Anyone can lead the climate journey in an SME. Want to try? Here is a Guidebook for you.

Background: The Role of the Climate Journey Facilitator

In navigating the climate journey in an SME, a Facilitator plays a pivotal role. This individual, whether external or internal in the company and regardless of what her/his primary job is, should possess a passion for the cause and ideally have some experience at leadership or board level, or alternatively, consulting or project management expertise. The time occupation can vary between 2-8 hours per month plus the self-education time required to build over time and keep updated high-level subject knowledge.

The facilitator's added value will encompass the followings:

1.     Maintaining Updated Subject Knowledge: Continuously acquire and update subject high-level knowledge to stay abreast of evolving climate-related dynamics and draw on growing expertise to guide decision-making and implementation. This will require some time commitment but is also an investment in one's own development.

2.     Presiding Over Net Zero Meetings: Facilitate regular Net Zero meetings and oversee the reception of progress reports from the team. Make sure that the meetings are regularly held, especially at the beginning, inspire discipline int he process.

3.     Supporting Strategic Process and Plan Design: Assist in shaping the strategic process and contribute to designing a comprehensive plan but make sure that the strategy and plan are actually made by the company.

4.     Participating in Emission Reduction Monitoring: Engage actively with the company in monitoring the reduction of carbon emissions over time, ensuring alignment with long-term goals.

5.     Experimenting the climate journey in own personal life: Experiment net-zero lifestyle changes such as food habits, mobility habits, use of energy at home, and a new approach to fashion, holidays etc; use the lessons learned to become a more emphatic and credible Facilitator and a role model inspiring the net-zero team.

6. Optional: Board Membership: Optionally, the facilitator may hold a seat on the Board, providing an additional layer of integration and strategic insight.

Exclusions:

The sectors excluded from the scope of this paper are those that require a more sector-specific approach. Therefore, it is recommended to deepen in the secotr-specific net-zero methodologies before starting. These sectors include Aluminium, fashion, Aviation, Buildings, Chemicals, Cement, Financial Institutions, Forest, Land, and Agriculture, Maritime, Oil and Gas, Power, Steel, and Transport. Also, an SME can be considered as such – and therefore in the scope of this paper – when 1- such SME is not a subsidiary of another company which is not an SME itself, 2- the company emits less than 10,000 tCO2e in scope 1 + 2, and has less than 200 employees, or has a Turnover of less than €30 million, or alternatively has less than €10 million of total assets. These numbers are a reference only.

Step 1: Start the journey only when you are sure to have obtained Top-Level Support

In the first step of embarking on a climate journey within an SME, it is crucial to secure support from the highest levels of leadership, such as the CEO and the Board. However, it's essential to acknowledge that these leaders may have concerns or reservations about initiating such a journey.

Common challenges Leadership may encounter:

1.     Resource and Time Constraints: Often, senior executives face limitations in terms of time and resources for new projects. Limited resources often hinder investment in emission reduction efforts.

2.     Competing Priorities : CEOs and Boards may need to address existing priorities before allocating resources to climate initiatives.

3.     Lack of Expertise: Many leaders may not have a comprehensive understanding of climate-related matters.

4.     Short-Term Profit Focus: The pressure to maintain short-term profitability can overshadow long-term climate goals.

5.     Lack of Stakeholder Pressure: If stakeholders are not demanding climate action, leaders might be less inclined to act.

6. Mindset: check to which extent the leadership is committed to both heartfelt and thoughtful change. To what extent is it concerned about the remaining resources available to humanity, and to which extent do they understand the potential role and impact they could have? The answer to this question must be at least a partial yes before starting the journey.

Without the necessary support and thoughtful planning, a climate journey can be sporadic, yielding only partial results at best. Therefore, the Facilitator will need to obtain the backing of senior leaders, particularly the CEO, or, if required, provide them with the necessary education and training to secure their commitment before step 2.

