New EU regulations are driving companies to integrate comprehensive, 1.5 degree-aligned climate transition plans into their core business strategies. To stay compliant and competitive, companies must overhaul traditional business models, increase cross-functional and cross-company collaboration, and build sustainability expertise within management and boards. This regulatory shift transforms climate action from a voluntary initiative to a critical, organization-wide mandate.
In a deep dive on how regulation is impacting corporate value chain decarbonization work, the first module of Combient Pure’s Scope 3 Decarbonization Accelerator kicked off in October with 60+ attendees from 20+ Combient companies. Below we dive into the key insights from the day and give some practical tips that were shared in the day’s discussions.
A 1.5 degree-aligned climate plan is no longer optional
The workshop kicked off with an introduction to the major EU regulations impacting value chain decarbonization, like the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), the Ecodesign for Sustainable Products Regulation (ESPR) and the Carbon Border Adjustment Mechanism (CBAM).
For Scope 3 work, the most transformative impact of new EU regulation is that a credible, transparently reported and documented 1.5 degree-aligned climate transition plan is now required by CSDDD. However, for most companies, this type of plan may not be compatible with current business models, requiring a major strategic shift to align the organization with 1.5 degrees. In addition, regulation will make the board liable for signing off on the company’s sustainability focus areas, plans and metrics through the CSRD double materiality assessment. New liabilities mean new types of skill sets are needed on boards in climate and sustainability more broadly.
A broader view on a company’s impacts is one of the main results of changing regulation. CSDDD requires companies to track and manage sustainability performance throughout their value chains, while the ESPR will require companies to develop their products’ sustainability along their full life cycle. The two perspectives can feed into each other, as product level climate and sustainability work can help shed light on the organization’s impact areas and help find focus to achieve larger, company-wide targets.
More communication across companies and functions is needed
Pulling together a credible climate transition plan, let alone implementing it, will require organization-wide work to gather data, engage suppliers and customers to decarbonize, and create solutions for a 1.5 degree pathway. The work can and should also include cross-company and industry collaboration to accelerate decarbonization. This is the time to build uncommon and new partnerships with those whose value chains intersect with yours.
Communicating without jargon, building a taskforce to work cross-functionally, and finding ways to transparently share information internally and externally will be critical to ensuring that all the pieces are in place to comply with new regulatory requirements - and ultimately make sustainability or climate performance a competitive advantage for the company. A few practical ways to get started include getting legal involved in renewing supplier contracts to include clauses on e.g. Scope 3 data sharing, and making sustainability training mandatory for all relevant functions.
The tsunami of EU regulation is changing how organizations and value chains work on climate change mitigation. Climate work is no longer a nice to have for any company, but a prerequisite to staying in business. No matter what function you represent, this shift in priorities means climate topics and Scope 3 work will also become a central part of your work. Also management teams and boards now need to consider how to turn corporate business models and product offerings into low carbon ones. What is your part in building out the company’s transition plan for 1.5 degrees?
Combient Pure’s Scope 3 Decarbonization Accelerator continues on November 26th with a hybrid workshop in Stockholm and online. The second module focuses on Scope 3 data collection and management. Sign-up on Combient Twin to join us (only available for Combient companies).
For more information on the Accelerator and upcoming modules, please don’t hesitate to contact us, we would be happy to tell you more!
Anna Pakkala, Business Development Manager, anna.pakkala@combient.com
