warner, Regional Energy Market Manager,
Schneider Electric

Life Is On | Schneider Electric 13

 THE HOW

The “low hanging fruit” of resource This perception is exacerbated by the fact that there
efficiency optimization are an increasing number of inventive funding solutions
available to help companies overcome any real capital
The common second step in decarbonization—and,
barriers. Not only does technology continue to improve
for some companies, the only step they may be familiar
while costs continue to fall, but models ranging from
with—is optimizing for efficiency. 93% of the participants
demand response to Energy as a Service are available to
in our 2020 study reported that they have used or are
help companies hasten payback periods and leverage off-
using energy efficiency in their operations. And yet, as
balance sheet financing8.
recently as 2019, the IEA found that energy efficiency,
measured in global energy intensity, had slowed to its
lowest level in nearly two decades.

We see several common barriers among our clients in

maximizing energy efficiency. One is lack of centralized
efficiency efforts at the enterprise level, resulting in a
mishmash of one-off, low-impact projects. A second The role of circularity in
is the perceived cost associated with capital-intensive a climate action plan
efficiency projects. In our 2019 research study, 57% of
The concept of a circular economy has gained
respondents said that lack of capital was the biggest
momentum in recent years, thanks in part to the
barrier they faced. However, at the same time, we found
efforts of organizations like the Ellen MacArthur
that successful business cases for efficiency were the
Foundation, which advocates for the gradual
result of demonstrated ROI and executive support.
uncoupling of economic growth from the use of
finite resources through the practice of circularity.

Climate action is sometimes conflated with waste

management models, and circularity is where
they come together in practice. Circularity is not
“Establishing a strategic efficiency plan
only about the reuse and reclamation of materials,
based on a holistic view helps companies it is also about the redesigning of industrial
to move beyond site-specific energy processes to eliminate waste and pollution and the
savings and ‘one-and-done’ efficiency regeneration and restoration of natural systems.

projects, allowing them to leverage best A 2019 report from the Ellen MacArthur Foundation
practices across their entire enterprise— found that 45% of global emissions are driven by
and freeing up capital to reinvest in future- industrial processes and land use for agriculture
and forestry. By adopting three principles—
proofing overall performance.10”
designing out waste and pollution, keeping
— Ron Taglieri, Demand Offer Manager, Schneider Electric products and materials in use, and regenerating
natural systems—companies can make a material
impact on that 45% figure. The report predicts
that a circular economic approach to industry
alone could reduce global emissions by 3.7 billion
tonnes by 20509.

8
Access our Innovative Funding Toolkit here.
9
Read the Ellen MacArthur Foundation original report here.
10
Read Ron’s full article published by Sustainable Brands. Life Is On | Schneider Electric 14
THE HOW

Addressing what can’t be optimized

Resource optimization will only get a company so far down the decarbonization pathway;
at some point, it becomes necessary to replace high-emission energy sources with lower-
emission energy sources, and balance those energy sources that can’t otherwise be
replaced or reduced.

Most organizations pursuing climate action today find themselves in this stage. It is an
iterative process; as organizations grow or contract, or as technology improves or expands,
companies must revisit their overall footprint and seek ways to proactively manage it. The
larger and more complex a company, the more multifaceted the solutions.

Emissions are classified by type, or scope, and must be addressed according to their
classification11. Their volume can also vary wildly based on industry-type.

ATMOSPHERIC GREENHOUSE GASES

CH4 PFCs HFCs

N2O SF6
CO2

SCOPE 1
DIRECT EMISSIONS
EMISSION SOURCE: All direct emissions within the SCOPE 3
operational control of an organization. INDIRECT EMISSIONS
EMISSION SOURCE: All other indirect emissions
from sources such as business travel, waste
management, and the value chain.

SCOPE 2
INDIRECT EMISSIONS
EMISSION SOURCE: Indirect emissions generated
from purchased electricity, heat, steam or cooling.

• Scope 1 emissions are those emissions an organization is directly responsible for

generating. Common examples include fleet vehicles that are owned and operated by the
company or onsite sources of heat or power generation such as boilers.

• Scope 2 emissions are those emissions resulting from grid-sourced generation of power.
These emissions are considered outside the direct responsibility of the organization
(since it is the grid operator who determines the mix of power sources on the grid), but the
company is still responsible for these emissions, as they are driven by demand.

