It has been clearly documented that a significant component of achieving Net Zero will require Governments to reduce their dependency on fossil fuels over time and to start introducing cleaner energy solutions into their national power supplies.

Dirty fuels like coal, oil and gas need to be replaced with greener renewable alternatives such as solar, wind, hydro and nuclear plus any clean technologies and solutions that emerge in the future.

Whilst carbon production from national power is a Government commitment there are three important things corporates must bear in mind:

National power is not the only source of carbon to be accounted for in a Scope 3 calculation. Transportation emissions created by moving goods around the supply chain are unlikely to be captured as part of the national power initiatives. It is unlikely that any government will achieve national power at a true zero carbon position. This means that Governments are going to require the use of carbon mitigation actions to net out the carbon left in the national power grid. They will need to pass the costs of these carbon mitigation back to its consumers through the price per KwH. An alternate model for corporates could be they are required to purchase the carbon mitigating actions required to achieve a Net Zero position on behalf of the Government. Determining which supplier to procure from is going to have to consider this equation as part of the selection process. The path from today to 2030 and onto 2050

Governments are at varying levels of progress towards their Net Zero commitments. Currently each Government produces a carbon in grams for every kilowatt hour or electricity produced. These are published annually and help to show the progress a country is making to remove dirty fuels from the national grid and replace them with renewable energy solutions. The target is to lower this figure by 45% against the baseline set in 2010.

For a company to demonstrate it is on track to deliver its 45% reduction, it needs to start capturing this data and using it in its own calculations.

At some point on the journey towards Net Zero, and hopefully before 2050, Governments will achieve its Net Zero goals. At this point, and for the countries that have achieved this, capturing the carbon per KwH figure becomes irrelevant as the Government will have taken the carbon mitigating action out on behalf of the consumer of the electricity. The net result is the power source creates no carbon into the atmosphere that has not been mitigated already.

It everyone’s responsibility to reduce power demand across the board

What companies must continue to do, however, is capture the power consumption data and make every effort possible to reduce it over time. Not only will it be cheaper for everyone as it’s an avoided cost but it is also much better for the environment to reduce the amount of carbon that is produced at source. This can only be achieved by reducing consumption demand.

How can power demand be reduced?

For companies involved in the manufacturing of goods, power demand can be reduced by implementing the following:

Change consumer behaviour so purchasing demand is permanently reduced. Lower demand should result in lower production levels and in turn lower power demand. This may be achieved by educating the consumer on purchasing the minimum quantity of product to serve their needs, eliminating products that end up a landfill and improving the quality of products so they have a more durable life Replace legacy equipment with more modern equivalents that have a lower power requirements than the machines they replace. Used local power sources, independent to the national grid, that produce carbon zero power directly to machines used for the production of goods. For example, powering an apparel factory with a solar array fitted to the roof would remove the demand from the national grid and avoid carbon production at source. Implement manufacturing process changes that reduce the time it takes to complete a process on a machine that draws power from a carbon producing power source. How can consumer demand be influenced so it is lower than today?

It’s all about consumer education. Brands need to make the consumer more aware of their impact of their purchasing decisions but to achieve this is they need accurate baseline data to see what their products do to the environment today.

The consumer needs to be educated around the impact of buying surplus quantities over and above their core, or immediate, need. If every consumer bought just the quantity of product that they needed, there is likely be less wastage and less products in storage not being used. Eliminating both of these will reduce the amount of goods produced and therefore the overall power demand.

The consumer also needs to stop this throw away culture. Fuelled by low prices, especially in the fast fashion industry, the consumer is purchasing product which invariably lands up in landfill due to a shorter than expected life because of either (a) lower product quality or (b) mistreatment of the product because it was cheap.

What does this mean to a buyer?

It adds another set of requirement on to the supplier selection criteria. The country where the supplier is located will need evaluating to see what the current carbon per KwH is and how it is projected to move going forwards.

The buyer will need to understand two aspects of the supplier process in fulfilling an order. The first is the machinery that will be used and whether this machinery has the most optimal power consumption profile. The second is an estimate of the total power demand required to fulfil each unit of an order.

This information needs to be analysed by the buyer to determine if this supplier will represent a net increase or decrease in carbon production and if an increase what the cost of further mitigating actions the buyer will need to purchase.

Are there alternatives?

For suppliers with significant power demands, they may need to look at more localised power solutions such as green hydrogen, solar and wind installed on premises.

Whilst this will require an initial capital investment it will, depending upon the installed capacity, remove or reduce the power demand from the grid. This in turn will either reduce the cost of purchasing power from the national grid (which could contain indirect costs of carbon mitigating actions) or the cost of purchasing carbon mitigating actions directly to net out the carbon.

Why don’t I just move sourcing to the countries with the lowest carbon output?

This is certainly something that needs to be considered, but not in isolation. There are so many other factors that need to be taken into account alongside this.

Changing suppliers is not an easy change. There are many factors and risks that need to be considered before a new supplier can be onboarded and this takes time and often significant financial resources to complete. Companies will not want to make too many changes in parallel to their supply chain to manage the overall revenue risks.

That said, speaking with suppliers about their intentions is something that has potential upside. Suppliers will have the same carbon concerns as the buyers and everyone is looking for a solution. It may be the supplier is already evaluating opening up production capabilities in other countries, or could be encouraged to do so if they knew there was business available to them by doing so. Suppliers with significant capital may be looking to make acquisitions overseas, in lower carbon countries, to enhance their capabilities.

A word of caution is required here though. The data from Vietnam is a good example of the risk this potentially runs:

The chart above shows the Vietnam national grid environmental impact in carbon grams for every KwH it produces. The governments efforts on implementing renewable energy solutions can be seen between 2019 and 2022 but in the last reported year this trend starts to reverse. It moved from 415.49 g/KwH in 2022 to 472.47 in 2023. Thats a 12% increase in one year, so if your company had used Vietnam as a way of reducing carbon, the benefits could have been lost over night.

So why did the figure move upwards? Well, power demand out stripped supply and the gap was filled by burning fossil fuels, which can be seen in this chart:

The lower emitting green solutions formed a smaller overall percentage of the total generation and coal moved from 39.24% in 2022 to 46.87% in 2023.

So what can we do to protect against this? Well firstly, we have to assume that governments will deliver positive reductions in the end, otherwise Net Zero cannot happen but the path towards this may not be straight. One strategy to de-risk this is two fold. First, ensure that the power demand from your premises is at the most optimal level possible. Modern manufacturing processes and power efficient devices are installed will go a long way towards this but installation of green energy solutions on site, such as solar and clean hydrogen can help to reduce the dependency on the national grid.