Reduction scenarios: how to model future carbon emissions reduction plans

To achieve ambitious carbon reduction goals businesses need to do more than just report on past emissions – they need to be able to take strategic action.

Decision-makers responsible for meeting big reductions objectives, such as those aligned with a 1.5°C warming scenario or net-zero targets, need insights that help them identify where they should take action, and what actions could yield the best results. The ability to do so plays a big role in ensuring a business is competitive in its market.

A study from McKinsey found that investors are willing to pay 10% more for a company with a positive ESG record. In this context, setting a clear strategy to deliver against ambitious but realistic targets has a material impact on a business beyond compliance. 

Normative’s carbon accounting platform is constantly evolving to help businesses move beyond simply measuring past emissions, to actively shaping a sustainable future. A number of features are helping our customers to understand the necessary changes, evaluate different options, and plan a strategic journey towards making significant emission reductions.

This article lifts the lid on how these features could help your business today.

Key challenges when making carbon emissions reduction plans

To get to a position where a business can identify how its emissions could evolve and build an action plan to tackle those changes – a future emission pathway – there are key obstacles that need to be overcome. Decision-makers need to be able to:

• Identify the right actions: uncover the actions that will have the biggest impact on reducing emissions across various business activities and the value chain. 
• Set the right level of ambition: to set realistic goals, businesses have to understand the magnitude of reductions needed to align with science-based targets and global climate goals.
• Find the most effective reduction strategy: there are a number of different approaches a business can take to making reductions, so it’s important to be able to compare the effectiveness and feasibility of each option. This can include assessing the merits of technological shifts, operational changes and supplier engagement, to understand which suits your business’ needs best.
• Understand potential impact of suppliers: be clear how the actions of suppliers can contribute to  reduction targets and where direct efforts are most critical.

How to achieve emissions reductions with Normative

Three features in particular, are used on a regular basis by Normative customers to set realistic reduction targets and make progress towards them in the most efficient manner possible.

Scenarios

The Scenarios tool allows you to estimate the impact potential changes in your business activities could have on your carbon emissions. By creating different scenarios based on your existing emissions, businesses can model pathways to reduce emissions, aligning with climate targets such as the 1.5°C warming scenario.

Supplier Forecasts

The Supplier Forecast feature provides valuable insights into the potential scope 3 emission reductions that may occur as suppliers achieve their own reduction targets. Integrating this forecast into a business’ scenario planning can lead to a more comprehensive and realistic understanding of its future emission trajectory and help to strategically plan reduction initiatives.

Impact Comparison

The Impact Comparison feature is a powerful tool that can directly inform the reduction initiatives you model within your Scenarios. By using comparisons to evaluate the emission reduction potential and potential costs of different actions, you can make data-driven decisions about which changes to incorporate into your future emission pathways.

We work with businesses spanning multiple industries and countries to combine the use of these features to tackle the key challenges businesses face when planning emissions reductions. Together, they enable businesses to: 

• Visualize Future Emission Trajectories: Model different pathways based on various reduction initiatives and understand their projected impact over time.
• Prioritize Effective Actions: Identify the initiatives that will yield the most significant emission reductions, enabling strategic allocation of resources.
• Make Informed Decisions: Evaluate the potential of different alternatives and substitutions using data-driven comparisons, considering both emission reduction potential and potential costs.
• Integrate Value Chain Impact: Understand the contribution of supplier actions to your overall reduction goals and identify areas for collaboration and direct intervention.
• Plan for Long-Term Goals: Chart a course towards ambitious targets like Net Zero by breaking down the necessary steps and timelines.

So, how can you expect these features to help you on a day-to-day basis in your role?

The detail: how you could plan emissions reductions effectively in Normative

Prioritize effective actions

Identify areas for potential change:

Identify your major emission sources. These are the activities where changes will have the most significant impact on your overall trajectory.

How increasing emissions in modeling can help

You might want to increase the emissions of certain activities within the Scenario tool to model a transition or substitution effect. For example, if you plan to replace a high-emission activity with a lower-emission alternative, you could simulate this by gradually decreasing the emissions of the high-emission activity while simultaneously increasing the emissions of the lower-emission alternative. This allows you to visualize the impact of such a shift.

Use Impact Comparisons to explore alternatives:

For those key emission sources, the Impact Comparison feature allows you to explore lower-emission alternatives. For example:

• If business travel is a significant contributor, compare the emissions and costs of short-haul flights versus train travel for common routes.
• If purchased goods are high-emitting, compare the impact of switching to materials with recycled content or sourcing from suppliers in regions with lower emission factors for similar goods.
• If your vehicle fleet contributes significantly to scope 1 emissions, compare the emissions and costs of transitioning from internal combustion engine vehicles to hybrid or electric vehicles.

