This article is sponsored by Enel North America.
As climate impacts multiply, mitigation is becoming increasingly urgent. Businesses’ biggest stakeholders — investors, customers and employees — are ramping-up demands for organizations to invest and operate more sustainably. This pressure has prompted many corporate and industrial energy buyers to take a deeper look at their decarbonization strategies and procurement functions to identify areas of improvement. But that’s easier said than done. As many as 72 percent of corporate leaders do not know how to move sustainability efforts forward, according to Google Cloud.
In the maturing renewable energy procurement market, two key trends are emerging among large energy customers that serve as a blueprint for forward progress: collaborative decarbonization and heightened ESG standards. Both are valuable strategies for business leaders pursuing ambitious and responsible emission reduction, who may still be unsure of how to advance their efforts.
The rise of collaborative scope 3 decarbonization
As corporate and industrial clean energy buyers map out strategies to meet decarbonization targets, Scope 3 emissions across supply chains are a particularly challenging area to tackle. CDP reports about 75 percent of emissions lie upstream or downstream of core operations, making Scope 3 emissions a necessary focus for organizations pursuing net zero — despite being outside of their direct control.
As renewable energy procurement has evolved in the past years, some organizations have begun to work closely with their suppliers to identify best practices, raise standards for procurement and even jointly procure renewable energy.
To address Scope 3 emissions through clean energy procurement, corporations are making notable efforts to serve as platform conveners for their suppliers and partners. Recently, several leading companies have entered into aggregated power purchase agreements with their suppliers and partners — ensuring that the electricity load of their entire supply chain is covered with renewables.
This type of aggregate renewable energy purchase is a way for companies to take an active role in supporting supplier decarbonization that goes beyond best practice sharing. It exemplifies how joint efforts can reduce emissions and address Scope 3 targets more effectively than any one company alone.
A new standard emerging for sustainable energy
In addition to becoming more collaborative, clean energy buyers are increasingly focused on social equity and environmental sustainability. Not all renewable energy projects have equivalent impact or co-benefits for advancing an inclusive, just energy transition. Large energy customers are realizing that these projects can create a ripple effect of benefits beyond providing clean electricity, reducing costs and lowering carbon emissions. Those organizations interested in maximizing co-benefits of renewable energy investments are beginning to include additional environmental and social preferences in their procurement process.
To maximize the economic, social and environmental value of their decarbonization strategies, energy buyers are including criteria that guarantee wildlife protection and sustainable land use, promote air and water quality or address energy poverty, and support economic development, grid modernization and resilience in a project’s local community. The most sustainably minded companies also expect these clean energy investments to support principles of circular economy and diversity, equity and inclusion efforts.
As organizations develop more holistic approaches to clean energy procurement, established renewable energy targets, such as RE100 and Science Based Targets Initiative (SBTi), will be increasingly scrutinized and subject to hawkish stakeholder oversight and analytical methodologies, such as the Climate Action 100+ Net Zero Company Benchmark. Additionally, a coalition organized by the Clean Energy Buyers Institute (CEBI) Beyond the Megawatt Initiative recently launched the Principles of Purpose-Driven Energy Procurement, signaling an evolution in the supply- and demand-side decision-making approach to maximize clean energy benefits.
Next steps for clean energy buyers
Organizations should seek out energy partners who embed social and environmental performance into every aspect of their projects and have established models for stakeholder mapping, environment and social impact assessments, social investment planning and ESG monitoring metrics to assure performance and impact disclosure. Sustainable and circular business practices can be built into each renewable generation site from the design stage through construction and into operation and second-life applications. And going a step further, there are methods to measuring the circularity of a project through its raw material use and economic performance.
When it comes to maximizing social and local economic benefits of clean energy projects, the best-case scenario is for energy companies and energy buyers to listen and understand the needs and priorities of local communities, then work side-by-side to align shared interests and create long-term shared value.
Many projects that a company invests in will support economic development through tax revenue, landowner payments and jobs, to name a few. But to truly advance a just energy transition, energy buyers should prioritize partnerships that also create inclusive and equitable opportunities for all people and historically disadvantaged communities. At Enel, we approach this by inviting our customers to collaborate and co-develop community benefit and impact initiatives near the project or their corporate footprint.
Maximizing impact of clean energy procurement
For business leaders and influencers who seek to maximize impact of their clean energy procurement, you’re not alone. Take note of the trends in the current renewables market and seek out energy partners who can navigate and deliver the economic, social and environmental results of your decarbonization efforts. Raise the bar for what makes a smart clean energy investment in your portfolio. And look for opportunities to collaborate with your community partners, advisers, suppliers and other organizations to assure more impactful results.