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Key commercial scenarios for corporate sustainability leaders to master

Key commercial scenarios for corporate sustainability leaders to master

The initial corporate decarbonisation strategy and business case is just the first hurdle. To maintain momentum and ensure ongoing or increased financial commitment, sustainability teams need buy-in and engagement from executives, boards and investors. We explore seven commercial scenarios that help with this alignment.

Key commercial scenarios for corporate sustainability leaders to master

The net zero challenge requires big investment, ongoing board and executive buy-in is essential

The global climate crisis requires big investment from governments and businesses. While the price may be high, action is non-negotiable. The stakes are just too great.

For businesses, a meaningful and robust decarbonisation strategy must deliver short and medium-term emissions reductions, but also long-term business transformation. It is a costly and complex process, often completed over many years.

The initial strategy and business case for action is just the first hurdle. To maintain momentum and ensure ongoing or increased financial commitment, sustainability teams need buy-in and engagement from executives, boards and investors.

In large businesses, being able to model and communicate climate performance and commercial positions with clarity and confidence is key to ensuring that change can happen at the scale and at the speed that’s needed.

Many sustainability leaders recognise this and are actively thinking more like CEOs and CFOs – two key stakeholders they need on side – as they navigate the path to net zero.

In this article we explore seven commercial scenarios that help with this alignment.

Key scenarios to help align commercial and climate goals

Here are key commercial scenarios corporate sustainability leaders should be equipped to model with ease, to better balance financial and climate goals.

  • The impact of proposed initiatives against portfolio targets
    When creating a business case for new emissions reduction or climate investment initiatives, it is critical to understand both the financial investment and the benefit delivered over time.

    For example, when planning a major equipment upgrade, it is about clarity on the initiative's expected impact on your portfolio specific targets, over its duration.

    This may be the impact on the overall ESG budget, the overall emissions reduction target, or your organisation’s overall emissions position and the associated financial exposure to voluntary or compliance carbon pricing.
  • The impact of changes to reduction initiatives
    Sometimes things don’t go to plan. When project delivery timelines change for reductions initiatives – either ahead or behind schedule – the financial and emissions exposure impact needs to be understood by the business.

    To have a clear view of your emissions position over the short, medium and long-term, you need to be able to visualise the impact of changing project timelines, emissions reduction outcomes and implementation progress.
  • The impact of policy or legislative changes
    The policy and legislative landscape in which sustainability leaders operate is constantly evolving. This may include external policy such as compliance rules set by the government or regulators, or internal policy such as a preference for particular types of carbon credits.

    Each such change may have an impact on the ESG budget, targets, timelines in which initiatives can be delivered, and which carbon credits can be procured. Being able to efficiently model and communicate this impact internally will help the business prioritise, invest appropriately and minimise risk.
  • Best value for money carbon credit procurement options
    While meaningful emissions reduction must be a priority, many organisations are also investing in nature-based and technology-based carbon projects to offset their emissions during the transition.

    For many large organisations, this comes at a significant financial investment. This investment can fluctuate with changing internal preferences for right-fit projects, and with variations in external carbon market dynamics, such as price and availability.

    Being able to model the impact of these changes is critical to helping the business plan and manage the associated financial exposure.
  • Finding projects that meet your business criteria 
    Once you’ve decided to buy carbon credits, being able to find and select right-fit carbon projects quickly and at the right price is key. Undertaking proper due diligence is a critical step in managing risk and ensuring that the investment delivers the expected impact.  

    Being able to quickly and efficiently filter out projects that don’t meet your price and quality criteria, without expensive and lengthy market engagement, is an important capability to ensure market opportunities aren’t missed. 
  • Portfolio impact of changing project preferences
    Carbon markets are constantly evolving, as are consumer and corporate preferences for which type of solutions best suit their goals.

    While prudent organisations effectively manage financial risk by procuring carbon credits over time, or through long-term offtakes, new information, project methodologies and preferences may require carbon credit portfolios to be adjusted after a purchase.

    Being able to model the impact of a change to carbon credit portfolios, project mix or the introduction of new carbon schemes will enable sustainability leaders to act quickly on changing market conditions.
  • Comparing the cost and impact of an internal initiative vs a carbon credit purchase
    While businesses must prioritise emission reduction initiatives and the business transformation that is often required to deliver them, it is important to recognise that this takes time to implement. And in many cases, the technological advancement needed is yet to materialise.

    Many businesses are planning for the long-term while also wanting to make an immediate positive climate impact.

    Being able to compare the cost and timeline of delivering an initiative against the cost of the equivalent emissions impact through carbon credit purchases will help the business budget for and balance short and long-term commitments. And to deliver real impact where cost effective reductions initiatives are not yet available.

Deliver optimal climate and commercial impact

The above scenarios illustrate how an organisation’s emissions position – and more specifically, the price of carbon – can be integrated into business-as-usual decision making.

Aligning the commercial and climate performance of the decarbonisation journey helps the business prioritise, invest and minimise risk. This in turn supports confidence and drives momentum in the low-carbon transformation.

The CORE Markets teams helps sustainability teams work through scenarios, and gain board engagement and approval. We also offer tools to help you manage the process in-house. Get in touch to find out more.

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Key commercial scenarios for corporate sustainability leaders to master

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July 21, 2023

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