As companies continue to grow and their carbon emissions inevitably rise, carbon intensity offers a nuanced, scalable way to measure sustainability. Carbon intensity allows companies to measure the amount of carbon emissions per unit of output. It is the key metric that investors use to adjust their portfolios to reflect the investment risks and opportunities associated with climate change. Usefully, intensity-based carbon reduction targets allow businesses to establish emissions reduction objectives while still factoring in growth.
In this blog, we’ll explore:
- What carbon intensity is
- Why carbon intensity matters to growing companies
- The issues with only tracking absolute emissions
- How to use carbon intensity in your sustainability strategy
- Benefits of carbon intensity
What is Carbon Emissions Intensity?
Carbon intensity is a measure of the amount of carbon dioxide equivalent (CO2e) emissions per unit of activity, output or product. It is calculated by dividing the total emissions by a metric of an operation. For example, the number of products or units produced, number of full time employees, or the square footage of buildings.
If you are making a product, the emissions intensity may be in kg or CO2e per item that you manufactured. If you are an office-only type of operation, and your footprint is limited to the emissions associated with your office, your carbon intensity may be measured in terms of full time employee equivalents or emissions per square foot.
Why Does Carbon Intensity Matter To Growing Companies?
Carbon emissions intensity is a valuable metric that links an organisation’s emissions to its scale, providing insight into environmental performance relative to growth. Companies who are environmentally compliant have likely set specific targets based on their own emissions – for example, a target for when your business aims to reach net zero by. As an organisation grows, its overall carbon footprint simultaneously grow. Moreover, the main benefit of using carbon intensity to compare company emissions is that carbon intensity is directly related to company size.
Carbon emissions intensity is also important because it helps companies track their progress towards sustainability and mitigating climate change. Carbon intensity allows for comparison across industries, identifies areas for improvement and provides a way to assess the efficiency of emission reduction efforts, even if these emissions are increasing.
Problems With Only Tracking Absolute Emissions
Absolute emissions reductions targets are straightforward, simple and explicit. They focus on decreasing a company’s total greenhouse gas emissions by a set quantity within a certain time period. For example, companies could focus on cutting emissions by X% in 2025 or achieve Net Zero emissions by a specific year. These targets are often seen as direct contributions to global climate goals.
The challenges that come with absolute emissions include the fact that they can often be overly uniform in their application. Factors like sector, industry, and complexity of supply chains influence costs and feasibility of emissions reductions. Discrepancy can lead to difficulties in setting realistic, achievable targets for all companies. Absolute emissions targets can also prove hard to achieve. Setting and achieving absolute emissions reduction targets can be difficult in the short term, especially for industries or sectors with high emissions activities.
Additionally, absolute metrics can mask efficiency improvements in a growing business. A company’s overall emissions could increase throughout a growth stage, even if the organisation makes emissions improvements. The metrics can make it challenging to compare results across sectors since total emissions can vary between regions, organisations, and business models.
How To Use Carbon Intensity In Your Sustainability Strategy
Firstly, establish where you are with your current carbon emissions (Scope 1, 2 and 3) and compare to your key performance indicators (KPIs) such as revenue, production, or relevant metrics to calculate and understand your carbon intensity.
Suggestions on how to use carbon emissions intensity into your sustainability strategy:
- Streamline your operations by minimising waste disposal and improve efficiency, therefore reducing emissions per unit of output.
- Energy efficiency: Upgrading to more energy efficient machinery, lighting, heating, ventilation, air-conditioning systems to lower carbon emissions.
- Renewable energy transition: Shifting from fossil fuels to renewable energy sources, such as solar, wind, hydro, to power operations with lower carbon emissions.
- Product design and innovation: Developing products which require less energy to produce or that have a lower carbon footprint over their lifecycle.
- Employee engagement and training: Encourage sustainable practices across employees and provide training on how to reduce carbon emissions throughout daily activities and work processes.
- Supply chain management: Working with suppliers to reduce emissions in the supply chain, including selecting specific suppliers with low emissions intensity and working on sustainability projects together.
Benefits Of Energy Intensity
Carbon intensity targets can act as an easy comparison across multiple industries, providing comparison using a common denominator and making it easy to assess emissions across different industries and activities. They can also be used to set more achievable targets for emissions reduction, for example, reducing greenhouse gas emissions per unit of energy produced.
Intensity-based targets provide room for growth (for companies who undergo transformations) while still emphasising emissions efficiency. They are ideal for companies seeking innovative ways to produce more with fewer emissions, driving technological advancements and sustainable practices. Companies can focus on efficiency contributes to long term sustainability and can lead to innovative solutions with extensive environmental benefits.
Additionally, intensity based targets recognise that emissions reductions should complement growth and expansion rather than hinder it. Companies can set goals and targets which align with operational realities through linking emissions to economic output.
Supply chain can also be a large portion of a company’s emissions. Carbon intensity targets can offer a practical solution to navigate this complexity and allows businesses to measure emissions efficiency across the value chain by fostering collaboration and sustainability improvements with suppliers and partners.
Carbon intensity targets also support transparency and reporting. Stakeholders, investors and customers are increasingly interested in understanding a company’s environmental impact. Intensity based targets provide a clear and understandable metric fore reporting, making it easier for companies to communicate their sustainability efforts.
To Summarise…
As sustainability becomes a key pillar for corporate responsibility, carbon intensity metrics serve as a powerful tool for growing companies to measure and manage their environmental impact. They allow for a nuanced comparison of environmental efficiency in comparison to absolute emissions. Carbon intensity highlights efficiency improvements and aligns emissions tracking with operational scale. It helps businesses set ambitious yet achievable sustainability goals that reflect their environmental commitment. By integrating carbon intensity into their sustainability strategies, companies can increase stakeholder engagement and attract investors.
If you have any further questions about carbon intensity metrics, don’t hesitate to get in touch with our team.