How businesses can create an energy transition strategy

Transitioning to clean energy is an essential part of plans for businesses to achieve net zero. According to experts from global management consultancy, Bip, managing that transition hinges upon three key points.

Research from Bip found that the total investment in renewables by the oil and gas sector rose to $17 billion in 2022 –  almost six times higher than 2019 rates. However, in spite of this, the use of fossil fuels in Britain is soaring. Even as European gas prices peaked at over €300 per megawatt hour in 2022 – from €50 in 2021 – demand for gas and global carbon emissions reached an estimated 40.6 billion tonnes. This puts the UK at risk of missing many of its most important climate pledges.

“The deadline set by the Paris Agreement for a 45% reduction in carbon emissions by 2030 is approaching and the next few years will be critical for ensuring that an environmental tipping point is not reached,” Carlo Capé, Co-Founder and CEO of Bip, explained. “Businesses have a vital role to play, changing their outlook and processes to reflect the new state of the energy market and the ever-pressing need to reduce carbon emissions.”

With energy supply and sustainability leading the corporate agenda at present, Capé has outlined three key focal points for businesses aiming to reduce emissions and guarantee energy security.

Data-based targets

First, one of the most consistent pitfalls businesses face with their climate change policy comes from the fact their energy related pledges and targets are not rooted in the reality of their energy usage. Ambitious goals can often be made without a strong foundational understanding of an organisation’s current emissions and the drastic change needed to meet such targets, or even net zero. For example, previous research suggests that fewer than one-quarter of organisations with net zero pledges are well informed on the emissions sources in their supply chain.

Capé explained, “For an effective solution, businesses must collect and analyse data properly to understand how they use energy and its corresponding emissions, and these findings must be visible and understood at a board level. Only once data is foundational for your business’ energy transition plans can targets and metrics be reliably made. These targets form the basis of the roadmap for improving emissions. Without these metrics, a business is flying blind and risks falling behind on the basic requirements on climate reporting.” 

Plan effectively

At the same time, “having a reliable framework in place for a business’ energy transition” is crucial, before launching any such transition. Capé suggested there should be an airtight plan, which reflects the goals of the wider world, and could be followed internally, to drive a successful transition. Such strategies are complex, however, and many businesses may need support from external experts and consultants, who can provide an impartial view to ensure plans are achievable in both the short-term and long-term.

He added, “The end goal, whether it’s reducing a business’ emissions or its exposure to energy insecurity, will be rooted in data and backed with clear evidence for gauging success. From kick-off, your transformation team should know exactly what success looks like and will be prepared to alter legacy processes which conflict with the end goal. Critical decisions should be well-defined, with each team member empowered to make the necessary calls.”

Company-wide commitment  

Finally, as with any transformation campaign, it is important for firms do not neglect their internal culture. While a dedicated transition department, or external support, which is responsible for a company meeting its sustainability goals is important, strategies must be embedded within the entire company for them to work. While changes of this scale may begin at the board level, their success depends on everyday adoption throughout a firm’s hierarchy.

“For example,” Capé noted, “recommendations on the reporting and measurement of emissions, the collection of data or corresponding roadmaps are nullified if policies cannot be applied across an entire organisation. A coordinated approach which is layered to the very foundations of the organisation will mean your desired energy policy is factored into every decision-making process.”