• Finally, Scope 3 emissions are all other indirect emissions. This broad category includes
everything from the emissions generated through waste management to those generated
in the value chain. For many organizations, Scope 3 emissions not only make up the
highest amount of their total emissions footprint, but are also the most difficult to address.

11
 he GHG Protocol is widely considered the standard for classifying emissions reporting
T
and management.

Life Is On | Schneider Electric 15

THE HOW

Replacing what can be replaced Renewables are also dogged by their reputation of
Low- or zero-carbon replacement of fuels and unreliability and intermittency. However, when combined
technologies that generate Scope 1 and Scope 2 together or with other clean technologies like batteries,
emissions is where companies commonly start their fuel cells, or as a microgrid, renewables deliver strong
decarbonization efforts. Happily, these efforts can also performance and reliability12.
result in budgetary savings and stability, and in some
cases, resilience against disruption. Common actions in The most common mechanisms today for renewable
this stage include renewable electricity and cleantech electricity procurement are onsite generation
procurement, electrification, and the exploration of (predominantly from solar photovoltaic), offsite generation
alternative fuel sources. via power purchase agreement (PPA), and Energy
Attribute Certificates (EACs). Most companies use a blend
Renewable electricity and cleantech procurement of these technologies—increasingly paired with other
for Scope 2 emissions cleantech—to ramp towards their Scope 2 goals13.
There is still a common misperception in the marketplace
that the procurement of renewable electricity today is
costly and difficult. In truth, renewable sources of power, “Today’s companies see sustainability
including wind and solar, are among the lowest cost commitments as essential to paving a
energy sources in the market. Renewables can also be resilient future for business, but achieving
sourced nearly anywhere in the world to varying degrees,
a science-based target can be easier
with recent market-opening activity in Latin America, the
Middle East and Africa, and southern Asia.
said than done. For most organizations,
reaching a 1.5 degree reduction scenario
necessitates a scalable renewable
electricity solution.”
— Jason Wykoff, Client Development Manager,
Schneider Electric

12
 earn how Montgomery County, Maryland is deploying microgrids to support critical functions
L
in this video.
13
 e’ve developed an extensive library of educational materials on renewable electricity and
W
Life Is On | Schneider Electric 16
its procurement.
THE HOW

Electrification and alternative fuel sources for

Scope 1 emissions

Renewable electricity can only be used to address the

emissions affiliated with purchased electricity. To address
a company’s Scope 1 footprint, we look to electrification What’s all the hype
about hydrogen?
and alternative fuel.

Globally, electrification is on the rise, driven in part by The cleantech headlines in 2021 have
the falling cost of electricity as renewable penetration been dominated by one solution: hydrogen.
increases. As demand for electrification grows and global Everyone’s talking about it and its role in a
penetration of renewables continues to increase, the climate positive future.
transition to electrified fleets, heating, and production
But what is it—and does hydrogen live up to
processes is a key means for organizations to address
the hype?
their Scope 1 footprint.
Hydrogen is the most abundant gaseous
Transportation is a significant segment primed for element on earth, and is an energy carrier,
electrification. It accounts for a quarter of global with great potential to store and deliver energy.
greenhouse gas emissions (24% in 201914) and yet uses Today, hydrogen is used as a catalyst in
a fraction of the electricity consumed today. This is not petroleum refining, fertilizer production, and
universally true; electric vehicle (EV) growth increased by metal processing, and in fuel cells, and is being
43% in Europe in 2020 and fleet vehicles15, specifically, are explored for applications like carbon capture
predicted to be a big driver of future EV growth in the U.S. and storage (CCS).

