November 14, 2023
This post first appeared in SR Inc’s Q3 Newsletter as the Service Leader Comment.
Directors of Corporate Sustainability face a false choice when they choose between developing a strategy for Science-Based Targets initiative (SBTi) aligned near and long-term Net Zero Emissions (NZE) goals and working on the decarbonization of the grids they operate in, or at least the decarbonization of the grid in their headquarters community. This is a false choice because these two approaches are the opposite of mutually exclusive. Understood correctly, these two strategies are, in fact, complementary.
The first, a strategy to drive to SBTi approved Net Zero Emissions, is an emission reduction strategy designed for maximum credibility, scalability, and near-term, global, emission reduction impact. The second strategy involves contributing to public policy-based changes in the host community’s grid. It’s a strategic addition to energy procurement, requiring cross-industry coordination over many years to transform local electrical systems. The two approaches are radically different, but both are necessary and contribute to a world-class corporate decarbonization strategy. The majority of companies in developed economies lack the concentrated energy demand of data centers, manufacturing, or processing plants. Which makes it very difficult or impossible to unilaterally influence grid development. Consequently, for the vast majority of enterprises, the first strategy, SBTi approved NZE goals, offers a better opportunity for immediate positive impact but the second strategy, involving cross-industry collaboration to influence their host communities’ grid development for greater sustainability, is also important for the system-wide decarbonization human-caused climate and environmental breakdown demands.
The first strategy, “SBTi approved NZE,” is an accounting framework for credible enterprise emission reductions, globally, that done correctly enables companies to use their contracting power to cause new renewable energy capacity. Best practice in advancing to SBTi approved NZE is through combining firm-wide commitments to greater energy efficiency and on-site renewable energy with long-term contracting for Environmental Attribute Certificates (EACs), through committing to a long-term minimum price that enables developers to finance and build new renewable energy capacity. These amount to “Purchaser Caused” EACs. In North America, EACs are specifically called Renewable Energy Certificates (RECs), and in the EU are called Guarantees of Origins or (GO). Long-term contracts for Purchaser Caused EACs are called Virtual Power Purchase Agreements (VPPAs). These “VPPAs” are considered “virtual” because the corporate buyer pays for both the energy and the associated RECs, but does not take the title of the energy, which is sold into the local market. These VPPAs have proved outstandingly effective in timely causing scores of gigawatts (GW) of new renewable energy capacity in grids across North America, and now in the EU. When best directed, these Purchaser Caused EAC transactions (RECs in the U.S. and for “Guarantees of Origins” or “GOs” in the EU) cause new renewable energy capacity in grids that are the same or dirtier than the grids from which the corporation primarily draws electricity, as explained by the Emissions First Partnership. These corporate buyers will regularly be internally aggregating their low intensity (often leased office and warehouse space) to create enough demand to cause new renewable capacity – either alone or as part of an aggregated, multiple company, procurement. In the United States, many sustainability conscious companies, have their corporate headquarters in states like California (CA), Massachusetts (MA), and New York which have relatively cleaner grids than where these corporates can most economically contract for Purchaser Caused RECs, thereby helping to clean-up those more polluting grids.
While SBTi approved NZE is a vitally important strategy for corporations to reduce their carbon footprint, it should not be viewed in isolation. It is a means for corporations to take responsibility for their emissions and drive the growth of renewable energy capacity, especially in dirtier grids. However, it does not directly address the challenges of decarbonizing the grids in their local communities.
Decarbonizing the grids in the corporate headquarter’s community is a complex, localized endeavor involving diverse community stakeholders and a long-term commitment spanning decades. This process involves not only the physical procurement of renewable energy but also the development and implementation of policy changes, infrastructure upgrades, and community engagement initiatives. Achieving grid decarbonization requires systematic collaboration between policymakers, local utilities, community organizations, and residents. The efforts must be sustained over years through institutionalized – or institutionally supported – collaborations to make the local grid more sustainable.
Directors of Corporate Sustainability should not view SBTi-aligned NZE and grid decarbonization as competing priorities. Instead, they can both be recognized as beneficial components of a comprehensive corporate sustainability strategy. SBTi-aligned NZE allows corporations to take responsibility for their global carbon emissions and support the growth of renewable energy capacity in regions that have a heightened need for it. Simultaneously, localized grid decarbonization efforts contribute to the broader goal of achieving “real zero” emissions within your company’s host communities. It also enhances corporate collaborative capacity for greater sustainability, aiding contributions to national and even international decarbonization efforts.
SR Inc Member-clients including Akamai, Biogen, and Millipore exemplify best practices in this regard. They have successfully developed and are actively pursuing SBTi-aligned enterprise NZE goals, supporting renewable energy capacity growth in grids with higher emissions, and simultaneously supporting local efforts to move towards “real zero” emissions. For instance, some of those companies have partnered with organizations like the Alliance for Business Leadership‘s Commonwealth Climate Coalition, an educational non-profit, in MA to help their U.S. HQ state accelerate its journey to “real zero” emissions.
In conclusion, SBTi-aligned NZE and host community grid decarbonization are complementary components of a comprehensive corporate sustainability strategy. SBTi-aligned NZE empowers corporations to take responsibility for their emissions and accelerate renewable energy capacity growth in dirtier grids to maximize their global emission reduction impact. Simultaneously, purpose driven systematic community engagement for grid decarbonization, represents a needed, collaborative, effort that can provide the all too regularly missing “business voice” in favor of grid decarbonization. Consequently, the best path forward lies in embracing both approaches to achieve not only corporate sustainability but also to help host communities become more sustainable. The example of companies like Akamai, Biogen, Millipore, Thermo Fisher Scientific, and Wayfair demonstrate the potential of this integrating approach. Ultimately, pursuing both SBTi-aligned NZE and host community grid decarbonization helps build both the more sustainable enterprises and communities we need.
Jim Boyle is the CEO & Founder of Sustainability Roundtable, Inc. For more than a dozen years, Jim has led full-time teams of diverse experts to assist nearly 100 Fortune 500 and growth companies in their move to more sustainable high-performance. Specifically, SR Inc has helped world-leading corporations, real estate owners, and federal agencies to set goals, drive progress, and report results in their move to greater Corporate Sustainability. Mr. Boyle led in the creation of SR Inc’s Net Zero Consortium for Buyers (NZCB), which advises and represents Fortune 500 and fast growth companies across the U.S. and internationally in the development of renewable energy strategies and the procurement of both on and off-site advanced energy solutions. Before founding SR Inc, Mr. Boyle co-led Trammell Crow Company Corporate Advisory Services in San Francisco and returned to his native Boston and Trammell Crow Company’s market leading team in Greater Boston where he received the Commercial Brokers Association’s Platinum Award for the highest level of commercial real estate transactions. Earlier, he advised companies on real estate and environmental matters as an attorney at a large law firm based in Boston. Jim is a graduate of Middlebury College, where he co-captained the football team, and Boston College Law School. Early in his career, he served as a federal law clerk, an aide to John F. Kerry in the U. S. Senate, and on Vice President Al Gore’s campaign for President. Jim lives in Concord, MA with his wife and kids a half mile across the street from Emerson’s house and museum on the route to Walden Pond.
