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  • Writer's pictureMagali Depras

Energy Transition. What’s in it for SME’s?



COP28 has just come to an end, after almost 2 weeks of intense discussions and difficult negotiations, with ultimately, it seems to me, a concession reflected in the choice of words. Everyone agrees that this was not the hoped-for conclusion to the goal of phasing out fossil fuels, as formulated by UN Secretary General António Guterres prior to the launch of the Conference. However, the conclusion of these negotiations is greeted as historical. The final agreement refers for the first time to the transition to a gradual phase-out of fossil fuels, with the aim of achieving carbon neutrality by 2050. Between the initial objective and the conclusions, one can easily imagine that a fair number of trade-offs had to be made...


Decarbonization pays off!

Let’s talk business! Globally, the number of leaders who have realized the urgency of taking action is growing. For example, more than 6,700 major companies worldwide have set science-based targets as part of the SBTI (Companies taking action - Science Based Targets), with plans to reduce greenhouse gas emissions by 2030, or to achieve net-zero by 2050.


Here in Canada, according to a recent BDC survey (The Benefits for SMEs of Taking Climate Actions | BDC.ca), half of Canadian business owners have taken steps to reduce their carbon footprint over the past five years, and even report an average payback period of just 16 months!


This last point is particularly interesting. Numerous studies show that taking action to reduce your carbon footprint pays off! In terms of efficiency and competitiveness to start with. The company also creates business opportunities for itself, through innovation, and saves money through measures taken to reduce energy consumption or waste, for example.


Why do companies get involved?

In a previous blog I referred to key stakeholders - in particular employees, customers and investors - who set increasingly high expectations when it comes to ESG indicators (environmental, social and governance).


Companies are turning to their suppliers to help them reduce their carbon footprint.

Let's not forget that the scope 3 of a company's GHG emissions, i.e. all indirect emissions upstream and downstream of its activity, are generally the direct emissions of its supplier.

And these scope 3 emissions account for 80% of a company's total GHG emissions on average, depending on the business sector.


As a result, supplier assessments by large customer accounts are becoming increasingly detailed, and an SME that is not prepared to take action on environmental issues could well be missing out on business opportunities.

The value chain is interconnected, and it's no longer possible to hide!


New accounting standards in 2024

The arrival of IFRS S1 and S2 next year will raise the bar on reporting requirements for large companies. IFRS - IFRS Sustainability Standards Navigator


IFRS S1 sets out the general requirements for sustainability reporting. It requires companies to disclose information on their governance, strategy, risk management and objectives in relation to sustainability risks and opportunities.

IFRS S2 focuses on climate change. It will require companies to provide information on the opportunities and risks associated with climate change, and their impact on their financial position, cash flows, strategy and business model.


The arrival of these new standards also means that companies will have to disclose their greenhouse gas emissions in a more complete and detailed way. As I mentioned earlier, Scope 3 of a principal for his purchases of goods and services = Scope 1 and 2 of his suppliers. In short, all companies will be directly or indirectly concerned. So, better be prepared!


My SME hasn't yet launched a plan to reduce GHG emissions. Where to start?


This is a question I often hear, and I'd sum up the actions to be taken in a few main points:


1- Get support: Especially if you're starting from scratch, but also if you don't have the resources in-house or if you'd like an external expert opinion.


2- Carry out an energy audit : This will highlight your current energy consumption and actions to be taken. This often starts with measures such as optimizing heating, ventilation or air-conditioning systems, or adjusting machinery. It's worth noting that federal and provincial grants are available to finance energy-related measures.


3- Understand my stakeholders' priorities: In the case of their purchase of goods and services, what is important to my clients? Have they set objectives that I should act upon? What information do they need?


4- Start measuring my carbon footprint: There are online tools for calculating GHG emissions, but I'd recommend getting help if you're just starting out. In any case, it's important to start by establishing a base year.


5- Articulate a GHG reduction roadmap: Set smart goals in order to embark on a step-by-step GHG reduction trajectory.


6- Establish good governance: Be clear about the division of roles and responsibilities on these subjects within the company, and systematically collect and document environmental data.


7- Communicate: Educate your teams about climate, explain why and how each person's actions contribute to the collective result and communicate with your stakeholders about your roadmap and the progress you've made.


In conclusion, committing to a trajectory of carbon footprint reduction is the right thing to do for the planet, our children and future generations. It can create great business opportunities for a company committed to support its customers. And provides easier access to investment that favors these projects.

Reducing your carbon footprint also means savings on energy bills and gains in efficiency and productivity. And last but not least, you will make happier and more engaged employees, because these initiatives give meaning to their day-to-day work.

So, are you ready to take the plunge and become an agent of change? Let's get started!


Sustainably,

Magali

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