Leading by Design: Lowering Carbon Benefits
Lowering Carbon Puts Companies on the Road to Savings, Innovation and Growth
Of the 300 companies that have signed up to Science-Based Targets, a methodology developed by CDP (Carbon Disclosure Project), WRI (World Resources Institute), WWF(World Wildlife Fund) and the UN Global Compact, one goal is to align their emissions reduction plans with the Paris Agreement’s goal. But that goal, while critical, is only a part of the long term efforts by those companies. In order to bring shareholders and Boards of Directors on board, the benefits reach beyond the need to preserve the planet for the next generation. Two articles in Ethical Corporation outlined those benefits as well as the process of making lowering carbon a reality.
- Understand your carbon footprint Identify hotspots of emissions across the full value chain and identify opportunities for improved efficiency and cost saving.
- Develop a roadmap to zero emissions Set out the practical steps required to deliver core products or services in a zero-carbon future.
- Set science-based targets Use the best available climate science to align emissions reductions goals with the requirements of a 1.5°C pathway.
- Invest in energy efficiency Implement cost-effective opportunities to improve the efficiency of your buildings, fleet and industrial processes.
- Switch to zero carbon electricity Invest in on-site renewable electricity generation and switching to electricity tariffs backed up by guarantees of origin.
- Move towards zero emissions transportation Understand options for vehicles powered by non-fossil fuel sources, such as batteries, hydrogen and biofuels.
- Decarbonise heating and cooling Replace existing fossil fuel sources of heating and cooling with more efficient or cleaner alternatives.
- Take action in the supply chain Drive supplier emissions reductions, improving efficiency and performance, at the same time as exploring transformational changes.
- Use an internal carbon price Implementing an internal carbon price can mitigate transition risks and improve decision making around investments.
- Introduce options for negative emissions Explore the long-term potential to economically include negative emissions within a business model or supply chain.
The Carlsberg Example
The Danish beer company, sees several advantages. The company originally looked for a 36% reduction but decided to get more aggressive. As Simon Hoffmeyer Boas, the Director of sustainability said:
“Our management had seen our projections on risks and opportunities by 2030, such as from carbon pricing and more erratic weather, and interruptions of supply, and thought a 36% reduction was not enough.” He went on to add, “Now that we have taken that decision, he said, “it is more likely that suppliers and solutions will pop up to help us do it.”
Energy efficiency is a win-win, because it pays for itself in the short term, while cutting costs and helping manage cost uncertainty for the long term. Carlsberg’s strategy is a “relentless focus on energy efficiency across our breweries, replicating good practice from one to the other.” Carlsberg is working with the UK’s Carbon Trust to find and develop strategies using the reduced costs to reinvest in more solutions for even longer paybacks.
Reducing Fossil Fuels
Carlsberg, whose 500 brands include Tuborg and Kronenbourg, is exiting coal power and targeting 2022 for all its operations to be powered with 100% renewable energy. There are many reasons that companies are working to exit or reduce fossil fuels, including cost uncertainties, concerns about importing fuels, rising costs of mining coal and pushback from a public concerned with air and soil degradation. In November, the company announced the first brewery to make the switch: its brewery in Falkenberg, Sweden is now fueled by 100% biogas and green electricity, after energy supplier Ørsted (formerly Dong), replaced natural gas with biogas.
Mr. Boas said the 86 breweries will use all available solutions, from onsite installations, power purchase agreements to buying renewable energy certificates with guarantees of origin. It already has the world’s fourth-biggest brewery solar installation in China, with 8,000 solar panels generating 21% of the site’s electricity.
Besides setting targets, Carlsberg is engaging in knowledge-sharing, which serves as a platform for companies to jointly source renewable energy. Having joined RE100, a group of over 115 international companies that have pledged to go 100% carbon neutral, Mr Boas sees ample opportunities for collaboration.
“[I]t’s realistic that we will reach out to other RE100 companies to jointly create renewable energy. If you have a joint goal that goes outside the industry and competition, it is much easier to cooperate.”
Such collaboration will be crucial if Carlsberg is to meet its even more ambitious goal of reducing CO2 emissions through its entire supply chain, what it calls its “beer in hand” footprint, by 30% by 2030, against a testing 2015 baseline.
