First Public consultaiton of the short version of the ACT Chemical Methodology - Accepting comments until June 28, 2021

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Chemical sector methodology

SHORT VERSION

Public consultation – May 2021

 

 

1. Introduction

 

1.1 General introduction

The 2015 United Nations Climate Change Conference (COP21) in Paris further strengthened the global recognition of limiting dangerous climate change. Political agreement was reached on limiting warming to well below 2 degrees above pre-industrial levels. The project ‘Assessing low Carbon Transition’ (ACT) measures a company's alignment with a future low-carbon world. The goal is to drive action by companies and encourage businesses to move to a low carbon pathway with regards to their climate strategy, business model, investments, operations and GHG emissions management. The general approach of ACT is described in the ACT Methodological Framework document. The public expression of short, mid and long-term emission reduction targets, is considered as a demonstration of a "willingness" (or commitment) to transition that is then compared with a specified low-carbon transition scenario that depends on the sector of activity considered (e.g. the Sectoral Decarbonization Approach developed by the Science Base Target initiative). This is then further assessed through a range of detailed indicators which the Framework provides and sector methodologies should detail. The ACT methodology is not explicitly aligned with the TCFD guidelines (1),  but they are complementary and have a common goal: help companies to manage their risks related to climate change and support them to identify opportunities provided by the shift towards a low-carbon model.

(1) Recommendations of the Task Force on Climate-related Financial Disclosure (June 2017)

The Chemical sector: a large diversity of actors and products

Figure 1 : Chemical sector value chain. From (1)

The chemical industry is a pillar of our current world economy. It aims to convert raw materials such as oil & gas products, minerals, metals or water into thousands of end-products. Different categories exist within the sector: industrial inorganic chemicals; plastics and synthetics; drugs; soap, cleaners, and toilet goods; paints and allied products; industrial organic chemicals; agricultural chemicals; and miscellaneous chemical products.

A big challenge to be addressed in the ACT Chemicals methodology is to get a rating system that works for all actors and activities in the sector.

 

Focus on the primary chemicals

On the upstream side of the value chain of the Chemical sector there are a few main chemicals, which are often referred to as ‘primary’ or ‘basic’. Petrochemistry corresponds to the transformation of crude oil and natural gas into raw materials. The main outputs are (2):

(2) Various processes can be used to obtain some of these primary chemicals, the main ones are described here.

  • Ethylene, propylene and BTX (benzene, toluene and xylenes, which are aromatic compounds) mainly resulting from naphtha cracking or fluid catalytic cracking. These chemicals are mainly used as precursors for polymers (polyethylene, polypropylene) or secondary chemicals (styrene, cumene, terephthalic acid, etc.)
  • Ammonia, methanol and hydrogen mainly resulting from natural gas reforming. Ammonia is the basis of a high share of the fertilizers used worldwide, methanol is mainly used for fuels, and hydrogen appears today as a potential key-element to decarbonize many sectors as a vector for energy transportation and storage.

The main output of inorganic chemistry is chlorine, which is used as a raw material to obtain a large panel of chemicals and products, amongst which polyvinyl chloride (PVC), one of the most common polymers.

Since the whole chemical sector relies on these several basic chemicals and since they are extremely carbo-intensive (covering approximately two thirds of the direct emissions of the entire sector), they are given a particular focus in the ACT methodology.

 

Statistics of the sector

Among heavy industries, the chemical sector accounts for 18% of the heavy industries emissions, which amounts to 1.5 GtCO2 worldwide, which corresponds to about 4% of global CO2 emissions (3).

(3) Considering annual global CO2 emissions to be 36.44 Gt (2019), data from https://ourworldindata.org/co2-emissions

Direct CO2 emissions from the production of seven primary chemicals (4) amounted to 880 MtCO2 in 2018, a nearly 4% increase from the previous year, which was driven by growth in production. Despite being the largest industrial energy consumer - accounting for 15% of total primary demand for oil on a volumetric basis and 9% of gas demand, it is the third industry subsector in terms of direct CO2 emissions behind the cement and iron & steel industries. This is largely because around half of the chemical subsector’s energy input is consumed as feedstock – where fuel is used as raw material input rather than as a source of energy.

(4) Including ammonia, ethylene, propylene, BTX, methanol.

In 2019, the amount of chemicals produced in the world reached 2 Gt with the main products being ammonia (9.3% of production, 185 Mt/year), ethylene and propylene (12.8% of production, 255 Mt/year), BTX (5.5% of production, 110 Mt/year), chlorine (3% of production, 60 Mt), methanol (5% of production, 100 Mt/year) and hydrogen (3.5% of production, 70 Mt). Energy demand from the Chemical sector is projected to increase by half by 2050, according to the IEA (5).

(5) IEA, The future of petrochemicals, 2018

 

Levers to decarbonize the sector

Since the chemical sector is highly complex and encompasses very different actors both in terms of size, activities and end-products, various solutions are available to decrease the GHG emissions of the sector. All of these solutions are not applicable to all activities, but the ACT Chemicals methodology has been designed to take into account, to the extent possible, only relevant levers of decarbonization for every assessed company. The main levers identified are:

  • Switch to renewable sources of energy for chemical processes
  • Alternatives to fossil fuels feedstocks
  • Circular economy practices
  • Energy efficiency
  • Carbon capture use and storage (CCUS) technologies

More detail about the production processes and impact of primary chemicals (related energy consumption and GHG emissions), and about the levers of decarbonization of the sector, are available in the full version of the methodology.

 

----------------------------------------------------------

This document introduces the ACT Chemicals methodology. It includes of all the elements addressed in the various segments of the chemical sector. The assessment methodology is composed of 9 modules, with quantitative indicators (GHG emissions performance, etc.) and qualitative ones (supplier engagement, management practices, etc.). A pilot (road test) phase is planned and will help test the methodology with real company data and collect feedback to improve it and make it more operational.

 

1.2 Principles of ACT methodologies

The selection of principles to be used for the methodology development and implementation is explained in the general ACT Framework. Table 2 recaps the principles that were adhered to when developing the methodology.

Table 2: PRINCIPLES FOR IMPLEMENTATION

RELEVANCE - Select the most relevant information (core business and stakeholders) to assess low-carbon transition.
VERIFIABILITY - The data required for the assessment shall be verified or verifiable.
CONSERVATIVENESS - Whenever the use of assumptions is required, the assumption shall be on the side of achieving a 2° maximum global warming.
CONSISTENCY - Whenever time series data is used, it should be comparable over time.
LONG-TERM ORIENTATION - Enables the evaluation of the long-term performance of a company while simultaneously providing insights into short- and medium-term outcomes in alignment with the long-term.

