New ACT programme seeks to assess transformative business models
New methodologies to quantify the preparation of companies in the utilities, transport and retail sectors in shifting towards a low-carbon economy look set to be deployed, after year-long pilot projects highlighted the needs of these sectors.
CDP partnered with climate-orientated organisations such as 2DII, the European Investment Bank, ADEME and ClimateCHECK to launch the Assessing Low-Carbon Transition (ACT) project at COP21 in Paris. ACT enlisted the help of global private firms to establish a framework to steer the development of measurable methodologies that generate commentary on how prepared a company is to embark on the low-carbon transition.
The trials, which lasted a year, ranked companies on their abilities to answer and respond to five pressing questions (which are listed in the image below). ACT will now use these case studies, presented in a newly-released report, to develop “road-tested” methodologies that companies can track themselves against in order to align their business practices with the goals of the Paris Agreement.
“The creation of strong plans to transition to the low-carbon economy can no longer be delayed,” CDP’s technical director Pedro Faria said. “Given the long lead times to shift strategy and make low-carbon investments, companies need to start moving to develop a long-term vision coupled with a clear step-by-step trajectory that ensures they are on the right path to the low-carbon economy in 5, 10 and ultimately 33 years from now.”
The ACT project notes that a number of companies are taking steps to combat climate change and the organisations behind the project hope that it will fill the gap and hold company projects to account by mapping them against best practice standards.
Companies such as Renault, Toyota, Decathlon and Enel were highlighted as “leading companies” during the trials, although none of the companies were able to align with all of the listed requirements for ACT’s low-carbon transition definitions.
The project targeted companies from the electric utilities sector, which accounts for around a quarter of global emissions. The pilot projects revealed that companies are “ahead of the curve” on climate strategies but that transforming their generation portfolios away from fossil fuels was “lagging behind”.
The report recommends that strong transition plans are introduced alongside a step-by-step trajectory to phase-out fossil fuels.
For the transport sector, which represents almost 14% of fossil fuel emissions according to the IPCC, the report notes the need for a “critical” adoption of low-carbon vehicles within the next 15 years as cars sold today will still be emitting CO2 across this timeframe.
ACT calls on automakers to match the claims made by the IEA in 2015, which suggested that 80 million low-carbon vehicles need to be on the road by 2025. To do so, “immediate action” must be taken to upgrade technology and production capacity to avoid lock-in emission effects.
The retail sector’s inclusion in the report is due to its complexity. The report noted that most of the emissions attributed to the retail sector occur in the value chain. Therefore, a low-carbon transition must encompass the entirety of retail operations.
The report calls on retailers to shift business models to account for the circular economy and to influence consumer behaviour and demand to make these products and services more attractive for buyers and investors. Accomplishing this task will depend on the sector’s ability to collaborate, which the report notes isn’t up to adequate standards.
Get your act together
The ACT pilots revealed that there will be “winners and losers” as part of the transformation, but steps can be taken to future-proof a company as it grows. Renault was praised for its use of science-based targets, and this provides a means to enhance low-carbon growth during the transition. However, the report warns that any public commitments relating to new emissions goals need to be backed by R&D investment and new technologies.
Subsequent methodologies, which are sector specific to account for different emissions shares, arising from the ACT trials will now be “road-tested” across Europe. At COP22, 16 organisations signed the “ACT declaration” to commit to the aims of the initiative.
In France, 30 SME and mid-cap companies have been selected to cover existing ACT sectors and the construction and food & beverage sectors to trial adapted versions of the methodology in 2017.
The three sectors listed under the ACT pilots have already undergone radical transformations as part of the low-carbon transition. As well as increasing the share of renewables in the energy mix, electricity firms are also exploring demand response and energy storage. The auto sector is leading the way to decarbonise its products through the surge in popularity of electric vehicles.
Finally, incumbents from the retail sector are hoping to remain competitive during a period of disruption. Sharing and circular economies have been joined by servitisation as new business models to explore.