Ultimately, a climate policy must seamlessly integrate into the overall business strategy and decision-making processes. As a prerequisite for launching this project, the Facilitator must ensure that the CEO and the Board grasp from the beginning the uncertainties surrounding the outcomes of their investment in a climate journey. They should be aware that over time various costs and benefits will alternate, including those listed below.

Costs and benefits (incomplete list)

1.     Allocating Resources for Project Management: the project must commence by allocating enough resources for project management and consider budgeting as an evolving component that can be introduced progressively, therefore creating immediate new costs.

2.     Mitigating Long-Term Risks from inaction: Addressing long-term risks resulting from inaction, including preempting future regulations and aligning with evolving customer expectations, mitigates a part of the present and future climate change-related risks and, therefore, creates benefits.

3.     Addressing Climate-Related Risks: Identifying and mitigating risks associated with climate-related events, such as floods, fires, droughts etc, which would impact production units, employees, clients, and the entire value chain, including critical suppliers, mitigates the remaining climate change-related risks and therefore increase benefits.

4.     Managing Risks of Moving Too Quickly: the company should also continually evaluate the potential risks linked to (too) swift actions, including the danger of going out of the market due to the pace of implemented measures. Those are additional risks that the company must be aware of.

5.     Exposing to Greenwashing Accusations: the company should also carefully assess and, in case, mitigate the risk of being accused of greenwashing by ensuring that climate initiatives genuinely contribute to environmental impact. Those, again, are additional risks that the company must be aware of.

6.     Benefitting from Cost Reduction Opportunities: during the journey, the company will also recognise opportunities for cost reduction, such as e.g. minimising material usage and embracing circular practicesz

7.     Being affected by Cost Increases: On the other end, the company will face several times the potential for cost increases, for example, higher expenses associated with obtaining net-zero materials.

8.     Benefitting from additional Innovation: the search for carbon reduction opportunities will naturally foster innovation, encouraging the development of circularity, new packaging, processes, products, or targeting new client segments.

9.     Being exposed to Brand and Image Effects: the company will face the positive (or occasionally adverse) effects of climate initiatives on brand, image, and marketing. This tends to be a net benefit for the company.

10.  Publishing Sustainability Reporting: Lastly, the company should prepare for the annual publication of a public sustainability report summarising achievements and commitments. This is both a cost and risk as well as a benefit.

Step 2: Assemble the company's Net Zero Dream Team

In this critical phase of the climate journey, the second step for the Facilitator involves asking the internal Sponsor (e.g. the CEO) to create a dedicated small internal team focused on achieving net-zero emissions. The team's primary responsibilities include agreeing on a regular meeting schedule and processes, designating a project manager who will be responsible for planning and managing the associated documentation and agreeing and acting on a plan. The dream team should comprise individuals with some (or all) of the following competencies or roles:

The Dream Team

1.     CEO (Essential for leadership and strategic direction)

2.     Finance (Crucial for carbon accounting and financial considerations)

3.     Sustainability Department (If available, central to driving sustainability initiatives)

4.     Purchasing (To manage sustainable procurement and supply chain considerations)

5.     Marketing (For communicating sustainability efforts and engaging customers)

6.     Product (To incorporate sustainability into product development)

7.     Logistics (To address supply chain and operational emissions)

8.     And/or other relevant roles depending on your specific business needs.

 Dream Team meetings structure

Meetings should initially occur every two weeks, transitioning to monthly as the project progresses. Each meeting should follow a structured agenda, including the following basic components:

1. Review of Previous Actions: Discuss the actions agreed upon during the previous meeting and evaluate progress.
2. Project Status Review: Assess the current overall status of the project, share lessons learned and new data since the last meeting, and make any necessary adjustments to the plan.
3. Operational Decisions: If applicable, discuss and decide on operational matters, such as e.g. selecting carbon accounting software or choosing a renewable energy supplier, approval of budgetary modifications etc.
4. Define actions Before the Next Meeting: Clearly outline the tasks that must be completed before the next meeting.