 

2. Construction of the ACT score

 

The ACT rating shall comprise:

  1. a. Performance score as a number from 1 (lowest) to 20 (highest)
  2. b. Narrative score as a letter from E (lowest) to A (highest)
  3. c. Trend score as either “+” for improving, “-” for worsening, or “=” for stable.

 

In some situations, trend scoring may reveal itself unfeasible depending on data availability. In this case, it should be replaced with a “?”.

The highest rating is thus represented as “20A+”, the lowest as “1E-” and the midpoint as “10C=”.

Performance, narrative and trend scoring shall be performed in compliance with the ACT Framework. Considering the characteristics of the Chemical sector, all the modules (performance scoring) of ACT Framework are integrated in the analysis. The scoring will depend on the position of the company in the value chain. The weighting scheme depends on whether the company is a type A, type B, or integrated player:

  • Type A companies: Companies exclusively focused on producing primary chemicals (either Ammonia, Methanol, Ethylene, Propylene, BTX, Chlorine or Hydrogen)
  • Type B companies: Companies that produce any other chemicals and do not produce any primary one as defined above.
  • Integrated companies: Companies producing both primary chemicals and other chemicals.

See Introduction section and/or the full version of the methodology to find rationales of these categories.

 

3. Scope and boundaries

 

3.1 Scope of the chemical sector

 

3.1.1 Scope of activities

The chemical industry is a complex industry with a high variety of processes and end products. Its value chain depends on the raw materials used upstream, which define whether the industry is related to petrochemicals (inputs of carbon and hydrogen as basic chemicals most commonly obtained from oil or natural gas) or not (i.e. mostly inorganic compounds, metals, minerals and organometallic elements).

Regarding the petrochemicals industry, the value chain can be divided into 4 main steps:

  1. Extraction of raw material (oil, natural gas, coal and biomass which can also be used as a feedstock for the chemical industry and while its current use as a raw material is low, it is projected to grow over the next decades)
  2. Refining of the raw material
  3. Cracking/reforming of refined feedstock (naphtha, refined gas) or other feedstock (ethane, coal, etc.)
  4. Downstream and specialty industry processing the main chemicals building blocks (HVCs, aromatics, methanol, ammonia, etc.).

The inorganic chemistry mainly aims at producing chlorine, ammonia, soda ash or caustic soda. Even though the inorganic chemistry industry may be interconnected with petrochemicals for the production of some chemicals (carbon black production, Cl2 as feedstock …), its main steps are:

  1. Mining and extraction of feedstock
  2. Intermediate processes such as the chloralkali process for the production of chlorine
  3. Downstream and fine chemistry processes.

 

Figure 2: Activities related to the chemical sector

 

 

3.1.2 Scope of the actors

 

3.2 Boundaries of the chemical sector

To assess a company in the ACT methodology for the chemical sector, the next table summarizes the categories of emissions that will be taken into account:

 

(1): The emissions can be assessed and compared with a quantitative emission reduction pathway (SDA or ACA) (6).

(2): These emissions will be assessed directly or indirectly, but will not be compared to a quantitative emission reduction pathway.

(6) Sectoral Decarbonization Approach and Absolute Contraction Approach, respectively. These two allocation methods have been designed by the Science-Based Target Initiative. See more details in full version of the methodology.

 

3.3 TYPES OF GREENSHOUSE GAS CONSIDERED

The chemical sector emits different kinds of greenhouse gases. In 2010, CO2 accounted for over three quarters of the overall chemical sector emissions on a global scale (see table below). This ratio is likely to keep increasing as the practices and technologies are spread globally: in the EU, the share of CO2 now accounts for over 95% of the sectoral emissions (CEFIC, 2020). As a consequence, CO2 is the most important contributor that should be captured by the ACT methodology.

Table 3: Weight of the Different GHG in the chemical sector's emissions, source: IPCC 5th report

Greenhouse Gas 2010 Emissions Mt CO2e Share (%)
CO2 1159 76%
HFC 207 14%
N2O 140 9%
SF6 12 1%
CH4 5 < 1%

The literature review conducted did not reveal a robust and globally accepted benchmark for the non-CO2 emissions. As a consequence, except when the Absolute Contraction Approach will be applied, the emission reduction pathways will only cover CO2 emissions (type A companies). For the other categories of companies (type B and integrated), all relevant non-CO2 emissions will be considered.

 

Figure 4: Historic of Emissions for all GHG for the EU28 Chemical sector. Source: CEFIC (7)

 

 

3.4 Scenario benchmark

 

3.4.1 Description of the benchmark

The fundamental target to achieve for all organizations is to contribute to not exceeding a threshold of 2⁰ global warming compared to pre-industrial temperatures. This target has long been widely accepted as a credible threshold for achieving a reasonable likelihood of avoiding climate instability, while a 1.5⁰C rise has been agreed upon as an aspirational target. As a consequence, low carbon scenarios used for the benchmark are Well Below 2°C scenarios or 1.5°C scenarios.

Every company shall be assessed against an acceptable and credible benchmark that aligns with the boundaries of the methodology. Three types of companies have been categorized:

  • - Type A companies: Companies producing primary chemicals (Ethylene, Propylene, Ammonia, Methanol, BTX, Chlorine and Hydrogen)
  • - Type B companies: Companies producing other chemicals
  • - Integrated companies: Companies producing both primary chemicals and other ones.

Type A companies are evaluated according to chemical-specific benchmarks, type B companies are evaluated according to a generic sectoral benchmark and integrated ones are evaluated according both as per the share of scope 1 & 2 emissions of primary chemicals and other chemicals produced.

3.4.2 Reference pathway classification

A reference pathway defines the carbon intensity (tCO2/t) pathway for a given chemical or the carbon absolute emissions (tCO2) trajectory for the general sector.

For the chemical sector, we consider 2 types of pathways:

  • The generic pathway for all chemicals
  • Specific pathways for primary chemicals (e.g. pathway related to the ammonia production).

 

3.4.3 Available reference pathways

The following data and scenarios have been used to calculate the carbon intensity pathway for primary chemicals, as defined in this methodology:

  • High-value chemicals (ethylene, propylene, BTX), ammonia and methanol: Sustainable Development Scenario (SDS) from the International Energy Agency (IEA) Energy Technology Perspective (ETP) 2020
  • Chlorine: EU Taxonomy from the European Commission (for the electricity consumption threshold) and SDS from IEA ETP 2020 (for the electricity production carbon intensity pathway)
  • Hydrogen: SDS from IEA ETP 2020 and The Future of Hydrogen from IEA

 

Figure 3: Carbon intensity pathway for all primary chemicals (8)

(8) All computation details can be found in the full version of the methodology.

