The Climate Q&A…
with Brad Schallert, Director of Net Zero Climate Services, Winrock International
Brad Schallert has more than 15 years of experience in the field of climate change. His areas of expertise include carbon credit markets, international climate negotiations, climate policy design, voluntary corporate climate strategies, and aviation climate strategy. Brad joins Winrock after 10 years at the World Wildlife Fund (WWF-US) where he led work on carbon markets and aviation, and helped launch cross-departmental projects including We Are Still In, the largest and most diverse coalition ever established in pursuit of climate action in the U.S.
You are Winrock International’s new Director of Net Zero Climate Services. Can you tell us why you joined Winrock and what some of your goals are?
Winrock for me has always had a reputation as a pragmatic, results-oriented organization. When I was a Peace Corps Volunteer in Cameroon, I saw their work in action. Winrock has long been a leader in the climate change arena having been an early pioneer of the voluntary carbon market through the American Carbon Registry – the first private voluntary greenhouse gas registry in the world. Winrock has a reputation as a center of excellence on land-based carbon accounting methods. I’m excited to help expand our work with companies, investors, and governments to establish and operationalize bold climate strategies.
If I’m a CEO or a corporate board member and asked: “What’s the business case or market argument for transitioning to net zero?” How would you answer?
Companies are increasingly being asked by investors and government regulators about risks to their businesses posed by climate change. Companies, more than ever, have to demonstrate to investors that they can weather physical risks of our warming planet ─ more abundant and intense floods, droughts, hurricanes, etc. They also must show how they will be viable companies in a business environment, which will likely ─ and hopefully ─ have more and more stringent climate policies and regulations. The U.S. Securities and Exchange Commission’s new draft environmental, social and governance investments disclosure rule and other similar disclosure laws in Singapore, the U.K., and the European Union could be just the tip of the iceberg. This is looking at it from a risk perspective, but CEOs and other executives in the C-Suite should also be looking at the opportunities that setting a net zero strategy provide.
For many years, leading companies have been investing in energy efficiency measures and renewable energy, because it can make good business sense. Even so, other capital expenditure opportunities might still look more attractive to a CEO, CFO or board member. But in these times of economic uncertainty, the C-Suite should be giving profitable, emissions-cutting activities an even closer look to improve their company’s near-term balance sheet while preparing for a regulatory environment that will reward lower-carbon companies, which would in turn lead to long-term competitiveness.
Should carbon credits be an integral part of a company’s net zero strategy? And if so, how can carbon credits help the world limit additional warming to 1.5 degrees Celsius?
The most integral part of a company’s climate mitigation strategy should be its own operational emissions, called Scope 1 and 2 emissions, then the other emissions in its value chain, known as Scope 3, and then investments beyond its value chain like carbon credits. This order of operations is what climate experts commonly call the climate mitigation hierarchy. Another way to understand the hierarchy is that every company has limited resources, so it’s important for companies to focus on delivering the greatest benefit to the climate based on the unique capacities and influence their companies wield. This is not to diminish the impact or necessity of carbon credit markets. We need every tool in the box to keep global temperature rise to no more than 1.5C, and potentially even lower than 1.5C. Companies will still generate annual emissions from their activities even with advanced efforts to reduce their emissions to zero. This is why many companies choose to take responsibility for these emissions and counterbalance them by paying others to reduce their emissions ─ or to remove carbon from the atmosphere and store it. Buying and retiring carbon credits ─ or offset credits depending on one’s choice of terminology ─ is one of the most turn-key ways for companies to put the “net” in “net zero.”
Scope 3 emissions – those resulting from activities or assets not owned or controlled by a company ─ are often cited as the most difficult for companies to tackle. Why is Scope 3 so thorny, and how can Winrock help?
Companies struggle with Scope 3 emissions for many reasons. First and foremost, emissions data from their suppliers is often nonexistent, incomplete or lacking in other ways. That makes it difficult to understand how many Scope 3 emissions sources ─ and the quantities being emitted from those sources ─ a company has in the first place. Furthermore, some supply chains shift from year-to-year, and tracking these shifts can be impossible for a multinational that has many, long product or service supply chains. Additionally, standard accounting rules and guidance for how to meet Scope 3 goals is still being developed and updated. Winrock works at the intersection of all these questions, helping companies to navigate the existing challenges and uncertainty around Scope 3 emissions reduction accounting and actions, and working with standard setters to send the right incentives to companies and achieve clarity both on how to act and which actions will count. Winrock can also help companies think strategically about their Scope 3 emissions by identifying opportunities for long term procurement decisions that could reduce various sources of emissions while also decreasing long term climate-related supply chain risks.
How can Winrock help companies make emission-cutting impact investments, and how are those investments different from carbon credits? Are those investments part of net zero strategy?
I used to work for a tree planting organization around 15 years ago, and we always had a saying: “Right tree right place.” You might have a wonderful tree, but if its root system might break the sidewalk in a few years or grow into powerlines, it’s just not the right tree for the planting hole you have.
So, while there’s a lot of excitement around carbon (offset) credits these days, carbon credit interventions might not always be the best strategy for certain types of emissions sources. Sometimes a new technology or emission reduction approach is so nascent that there might not be a quantification methodology that fits. In other instances, information might be lacking such that it’s difficult to set a credible emissions baseline from which to issue carbon credits. In these cases, you need different approaches to financing emissions reductions before the impact is clear and tangible. Looking at this from another dimension, carbon credits must be “real,” meaning they shouldn’t be issued based on expected emissions reductions or removals, but rather on actual results from emissions cuts. But sometimes we need to finance emissions cutting actions upfront, before we get the climate mitigation results. There are many different kinds of climate finance options, such as blended finance, sustainability-linked bonds, and sustainability-linked loans. In addition to all the other services and support I mentioned already, Winrock can help companies find the right kind of climate financing and tailor it to their needs.