Heat is also electrifying; a recent study from the University However, hydrogen production is energy-intensive,
of California Berkeley found that the percentage of U.S. and nearly 100% of the hydrogen produced
homes that get their heat from electricity has grown from today is powered by fossil fuels. So-called green
1% in 1950 to 40% in 2018. And commercial buildings hydrogen is produced using renewable-powered
that switch from gas-fueled heating systems to electrified electrolysis with only a single by-product: water.
heat pumps can reduce emissions by an average of 44%
While hydrogen is a promising component to an
according to recent research by ACEEE.
overall climate strategy16, it is not yet a scalable
The frontier for heat electrification in business is energy’s solution. The production of zero-carbon green
industrial thermal applications. While renewable adoption hydrogen will call for significant expansion in and
has predominantly focused on decarbonizing the power price reduction of renewable power – which could
system to date, a significant opportunity to apply low- and also be used to address grid-based emissions.
zero-carbon thermal technologies still exists. Recent So-called blue hydrogen—used in CCS—will
research published by the Renewable Thermal Collective require additional innovation in technology before
indicates that there are annually petajoules of energy to it can be widely deployed at an industrial level.
be saved through this transition in industrial processes Corporate interest, country-level commitments,
using technologies such as UV heating, arc furnaces, and and falling technology costs are expected to drive
electric boilers. hydrogen production over time—the same drivers
that have helped renewable energy resources to
In the interim, alternative fuel sources provide a lower-
escalate and become dominant. In the meantime,
carbon option for many Scope 1 emission activities.
electrification offers a more readily available path
These may include biogas, hydrogen, and renewable
to effective decarbonization.
natural gas.

14
https://www.iea.org/topics/transport
15
Learn more about the value of fleet electrification in our white paper.
16
With thanks to the Renewable Thermal Collective for their introduction to hydrogen. Life Is On | Schneider Electric 17
THE HOW

Balancing what remains mature its renewable energy development is the

Unfortunately, while walking the decarbonization pathway, establishment of an EAC trading scheme. EACs can be
all companies will encounter unavoidable emissions purchased unbundled from energy generation throughout
that cannot (yet) be reduced or replaced. This may be the world, and can provide a bridge to Scope 2 reductions
because the technology or fuel doesn’t currently exist in the absence of other, more direct options.
or because there are geographic, political, or economic
constraints on the market17. When highly credible and charismatic, carbon offsets are
an essential building block of any climate action roadmap.
A common example is business air travel. Unless a These counterbalancing mechanisms for Scope 1 and
company operates its own jet fleet, this kind of travel Scope 3 emissions are sourced from a wide variety of
falls into the Scope 3 emissions category. The carbon avoiding or carbon sequestering technologies
business is not directly responsible for the emissions around the world and provide critical funding to these
generated by the air travel—the airline is. Yet, jet fuel projects. Offsets have not been without their critics,
cannot be replaced with low-carbon fuel at scale, and though; often, companies are accused of using offsets
aviation remains a highly carbon-intensive industry. to avoid operational resource efficiencies, or of buying
Any organizations that use air travel as part of their less credible or invalid offsets. When selecting offsets, it
operations are then accountable for the emissions is essential for organizations to work with a procurement
generated through that activity. The responsible partner that understands the market to avoid any concerns
organization must then address these emissions about greenwashing19.
through a balancing mechanism.
“Offsets provide economic incentives for
Energy Attribute Certificates (EACs) and carbon
projects that reduce greenhouse gas
offsets are the most commonly used balancing
mechanisms today. emissions and put a monetary value on
the environmental cost of carbon pollution
EACs18 —the tradable commodities that underpin all that can be used by organizations
global renewable electricity transactions—are a useful
incorporating a ‘cost of carbon’ in their
and flexible mechanism to address Scope 2 emissions
decision-making processes.”
where other alternatives, such as PPAs, are unavailable.
Often, the first signal that a new market is ready to — David Eastwood, Head of Energy & Sustainability
Services Australia, Schneider Electric

17
 e remain optimistic that human ingenuity will enable us to develop a fully carbon-free
W
economy. The opportunities for innovation, such as the solutions submitted to Bertrand
Piccard’s Solar Impulse Foundation or those in development by members of the
Ellen MacArthur Foundation for circular economy, present one of the most lucrative
economic opportunities of this century.
18
Read our Definitive Guide to learn more about EACs.
19
Our white paper details credible criteria and considerations for offset purchasing. Life Is On | Schneider Electric 18
 THE HOW

