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Is carbon offsetting a hope or a hoax?

by Alex West, Senior Principal Analyst

And does planting trees sufficiently offset #emissions being produced elsewhere? Beyond the questionable veracity of some carbon offsetting practices and the carbon offset registry industry governing it, the mathematics are concerning.

Meeting a goal of ‘#netzero carbon emissions by 2050’ would require an estimated 1.6 billion hectares of new forest—five times the size of India, according to an Oxfam report. This is in contrast to an estimated 500 million hectares of land still available for new forests.

And it’s not just a question of having enough land. It’s also about whether projects have an impact beyond ‘business as usual.’

Reasons why an initiative might not have an additional impact:

i)     Claiming projects that wouldn’t have gone ahead either way as wins (e.g. forest conservation projects on protected land, which wouldn’t have been deforested)
ii)     Planting trees in cooler climates, where a greater amount of solar radiation is absorbed rather than reflected (the Albedo effect), reducing the benefits of carbon capture

In fact, according to research from Berkeley, Oxford, and Carbon Plan (from 2016) it was found that 85% of offsets sold at the time of the study were not additional—and so had no impact on climate change1.

However, it’s not just the questionable efficacy of this approach to sufficiently meet carbon capture needs that’s problematic, it’s also the false sense of security that’s created by saying these efforts are having a positive impact. To borrow a quote from John Oliver “when you buy an offset so you can pollute more, and that offset is ‘cow manure’ (edited), you’re now actively making things worse”.

The ‘see no evil, hear no evil’ approach adopted by some industrial companies—associated with some carbon offsetting practices—can create a dangerous mindset that you can pollute more because of offsets.

The offsets industry is undoubtedly becoming more regulated and will play an important role in the sustainability transition, but not to the overstated degree many industrial companies are relying on.

The road to net zero for the industrial sector is going to take all the tools in the bag, and this includes digital transformation, which can impact #design#operations and a company’s #supplychain, as industries both address low-hanging fruit through optimization and the longer term challenges of reinventing some processes and products. 

Martin Cames et al., “How Additional Is the Clean Development Mechanism?” (Berlin, 2016)1

Sustainability takeaways from #SIM2022

by Alex West, Senior Principal Analyst

It was great to be in Brussels at the start of the month at #SIM2022, discussing the role of technology in sustainability transformation (SX). Alongside the broader topic of decarbonization of heavy industry and the path to net zero, more specific conversations around green hydrogen, carbon capture, the circular economy, and legislation were covered across heavy industries such as cement, metals, and glass.
Here are some of my takeaways from the event:
  • We’re still very much at the start of the journey (and already falling behind in terms of ability to meet 2050 targets), with a lot of significant challenges ahead. However, technology is not the bottleneck, with solutions already available to help customers address challenges of emissions, waste etc. Some leading players in hard-to-abate emissions industries such as cement, metals, chemicals, and glass industries etc. are aggressively forging a path to tackle the problems.
  • Big challenges and questions include: can sustainability be profitable; how to embed cultural and organizational change; and the role and roll-out of regulations and standards across the different manufacturing sectors that balance maintaining a competitive market whilst eliminating (or at least reducing) the loopholes that facilitate greenwashing.
  • The two overarching topics that resonated were around decarbonization and circular supply chains:
  • As an extension of discussions on circular economy, we heard more about “Industry symbiosis” and “industry clusters,” where waste materials can be reintroduced to new product lifecycles in local businesses (with minimal transportation) operating in different industry sectors.
  • Industry clusters can create the needed critical mass to make access to technologies such as carbon capture and storage solutions (CCS) more economically viable, especially for small to medium size companies. 
  • The data challenge is still significant, especially as companies look to extend beyond basic monitoring (e.g., energy meter monitoring overall consumption) for visualization (e.g., understanding where the inefficiencies in their process lie), and leveraging data for optimization of processes. More sensing is necessary to be able to provide greater granularity of data down from plant-level to process, line, or asset level insight. In many companies, data isn’t tagged (or is incorrectly tagged) so it lacks contextualization. The variety of functions available in solutions, such as within energy management systems, can’t be accessed until these basics are in place. 
  • These challenges are not just internal but extend across the product lifecycle, and even as it extends into second life products. This requires secure data exchange and traceability across for industrial supply chains as companies face growing requirements to consider both their scope-three emissions, and a product’s carbon footprint (PCF).
  • Another significant focus was on the role and evolution of regulations, the challenges in implementing a standardized approach and the impact on multi-national competition. The European Union has taken the lead with EU-#CBAM (Carbon Border Adjustment Mechanism), an extension of the EU #ETS; however, this was recently delayed in the EU parliament. Sentiment from some of the speakers at the event was that this wasn’t entirely bad and would support more far-reaching measures in a final version.
  • At the crux of all of these discussions is the simple question—is sustainability profitable? Yes, no, and yes!
  • Yes - Digital transformation can already provide tools to optimize processes and minimize inefficiencies across multiple business functions (design, operations, maintenance, supply chain) that can both provide an immediate RoI whilst improving sustainability.
  • No - Some of the changes needed to meet corporate pledges and commitments e.g., in changing of processes or use of new materials etc. may require investment that doesn’t have an immediate payback.
  • Yes – however, the cost of not doing something should not be ignored. With the combination of stakeholder pressure, the evolution of regulations (including the ever-rising EU carbon price), as well as pressure to meet targets aligned to major corporations decarbonizing their supply chain, companies not starting their SX journey will find themselves in a precarious position in the future.  

