I celebrated Canada Day this year visiting family and friends in Nova Scotia and enjoying the ocean views. I had many lively conversations while I was there, but one topic was inescapable: the current and unprecedented nationwide wildfire situation. The conditions for it, my local hosts were certain (at least for the fires that threatened the greater Halifax area in May and June), had been set the previous September with Hurricane Fiona, which knocked down a huge number of trees that laid still on the forest floor, drying into a vast and massive tinder box.
And with that, it all came into focus. The wildfire situation is ultimately linked to the increasing accumulation of carbon in our atmosphere and the interconnected impacts of climate change—also the reason why now, more than ever, organizations are feeling the urgency to decarbonize. We are in crisis, yes. But amid evolving regulations, market volatility, skyrocketing energy costs and intense competition for capital lies significant opportunity—not only to improve quality of life by mitigating the effects of climate change, but also creating a more resilient and prosperous economy, today and for future generations.
For years, organizations of varying sizes across numerous sectors have been hard at work building the foundations of robust and forward-looking decarbonization strategies. KPMG has helped several of them to quantify current emissions, establish priorities and develop reduction targets.
Building on this foundation, many companies made ambitious commitments and timelines to reduce their carbon emissions. As deadlines draw closer, these companies are entering the next phase in the decarbonization process—where the real challenges lie. This means working to develop detailed climate transition plans, to deliver on the projects and initiatives previously identified, to operationalize and integrate decarbonization efforts with broader business strategy and to establish monitoring, reporting and feedback mechanisms that can track progress and inform future actions. Taken together, this is what I mean by the race to decarbonize.
Canada’s federal government, meanwhile, has committed to reducing carbon emissions by 40 to 45 per cent by 2030 and has introduced several funding and incentive programs designed to accelerate the development and adoption of low carbon solutions in the private sector. These government programs—including those introduced in the clean-tech-focused 2023 federal budget—can help ease the financial burden for businesses as they work to reduce their operational emissions. For many companies, the cost-benefit equation of undertaking integrated decarbonization projects now tips in favour of action.
Alongside this inflow of government funding, organizations that commit to decarbonizing also stand to realize a competitive advantage relative to their peers. Companies committed to meaningful climate goals have an edge in attracting talent and investors, and in improving their reputation with customers. These companies will also be well-positioned to weather rising prices for fossil fuels, growing regulatory pressures around climate risk management, reporting and disclosure, and evolving stakeholder expectations. A company’s commitment to decarbonization is also becoming an increasingly important factor for capital providers and lenders when assessing value and managing risk within their portfolios.
In 2022, 72 per cent of Canada's top 200 companies by revenue reported on their carbon reduction targets, and the participation rate is growing year over year. It’s imperative now for these organizations to take meaningful action to meet their commitments, moving from strategy at the Board and C-suite levels to implementing decarbonization solutions at the asset level.
To support our clients with this transition, KPMG’s cross-functional team of subject matter advisors (including our Decarbonization Hub—a centre of excellence for implementing decarbonization solutions) helps public and private sector organizations navigate the full range of decarbonization opportunities as they mobilize resources and make the critical investments needed to achieve carbon reduction targets.
These opportunities include:
- Emissions reduction solutions, interventions that can be implemented at the source of emissions, addressing operational and embodied carbon.
- Energy transition solutions, such as the development of low-carbon energy sources, along with transport and storage infrastructure, to decarbonize energy systems.
- Carbon capture and removal solutions, including future-focused technologies to capture or remove carbon from the atmosphere through technology or nature-based solutions.
Keeping the pace
But the transition to net zero doesn’t come without its challenges. Implementing an integrated, effective decarbonization strategy involves a significant investment of capital and resources. Organizations are trying to balance the need to maintain affordable products and services with the increasing costs of transitioning to low-carbon operations, and competition for capital grows every time someone new joins the race.
There is also the matter of regulatory and market uncertainty. The lack of consistent and predictable policy and market changes related to carbon makes it difficult for clients to anticipate the future and plan for it, raising questions around timelines and feasibility in the process.
The absence of high-quality data and technology is another challenge. Decarbonization projects are often prioritized, planned and delivered without sufficient data to accurately forecast, validate and report on emission reductions. But new software solutions are helping organizations gather data and assess current emissions, run scenarios to validate decarbonization levers, and monitor the performance of their decarbonization investments. For investors, these software solutions provide the opportunity to assess decarbonization potential and support due diligence for new assets.
So, yes, the race is on, and I look forward to cheering on the contenders and helping them train and improve and persevere. After all, all of us are dependent on their success.
With one of Canada’s largest infrastructure advisory practices with a national network of leading ESG specialists, KPMG is committed to bringing the right knowledge and experience at all stages of your decarbonization journey. Learn more about how our experienced and innovative team can help you transform decarbonization challenges into growth opportunities here.
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