Existing technologies are not likely to help Carlsberg meet their targets. As a result, in 2014 the company set up the Carlsberg Circular Community, where it partners with different innovators to rethink the design and production of packaging materials. The aim is to eliminate waste and optimize materials for high-quality reuse and recycling, known as “upcycling”. Some of their innovations include:
- The world’s first bio-based beer bottle. With packaging accounting for 40% of Carlsberg’s total carbon footprint, compared to 14% from its 86 breweries, a big focus is on reducing the environmental impact of aluminum, glass and cardboard.
- The green fiber bottle, which will be the world’s first bio-based beer bottle, made from sustainably sourced wood-fiber that is 100% biodegradable, the result of a cooperation between Carlsberg, Danish startup EcoXpac, Innovation Fund Denmark, Swedish forestry company Billerudkorsnäs and the Technical University of Denmark.
- In November, Georgia-based WestRock Co also earned bronze cradle-to-cradle certification for the Kronenbourg 1664 six-pack carton, made with 15% recycled content.
- In the UK, Carlsberg worked with consumer packaging company Rexam (now Ball Corporation) is develop the first aluminum beverage can to get cradle-to-cradle bronze certification.
Such innovation has ripple effects throughout the industry, as suppliers find that successful new products expand their markets.
“We’ve worked on partnerships in the Carlsberg Circular Economy for three or four years now,” says Mr. Boas. “That partnership angle is what we will continue using in the Together Towards Zero program, because we’ve seen it be so effective. The fact that the suppliers know about the material is much more valuable than just us telling them what to do.”
But packaging is arguably the easy bit. The bigger challenge is collection at the end of life, preventing branded products from ending up in the wrong places. In Denmark, Carlsberg helped advise the government on setting up the national deposit return scheme and recycling legislation. In its home market Carlsberg collaborated with competitors, the drinks trade and the Danish government on setting up the national deposit return scheme, similar to the one now planned for Scotland, and in helping draft legislation to enable more recycling.
But the going is harder in its 11 Asian markets, where recycling infrastructure is weak. There the company has focused on retrieving its bottles for refilling through incentives for suppliers to collect and return bottles by paying a small price for them. “The biggest challenge is to make the system cost-effective. That involves a lot of hard work.”
Yet there is progress. In 2016 5.6 billion bottles were refills of returned bottles. According to its 2016 sustainability report, a total around 40% of all that Carlsberg puts out it the market globally are in refillable packaging.
Needless to say, clean water is an essential ingredient for a beverage manufacturer. Mr. Boas points out that it takes 3.2 hectolitres of water to make 1hl of Carlsberg beer. “Water is absolutely key for us, That’s why we set a 50% target on water by 2030, 25% by 2022.”
The targets were set after Carlsberg partnered with WWF to carry out a water risk assessment of all its breweries, looking at physical risks such as scarcity, flooding and droughts and for environmental issues such as water quality. It has prioritised 15 high-risk sites in India, Nepal, China and Vietnam. Multi-stakeholder approaches to water stewardship have worked well in Africa, where Heineken and SAB Miller are among 33 companies that have signed up to the International Water Stewardship Program, though Carlsberg is not present in Africa.
The commercial case for carbon reducation and water stewardship is strengthened by reputational risk, an area Carlsberg has been involved in for some time.
“If we can sell a sustainable bio-based bottle and sell more beers, then that’s fantastic. It also helps to win support for the ambitious new green strategy with investors." Mr. Boas went on to add, “When we did the initial concept testing it showed that the younger generation and women had a bigger purchase intent from buying beer in a green fiber bottle.”
The latter, in particular, is a vast, largely untapped market, with only 23% of women ranking beer higher than wine or liquor, according to a 2016 Gallup pool. To borrow the slogan of arch-competitor Heineken, the bio-bottles could give Carlsberg an edge on reaching the parts other beers cannot touch. While some companies are reluctant to market themselves as green to consumers, partly for fear of mistakes and errors being called 'greenwashing', Carlsberg is not planning on failure.
“Consumers today are bombarded with messages,” Mr. Boas says. “To me a green message is not relevant to the consumer unless he has something he can interact with, such as a new type of packaging. It has to be relevant. It has to be concrete, and it has to be in line with what they experience from us.”
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