The Role of the Facilitator in the Meetings

The role of the Facilitator in this phase is to facilitate the progress of the dream team and the broader company. Such progress will follow predictable phases: the following list describes the natural evolution expected during the net-zero journey:

1. Initial Skepticism and Exploration: At the journey's outset, scepticism may outweigh knowledge. However, sustainability will gradually gain importance as the team examines customer demand, seeks external perspectives, and identify quick wins.
2. Development of Sustainability Capabilities: After this initial period, the Dream Team's sustainability capabilities will grow, extending across the entire organisation as sustainability becomes integrated into core processes.
3. Acceleration: In the next phase, as a result of the advances in the project, learning and increase of relevant company processes and reinforcement of a culture of sustainability, expect an increase in the speed and scale of the sustainability efforts of the company, with a growing focus on rethinking business activities.
4. Maturity: At maturity, a lasting sustainability infrastructure should finally be visible, along with transformative partnerships in the industry sectors and value chains where the company belongs.

Step 3: Measuring Carbon Emission and Eco Footprint Measurement

In this phase, the Facilitator will guide the company on the journey of understanding and quantifying carbon emissions and other ecological footprints. While it may seem complex initially, as there might still be a lack of best practices, tools and data in the business environment and market, the process becomes more manageable with time.

The following steps in the carbon measurement process are anticipated:

1.     Data Sourcing and Software Selection: Begin by assigning the finance department to identify reliable data sources and software solutions for calculating scope 1 and 2 emissions initially, followed by scope 3 emissions. The aim is to gather precise and reliable data for carbon accounting. For more info about Scop 1, 2 and 3 you can refer to several sites including the official Race to Zero website or Wikipedia.

2.     Refining Carbon Accounting: Develop accurate data and accounting systems for carbon accounting. It can be challenging to date. For instance, consider future scenarios like introducing new low-carbon material for a specific product line: how does this change impact emissions, and how can it be accurately captured in your accounting, i.e. is the accounting system granular enough?

3.     Iterative Process: Continuously refine your calculations internally until you are satisfied with their accuracy and quality and scalability of the system in the future.

4.     Establish Reporting Systems: Create a structured reporting system to communicate your emissions data effectively. If you have a professional software solution, the reporting will be automated. here for example a list of European carbon software solutions, or SME climate Hub @Race to Zero offer their own software solution in partnership with Novative.

5.     Customize for the SME Size you are dealing with: Depending on the size of your SME, consider options for disaggregating data at the business unit, product line, geographical, or other relevant levels. Explore what the adequte software solutions that offer user-friendly emissions tracking are, balancing cost and complexity. Remember that while some solutions may be too expensive and complex for certain SMEs, others may be overly simplistic, especially when it comes to scope 3 accounting. Choose a solution that aligns with the specific needs.

6.     Beyond Carbon Emissions: Once the CO2e reporting system is established, the company can extend its focus to broader environmental considerations, including:

-       Climate Risk Exposure Assessment: Organize a dedicated workstream to assess climate risk exposure. This includes evaluating the potential impacts of events such as extreme weather on your own operations and throughout the value chain. Explore practical strategies to mitigate these identified risks. This risk exist, it is a hidden liability.

-       Deforestation Risk Evaluation: when possible, establish a workstream to evaluate the risk of deforestation among your suppliers. This involves a comprehensive examination of the supply chain to identify and address potential risks related to deforestation and will take time.

-       Plastic Pollution Examination: Implement a workstream to assess exposure to plastic pollution, focusing both on products - when maybe there is not yet a circular design) as well as on primary and secondary packaging. Identify areas for improvement and implement strategies to minimise and ultimately eliminate plastic-related environmental impact. Yes, it is possible... but complex too.

-       Water-Related Impact Assessment: Form a workstream to examine the impact and assess risks related to water usage. Understand how water-related factors may affect your operations and take proactive measures to mitigate identified risks.

The above exercise will enable the dream team to establish a baseline footprint and set the course towards achieving net-zero emissions.

Just so you know: scope 3 emissions are often challenging to calculate due to data limitations, and they are likely to be a significant contributor to your footprint. Controlling and reducing scope 3 emissions may present unique challenges.