As per the evaluation of Type B companies there is no SDA available and thus, we use the ACA method (Absolute Contraction Approach) developed by the SBTi methodology (9). More precisely, according to the ACA method, all companies of Type B are expected to reduce their Scope 1+2 emissions by 2.5% every year for 15 years, thus a reduction of 37,5% over a 15-years period (annual linear variation). This is the SBTi approach that corresponds to the WB2˚C scenario of IEA ETP. The contraction approach provides the company with the amount of absolute CO2e emissions that it cannot exceed.

(9) SBTi - Foundations of Science-based Target Setting - 2019

 

Figure 18: Illustration of absolute contraction approach for scope 1 and scope 2 emissions

 

Other quantitative benchmarks are used to assess companies thanks to qualitative indicators (based on a maturity matrix). They are listed in the full version of the methodology.

 

4. Performance scoring

 

4.1 Company data request

The data request will be presented to companies in a comprehensive data collection format. The following data will be requested:

  • GHG emissions (on scopes defined in the quantitative indicators from the modules 1, 2 and 4)
  • Activity data
  • Reduction targets (absolute and intensity)
  • Low-Carbon CAPEX
  • R&D in low-carbon technologies
  • Low-carbon Patenting Activity
  • Environmental policy and details regarding governance
  • Management incentives
  • Scenario testing
  • List of environmental/CSR contract clauses in purchasing & suppliers’ selection process
  • List of initiatives implemented to influence suppliers to reduce their GHG emissions, green purchase policy or track record, supplier code of conduct
  • Client policy
  • List of initiatives implemented to influence client behavior to reduce their GHG emissions
  • Company policy on engagement with trade associations
  • Position of the company on significant climate policies (public statements, etc.)
  • List and turnover or invested capital (or other financial KPI) of activities in new businesses related to low-carbon business models
  • Current position and action plan of the company towards the identified low-carbon business models

 

4.2 Description of the performance indicators

Table 5: KEY PERFORMANCE INDICATORS OF ACT CHEMICAL SECTOR ASSESSMENT

 

4.3 Performance Indicators

 

4.3.1 Targets (Weighting: 15%)

 

4.3.1.1 - CH 1.1 Alignment of scope 1+2 emissions reduction targets

Short description of indicator A measure of the alignment of the company’s scope 1+2 GHG emissions reduction targets with their low-carbon benchmark pathway. The indicator will compare the trend of company’s target pathway to the trend of company’s benchmark and thus identify the gap between both pathways at the target year, which is expressed as the company’s commitment gap.
Rationale of the indicator

Emissions reduction targets related to the Scope 1+2 are included in the ACT Chemicals assessment for the following reasons:

  1. Targets are an indicator of corporate commitment to reduce emissions, and are a meaningful metric of the company’s internal planning towards the transition.
  2. Targets are one of the few metrics that can predict a company’s long-term plan beyond that which can be projected in the short-term, satisfying ACT’s need for indicators that can provide information on the long-term future of a company.
  3. For the upstream part of the sector, direct emissions represent the highest share of emissions (1,4 GtCO2 from direct emissions in the chemical industry in 2019). A GHG emissions reduction target should be assigned to them.

 

4.3.1.2 - CH 1.2 Alignment of scope 1+2+3 emissions reduction targets

Short description of indicator A measure of the alignment of the company’s scope 1+2+3 GHG emissions reduction targets with their low-carbon benchmark pathway. Note that not all scope 3 emissions should be included but the main ones (purchased goods and services, processing, use and end-of-life treatment of sold products …). The indicator will compare the trend of company’s target pathway to the trend of company’s benchmark and thus identify the gap between both pathways at the target year, which is expressed as the company’s commitment gap.
Rationale of the indicator

Emissions reduction targets related to the Scope 1+2+3 are included in the ACT Chemicals assessment for the following reasons:

  1. Targets are an indicator of corporate commitment to reduce emissions, and are a meaningful metric of the company’s internal planning towards the transition.
  2. Targets are one of the few metrics that can predict a company’s long-term plans beyond that which can be projected in the short-term, satisfying ACT’s need for indicators that can provide information on the long-term future of a company.
  3. The Chemical companies cover a large range of activities in the sector, they take responsibility of the climate impact of Chemical products at several points in the economic chain. The Life Cycle Analysis of the Chemical products, on all the GHG scopes, is therefore a relevant tool to be used in order to embrace the diverse sources of emissions caused by the Chemical business models.
  4. For the downstream part of the sector, direct emissions represent the highest share of emissions (1.4 GtCO2 from direct emissions in the chemical industry in 2019). A GHG emissions reduction target should be assigned to them.

 

4.3.1.3 - CH 1.3 Time horizon of targets

Short description of indicator A measure of the time horizon of company targets. The ideal set of targets is forward looking enough to include a long-time horizon that includes the majority of a company’s asset lifetimes, but also includes short-term targets that incentivize action in the present.
Rationale of the indicator

The time horizon of targets is included in this ACT methodology for the following reasons:

  • The target endpoint is an indicator of how forward-looking the company’s transition strategy is.
  • Aside from communicating long-term commitments, short-term action needs to be incentivized. This is why short time intervals between targets are needed. A 5-year interval is seen as a suitable interval to ensure company is taking enough action, holding itself accountable by measuring progress every 5 years.
  • The very long expected lifetime of Chemicals infrastructure means that Chemical companies ‘commit’ a large amount of carbon emissions into the future through the assets owned today, which requires targets that have time horizons which align with this reality.

 

4.3.1.4 - CH 1.4 Achievement of past and current targets

Short description of indicator A measure of the company’s historic target achievements and current progress towards active emission reduction targets. All the scopes of the company are considered. The ambition of the target is qualitatively assessed and is not included in the performance indicators.
Rationale of the indicator

The historic target ambition and company performance is included in this ACT methodology for the following reasons:

  • The ACT assessment looks only to the past to the extent where it can inform on the future. This indicator is future-relevant by providing information on the organizational capability to set and meet emission reduction targets. Dimension 1 of this indicator adds credibility to any company claim to commit to a science-based reduction pathway.
  • Dimension 2 of this indicator adds value to the assessment of comparison to the company’s performance with respect to their targets in the reporting year.

