ABSTRACT
This article highlights the role of SW Sustainability Center in advancing decarbonization initiatives through technology-driven measurement systems. By developing comprehensive Decarbonization Rating Reports, SW Sustainability Center supports companies in tracking carbon emissions across Scope 1, 2, and 3, ensuring alignment with global sustainability standards. SW also facilitates certification processes, helping businesses comply with international frameworks like the EU’s Carbon Border Adjustment Mechanism (CBAM). Additionally, SW Indonesia promotes sustainability literacy through its SEL Southeast Asia training center, empowering professionals to navigate the low-carbon economy. These initiatives position SW Indonesia as a key player in driving sustainable business practices.
Decarbonization refers to the reduction of carbon emissions, often through the transition to renewable energy sources and the implementation of energy efficiency measures. Scope 1 decarbonization includes the reduction of direct carbon emissions from a company’s own operations, while Scope 2 refers to indirect carbon emissions from energy consumption.
Recently, practitioners and advocates of Environment, Social, and Governance (ESG) have been developing Scope 3 Decarbonization, which includes the reduction of all other indirect carbon emissions across the entire business value chain. Scope 3 covers efforts to reduce Greenhouse Gas (GHG) emissions from both upstream and downstream activities that are not owned or controlled by the company.
The positive impact and thinking around decarbonization continue to be advanced by global ESG practitioners. We believe that only what can be measured can be improved. The fundamental principle of effective measurement is designing tools capable of producing accurate measurements of what we aim to assess. Decarbonization assessments often use various metrics to evaluate progress, including the following three:
- Baseline Emissions: The amount of greenhouse gases (GHG) released in a “business-as-usual” scenario.
- Renewable Energy Share: The proportion of energy generated from renewable sources such as solar and wind.
- Electrification: Replacing fossil fuel-based technologies with electric alternatives.
One of the measurements developed within the ESG domain is the “Decarbonization Rating.” The Decarbonization Rating is a metric that evaluates the effectiveness with which a company, country, or sector reduces carbon emissions, often based on indicators such as emission reduction, renewable energy adoption, and carbon footprint.
The Decarbonization Rating evaluates the effectiveness with which a company, industry, country, or region implements systems aimed at reducing carbon emissions from energy operations. Its primary objective remains consistent: to lower greenhouse gas (GHG) emissions and address climate change.
The Decarbonization Rating Report enables companies, governments, and institutions to full-fill their commitments to the Sustainable Development Goals (SDGs) established by the United Nations (UN). Decarbonization is a key component of the SDGs, designed to ensure a healthy planet for future generations.
Specifically, based on the Decarbonization Rating Report, management can evaluate and benchmark carbon emissions against industry peers. Furthermore, company management should access qualitative feedback regarding key milestones and progress achieved to date in relation to sustainability objectives.
Technology facilitates the development of Decarbonization Rating Reports to be more comprehensive, relevant, and comparable. The application of sustainability technologies has classified carbon emission measurements based on Scope 1 and Scope 2, and is currently being further developed to include Scope 3.
For example, the sustainability technology application utilized by SW Sustainability Center assesses the Decarbonization Rating based on eight modules, which take into account factors including the emission reduction measures implemented by a company and its investments in carbon reduction projects.
Overall, this is essential for maintaining organizational accountability, enabling them to effectively track, measure, and monitor the quality of their efforts in accordance with tailored methodologies and risk assessment frameworks based on internationally recognized standards. These international standards refer to the highest-reputation global institutions operating in the environmental field, within the context of the “E” in ESG.
The objective is to provide solutions that empower clients to stay ahead, enabling them to easily comply with new regulatory requirements. Identified as the world’s sixth-largest fossil fuel emitter in 2022, Indonesia has taken significant steps to reduce its environmental impact through a combination of government-led and private sector initiatives.
This is happening at a very critical time for Indonesia, amid an accelerated timeline set to achieve its net-zero emissions target before 2060. Indonesia is one of the world’s leading exporters of commodities such as steel. These industries often attract attention, frequently negative or in the form of criticism, due to their environmental impact, resulting in the establishment of new reporting frameworks and guidelines by trading partners such as the European Union.
This phenomenon includes the European Union’s Carbon Border Adjustment Mechanism (CBAM), which aims to restrict the import of goods produced through carbon-intensive methods by imposing a carbon tariff on highly polluting industries. CBAM is part of the European Green Deal and is expected to affect nearly 20 percent of Indonesia’s exports once it comes into effect in October 2023.
In the context of being part of the business value chain in Europe, all emission reports submitted by non-EU exporters must be certified by a Global Validation/Verification Body (VVB) recognized by the European Union. With such certified Decarbonization Ratings, facilitated through the Carbon Connect Suite, companies outside Europe that export to European countries will be able to operate with confidence and receive various incentives.
The carbon disclosures of companies within the business value chains of European countries have been ISO-verified and certified by globally recognized sustainability standard providers such as the British Standards Institution (BSI) or TÜV-SÜD. Furthermore, the use of the Carbon Connect Suite will also prepare them for the implementation of Indonesia’s carbon taxation scheme, which is currently still pending.
SW Indonesia is currently continuing to develop its Decarbonization Journey through one of its business units, SW Sustainability Center. In addition, to promote awareness and literacy on Sustainability (ESG), SW Indonesia has specifically established a training center for professionals under the SEL Southeast Asia brand.
SW Indonesia believes that successful decarbonization will bring greater economic opportunities for many. The transition to a new world with a low-carbon economy can create new economic and industrial opportunities.