Step 4: Pledge

When the Facilitator feels it is the right timing to ask to formally pledge Net-Zero (maybe even during on of the previous steps), it is as simple as completing this form SME Climate Hub, the Race to Zero partner specialised in SMEs. The commitment is the following:

• Halve greenhouse gas emissions before 2030
• Achieve net zero emissions before 2050
• Disclose progress on a yearly basis

Step 5: Evaluating Carbon Footprint Reporting, Establishing Boundaries, and Researching Potential Actions

 In this crucial step of our climate journey, we focus on the meticulous analysis of carbon footprint reporting, the definition of boundaries, and the exploration of potential actions. Clarity and strategic decision-making are paramount.

Here are the steps:

1.     Scope 3 Inclusion: Deliberate on whether to incorporate Scope 3 emissions into the plan—whether in full, partially, or not at all. This decision will significantly impact the comprehensiveness of our net-zero approach.

2.     Identification of Exclusions: Determine which activities, units, or subsidiaries, if any, should be excluded from the net-zero journey. It is imperative to internally communicate the rationale behind each exclusion, fostering clear understanding and alignment.

3.     Internal Clarity: Establish unequivocal internal guidelines explaining the reasoning behind excluding certain elements from the net-zero commitment. This internal clarity is crucial for maintaining transparency and consistency throughout the journey.

Research the options and start a List of Actions:

Conduct thorough research to compile a comprehensive list of potential actions to be taken over time. When transforming it into a plane (see step 7 below), begin with addressing hot spots and seizing quick wins before progressing to long-term strategies and the integration of technologies not yet commercially available. First 2023, then 2050. This is not one task but an ongoing process, starting with small steps.

Step 6: Crafting a Clear Beyond-the-Value-Chain Mitigation Strategy

In the sixth stage of the climate journey, the Facilitator dig into shaping a well-defined beyond-the-value-chain mitigation strategy. The focus here is on actions or investments that extend beyond the company’s value chain, contributing to the reduction and removal of greenhouse gas emissions.

Mitigation Actions and Mitigation Investments:

This encompasses activities beyond the company’s value chain that either prevent or reduce greenhouse gas emissions or permanently store them. Key examples include:

• Forestry
• Conservation Projects
• Energy Efficiency Initiatives
• Methane Removal Initiatives
• Renewable Energy Projects
• Scale-up of CDR Technologies (e.g., DAC)
• Other

 Key Considerations:

1. CDR Type Selection: research and decide on the type of Carbon Dioxide Removal (CDR) technologies to incorporate over time, considering their efficacy and alignment with the company’s overall goals.
2. Like-for-Like Removals: Embrace a Like-for-Like Removals approach, ensuring that the chosen actions effectively offset emissions in a comparable manner. See the definition/explanation of like-for-like below (*).
3. Policy Implementation: Implement policies that prevent the substitution of emissions reductions by the use of CDR. Maintain a clear distinction in the plan, emphasising that investments in CDR scale up over time independently of emissions reduction efforts.
4. Regulatory Alignment: Stay attuned to the evolving landscape of Carbon Removal Certification Frameworks and future regulations related to CDR. Fine-tune the company’s CDR strategy based on these developments, ensuring compliance and effectiveness.

Like-for-like removals

Like-for-like removals are defined by the UNFCCCs Race to Zero campaign as ‘when a source of emissions and an emissions sink correspond in terms of their warming impact, and in terms of the timescale and durability of carbon storage’. This definition indicates that CO₂ that came from permanent storage, such as fossil fuels, must be returned to permanent storage. At the same time, CO₂ released from insecure storage such as forests or soils can be returned to the same type of storage (i.e. offset land use change with forestation). It also means that short-lived greenhouse gasses such as methane could potentially be neutralised by CO₂ storage with the same lifetime as methane (adjusting volumes for global warming potential). The like-for-like principle stems from the structure of the natural carbon cycle and safeguards against, for example, an oil company continuing to produce fossil fuels and releasing CO₂ from the long carbon cycle, while offsetting their emissions by planting trees and restoring carbon into the short carbon cycle. The like-for-like principle should always be used when neutralising emissions with removals to contribute to reaching a durable net zero state.