 

4.3.2 Material Investment (Weighting: 10 - 32%)

 

4.3.2.1 - CH 2.1 Trend in past Scope 1+2 emissions intensity

Short description of indicator A measure of the alignment of the company’s recent emissions intensity for scope 1+2, with that of their decarbonization pathway. The indicator will compare the gradient of this trend over a 5-year period to the reporting year (reporting year minus 5 years) with the decarbonization pathway trend over a 5-year period after the reporting year.
Rationale of the indicator

Past performance indicator is included in this ACT methodology for the following reasons:

  • Dimension 1 (trend in past emissions intensity) shows the speed at which the company has been reducing its emissions intensity over the recent past. Comparing this to the low-carbon benchmark pathway on the same historical period gives an indication of the scale of the change that should have been made within the company to bring it onto a low-carbon pathway. Recent emissions intensity performance indicates the company’s progression towards the future emissions intensity necessary to decarbonize in-line with a low-carbon scenario.
  • Dimension 2 (Alignment of past performance with sectoral carbon budget) helps the company having an overview of its emissions exceedance in the recent past. This dimension also intends to remind that the carbon budget is set for the global economy and that each sector and each company has a defined carbon budget that cannot be exceeded to reach the overall long-term objective of limiting global warming. The sector benchmark is defined for the next years, assuming it was respected for the past years where it was already defined. The emissions overshooting the benchmark in the past correspond to accumulated CO2 that will remain in the atmosphere for decades. Hence, a company having already exceeded the benchmark should further its efforts to decrease its emissions in the near and remote future. This dimension is a ratio of the values of the emissions over a period of time in the past, as companies are very unlikely to provide data for the same period. What is considered here is the emission excess compared to the sectoral carbon budget, proportionally to the period of time.
  • While ACT aims to be as future-oriented as possible, it nevertheless does not want to solely rely on projections of the future, in a way that would make the analysis too vulnerable to the uncertainty of those projections. Therefore, this measure, along with projected emissions intensity and absolute emissions, forms part of a holistic view of company emissions performance in the past, present, and future.
  • This indicator is future-relevant by providing information on the organizational capability to meet emission reduction that is aligned with the benchmark. This indicator adds credibility to any company whose past emissions intensity were aligned with their historic benchmark and whose past carbon budget did not exceed the sectoral carbon budget.

 

4.3.2.2 - CH 2.2 Trend in future Scope 1+2 emissions intensity

Short description of indicator A measure of the alignment of the company’s future emissions intensity for scope 1+2, with that of their decarbonization pathway. The indicator will compare the gradient of this trend over a 5-year period following the reporting year (reporting year plus 5 years) with the decarbonization pathway trend over a 5-year period after the reporting year.
Rationale of the indicator

Trends in future emissions intensity from material investment are included in this ACT methodology for the following reasons:

  • The trend shows the speed at which the company needs to reduce its emissions intensity for the coming years. Comparing this to the low-carbon benchmark pathway gives an indication of the scale of the change that needs to be made within the company to bring it onto a low-carbon pathway.
  • ACT aims to be future-oriented. Therefore, this particular indicator, with projected emissions intensity, forms part of a holistic view of company emissions performance in the past, present, and future.

 

4.3.2.3 - CH 2.3 Emissions locked-in from material investment

Short description of indicator Measure of the company’s cumulative GHG emissions implied by the company’s installed and planned assets over a 15-years period from the reporting year. These locked-in emissions are compared to a theoretical portfolio with a similar locked activity per year and benchmark emissions
Rationale of the indicator

Locked-in emissions are included in this ACT methodology for the following reasons:

  • Absolute GHG emissions over time are the most relevant measure of emissions performance for assessing a company’s contribution to global warming. Furthermore, the concept of locked-in emissions allows a judgement to be made about the company’s outlook in more distant time periods than ones of the investment plans.
  • Analysing a company’s locked-in emissions alongside science-based budgets also introduces the means to scrutinise the potential cost of inaction, including the possibility of stranded assets.
  • Examining absolute emissions, along with recent and short-term emissions intensity trends, forms part of a holistic view of a company’s emissions performance in the past, present, and future.
  • The approach using the secured-activity ratio is a coherence check between the company's ambition for emissions reduction, and its investments (and the inevitable emissions associated). It allows showing the leeway for future investments and alerts for the cost of inaction and the risk of stranded assets.

 

4.3.2.4 - CH 2.4 Low carbon, mitigation carbon removal technologies CAPEX share

Short description of indicator A measure of the alignment of the company’s planned CAPEX, i.e. investment by the company, for the next five years in low carbon, mitigation and carbon removal technologies with their pathway required in the low-carbon scenario.
Rationale of the indicator

Investments planning related to the company’s low-carbon and mitigation technologies and carbon removal technologies CAPEX are included in this ACT methodology as CAPEX planification is an indicator of corporate commitment to a low-carbon transition, and is a meaningful metric of the company’s internal planning towards the transition.

Although this indicator may be based on a specific ratio in other ACT methodologies, no benchmarks are available for this sector. Therefore, thresholds have been defined accordingly.

 

4.3.2.5 - CH 2.5 Energy management

Short description of indicator A measure of the company’s energy management actions at the reporting year. The indicator will evaluate the implementation of global recommendations to decarbonize the assets consuming energy.
Rationale of the indicator The goal with this indicator is to integrate the specificity of electrolysis-based productions which is very electric-intensive without focusing on it. It was extended to the overall energy demand of companies.

 

4.3.3 Intangible investment (weighting: 5 - 10%)

 

4.3.3.1 - CH 3.1 R&D in low-carbon, mitigation and carbon removal technologies

Short description of indicator A measure of the ratio of R&D costs/investments in low-carbon, mitigation and carbon removal technologies. The indicator identifies the ratio between the company’s R&D investment in low-carbon, mitigation and carbon removal technologies and total R&D investments.
Rationale of the indicator

R&D in low-carbon technologies is included in the ACT Chemicals assessment for the following reasons:

  • To enable the transition, the sector where there are technological stakes relies heavily on the development of low-carbon solutions to replace its currently high emitting systems
  • R&D is one of the main proactive action to develop these technologies.
  • R&D is also one of the main tools to reduce the costs of a technology in order to increase its market penetration.
  • Aside from technology, companies can also invest into R&D on operational practices to optimize the carbon impact where they have direct responsibility.
  • Lastly, the R&D investment of a company into non-mature technologies and practices allows for direct insight in the company’s commitment to alternative technologies that may not currently be part of its main business model.

Although this indicator may be based on a specific ratio in other ACT methodologies, no benchmarks are available for this sector. Therefore, thresholds have been defined accordingly.

 

4.3.3.2 - CH 3.2 Company Low-carbon Patenting Activity

Short description of indicator A measure of the company patenting activity related to low-carbon technologies. The indicator identifies the ratio between the company’s patent activity for the last 5 years and average patenting activity linked to climate change of the sector.
Rationale of the indicator

The indicator on CCMTs patenting activity is complementary to the one dedicated to R&D in low-carbon technologies, as it monitors the technology diffusion whereas R&D expenditures monitor the technology development.