Unlocking Scope 3: Value chain decarbonization

For nearly all companies, addressing the nebulous
category of Scope 3 indirect emissions is a daunting
challenge—but one with significant potential. Leading Who’s leading on supply
organizations know that true climate action depends on chain sustainability?
engaging, encouraging, and empowering their suppliers
While many multinational corporations have taken
and partners to replicate their own efforts to reduce
action on sustainability in their supply chains, two
emissions within their organizational scope.
brands have emerged as leaders synonymous
with excellence in the past decade: Gap Inc. and
This is commonly easier said than done—which is
Walmart.
why companies tend to shy away from value chain
decarbonization. However, the increasing pressures that Gap Inc.21
companies face are also forcing others in their value
Gap Inc. has had a proactive supplier
chain to respond. And companies—as their supplier’s
engagement program in place for many years,
customer—can also be a source of significant pressure
and the company was a founding member of
and market demand signals that ultimately influence their
the Sustainable Apparel Coalition, the originator
operational ecosystem.
of the ground-breaking supplier sustainability
initiative the Higg Index. In 2014, Gap Inc. was
Organizational maturity—of both the buying company and
the first large retailer to conduct a comprehensive
the providing company—is an important consideration
roll-out of the Higg Index to its supply chain, and
when embarking on supply chain decarbonization. Some
in 2019, the company achieved a higher than
companies on both sides of the equation may be very
90% response rate to its Higg Index initiatives.
advanced, where others are not. Appropriate first steps
The company set a science-based carbon
include defining which suppliers/customers to target and
reduction target in 2019 that includes Scope
assessing those partners to establish a data baseline.
3 emissions and has also developed a supply
From there, companies can build an engagement program
chain climate strategy using data obtained from
that will be effective, and potentially identify opportunities
the Higg Index. Data is centralized in an online
for collaboration or cooperation with others20.
dashboard that allows suppliers to monitor their
targets and performance, and the program is
“Environmental risks and impacts don’t end enabled with routine training for suppliers.
at your organization’s office door. Investors,
consumers, and policymakers want to see Walmart 22

companies taking responsibility for their value In 2009, Walmart debuted the Sustainability
Index, a revolutionary initiative that asked
chain and purchasing decisions.”
suppliers to respond across a variety of
— Ekaterina Tsvetkova, environmental and social practice categories.
European Sustainability Consultancy Lead, Since that time, the company has matured its
Schneider Electric
approach, refining the Sustainability Index into
the THESIS program. In 2017, Walmart met its
goal of sourcing 70% of its goods from THESIS
program participating suppliers. That same year,
the company established Project Gigaton, its
moonshot ambition to avoid a gigaton of carbon
from its value chain by 2030. The program
includes a variety of initiatives designed to
eliminate emissions, ranging from agriculture use
to renewable energy procurement.
20
Find helpful guidance in our Supply Chain Decarbonization toolkit.
21
https://www.gapincsustainability.com/environment/supply-chain
22
https://www.walmartsustainabilityhub.com/sustainability-index Life Is On | Schneider Electric 19
ACTION HURDLES

Jumping the climate

action hurdles
What is little mentioned outside a company’s walls is how difficult it is to do
what we’ve spelled out as the “how” of climate action. It may mean completely
re-envisioning a company and undertaking a massive change effort, requiring
resources, innovation, and, above all, courage. For many companies, it can take
years of sustained vision and effort to make significant progress, and often, the
levers they need to or want to pull are outside of their immediate or direct control.
The task is daunting, but essential.

In our work with clients, we’ve uncovered four primary hurdles to climate action.
Knowing about and being prepared for these challenges can help organizations
develop proactive strategies to address them.

1. C
 ompeting priorities within the organization
Executives must manage across multiple organizational fronts, all of which
require attention and resources. For some companies, sustainability and
responsibility may not rise to the level of priority required to make meaningful
change. As a result, initiatives never get started, remain small, or fail.

A top-down commitment and embedded expectations for performance at all

managerial levels of the organization can ensure alignment on climate action as
a key corporate goal. While grassroots efforts toward sustainability from inside
the organization may be effective in building an action coalition, ultimately,
commitments to climate will fail without an aligned vision and purpose.

2. Lack of expertise
Although many companies are investing in staff in energy and sustainability
today, there may remain a lack of expertise in these complicated areas of
management. Or, while the energy and sustainability leaders in the company may
understand the urgency and the complexity, other stakeholders in the business
may not. We often find that our clients may have deep domain expertise in their
field or industry, but understandably do not know the ins-and-outs of every angle
of climate action. Occasionally, this lack of expertise can lead company initiatives
to flounder, or fail to progress as fervently as planned.