Step 7: Finalizing a Clear and Actionable Climate Plan

In this critical seventh step of the climate journey, the team transitions from strategising to the concrete formulation of a plan. Clarity and precision are paramount to ensure effective execution:

1.     Establish Long-Term and Short-Term Goals: Clearly define ambitious long-term goals, especially for 2050. However, prioritise articulating specific short-term targets for the immediate years leading up to 2030.

2.     Define Success Metrics: Be transparent about how success will be measured. Establish key performance indicators (KPIs) that align with both short-term and long-term objectives.

3.     Resource Allocation: Clearly outline the monthly allocation of man-hours for the first year and subsequent years, along with the corresponding financial resources dedicated to the project.

4.     Cost-Benefit Analysis: Identify, update, and meticulously assess all associated benefits and costs. This evaluation ensures a comprehensive understanding of the plan's economic implications.

5.     Publicise a Milestone-Driven Plan: Develop a plan with well-defined milestones. Consider making, at minimum, a condensed version public, showcasing the trajectory and progress of your climate journey.

6.     Internal Carbon Pricing: Evaluate the feasibility of implementing an internal carbon pricing system, potentially ranging between 100 to 200 euros per ton of CO2e. This mechanism serves as an internal incentive for emission reduction.

7.     Leverage Customer and Supplier Influence: Recognise the influential role you can play by encouraging customers and suppliers to measure and reduce their carbon footprint. This action, while cost-effective, can yield a significant positive impact.

8.     Prioritise Impactful Actions: Strategically prioritise actions that yield the most significant impact in achieving short-term goals and those set for 2030. Recognise the necessity of a phased approach, postponing more challenging decarbonisation actions while progressing incrementally toward 2050.

Step 8: Ensuring Dynamic Oversight with Ongoing Plan Review

In the eight step of our climate journey, the Facilitator emphasises the importance of continual plan evaluation to maintain agility and effectiveness. Clarity in ongoing processes is crucial:

1.     Monthly Task Performance Check: Regularly assess whether planned tasks have been executed each month. If any deviations occur, conduct a thorough analysis to understand the underlying reasons.

2.     Roadblock Identification and Plan Refinement: Identify and address roadblocks promptly. Refine the plan to adapt to evolving circumstances and challenges, ensuring continued progress toward goals.

3.     Understanding Delays: Investigate reasons for any delays, recognising potential factors such as e.g. the availability or premium pricing of net-zero solutions in the market or competing priorities.

4.     Comprehensive Win and Resource Accounting: Account for each busiess win, whether it be cost savings, enhanced branding, or innovation stimulation. Document all resources utilised, distinguishing between time and financial investments. You then have a more transparent P&L of the Net-Zero Project from a company cost-benefit stand point.

5.     Effectiveness Tracking: Monitor the effectiveness of every operational action, capturing valuable lessons learned. Identify challenges that may have been more complex than anticipated and assess the efficiency of each action in reducing emissions.

6.     Measure Reductions in Business Units: Where applicable, quantify emission reductions from various actions in different business units. Consolidate these measurements to project the overall company reduction, ensuring alignment with our global objectives.

7.     Public Reporting: Demonstrate transparency and accountability by publicly reporting company-wide greenhouse gas (GHG) emissions on an annual basis. This fosters trust and provides a clear picture of our environmental impact.

Step 9: Celebrate successes, be proud of your results, and enjoy the impact journey

Thanks for your contribution to the journey. Paolo Senes

PS: have a look at Community Impact Challenge website and LinkedIn Group, a volunteer-based climate impact movement that I have co-founded, with its Race to Zero program as well as StartNow climate challenge, to learn, act and connect.

(Photo: Paolo Senes: moonshine in Sardinia, Italy, during an extreme weather event)