It is included in this ACT Chemicals methodology for the following reasons:

  • To enable the transition, the sector where there are technological stakes relies heavily on the development of low-carbon solutions to replace its currently high emitting systems
  • Patent data are commensurable because patents are based on an objective standard (OECD 2015)
  • Patent data measure the intermediate outputs of an inventive process, where R&D data expenditures measure the input (OECD 2015)
  • Patent data can be disaggregated into specific technological fields (OECD 2015)

 

4.3.4 Sold product performance (weighting 2-20%)

 

4.3.4.1 - CH 4.1 TREND IN PAST PRODUCTS SPECIFIC PERFORMANCE

Short description of indicator A measure of the alignment of the company’s past sold or purchased product absolute emissions trend with its low-carbon benchmark pathway. The indicator will compare the gradient of this trend over a 5-year period to the reporting year (reporting year minus 5 years) with the low-carbon benchmark pathway trend over a 5-year period after the reporting year.
Rationale of the indicator

Trend in past absolute emissions is included in this ACT methodology for the following reasons:

  • The trend shows the speed at which the company has been reducing its emissions intensity over the recent past. Comparing this to the low-carbon transition pathway gives an indication of the scale of the change that needs to be made within the company to bring it onto a low-carbon pathway.
  • While ACT aims to be as future-oriented, it nevertheless does not want to solely rely on projections of the future, in a way that would make the analysis too vulnerable to the uncertainty of those projections. Therefore, this measure, along with projected emissions intensity and absolute emissions, forms part of a holistic view of company emissions performance in the past, present, and future.

 

4.3.4.2 - CH 4.2 Trend in future product specific performance

Short description of indicator A measure of the alignment of the company’s future sold or purchased product absolute emissions trend with its low-carbon benchmark pathway. The indicator will compare the gradient of this trend with the low-carbon benchmark pathway trend over a 5-year period after the reporting year.
Rationale of the indicator

Trends in future products specific performance are included in this ACT methodology for the following reasons:

  • The trend shows the speed at which the company needs to reduce its absolute emissions for the coming years. Comparing this to the low-carbon benchmark pathway gives an indication of the scale of the change that needs to be made within the company to bring it onto a low-carbon pathway.
  • ACT aims to be future-oriented. Therefore, this particular indicator, with projected absolute emissions, forms part of a holistic view of company emissions performance in the past, present, and future.

 

4.3.4.3 - CH 4.3 Ammonia Feedstock

Short description of indicator The indicator aims at assessing alignment of the feedstock used for ammonia production to a below 2°C scenario.
Rationale of the indicator The indicator aims at addressing the specificities of ammonia production. Almost 100% of hydrogen used as an input for the production of ammonia through the Haber-Bosch process today comes from fossil fuels (10). As decarbonizing the ammonia production can’t be performed without defossilizing its feedstock, this indicator accounts for the share of low-carbon feedstock derived from electrolysis.

(10) https://www.lelementarium.fr/product/methanol/

 

4.3.4.4 - CH 4.4 Methanol Feedstock

Short description of indicator The indicator aims at assessing alignment of the feedstock used for methanol production to a below 2°C scenario.
Rationale of the indicator The indicator aims at addressing the specificities of methanol production. Almost all of hydrogen used as an input for the production of methanol today comes from fossil fuels10. As decarbonizing the methanol production can’t be performed without defossilizing its feedstock, this indicator accounts for the share of low-carbon feedstock derived from electrolysis.

 

4.3.4.5 - CH 4.5 High Value Chemicals (HVC) Feedstock

Short description of indicator The indicator aims at assessing alignment of the feedstock used for HVC production to a below 2°C scenario.
Rationale of the indicator

Share of bio-based content in the HVC production of the company is included in this ACT methodology for the following reasons:

  • Switching feedstock from fossil-based to bio-sourced material is key to engage the decarbonation of the chemical sector. Incorporation of bio-based content can be measured with the share by weight of the overall material constituting the products sold by the company assessed.
  • Sourcing in a sustainable way and incorporating bio-based material within products can prove more energy-intensive than the conventional fossil-based technological route. This increase of energy consumption and associated GHG emissions, whether within the company’s perimeter or upstream, will not be captured by this indicator – it will however be reflected in the scope 1-2-3 emissions of indicators 1.2, 4.1 and 4.2 and in the scope 1-2 emissions of indicators 1.1, 2.1 and 2.2.

 

4.3.4.6 - CH 4.6 Recycled content of products sold

Short description of indicator An analysis of the company’s share of recycled content within the products sold.
Rationale of the indicator

Share of recycled content in the total product portfolio of the company is included in this ACT methodology for the following reasons:

  • Switching feedstock from fossil-based to e.g. secondary raw material is key to engage the decarbonation of the chemical sector. Incorporation of recycled content can be measured with the share by weight of the overall material constituting the products sold by the company assessed.
  • Recycling and incorporating secondary raw material within products can prove more energy-intensive than the conventional fossil-based technological route. This increase of energy consumption and associated GHG emissions, whether within the company’s perimeter or upstream, will not be captured by this indicator – it will however be reflected in the scope 1-2-3 emissions of indicators 4.1 and 4.2.

 

4.3.4.7 - CH 4.7 Bio-based content of products sold

Short description of indicator An analysis of the company’s share of bio-based content within the products sold. The indicator is specific to type B companies.
Rationale of the indicator

Share of bio-based content in the total product portfolio of the company is included in this ACT methodology for the following reasons:

  • Switching feedstock from fossil-based to bio-sourced material is key to engage the decarbonation of the chemical sector. Incorporation of bio-based content can be measured with the share by weight of the overall material constituting the products sold by the company assessed.
  • Sourcing in a sustainable way and incorporating bio-based material within products can prove more energy-intensive than the conventional fossil-based technological route. This increase of energy consumption and associated GHG emissions, whether within the company’s perimeter or upstream, will not be captured by this indicator – it will however be reflected in the scope 1-2-3 emissions of indicators 1.2, 4.1 and 4.2 and in the scope 1-2 emissions of indicators 1.1, 2.1 and 2.2.

