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Grainne Mooney

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COP 27 outcomes and what does it mean for business?

U.N. climate negotiations in Egypt (COP27) came up with an agreement to set up a Loss and Damage Fund. The Fund is the first step to addressing injustice to billions of people in developing countries who are the least responsible but suffer the most due to climate impacts: floods, droughts, hurricanes, and rising sea levels.

“The decision on loss and damage finance offers hope to the vulnerable people that they will get adequate help to recover from climate disasters and rebuild their lives,” said Harjeet Singh, head of the global political strategy for Climate Action Network.

The tricky part of the decision on the Lost and Damage Fund is who, how and when will fill it with cash. The agreement on these questions is postponed till COP28 next year in the United Arab Emirates.

While countries’ delegations tried to agree on addressing the consequences of the climate crisis – they failed to focus on the root cause of the crisis: fossil fuels. At the COP in Egypt, fossil fuel lobbyists were presented in high numbers and didn’t save money on side events and champagne.

In the final COP27 text, activists noticed the inclusion of “low-emission” energy as part of the solution. Some experts worry this broad definition may be a loophole for the growth of natural gas and nuclear power.

Countries such as UAE and Saudi Arabia, whose economies rely heavily on fossil fuels, have said they plan to supply the world with gas and oil. With an energy crisis in Europe due to the Russian invasion of Ukraine, some African countries plan to increase their export of fossil fuels to Europe.

With all these controversial talks in the halls and corridors, civil society and scientists keep saying that staying within the 1.5C limit would require even more dramatic and expensive emissions cuts. For now, average global temperatures have risen more than 1.2C since preindustrial times. The latest IPCC report also shows that today’s commitments will increase emissions by 10.6% by 2030 compared to 2010. Meanwhile, the IPCC AR6 report (2022) indicated that CO2 emissions needed to be reduced by 45% by 2030 compared to 2010.

U.N. Secretary-General Antonio Guterres warning our current trajectory places us “on a highway to climate hell with our foot still on the accelerator.”

Photo credit: Ministers deliver statements during the closing plenary at the COP27 climate summit in Red Sea resort of Sharm el-Sheikh, Egypt, November 20, 2022. REUTERS/Mohamed Abd El Ghany

What about business? 

U.N. climate negotiations get together a wide variety of people: politicians, official delegations, civil society, scientists and, of course, businesses. Last year, COP26 in Glasgow boosted countries’ pledges of emission reductions. It was a good push for many big and small companies to take their more ambitious climate targets towards net zero.

With almost no outcomes on mitigation at COP27, business companies become the essential moving force to address the climate crisis.

A strong focus on net-zero pledges, ESG disclosures, and best practices available for emission reduction will help to compensate poor results of COPs.

“We urgently need every business,  investor, city, state and region to walk the talk on their net zero promises. We cannot afford slow movers, fake  movers or any form of greenwashing.” António Guterres,  UN Secretary General

For some, 1.5°C is very much alive. The companies at COP spoke loudly about the need for governments to make progress on regulations and standards to facilitate the global transition of the private sector. There was also news that the number of companies setting science-based targets (SBTi) has doubled since COP26, with over 1,800 companies having validated targets and 4,000 having committed to setting them.

Loss and Damage fund and business.

Although there is no clarity on the Loss and Damage Fund, many experts commented that businesses could capitalise on the subsequent sustainability opportunities in previously underfunded countries. This agreement could open novel markets for companies in infrastructure, manufacturing, capital goods, and more for expansion and business development.

No greenwashing towards NetZero

At COP27, a U.N High Level Expert group release a report about greenwashing and its widespread impacts on successful climate action. The report aims to build on the Race to Zero and Science Based Targets initiative by providing corporates and investors with time-based frameworks to deliver net zero based on short, medium and long-term targets. The U.N. experts provide a list of recommendations to ensure developed net zero pledges do not fall for greenwashing pitfalls.

