Developing Decarbonisation Models and Roadmaps: A Strategic Approach to Decarbonisation
Decarbonisation roadmaps can have varying levels of complexity based on the industry, volume of emissions and ease in abating emissions. However, the process Rennie adopts in development of decarbonisation roadmaps is tested and proven to provide a collaborative and comprehensive pathway to achieve sustainability objectives.
Decarbonisation roadmaps are a data driven, structured approach to mapping out a pathway for a business to progress towards GHG emission reductions, while simultaneously providing an opportunity to create value drive innovation. Roadmaps outline key project and project interdependencies that are required to progress towards milestones, as well as serving as a communication tool to align stakeholders around common goals and objectives. A decarbonisation model is the critical tool sitting behind the roadmap, enabling collation and analysis of project information to inform the scenario development and decision making that culminates in the outputs for the roadmap.
Step 1: Set baselines and benchmarks
Conduct a comprehensive assessment of current emissions and energy usage across operations to understand the ‘base case’ emissions trajectory under a business-as-usual scenario.
Step 2: Identify targets and objectives
Define clear targets aligned with global climate objectives, company goals (including parent entities’ goals) and other legal requirements. In addition, it is important to define and agree global assumptions, being the environment in which combinations of initiatives or ‘pathways’ are overlaid and considered. Global assumptions may include differing assumptions around business activity, carbon pricing scenarios, grid decarbonisation rates, exchange rates and inflation rates. Decarbonisation outcomes may be more sensitive to some assumptions than others, which can be tested in the models and are important to capture in decision-making.
Step 3: Identify decarbonisation initiatives
Identify opportunities for decarbonisation projects and collate information on emissions abatement potential and financial estimates regarding implementation (e.g. incremental capital expenditure, operating expenditure and revenues). This involves engagement, collaboration and validation with internal teams across various business units.
Step 4: Define and develop pathways
A combination of various decarbonisation initiatives can be considered together as a ‘pathway’. Multiple decarbonisation pathways, with various technologies and cost implications, can be modelled and assessed in the roadmap. Consideration should be given to the impacts of pathways on emissions abatement potential, cost and ease of implementation. Development of such pathways create optionality to cope with technological uncertainty and a changing commercial and regulatory landscape. They can also help distinguish between immediate low-risk (‘no regret') capital investments and long-term strategic considerations.
Step 5: Model pathways via a decarbonisation model
A decarbonisation model is a helpful tool to support and provide input into the decarbonisation roadmap and inform decision making. It is designed to collate data and assumptions from across the business and transform these into usable projections. This involves overlaying the base case emissions trajectory with various combinations of initiatives to understand the resulting gap (if it remains), creating multiple ‘pathways’ that outline the collective impact of various reduction strategies over time. The model allows the analysis of the gap between projected (under the base case business-as-usual emissions trajectory and the resulting emissions trajectory after the implementation of initiatives) and target emissions, along with the associated costs of implementation. The key components of the model include:
The indicative model schematic below sets out the key components of a decarbonisation model.
Step 6: Prioritise and schedule initiatives / pathways
Organisations have limited resources that need to be allocated efficiently to drive the outcomes desired. By taking a multi-criteria analysis (MCA) approach, this allows a balanced view to be formed by considering a range of factors, along with traditional financial and return metrics. Taking a purely financial or emissions abatement approach to prioritising potential decarbonisation initiatives may not deliver the best short and long-term outcomes for a company. Designing what key ‘criteria’ are important for the MCA, and their relative weighting, involves broad stakeholder engagement to gain clarity and alignment.
Once identified, assessment and scoring of initiatives or pathway options against the agreed qualitative and quantitative criteria needs to be conducted. Quantitative criteria scores are likely outputs of the decarbonisation model (e.g. financial costs and emissions abatement potential can be quantified in the model). Prioritised initiatives or pathways should align with business strategies and balance of emissions reduction and commercial realities. It is key to involve all relevant stakeholders in the MCA process to ensure diverse perspectives are considered in decision-making. The process will give clarity to allow the selection of a preferred pathway on the basis of agreed criteria and weighting.
Step 7: Develop the roadmap
Outline specific actions, milestones, and timelines for reducing carbon emissions to achieve targets. This may involve identifying requirements for feasibility studies, engineering studies, pilot testing, proof of concept demonstrations and requirements for business casing. Identifying key dependencies, risks and enablers (e.g. supporting infrastructure required, budget and funding, governance and accountability) will be required to support implementation. A collaborative approach should be taken to gain operational / site input and engagement early. The roadmap usually includes financial cost components that can be used to feed in to company’s budgeting and strategic capital allocation processes, along with supporting business casing documentation.
Step 8: Feedback loop
Regularly review and adjust the roadmap and supporting model’s assumptions (e.g. carbon pricing forecasts, grid decarbonisation rate, emissions factors, or actual emissions measurements) based on new information, market changes, and progress. Integrating decarbonisation efforts into core business operations and decision-making processes will drive further value. This iterative process helps maintain momentum and effectiveness in emission reduction efforts, whilst remaining adaptable to change.
Final words
Developing decarbonisation models and roadmaps are a critical step for organisations in their journey towards a net-zero future. These strategic plans provide a clear pathway for reducing greenhouse gas emissions, offering numerous benefits while also presenting significant challenges. It is clear that to overcome challenges and maximise the benefits, organisations must adopt a holistic, flexible approach to decarbonisation. This includes setting clear targets, engaging stakeholders across the value chain to obtain alignment and successfully implement, and putting in place robust monitoring and reporting systems to track progress against. By embracing decarbonisation roadmaps and committing to their implementation, organisations can play a pivotal role in shaping a sustainable, low-carbon future for generations to come.
Rennie Advisory has extensive experience in developing decarbonisation roadmaps and building decarbonisation models for companies looking to progress their sustainability goals. We combine our experienced ESG team, with strong expertise in decarbonisation strategies, reporting, with our specialist modelling team to deliver robust roadmaps through a collaborative approach with clients.