Will the energy trilemma cause a backward step for sustainability?

Investment in sustainability in the manufacturing sector is on somewhat of a knife's edge as we see the impact of the tragic events in Ukraine spread. As oil prices contribute to soaring inflation, the global manufacturing sector is forecast to slow, with some predicting a recession in Europe and North America.

In the past, economic performance has correlated with decisions around sustainability investment. Will the same hold true this time around?

Over 40% of manufacturers in a recent Omdia survey have been making sustainability investments because it was seen as a corporate responsibility – as opposed to expecting cost savings or improved performance. Worryingly, as we’ve seen in the past, as market growth slows, good intentions tend weaken. So, will this be the same again?

Reducing energy consumption is the most important factor driving manufacturing companies to invest in operational sustainability initiatives, with a transition to renewable energy also a major objective. As well as being a primary driver for change, it’s also currently one with significant hurdles to overcome.

The energy trilemma of energy security, energy decarbonization and affordability has been brought into sharp contrast as a result of the Ukraine conflict. Whilst a global challenge, the difficulties faced by Germany emphasize the problem.

Affordability: With restrictions on Russian supply, the second largest gas and third largest oil producer globally, and accounting for approximately a third of its exports to Europe, prices have soared – contributing to inflationary pressures and weakening demand.

Security: Germany has been impacted more than many. It relies on Russia for approximately a third of its gas and is now scrambling to acquire other sources of energy.

Decarbonization: The result of this shift is an unfortunate reversion to coal plants. Germany plans to reactivate 10 GW of old coal plants to help meet the shortfall, and subsequently, increasing carbon emissions significantly!

Clearly this is bad news in the short term, but there’s a glimmer of good news as nations quickly look to reduce their reliance on Russian fossil fuels and re-evaluating their longer-term sources to ensure energy security. As part of this planning, investment in renewables will accelerate, as well as a greater attention on better managing energy demand.

Sometimes, to go beyond good intentions to real change, a bit of pain is needed. This may be the unfortunate stimulus the global energy market needed.

Apple helps clean its partner network

Many multi-nationals are already in the process of cleaning up their carbon footprint. However, with over three quarters of all emissions categorized as Scope 3, their influence over their partners is even greater.

Last month, Apple announced that 213 of its major manufacturing partners are pledging to use renewable electricity for all Apple production – enabling the company to reach its target of a carbon neutral supply chain by 2030.

Biden’s Big Battery Bonanza

Infrastructure funding, to the tune of $3.1 billion dollars, has been announced by the US DoE (Department of Energy) this month. This fund has been allocated to create, and retrofit existing, EV battery manufacturing facilities across the nation. A further $60 million will also be spent on both supporting a circular economy for re-use of batteries, as well as recycling materials back into the supply chain.

These investments align with the broader governmental strategy to strengthen America’s energy independence.

BMW iFACTORY where Digital Technology and Sustainability meet

Last month BMW launched its BMW iFACTORY strategy; an approach for its legacy and future plants as it plans its shift to e-mobility.

The BMW iFACTORY. LEAN. GREEN. DIGITAL., approach emphasises how factories of the future will combine new technologies, such as virtualization, data science and artificial intelligence, with sustainable practices such as renewable energy use and circularity, designed in from the outset. 

Its plant in Debrecen, Hungary will launch in 2025 and is planned to be the first CO2 free vehicle plant in the world.