Decarbonisation over compensation: Inside Kingfisher’s five-point plan to reach net-zero by 2040

Guest spoke to edie for Net-Zero November

Earlier this year, Kingfisher, which owns brands such as Screwfix and B&Q, announced new targets to reach net-zero emissions within its own operations by 2040 alongside an ambition to ensure that 60% of home product sales are classed as sustainable by 2025.

The new net-zero ambition is set for 2040 and is supported by a pre-existing science-based target of reducing operational emissions by 37.8% by 2025. Kingfisher has already reduced emissions by 24.5% through measures such as switching to 100% renewable electricity, rolling out alternative fuels for delivery fleets and investing in energy efficiency measures.

Speaking to edie as part of Net-Zero November, the company’s climate change lead Chris Guest confirmed that the company is aligning its net-zero journey with the Science Based Targets initiative (SBTi) Net-Zero Standard.

The SBTi has clarified that science-based net-zero targets will require companies to achieve deep decarbonisation of 90-95% before 2050. From that point companies should neutralise unavoidable emissions through offsets and removals. Crucially, the SBTi states that carbon offsetting and removals cannot exceed 5-10% of a company’s emissions, although this is sector-dependent.

Whereas many firms with net-zero targets in place are choosing to offset emissions now, Guest confirmed that Kingfisher will not offset its emissions until it has reached that 90% threshold and is only left with unavoidable, residual emissions.

“Our five-point plan recognises that there is no one silver bullet for decarbonisation post-2025,” Guest tells edie. “As a retailer, we have challenges around decarbonising heat and power in our stores, but also how we fuel our delivery fleets. But only once we’ve delivered our required emissions reductions set out by the SBTi will we look to neutralise our impact and residual emissions.

“In terms of what happens between now and 2040, it’s something that we still have to work on and if there’s the option to undertake high-quality compensation beyond our only value chain through those initiatives then we’ll explore it. But currently, we’re not using carbon credits to claim progress on our targets. There’s a lot of fragmentation in the net-zero landscape and what actually is credible, but we’re going to be guided by reputable standards that focus on decarbonisation over compensation.”

Five-point planning

The 24% reduction in carbon emissions recorded so far builds towards the company’s science-based targets, and scope 3 emissions have also been reduced by almost 20% against a 40% target for 2025. Emissions did increase year-on-year as a result of the coronavirus forcing the company to shutdown stores.

With more than 1,470 stores across eight European countries, Guest admits that there is no silver bullet for decarbonisation and that different regions will have different suitability for potential solutions. However, the net-zero target is already supported by various investments in low-carbon solutions.

Over the last 12 months, Kingfisher has invested £19.6m in energy efficiency projects ranging from LED lighting installations, building energy management systems and insulation and heating improvements. The company’s Responsible Business Report states that this will reduce energy consumption by 41GWh a year, saving 3,800 tonnes of carbon a year and £4.1m. Indeed, total energy consumption for the company is 6.4% lower than in 2016 and in a time when energy costs are spiralling, this is providing a much-needed business case for further low-carbon investments.

The five-point plan aims to address the twin challenges of heat and energy demand. The company wants to make its stores “all-electric” and has installed all electric heating using air source heat pumps at 102 locations this year. This is now a specification for all new Screwfix stores.

Solar PV has also been installed at 29 stores, offices and distribution centres, while biomass boilers are supplying two distribution centres and one head office building. Total investments into renewables have helped generate 9.5 million kWh per year and delivering more than £1.3m in financial benefit per year.

For Guest, this multi-faceted approach to low-carbon integration is crucial to trial and explore what solutions work in what situation and, importantly, how suitable they are based on region.

“One of the challenges we face is that we operate across Europe, so we have to account for the various levels of policy support and the various sophistications in infrastructure across different geographies,” Guest adds.

“What might work for us in reducing emissions in the UK might not work for us in Poland, so we need a differentiated approach. It adds a level of complexity to our planning that we have to be alive to. We have to be pretty agile, but it keeps the organisation invested in what is happening and what solutions may work.”

Financial North Star

Kingfisher is reaping the benefits of being proactive in its low-carbon spending, with research suggesting that businesses are planning to cut back on investments into decarbonisation as part of short-term measures to respond to the energy crisis.

Last year, the company confirmed that it had signed a £550m revolving credit facility agreement (RCF) with interest rates linked to environmental and community targets.

Under the loan agreement, Kingfisher will benefit from lower interest rates if it achieves KPIs aligned with its Responsible Business Plan, covering climate change, forestry and housing. The firm has been targeting a ‘net positive’ impact for people and the planet since 2015 and the updated Responsible Business Plan translates this long-term target into short and mid-term milestones.

Guest notes the importance of the RCF in creating an internal focus on sustainability within the organisation, but also how the company has moved to integrate its public net-zero target into financial planning.

“They [the RCF and net-zero target] have given us a North Star to aim for from a financial perspective. It keeps our emissions targets front of mind and has helped integrate them into planning,” Guests says. “But it’s more granular than that; it is ensuring that we have an ongoing three-year planning process and it’s ensuring that when we’re going through our planning process for say, capital investments, that it is fully aligned with our plans to achieve net-zero.

“There are also external developments that are strengthening the ties between sustainability and finance. I think developments such as implementation or the introduction of TCFD reporting has really highlighted the need for sustainability and finance teams to work together to understand how climate may impact the financial plans both now and in the future.

“So the relationship is still one which is evolving. We’re developing ways of working and the appropriate governance mechanisms. But also I think there’s a huge mutual education point, because both sustainability and finance need to cut through the jargon when they engage with each other.”

To support the delivery of the net-zero target, Kingfisher will develop a Climate Transition Plan in line with the UK Government’s new Sustainability Disclosure Requirements, and Guest believes that future legislative and reporting requirements will only strengthen the company’s approach to reaching net-zero.

Forest positive

There is a growing awareness amongst the sustainability profession that responding to the climate crisis will not be delivered solely through net-zero targets; nature also has to be considered.

Biodiversity and nature is something that is enshrined into the way Kingfisher does business. The company is working in partnership with the Rainforest Alliance to help the corporate become “forest positive” by 2025.

It is a founding member of the Rainforest Alliance’s Forest Allies initiative. Through the partnership, Kingfisher will support efforts to protect, restore, and enable responsible management of tropical forests, all while building stronger local economies for those that manage the surrounding land.

The partnership will also assist Kingfisher in meeting its commitment to become “forest positive” by creating more forests than it uses by 2025 – a target that was unveiled in 2020. As a result, Kingfisher will transition to 100% responsibly sourced wood and paper – the largest natural resources it uses.

Guest claims that the company’s net-zero target will be delivered “in unison” with nature. He cites the SBTi’s new guidance for companies to set targets that account for land-based emission reductions and removals, as something that Kingfisher will explore.

With support from WWF, the SBTi launched the Forest, Land and Agriculture (FLAG) Guidance, which will enable companies within those sectors to set science-based targets that include land-based emissions and removals. This includes emissions associated with biomass and soil losses, deforestation and degradation, peatland burning and emissions from land management including fertiliser use and emissions from relevant machinery and manufacturing.

“I think we’ve seen in the last two COPs that there is increasing recognition of the interrelationship between climate and nature and biodiversity,” Guest adds. “I think this recognition is slightly belated and we at Kingfisher are approaching both in unison.

“The relationship is complex and I’m not going to lie and say it’s easy to use nature as part of net-zero. We need to make sure that any action we take in one area is not to the detriment of the other, or will compensate for the other. That’s why we’re working with the likes of the Rainforest Alliance to better understand this work and how protecting forests can also deliver positive climate outcomes.”