How to set out a realistic net-zero strategy

The science is clear. To stabilise global warming, greenhouse gas emissions need to drop to a position where their net impact is zero. The longer it takes to get there, the more our climate will change.

Such urgency has helped to focus the minds of brands everywhere. According to Net Zero Tracker, the number of companies that have set net zero targets jumped more than 40% in 2023. Now, around 66% of the annual revenue at the world’s largest 2,000 companies is now covered by a net zero goal.

Of course, setting a target is one thing. Having a strategy in place that drives concrete carbon reduction is quite another.

Sime Darby Plantation has a unique set of challenges when it comes to reaching net zero by 2050, a target it established in 2022 and which has since been validated by the Science Based Targets initiative (SBTi). The company, the world’s largest producer of certified sustainable palm oil, has a wide-ranging customer base, including food and fast-moving consumer goods brands. And these businesses are increasingly looking for their suppliers to ramp up emissions reduction efforts. Similarly, SD Plantation has the task of encouraging its own suppliers to follow its lead if it is to meet its own 2050 commitments.

SD Plantation began its work on emissions reduction over ten years ago. The company’s first step was taking an inventory of its carbon footprint, to really understand where its biggest impacts are and how its work – and that of its suppliers – was contributing to climate change. Since then, working with the SBTi has been a gamechanger, says Rashyid Redza Anwarudin, SD Plantation’s chief sustainability officer. “There wasn’t any pressure from our customers to adopt SBTi, but we found that some of our key customers had adopted it and we saw it as a good opportunity to review our climate work and give it more credibility.”

As part of this process, SD Plantation was tasked with looking at its scope 1 and 2 direct and indirect emissions. But it also began to examine its scope 3 supply chain emissions for the first time. “The SBTi is actually quite prescriptive when it comes to the sort of targets that you need to set in the near-term and long-term to be in line with 1.5C.” The framework enabled Anwarudin and his team to establish some immediate targets and create what he calls “emissions reduction pathways” – essentially, the interventions needed to reduce emissions. “We then came up with the modelling to set out what actually needs to be done to meet the targets set.”

All this work led to the creation of a three-pronged net zero strategy. The company committed to investing in renewables and methane capture, continuing its efforts to eliminate deforestation and reduce the impact of land-use change, and increasing its supplier engagement to drive emissions reduction efforts along the supply chain. 

With around 74% of its energy and industrial processes emissions coming from effluent treatment, accelerating efforts to capture the methane coming from those sites has been crucial. Right now, 16 of the 67 mills under its control have been fitted with methane capture technology. It uses the greenhouse gas to create electricity that is sold back to the grid or used locally to power SD Plantation’s offices, workers’ housing and facilities. 

By 2030, the plan is to have 45 mills with methane capture technology, and the company is also investing in solar energy systems for a number of its estates.

Efforts to address its FLAG emissions – the impact of forest, land and agriculture-related carbon – are well underway. The company already has robust no deforestation, no peat and no exploitation (also known as NDPE) commitments and responsible agriculture policies in place, something it expects all suppliers to sign up to. “We avoid deforestation-related emissions, but because we still need to replant and hence, remove the old oil palms in some of our estates over the years, there are still associated emissions,” Anwarudin says. 

One of the key approaches taken has been to increase the amount of “conservation set-asides” within concession areas. On land deemed unsuitable for planting and harvesting oil palms (too steep for example), SD Plantation is in the process of reforesting, starting in Malaysia. 

Some of this work is being supported by Nestlé, which is one of the SD Plantation’s key customers. “It’s a win-win for both of us, where our reduction in scope 1 emissions are essentially their associated scope 3 reductions.” To date, SD Plantation has forest set-aside from programmes for conservation areas, and areas of High Conservation Value (HCV) of more than 47,000 hectares, with over 2m forest trees planted. The business is also looking at how to address emissions related to peatland and has committed to reforest a 400-hectare area of peat plantations in its east Malaysia operations.

On the plantations, fertiliser use contributes roughly 3% of SD Plantation’s emissions and the R&D team has investigated how precision agriculture might help reduce this impact. More targeted use of fertilisers and chemicals reduces emissions, saves costs and also reduces the company’s scope 3 emissions because it will potentially be using and buying less.

When it comes to engaging suppliers, SD Plantation has two sets of stakeholders: those supplying feedstock, including fruits; and, those that are supplying everything else, including agro-chemicals and transportation. A lot of what SD Plantation has implemented across its estates – from methane capture to reforesting – could be replicated and implemented across its feedstock suppliers, and that’s what the company is exploring right now.

But all of this will demand effective supplier engagement. Anwarudin says this is largely being achieved among feedstock suppliers via the NDPE commitment and its efforts to trace its feedstock back to individual mills. “We are roughly 96% traceable to the mill, and 74% traceable to estates. We’re also doing supply monitoring with our partners, including satellite monitoring and on the ground monitoring.” He says that in Indonesia, SD Plantation is also doing capacity building and training with suppliers, specifically around its NDPE commitments.

To engage the non-feedstock supply chain, Anwarudin will need the support of his procurement teams. “We’re currently in the midst of looking at our procurement data to really understand our big-ticket categories when it comes to scope 3 emissions – and targeting them first to get the ball rolling. Once we have a better understanding of our categories of suppliers, we will be rolling out further supplier engagement programmes.”

Just as SD Plantation is supporting its suppliers, some of its customers are helping the business on its net zero journey. As well as the partnership with Nestlé, the team is benefitting from similar collaborations with large customers, especially when it comes to rehabilitating and restoring land. 

“The challenge is that we need to make sure that the areas that need to be restored are within the supply chain of that particular customer. So if they buy oil from us from Papua New Guinea, for example, the effort for the projects needs to be in Papua New Guinea,” Anwarudin says. SD Plantation also works with partners to fund and develop the methane capture plants, using revenue sharing or joint investment mechanisms in some cases, profit-sharing.

So, with an ambitious net zero goal to be achieved by 2050, does the company even know whether it’s doable? “We’re optimistic about how to get most of the way there. But we’re also optimistic because 2050 is a long way away,” admits Anwarudin. “In 10 to 15 years’ time there may be new innovative solutions or technologies available to make existing unviable solutions become more economically viable. For example, fertilisers are currently the most efficient way to provide nutrient to the trees. But there has been talk about things like green ammonia for example, which could potentially be a carbon neutral way of providing certain nutrients to the trees.” Carbon neutral shipping options in the future will also help, he adds.

The one key piece of advice he has for other companies venturing out on their net zero journey is to develop a complete baseline measurement of your carbon emissions at the outset. “Make sure that the data in your baseline is granular enough that you are able to get insights on what are the most material sources of emissions. That way you’ll be able to identify the biggest sources of emissions and develop interventions based on that.”

SD Plantation’s interventions in the current net zero strategy covers around 75% of the firm’s total emissions profile for scope 1, 2 and 3, Anwarudin says. “A lot of the work we’re doing in tackling the 75% is not new. It’s about replicating and accelerating the work that we’re already doing and constantly being on the lookout for solutions to tackle the rest of the emissions.”