 

4.3.5 Management indicators (weighting: 12%)

 

4.3.5.1 - CH 5.1 Oversight of climate change issues

Short description of indicator The company discloses that responsibility for climate change within the company lies at the highest level of decision making within the company structure.
Rationale of the indicator Successful change within companies, such as the transition to a low-carbon economy, requires strategic oversight and buy-in from the highest levels of decision-making within the company. For the Chemical sector, a change in strategy and potentially business model will be required and this cannot be achieved at lower levels within an organization. Evidence of how climate change is addressed within the top decision-making structures is a proxy for how seriously the company takes climate change, and how well integrated it is at a strategic level. High-level ownership also increases the likelihood of effective action to address low-carbon transition.

 

4.3.5.2 - CH 5.2 Climate change oversight capability

Short description of indicator Company board or executive management has expertise on the science and economics of climate change, including an understanding of policy, technology and consumer drivers which can disrupt current business.
How the assessment will be done

The presence of expertise on relevant topics to climate change and low carbon transition within the individual or committee with overall responsibility for it within the company will be assessed. The presence of expertise is the condition that must be fulfilled for points to be awarded in the scoring.

The analyst will determine if the company has expertise as evidenced through a named expert biography outlining capabilities. A cross check will be performed against 5.1 on the highest responsibility for climate change, the expertise should exist at the level identified or the relationship between the structures/experts identified should also be evident.

 

4.3.5.3 - CH 5.3 Low-carbon transition plan

Short description of indicator The company has a plan on how to transition the company to a business model compatible with a low-carbon economy.
Rationale of the indicator The Chemical sector will require substantial changes to their business to align to a low-carbon economy, over the short, medium and long term, whether it is voluntarily following a strategy to do so or is forced to change by regulations and structural changes to the market. It is better for the success of its business and of its transition that these changes occur in a planned and controlled manner.

 

4.3.5.4 - CH 5.4 Climate change management incentives

Short description of indicator The Board’s Compensation Committee has included metrics for the reduction of GHG emissions in the annual and/or long-term compensation plans of senior executives; the Company provides monetary incentives for the management of climate change issues as defined by a series of relevant indicators.
Rationale of the indicator

Executive compensation should be aligned with overall business strategy and priorities. As well as commitments to action the company should ensure that incentives, especially at the executive level, are in place to reward progress towards low-carbon transition. This will improve the likelihood of successful low carbon transition.

Monetary incentives at the executive level are an indication of commitment to successful implementation of a strategy for low carbon transition.

 

4.3.5.5 - CH 5.5 Climate change scenario testing

Short description of indicator Testing or analysis relevant to determining the impact of transition to a low-carbon economy on the current and projected business model and/or business strategy that has been completed, with the results reported to the board or c-suite, the business strategy revised where necessary, and the results publicly reported.
Rationale of the indicator

Economical changes predicted to occur due to climate change could have a number of consequences for the chemical sector, including increased costs, a dramatically changed operating environment and major disruptions to the business. There are a variety of ways of analyzing the potential impacts of climate-related changes on the business, whether these are slow and gradual developments or one-off “shocks”. Investors are increasingly calling for techniques such as scenario analysis and stress testing to be implemented to enable companies to calculate the value-at-risk that such changes could pose to the business. As this practice is emergent at this time there is currently no comprehensive survey or guidance on specific techniques or tools recommended for the sector. The ACT methodology thus provides a broad definition of types of testing and analysis which can be relevant to this information requirement, to identify both current and best practices and consider them in the analysis.

Scenario stress testing is an important management tool for preparing for low-carbon transition. For businesses likely to be strongly affected by climate change impacts (both direct and indirect), it has even greater importance.

 

4.3.5.6 - CH 5.6 Carbon pricing integration

Short description of indicator Setting an internal carbon price to evaluate the impact of transition to a low-carbon economy on the current and projected business model and/or business strategy that has been completed, with the results reported to the board or c-suite, the business strategy revised where necessary, and the results publicly reported.
Rationale of the indicator Carbon pricing is a way to analyze the potential impacts of climate-related changes on the business. Investors are increasingly calling for the setting of an internal price on carbon to enable companies to calculate the value-at-risk that climate change changes could pose to the business. As this practice is emergent there is currently no comprehensive survey or guidance on specific techniques or tools recommended for the sector.

 

4.3.6 Supplier engagement indicators (weighting: 10-17%)

 

4.3.6.1 - CH 6.1 Strategy to influence suppliers to reduce their GHG emissions

Short description of indicator This indicator assesses the strategic policy and the process which are formalized and implemented by the company in order to engage its suppliers.
Rationale of the indicator

Supplier engagement is included in the ACT Chemicals assessment for the following reasons:

  1. Given their size and their decision-making power in the value chain, integrated companies have the ability to influence the strategy and performance of suppliers regarding climate.
  2. The upstream segment represents a high source of emissions throughout the value chain (>60% of the total GHG emissions (11) of the Chemicals value chain) and should be engaged. The weight of this indicator depends on the position of the company in the value chain and whether it has influence on its suppliers.
  3. Engaging suppliers through contract clauses and sales incentives is necessary to take them on board.

(11) ARC Energy Research Institute, using input data from the US Department of Energy National Energy Technology Laboratory to define the US Refined Average (2014)

 

4.3.6.2 - CH 6.2 Activities to influence suppliers to reduce their GHG emissions

Short description of indicator This indicator assesses initiatives and the partnerships launched by the company in order to engage its suppliers.
Rationale of the indicator

Activities to influence suppliers are included in the ACT Chemicals assessment for the following reasons:

  1. Given their size and their decision-making power in the value chain, integrated companies have the ability to influence the strategy and performance of suppliers regarding climate.
  2. The upstream segment represents a high source of emissions throughout the value chain (>60% GHG emissions of the Chemicals value chain) and should be engaged. However, the weight of this indicator depends on the position of the company in the value chain and whether it has influence on its suppliers.
  3. Engaging suppliers through contract clauses and sales incentives is necessary to take them on board.

 

4.3.7 Clients engagement indicators (Weighting: 4 - 6%)

 

4.3.7.1 - CH 7.1 Strategy to influence customer behaviour to reduce their GHG emissions

Short description of indicator This indicator assesses the level of engagement that the company has with its clients, based on an assessment of the client policy formalized and implemented by the company.
Rationale of the indicator

Strategy to influence customers are included in the ACT Chemicals assessment for the following reasons:

  1. Given their size and their decision-making power in the value chain, integrated companies have the ability to influence the strategy and performance of clients regarding climate.
  2. The downstream segment represents less emissions but is not to be neglected and should be engaged. The weight of this indicator depends on the position of the company in the value chain and whether it has influence on its clients.