In the report, experts stress that companies should no longer claim to be net zero if they are still involved in building or investing in new fossil fuel supply or support deforestation and other environmentally destructive activities. Firms should focus on cutting emissions before purchasing carbon credits, which should only be used as a last resort to offset hard-to-abate emissions.

International Organization for Standardization (ISO) presented a NetZeroGuidelines, and  Christoph Winterhalter, ISO Vice-President, explained: “We have the foundation, resources and industry experts to take global action. There are already numerous policy tools and standards available that help to address climate change. It is increasingly clear that we don’t need to reinvent the wheel, just realign it.”

Inflation in carbon prices.

We all know inflation is on the rise. The International Monetary Fund (IMF) says that the carbon price must go up to at least $75/ton by 2030 for global climate goals to succeed. This discussion also shows a clear path towards emission reduction as soon as possible because it’ll become more expensive.

Carbon offsets are back. What business should be aware of?

Experts noted a significant increase in offset conversations throughout COP27. Offset and renewable energy projects can help offset a company’s internal emissions or be sold to other organisations falling short. At the same time, business companies should be aware of junk offsets. Purchasing credits to support solar or wind projects sounds good for the climate. However, Bloomberg experts consider these offsets largely bogus. Barbara Haya, the director of the Berkeley Carbon Trading Project, views empty offsets as “paying for business as usual” behind a facade of decarbonisation.

Biodiversity is on the rise.

Although COP27 wrapped up past weekend, in December, Montreal is hosting COP15, the U.N. Biodiversity Conference.

Nature can’t be viewed as a secondary, less-important challenge to climate; action in one area impacts the other. Companies and governments need to respond and report to relevant frameworks. For example, in 2021, the Taskforce on Climate-related Financial Disclosures (TCFD) announced a new initiative called the Taskforce on Nature-related Financial Disclosures (TNFD). The framework was tested this year and is scheduled to officially launch in 2023. TNFD mimics the structure of TCFD, intending to help companies and local governments report on the risks associated with biodiversity loss and ecosystem degradation.

At Clearstream Solutions, we strongly believe small and big business companies play a dramatic role in preventing irreversible consequences of climate crisis. That’s why we assist organisations in measuring and implementing best-in-class environmental and sustainable practices in their businesses, products and supply chains to prevent a global climate crisis.

Khrystyna Rudnytska

Sustainability Program Associate

Clearstream Solutions

 

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What does Life Cycle Analysis (LCA) mean?

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Are you unclear about the environmental impact of your product, packaging or service?  Is it harmful to the environment or to your customers?  Or has your product environmental benefits over your competition?

With almost 50% of all emissions embodied in materials, it is important to gain transparency of the environmental impact associated with your products. Your customers are increasingly likely to want to measure the impact of the products and services they procure from you as they will appear in their Scope 3 GHG emissions.

Improving the sustainability of products and services will likely be different for every business.  The approach requires holistic overview & analytical accuracy of the end to end process… from ‘Cradle to Grave’.  Implementing a life cycle assessment (LCA), will systematically record the entire life cycle of a product of service.  This is done by capturing and analysing its impact on the environment typically in terms of GHG emissions. However, other environmental impacts may also be measured.

With almost 50% of all emissions are embodied in materials, it is important to gain transparency of your environmental impacts associated with your products and services.

With over 25 years industry experience in the LCA, Clearstream Solutions and its team of expert assessors manage and conduct LCA’s, to identify the right actions and approach for your business by measuring the environmental impact assessments of your products and services.  As a result, this process can be used to assess alternatives and identify the appropriate actions required to reduce your carbon footprint.

An LCA is broken down into four main steps: goal and scope, inventory analysis, impact assessment and interpretation.  By doing a LCA, this process will assist in purposefully locating and then implementing sustainable processes optimisations.

Goal and scope: this is the step where the aim and boundaries of the project and defined. Here the focus area is decided, and how in depth of an analysis done is chosen.