A trusted advisor that provides both a strategy and an action plan can be a
worthwhile investment for companies, especially those at the beginning of their
decarbonization pathway.

Life Is On | Schneider Electric 20

ACTION HURDLES

3. Investing the bare minimum 4. Resistance to change

For some organizations, ESG equals mere compliance. Ultimately, decarbonization requires change
They are prepared to do the minimum that is required to management. It requires team members to think
“tick the box” without understanding the opportunities differently, act differently, and be rewarded differently.
inherent in taking climate action. Or, worse, they’re It can be uncomfortable; it can cause organizational
willing to make only a minimal investment—effectively conflict; or, it can exercise its transformative power
throwing good money after bad. to become the very organizing principle on which an
organization operates23.
We’ve seen time and again that positioning sustainability
as only a compliance exercise fails in the long-term. However, as anyone who has attempted to manage
Companies in that situation today are finding themselves change knows, it can be difficult. Successful
scrambling to respond to stakeholder demands and organizations can approach climate action with this
expectations. And, unfortunately, sustainability doesn’t mentality and leverage change management strategies
happen overnight. By its very definition, sustainability (such as John Kotter’s 8-step model) alongside
must be sustained. sustainability management systems.

23
 atch the recording of Schneider Electric’s webinar co-hosted with the Global Footprint Network,
W
How to build lasting success on a finite planet

Life Is On | Schneider Electric 21

Influencing outside your own walls
Not only does climate action have the power to upend • Competitive pressure. Companies can apply their own
organizations in positive ways, delivering innovation, competitive pressure to organizations both upstream and
value, and bottom line impacts, but it can also become downstream in the value chain, expecting that others in
the means for companies to lead—especially early their ecosystem will practice and disclose ESG at a rate
adopters in particular markets or market segments. 41% similar to their own. Openly and regularly communicating
of the respondents to a recent survey of 2,800 Chartered publicly about climate targets and progress also
Financial Analyst investment professionals ranked the stimulates competition in industry verticals, driving
reputational benefits of ESG action in the top five drivers greater ambitions across entire segments.
behind ESG investing.
• Collaboration. It can be easier to take the
Corporations can play a key role as an influencer on decarbonization pathway in the company of others.
sustainability in: There is growing collaboration across industries to do
more together, faster. This includes pre-competitive
• Trade associations and NGOs. In some cases, these
groups like the Pharmaceutical Supply Chain Initiative
organizations are among the drivers for action, but in
alongside aggregated actions such as club-style buying
others, they lag behind. Companies who are leading
of renewable energy.
on climate action can align their brands with these
associations, or, better, influence the organization to • Legislation and lobbying. The corporate voice is
adopt sustainable principles and practices. important and loud—and governments need to hear
from corporations on what will facilitate climate action.
• Venture investment. Thousands of entrepreneurs in
This may be incentive or subsidy schemes that make
the clean technology space are seeking sponsors
corporate offtake of renewable energy attractive to
and funding to allow them to commercialize their
developers. Or, it may be infrastructure initiatives that
decarbonization solutions. Leading organizations can
accelerate the energy and digital transition. Leading
partner with these innovators by providing the necessary
companies can, and should, put climate issues at the
backing to help their ideas reach commercial viability.
center of their government relations agenda.

Life Is On | Schneider Electric 22

Conclusion

The question, “Why act on climate?” is one that many experts have
ventured to answer, and today, most organizations understand. The
opportunities and the risks of climate change are equally weighted in the Learn more about
‘why act’ equation, and the impacts of inaction affect every organization.
Schneider Electric’s
However, the next logical question, “How to act on climate?” is unique pragmatic 4-step
to each individual organization. The goals you set and the solutions you approach to holistic
use to connect the strategy to action differ widely, as explored in this climate action in
paper. But one thing remains the same: companies that take an active
role in ESG programs and commit to sustainable business transformation
The Decarbonization
by setting bold targets rooted in science will spark a chain reaction that Challenge Part 2:
uncovers market advantages, opportunities for collaboration, and an Getting it Done
unmatchable set of future-proofing tools for your business.

The aspiration to act on climate is ripe; the solutions

to do it are available. Let’s work together to tackle the
decarbonization challenge at your organization.

se.com/ess

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