 

4.3.7.2 - CH 7.2 Activities to influence customer behaviour to reduce their GHG emissions

Short description of indicator This indicator assesses the level of engagement that the company has with its clients, based on an assessment of previous initiatives that show whether or not the company engages with clients in various ways.
Rationale of the indicator

Activities to influence customers are included in the ACT Chemicals assessment for the following reasons:

  1. Given their size and their decision-making power in the value chain, integrated companies have the ability to influence the strategy and performance of clients regarding climate.

The downstream segment represents less emissions but is not to be neglected and should be engaged. The weight of this indicator depends on the position of the company in the value chain and whether it has influence on its clients.

 

4.3.8 Policy engagement indicators (Weighting: 5%)

 

4.3.8.1 - CH 8.1 Company policy on engagement with trade associations

Short description of indicator The company has a policy on what action to take when industry organizations to which it belongs are found to be opposing “climate-friendly” policies.
Rationale of the indicator

Trade associations are a key instrument by which companies can indirectly influence policy on climate. Thus, when trade associations take positions, which are negative for climate, companies need to take action to ensure that this negative influence is countered or minimized.

This indicator is consistent with ACT philosophy and common to the other sectoral methodologies.

 

4.3.8.2 - CH 8.2 Trade associations supported do not have climate-negative activities or positions

Short description of indicator The company is not on the board or providing funding beyond membership of any trade associations that have climate-negative activities or positions. It should also be considered if the company is supporting trade associations with climate-positive activities and/or positions.
Rationale of the indicator Trade associations are a key instrument by which companies can indirectly influence policy on climate. Participating in trade associations which actively lobby against climate-positive legislation is hence, a negative indicator and likely to obstruct low-carbon transition. However, membership in association that supports climate positive policies should also be considered in the analysis.

 

4.3.8.3 - CH 8.3 Position on significant climate policies

Short description of indicator The company is not opposed to any significant climate relevant policy and/or supports climate friendly policies.
Rationale of the indicator Private and public stakeholders of the Chemical sectors have been developing initiatives about sustainable practices that contribute to the transition to a low-carbon economy. Companies should not oppose effective and well-designed regulation in these areas, but should support it. Assessing the position of the company regarding the evolution of the context is thus key to understand the corporate vision in these matters.

 

4.3.9 Business model indicators (Weighting: 10%)

 

4.3.9.1 - CH 9.1 Business activities that develop low-carbon, mitigation and carbon removal technologies

Short description of indicator The company is actively developing business models for a low-carbon future by demonstrating its application of low-carbon business model pathways. The innovative business models that have been identified as being strategic for the company’s low-carbon transition are the ones that develop low-carbon, mitigation and carbon removal technologies.
Rationale of the indicator

In addition to developing sustainable practices, a company may transition its business model to other areas to remain profitable in a low-carbon economy. The company’s future business model should enable it to decouple financial results from GHG emissions, in order to meet the constraints of low-carbon transition while continuing to generate value. The business model shifts identified do not conflict with the changes that are implied by decarbonizing the company’s Integrated Chemicals business model.

This indicator aims to identify both relevant current business activities, and those still at a burgeoning stage. It is recognized that promoting CCS/CCUS, with associated change in business models, is a high lever of CO2 emissions reduction in the chemical sector. The assessment will thus seek to identify and reward projects at an early stage as well as more mature business activities, although the latter (i.e. substantially sized, profitable, and/or expanding) business activities will be better rewarded.

 

4.3.9.2 - CH 9.2 Business activities that develop products enabling energy transition

Short description of indicator The indicator aims at valuing companies which chemicals manufactured are key for the transition of the economy to a low carbon one.
Rationale of the indicator

See first paragraph of the rationale for 9.1.

The chemical industry as a major industry in terms of capital and emissions share in the global total needs to reduce its own emissions but should also support other industries to decarbonize. Some chemicals are indeed key components for some low carbon transition activities to occur. The assessment will thus seek to identify and reward companies whose products sold are essential to activities enabling the transition.

 

4.3.9.3 - CH 9.3 Business activities that promote circular economy

Short description of indicator The company is actively developing business models around circular economy, in participating in business activities associated with reuse and recycling of material.
Rationale of the indicator See Rationale for 9.1.

 

4.4 Weightings

The weightings have been designed for each the three types of companies mentioned along the document: Type A, Type B, and integrated companies. This aims at reflecting the strategic stakes which are different from a chemical company to another mostly according to its position along the chemical sector value chain. For the sake of the dynamic weighting companies will have to disclose the share of their scope 1 & 2 emissions attributable to each of its products.

The full version of the methodology displays the weightings for all indicators. The parameters that have been designed to get a dynamic scoring (depending on the companies’ activities) are presented.

 

4.5 Rationale for weightings

The selection of weights for both the modules and the individual indicators was guided by a set of principles. These principles helped define the value of the indicators. The full version of the methodology includes the weightings rationales at the indicators level.

Principle Explanation
Value of information The value of the information that an indicator gives about a company’s outlook for the low-carbon transition is the primary principle for the selection of the weights.
Impact of variation A high impact of variation in an indicator means that not performing in such an indicator has a large impact on the success of a low-carbon transition, and this makes it more relevant for the assessment.
Future orientation Indicators that measure the future, or a proxy for the future, are more relevant for the ACT assessment than past & present indicators, which serve only to inform the likelihood and credibility of the transition.
Data quality sensitivity Indicators that are highly sensitive to expected data quality variations are not recommended for a high weight compared to other indicators, unless there is no other way to measure a particular dimension of the transition.

 

5. Aligned state

The table below presents the response of a low-carbon aligned company of the sector to the 5 questions of ACT:

→ What is the company planning to do? [Commitment]

→ How is the company planning to get there? [Transition Plan]

→ What is the company doing at present? [Present]

→ What has the company done in the recent past? [Legacy]

→ How do all of these plans and actions fit together? [Consistency]

 

 

1 2 3 4 5
The company has set emissions reduction targets on the major segments of its value chain. These objectives are aligned with a relevant time horizon which reflects the lifetime of the company, its products and services. The company understands where in the value chain the majority of its embedded emissions are. Therefore, the company discloses a transition plan that details operation steps to achieve their objectives. Current strategies and actions aim at reducing operational emissions and leverage its market position to drive change across the value chain from upstream to downstream activities. Clear evidence of reducing operational emissions, and a strong track record of successful intervention in the value chain that highlights the company’s ability and will to enact change beyond its direct emissions. The company’s targets, transition plan, present and past actions show a consistent willingness to achieve the goals of the transition. The company operates as the connection between clients and suppliers to address all relevant emissions in the value chain and holds its due place in the circular economy.