Inventory analysis: the data collection for all inputs and outputs.

Impact assessment: converting the data into impacts

Interpretation: arguably the most important step, this is where the impacts are quantified, evaluated and checked against the aim.

Coca Cola  is widely considered the first to ever complete a life cycle assessment.  Back in 1969. They wanted an all-inclusive study of their packaging, accounting for energy, waste and resources. The large majority of LCAs from the early days focused on packaging. For instance, LCA was used for its ability to assess emissions, energy usage, waste and resources.

Why use LCA?

Life cycle assessment helps guide you to the best solution. Firstly, It allows you to review the overall picture before making a decision. Up to 80% of a product’s environmental impact can be determined during the design phase. Secondly, Using LCA, it can highlight areas with high impacts in the current process, and areas the design could be optimised. Moreover, LCA as a tool during design can lead to less prototyping and secure resources to the ideal places. In conclusion encouraging more creative and innovative solutions. It can be linked to increases in circularity and help not only reduce waste but allow comparisons between sourcing. The process can cover raw material extraction, transportation, all manufacturing processes and stages, use-phase, and the end-of-life possibilities. All inputs are broken into the various single components for the product and shows the outputs that happen from this. An LCA not only accounts for the carbon footprint but other environmental impacts like water acidification or human health impacts.

LCA is a reporting tool, with benchmarking and analysis the bases for the process. It can however be used to alter designs and encourage broader thinking during this stage. Having a visual representation of the impacts, with ease for comparing different sources, allows the design teams to pick the best option for their product for both people and the planet.

How does LCA tie in with the circular economy?

LCA can help strengthen the circular economy. It is a robust tool that measures the environmental impact and can model how utilising the circular economy will improve the impacts of life extension, reuse, harvesting, repair, and disposal.

In addition, removing the disposal section will show the limitations and highlight the alternatives. Using Life Cycle Analysis and Circular Economy thinking will help implement circularity throughout the business. Using and embracing LCA can lead to innovative steps and continued growth.

LCA is a way of thinking that includes the economic, social and environmental consequences of a product or process over its entire life cycle – UENP Life Cycle Initiative.

Using Life Cycle Analysis during the design process an aid in decision making. Some advantages to LCA:

  • Shows the consequences of each stage of the products life
  • Update and innovate without prototyping
  • Shows how small changes can affect the overall impact
  • Can gather information on not only land impacts, but water, air and human affects too
  • Aid carbon foot printing
  • Make more informed decisions
  • Compare different products to find best solution
  • Can help identify improvement areas
  • Can include material extraction, manufacturing processes, use, end of life solutions
  • CE & LCA – interconnected
    • How recovery of waste will remove emissions
    • Planning strategies for future projects
    • Design out pollution

Aoife Green is a Product Sustainability Associate at Clearstream Solutions. Aoife graduated from Dublin City University with a MEng in Sustainable Energy & Systems and a bachelor’s in Mechanical & Manufacturing Engineering.

What does the EU Taxonomy mean for large companies?

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EU Taxonomy mean for large companiesNon-financial and sustainability reporting has become an integral part of business operations over the last number of years. However, understanding climate risk and opportunity continues to prove a significant challenge for investors and corporates alike. The EU Taxonomy is part of the broader EU Action Plan on Sustainable Finance which seeks to offer clarity to investors and large companies in relation to the sustainability of their business operations. In doing so, it is anticipated that the taxonomy will create security for investors, prevent greenwashing, help companies to become more climate-friendly and help shift investments to more sustainable initiatives.

What is the EU Taxonomy?

The EU Taxonomy is a list of economic activities with performance criteria for their contribution to six environmental objectives. It is part of a wider EU sustainable finance action plan to reorient capital flows towards a more sustainable economy. To begin with, large companies that fall under the scope of the Non-Financial Reporting Directive (NFRD) i.e. with greater than 500 employees, are obligated to comply with the EU Taxonomy. Those that fall under the incoming Corporate Sustainability Reporting Directive (CSRD) i.e. greater than 250 employees, will also be required to disclose their alignment to the Taxonomy.

