Linking carbon emissions to scientific goals

Pressure is mounting on companies to verify that carbon emissions cuts are real and real, he writes Emily Styles

Ireland’s largest companies are making steady progress in achieving net-zero greenhouse gas emissions targets by companies setting science-based targets (SBTs) as part of the campaign to go net-zero.

Four years ago, Business in Ireland shoot it low carbon pledge, with 47 companies registered. That number has now grown to 70. The signatories span 11 sectors, with professional services firms, agribusiness, food and beverage, and financial services companies representing the largest sectors represented.

The pledge requires all signatories to commit to preparing SBTs no later than 2024, and reviewing and evaluating indirect emissions and supply chain emissions.

This should include the full carbon footprint (Scope 1, 2 and 3) and be in line with the Paris Agreement and the latest IPCC findings. The ultimate goal of the pledge is to achieve carbon neutrality, and these goals are the first step towards a zero-zero world by 2050.

Signatories to the pledge include A&L Goodbody, William Fry, ABP, Gas Networks Ireland, Virgin Media, Vodafone, An Post, DHL, ESB, Tesco, EirGrid, Bidvest Noonan, Irish Rail, Irish Distillers, AIB, Allianz, Cairn Homes and Dawn Meats RSA Insurance, Deloitte, EY, Ornua, PM Group, PwC, SSE Ireland, Veolia,

In a recent update by PwC for BITCI, seven out of ten signatories to the pledge claimed to have ‘made good progress’ in setting science-based targets (SBTs) by 2024, with the majority set to achieve SBTs by 2030 or sooner. .

SBTs provide a specific pathway for companies to reduce greenhouse gas emissions. Targets are considered “science-based” if they align with pursuing efforts to limit warming to 1.5°C.

Many climate scientists believe that it is necessary to reach net zero global carbon dioxide emissions by mid-century in order to limit global warming to 1.5°C and reduce the negative effects of climate change.

As a result, says a PwC report, the concept of net zero has come to the fore over the past few years. In contrast to SBTs, net-zero targets refer to carbon neutrality, rather than direct emissions reductions, and thus carbon offset is allowed.

However, not all net zero goals are created equal, according to PwC. The definition of net zero, as well as the path to reach it, are diverse and often inconsistent. To address this, SBTi launched the first global science-based standard for the company’s net zero goals.

The SBTi net-zero standard defines a company’s net-zero as the reduction of Scope 1, 2 and 3 emissions to zero or to a residual level that corresponds to reaching net zero emissions globally or by sector.

SBTs provide short and medium term milestones for compliance with the Paris Agreement, but these goals can also lend credence to companies’ net zero commitments.

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1 . range Emissions are direct greenhouse gas emissions from sources owned or controlled by the company. range 2 Emissions are indirect greenhouse gas emissions from the consumption of purchased electricity, heat or steam. 3 . range Emissions relate to the supply chain (eg goods and services purchased, transportation and distribution, waste generated in processes) and customers (eg final transportation, end-of-life processing of products sold).

Two-thirds of organizations set a net goal of overall zero, citing the goal’s biggest challenge as cost.

Just over a quarter of the respondents in the Low Carbon Pledge report set their band 1 and 2 net ambitions to 2030 or earlier, while only one in eight set this target date for band 3 emissions.

The main drivers cited for adopting SBTs are business model flexibility, reputation, stakeholder pressure, social and corporate responsibility, and policy and regulation. Some cited the recording because it was simply the right thing to do.

One-third of the pledge’s signatories benefit from carbon offsets. Of these, 95% use payouts as part of their net zero strategy. This compensation is primarily concentrated in the transportation/logistics and professional services sectors.

At the same time, the PWC report notes that there are still challenges to making meaningful change, in particular around the need for guidance on baseline calculations, reporting, standards, etc., and value chain engagement with respect to Scope 3 emissions.

PricewaterhouseCoopers Kim McClingan He believes that companies must define comprehensive and ambitious strategies to achieve net zero.

“It is very encouraging to see the progress that the leading Irish companies are making and their clear commitment to decarbonizing their businesses,” he says. “However, the majority should move quickly from statements of intent to identify clear pathways to decarbonization and formally subscribe to SBTs.”

In the coming years, joining the Low Carbon Pledge may not be optional for large companies. European Union Corporate Sustainability Reporting Guidelines Recently approved by the European Parliament, it will require large companies to submit reliable information annually regarding their impact on the environment, social affairs and governance, as well as human rights.

The first phase of converting the Directive into Irish law begins in the fall through a public consultation process. The new reporting requirements will apply to companies with more than 250 employees and an annual turnover of €40 million, and companies that provide information on their climate impact will have to be independently audited and certified.

It is envisaged that from January 2024 the guidance will be applied to companies with more than 500 employees, dropping to 250 in 2025.

Green Budget Proposals

Aspects of climate change mitigation will have to be financed through private investment and entrepreneurs who will stimulate activity and develop the green economy. The view from PwC is that tax policy is an important lever, from tax incentives to encouraging investment in certain areas or taxing to discourage certain behaviors.

Peter RileyPwC’s head of tax policy, believes Finance Minister Paschal Donohoe can accelerate the green agenda with measures in the 2023 budget. The accounting firm has called for certainty for investors and renewable energy developers in investment taxation and divestment.

Areas that need to focus, Riley says, are the eligible nature of network connection costs, and the application of the participation exemption to pre-trading scenarios.

Improving the R&D tax credit system to support green innovation and climate technology development is another proposal. Riley also sees scope for establishing Ireland as a “centre for green finance”. This can be accelerated by introducing a preferential tax rate on returns generated from sustainable investment products.

To put a green tint on the 2023 budget, PwC thinks the finance minister should also take into account:

  • A tax credit for employers who purchase transportation tickets for employees.
  • Tax exemption for interest on retrofit loans, and an incentive for landlords to modify rental properties.
  • Insulation Assist Scheme, stamp duty exemption where retrofit occurs soon after purchase.
  • Tax credit for interest on electric car loans, tax credit for home charging points.

Photo: Environment Minister Eamonn Ryan (right) with (from left) BITCI CEO Thomas Serkovic, PwC partner Kim McClingan, and Heidi Huber Duffy of Iarnród Éireann. (Photo by Jason Clark)

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