Figure 4 : ALIGNED STATE FOR COMPANIES IN THE SECTOR

 

 

6. TWG members

ACT O&G methodology has been developed with inputs and feedbacks from members of the ACT Chemicals Technical Working Group. The methodology may not reflect TWG members’ opinions. The ACT initiative warmly thanks the following people for their inputs and feedbacks.

Table 8: List of TWG members (external to the Steering committee)

Organisation Name
ADEME Marlène Dresch, Julie Georges, Yann Rosetti
Agora Energiewende Oliver Sartor
Borealis Bertrand Walle
Cabot Corporation Gordon Reynolds
Candriam Arnaud Peythieu
CDP Alice De Palma
Climate Check Patrick Hardy
DECHEMA Florian Ausfelder
Deloitte Joel Neave, Julien Paulou
ECO2 Initiative Rémi Marcus
Firmenich William Gischlar
France Chimie Sylvain Le Net
Grantham Institute Gbemi Oluleye
Icare Tony Jugan, Nikolaos Kordevas, Olivier Polidori
INC@CNRS Jean-François Gérard
Inovyn Cyril Menard
International Energy Agency Peter Levi
JRC Jose Moya
JRC (previously) Aikaterini Boulamanti
Kemira Chemicals Mark Wenclawiak
Mosaic Company Natali Archibee
Nippon Paint Holding Yuji Matsushita
Sabara Giovanna Cappellano
SBTi Nate Aden, Kylee Chang
Synthos Norbert Eichler
Vencorex Philippe Barbeau
Welya SAS Olivier Pons Y Moll
Yara Susan Giles
Yygdrasill Yves Lenain

 

7. Integration of Physical risks and Adaptation in ACT

 

7.1 Introduction and context

This is a first version of a maturity matrix that aims to integrate climate physical risks and adaptation in ACT.

A specific method will be developed with a separate score, modules specific to climate risks and adaptation, and a possible joint assessment with the mitigation part of ACT. This is a first draft of its integration in ACT historical assessment method.

To be noted :

  • Each line (row) of the matrix corresponds to a category that is independent from others. Categories are just grouped by module. The matrix is composed of two dimensions, the physical climate risks and adaption. Each of these dimensions contains several modules.
  • Scores and weightings are detailed in this document.
  • The lists of impacts and vulnerabilities for the different activities of a company along its value chain are not exhaustive. Any other impact or vulnerability that is relevant for the company can be considered and analysed.
  • Any comment or feedback is welcome.
  • Two questions are for consultation.
  • A glossary of climate physical risks and adaptation terms is available in the longer version of this document.

7.2 Maturity Matrix

The two dimensions of the maturity matrix are climate physical risks and adaptation.

Physical climate risks correspond to the potential for negative consequences from physical climate events or trends. Risks from climate change impacts arise from the interaction between hazard (triggered by an event or trend related to climate change), vulnerability (susceptibility to harm) and exposure (people, assets or ecosystems at risk) (from IPCC, 2014).

Hazards refer to the potential occurrence of a natural or human-induced physical event or trend or physical impact that may cause loss of life, injury, or other health impacts, as well as damage and loss to property, infrastructure, livelihoods, service provision, ecosystems and environmental resources. In this note, the term hazard usually refers to climate-related physical events or trends or their physical impacts. Thus, it includes processes that range from brief events, such as severe storms, to slow trends, such as multi-decade droughts or multi-century sea level rise (from IPCC, 2014).

Exposition is the degree to which a company’s value chain (e.g., assets, operations, supply chain, customers) has the potential to be impacted by physical climate hazards due to its geographic location. These metrics should link part of a company’s value chain (e.g., physical assets) with specific physical climate hazards (e.g., tropical cyclones) (from IPCC, 2014).

Vulnerability is the propensity of different parts of a company’s value chain to suffer negative impacts when exposed to and then impacted by physical climate hazards. These metrics should assess specific characteristics of a company’s value chain (e.g., water intensity) that may make that part of the value chain more or less likely to suffer negative impacts from physical climate hazards (WRI, 2021).

The second dimension of the matrix is adaptation. It is the process of adjustment to actual or expected climate and its effects. In human systems, adaptation seeks to moderate or avoid harm or exploit beneficial opportunities. In some natural systems, human intervention may facilitate adjustment to expected climate and its effects.

Adaptation options exist in all sectors, but their context for implementation and potential to reduce climate-related risks differs across sectors and regions. Some adaptation responses involve significant co-benefits, synergies and trade-offs (from IPCC, 2014).

Here is presented a summary of the maturity matrix with a short description of each indicator. You can find the full maturity matrix in the full ACT Chemicals methodology version.

Here is an example, for one indicator, of the 5-level physical risks and adaptation maturity matrix:

 

7.3 Weightings

The weightings on 100% are distributed equally among Physical risks and Adaptation dimensions. Analysis and Organizational capacity modules are both fixed to 25%. If a company is not concerned by one or several modules between Supply chain, Production, Logistics or Demand, the analyst can decide

  • To attribute a weighting of 0% for it and to redistribute the corresponding weightings
  • To change marginally the weightings between these four modules for another distribution that could be more appropriate for the company

The final score of the complete matrix will be computed on 20 thanks to a weighted average. Two other scores will be computed, the physical risks score on 100% and the adaptation score on 100%.

Do you think this scoring is appropriate? What about the weightings?

 

7.4 Questions for consultation

 

Question 1: How do we want to assess the “Demand and sales” (5) aspect for the company?

 

OPTION 1: keep the module as it is now

OPTION 2: Modify the « Demand & sales » module (5) to make it more business related and integrate more in it the notion of climate-related opportunities, as well as keeping the risks analysis dimension

 

Question 2: How do we want to address the notion of climate-related opportunities in the matrix?

 

Climate-related opportunities in the ACT framework are defined as follow:

It is the potential positive impacts related to climate change on an organisation. It will vary depending on the region, market and industry in which an organisation operates. In the ACT framework, climate-related opportunity focuses on opportunities to adapt to market shifts driven by physical climate impacts and cater to any resulting new market needs, that is to say, the fundamental shifts in climate over the longer term may affect value chains and drive new consumer needs. For example, technology to keep buildings cool, along with water- and energy-efficient technologies, or crops that are better suited to chronic changes in precipitation and temperature. (EBRD)

  • OPTION 1: Add « Identification climate-related opportunities related to climate change » at the low-carbon aligned level in the matrix for
    • Analysis module (1)
    • Production module (3)
  • OPTION 2: Modify the « Demand & sales » module (5) to make it more business related and integrate more in it the notion of climate-related opportunities, as well as keeping the risks analysis dimension.
Technical coordination and ACT Co-founders
   
supported by:

 

 

   
Technical assistance

 

 

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Quality assurance and quality control

 

 

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