What areas of sustainable development does the EU Taxonomy address?

The EU Taxonomy targets six key environmental objectives:

The EU Taxonomy targets six key environmental objectives

Each of the above objectives contains a list of business activities with screening criteria, to identify whether the activity makes a substantial contribution to the objective. So far screening criteria has been issued for the first two climate change objectives of mitigation and adaptation, resulting in the identification of nearly 70 activities for each. It is anticipated that further criteria will be released for the remaining objectives, ahead of full compliance requirements in 2023.

Assessing the organisations economic activities.

As part of the initial process the company will undertake an evaluation process to identify if any of their current business activities makes a substantial contribution to one of the six environmental objectives as set forth under the remit of the Taxonomy. Once the company is satisfied that one or more of their current trading activities make a substantial contribution to one of the objectives, they must ensure, that the activity Does No Significant Harm (DNSH) to the remaining objectives.

Considering the environmental impact of a business activity is the main priority of the Taxonomy, however, companies must also consider the social impact by meeting the minimum social safeguards. Once an activity has met the above criteria, it can be considered Taxonomy-aligned and included as part of a disclosure. The Taxonomy seeks to address high emitting areas so in practice may have multiple Taxonomy-aligned economic activities or alternatively have very few. It will eventually expand to include a broader range of economic activities, which in turn may increase an entities level of alignment.

How does a company disclose its Taxonomy-alignment?

The Technical Expert Group (TEG) established by the European Commission have identified three Key Performance Indicators (KPIs) that companies must disclose in order to quantify their Taxonomy-alignment [1] the percentage of Turnover deriving from Taxonomy-aligned activities [2] the percentage of Capital Expenditure (CapEx) spent on Taxonomy-aligned activities and [3] the percentage of Operating Expenditure (OpEx) deriving from Taxonomy-aligned economic activities. Alongside these numeric KPIs, companies must disclose qualitative information including the companies accounting policy and any assumptions made during the calculation of each KPI.

When does the Taxonomy apply to Public Interest Entities (PIEs)?

The EU Taxonomy has adopted a phased approach to its introduction. Initially, companies will be required to report the percentage of their Turnover, CapEx and OpEx that is considered Taxonomy-eligible. In future years companies will be required to use the Technical Screening Criteria to assess if their activities are Taxonomy-aligned.

How can Clearstream Solutions help?

As a leading ESG corporate reporting advisory firm, Clearstream Solutions is well positioned to help companies seeking assistance with the EU Taxonomy and non-financial reporting related requirements. We can help you to identify how and to what extent the EU Taxonomy effects your business by performing a full analysis of your companies activities, assisting you in drafting the required disclosures, and by developing a reporting roadmap for future alignment. Please feel free to contact our ESG reporting team to discuss your needs.

New Climate Fund launched to Help Businesses Adapt

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As an approved Green Service provider, Clearstream Solutions can get you ready for a Green Future.
Last week the Climate Enterprise Action Fund with an initial allocation of €10m was launched. This Climate Enterprise Action Fund is now available to help companies reduce emissions & embed sustainability in how they work.
The Fund, which will be administered by Enterprise Ireland, through approved Green Service providers, will help businesses take action to drive down their emissions and embed sustainability in how they work.
This new fund supports Irish companies to build the capabilities required to deliver sustainable products, services and business models.

The grant funds companies to engage Clearstream Solutions to identify opportunities for your business and develop plans in areas like resource efficiency, renewable energy and the circular economy.

As an approved Green Service provider, financial supports available which reflect the needs of companies at different stages of their decarbonisation and sustainability journey also include the GreenStart and GreenPlus grants.

Contact brian@clearstreamsolutions.ie to discuss your Green Future journey.