The Economic Value of Decarbonization Strategies

Contributed by: Stephan M. Liozu

The race toward achieving net zero by 2030 or 2050 is well underway, with medium and large organizations spearheading the journey toward carbon neutrality, setting the pace in their ecosystems. While this is a positive development, the less encouraging aspect is that many of these entities are lagging significantly behind their ambitious targets. Moreover, they are missing the opportunity to use this transformative process to deliver economic value to their partners and supply chains. Decarbonization strategies concentrate on internal technical and supply chain programs, often tied to ESG and compliance reports. Unfortunately, they are seldom utilized to actively engage customers or positioned as a strategic competitive advantage. 

There are concrete economic benefits to collaborating closely with customers on decarbonization. Suppliers can offer direct financial benefits to customers through: 

1. Reduced costs: Decarbonization often leads to lower energy consumption, reduced waste, and more efficient processes, resulting in cost savings that can be passed on to customers 
 
2. Discounts and incentives: Suppliers may offer special discounts or incentives to customers who adopt sustainable practices or achieve specific decarbonization targets 
 
3. Carbon credits and rebates: Customers may be eligible for carbon credits or rebates by partnering with a decarbonized supplier, which can translate into direct financial benefits 
 
4. Lower transportation costs: Decarbonization strategies often involve optimizing logistics and transportation, potentially leading to reduced shipping costs for customers 
 
5. Extended product lifespan: Sustainable products and services can lead to extended product lifespans, reducing replacement costs and generating long-term savings for customers 
 
6. Resource optimization: Decarbonization often involves optimizing resource utilization, which can result in reduced consumption and lower costs for customers 
 
7. Reduced risk premiums: Companies with strong decarbonization strategies may be viewed as less risky by investors, potentially leading to lower risk premiums and improved financial terms for customers 
 
8. Investment and funding opportunities: Decarbonization initiatives can attract investors and funding, potentially creating new financial opportunities for customers 

LISTEN: Episode 7: Highlighting the Importance of Continuous Emissions Monitoring with Sensirion
 
By prioritizing decarbonization and incorporating it into their go-to-market strategy, a supplier can deliver direct financial advantages to customers, fortifying the partnership and contributing to mutual success. Achieving this necessitates a robust alignment between internal and technical stakeholders and their external commercial counterparts. Decarbonization initiatives and programs should be productized, transforming them into tangible value propositions that can be presented to customers alongside other products and services. This underscores the importance of intentional efforts in driving this integration. 
 
Let us take an example. Interface, a renowned carpet tile manufacturer, provides carbon-free flooring solutions that deliver economic value to customers through: 
 
1. Reduced energy consumption: Interface's carbon-free flooring is made from recycled materials and requires less energy to produce, resulting in lower energy bills for customers 
 
2. Extended product life: The high-quality tiles have a longer lifespan, reducing the need for frequent replacements and saving customers money on replacement costs 
 
3. Lower maintenance costs: The tiles are designed for easy maintenance, reducing the time and resources needed for upkeep, and saving customers on maintenance costs 
 
4. Improved indoor air quality: The carbon-free flooring emits lower VOCs (volatile organic compounds), contributing to better indoor air quality, and reducing the risk of associated health issues 
 
5. Enhanced brand reputation: By choosing carbon-free flooring, installers and building owners demonstrate their commitment to sustainability, potentially enhancing their brand reputation and appealing to eco-conscious clients 
 
6. Compliance with regulations: Interface's carbon-free flooring helps customers meet environmental regulations, avoiding potential fines and penalties 
 
7. Reduced waste: The tiles are designed for recycling, reducing waste, and minimizing the environmental impact of flooring replacement 
 
8. Contribution to global climate goals: By choosing Interface's carbon-free flooring, customers contribute to reducing carbon emissions and support global efforts to combat climate change 
 
By offering carbon-free flooring solutions, Interface not only provides customers with economic benefits but also champions sustainability, contributing to a healthier environment. While this proposition is compelling, it requires more than just a statement. The suggested customer benefits must be quantified and integrated into compelling customer value propositions, serving as key differentiators for Interface's offerings. Ultimately, the decision to charge a premium for carbon-free products falls under the purview of the marketing and pricing teams. 

READ: Navigating the Impact and Outcomes of the EU Methane Regulations with IOGP Europe

Hence, broadening the scope of decarbonization efforts is to be advocated for. While the primary goal may be achieving carbon neutrality or reducing short-term emissions, expanding these initiatives into the go-to-market realm allows suppliers to assist customers with consulting services, decarbonization support, and scope three reduction support. These initiatives add economic value to the supplier's value and supply chain. For every large company heavily invested in a decarbonization strategy, there are numerous small and medium-sized companies that have yet to start or are lagging in the process. This presents a unique opportunity to assist them, creating value and monetizing the relationship. Leadership in decarbonization can translate into leadership in monetized decarbonization programs.

Interested in our events?

Join is in Austin, Texas, from June 10-14 at the Methane Mitigation Technology & Innovation Summit, where the world’s leading minds meet to reduce oil and gas emissions. Featuring 75+ speakers, site tours, workshops, think tanks, daily tracks to choose from, and more, this year’s Summit will focus on cutting-edge technologies being developed in the sector and global regulations, explored through a range of operator case studies from the Americas, Europe, Asia and beyond. Download the agenda for more information.