Make informed decisions

Quantify reduction potential and cost:

The Impact Comparison tool will provide you with an estimated reduction in tCO₂e and the associated cost (if you input it) for each alternative you evaluate. This allows you to understand the potential impact of different changes.

Translate comparison insights into Scenario initiatives:

Once you have identified promising alternatives and quantified their potential impact using Impact Comparisons, you can translate these findings into reduction initiatives within your Scenario:

• For a “travel mode” comparison: If your comparison shows a significant emission reduction by shifting from flights to trains on a particular route, you can create a reduction initiative in your Scenario targeting a percentage decrease in flight travel for that route, with the initiative year reflecting when you plan to implement this shift.
• For a “material substitution” comparison: If switching to recycled PET shows a substantial reduction, you can create an initiative in your Scenario targeting a decrease in the proportion of virgin PET used by a specific year.
• For a “vehicle fleet” comparison: If transitioning to EVs offers significant emission reductions, you can model an initiative in your Scenario outlining a replacement of your existing fleet with EVs over a defined timeframe.

Define the initiative in your Scenario:

When adding a reduction initiative in your Scenario, you can specify the activity, the percentage reduction (informed by the tCO₂e difference calculated in your Impact Comparison), and the initiative year by which you aim to achieve this change.

By strategically using the Impact Comparison feature to evaluate alternatives, you can populate your Scenarios with well-informed and impactful reduction initiatives, creating a more robust and realistic roadmap towards your emission reduction targets.

Integrating value chain impact

The Supplier Forecast feature provides valuable insights into potential scope 3 emission reductions that may occur as your suppliers achieve their own reduction targets. You can integrate this forecast into your scenario planning to get a more comprehensive and realistic understanding of your business’ future emission trajectory as well as helping you to strategically plan your own reduction initiatives.

Here’s a breakdown of how Supplier Forecast can help you integrate value chain impact into your projections: 

Understand the baseline impact:

By activating the Supplier Forecast within a Scenario you can project the estimated emission reductions in your scope 3 based on the targets provided by your engaged suppliers. This gives you a baseline understanding of the reductions that might occur without any direct actions from your business.

Identify areas of alignment and opportunity:

You can also analyze the categories and suppliers where the forecast predicts significant reductions. This can highlight areas where your suppliers’ efforts are already contributing to your overall goals. Conversely, it can also pinpoint areas where supplier reductions are less significant, indicating areas where you need to intervene.  

This allows you to strategically allocate your resources and efforts to areas where they will have the most significant additional impact. For example:

• If the Supplier Forecast shows limited reductions from a high-emitting supplier, this might be a key area to explore direct engagement or alternative sourcing options, which you can then model as initiatives in your Scenario.
• If a particular Scope 3 category has minimal projected reductions from suppliers, this signals an area where internal initiatives or collaborative projects with suppliers (beyond their stated targets) could be particularly valuable.

Set realistic ambition levels:

The Supplier Forecast can help you gauge the overall ambition level of your value chain reductions. If the combined impact of your internal initiatives and the supplier forecast still falls short of your targets, it highlights the need to explore more aggressive reduction strategies, both internally and in collaboration with your suppliers.

Inform supplier engagement strategies:

The insights from the Supplier Forecast can inform your engagement strategies with suppliers. You might prioritize collaboration with suppliers who have ambitious targets to further accelerate their progress or focus on supporting suppliers with less ambitious targets to encourage greater action. You can then model the potential outcomes of successful engagement as initiatives in your Scenarios.

Model collaborative initiatives:

If you plan to work directly with suppliers on joint reduction projects that go beyond their existing targets, you can model these as specific initiatives within your Scenario, taking into account the baseline reductions projected by the Supplier Forecast.

By integrating the Supplier Forecast into your scenario planning, you can create more informed, realistic, and strategically targeted emission reduction pathways for your organization and its value chain.

Plan for long-term goals

Every scenario you create can be modeled in line with your business’ science-based targets or a reduction ambition in line with a 1.5˚C warming scenario. The target ambitions are currently based on guidelines from the UNFCCC and major contemporary target-setting initiatives and currently entail:

• Scope 1 & 2 Emissions: A 42% reduction by 2030.
• Scope 3 Emissions: A 28% reduction by 2030.
• Overall (Scopes 1, 2, & 3): A 90% reduction by 2050.

Next steps

Scenarios, combined with Supplier Forecasts and Impact Comparisons, enables you to strategically plan and model your organization’s emission reduction journey. If you want to understand the impact of different actions, integrate supplier contributions, and create realistic pathways to achieve your climate targets, get in touch with us today.