In brief:
- Avoided emissions offer a way for companies to expand their climate agenda by providing the necessary information to develop and scale impactful solutions in markets with high decarbonization potential.
- Companies can leverage avoided emissions as a metric to identify opportunities to innovate, to scale solutions and to facilitate internal discussions about how to increase their contribution to societal emissions reductions.
- Simply tallying up avoided emissions isn’t enough. To serve as an effective lever to global decarbonization, companies must use avoided emissions as a tool to examine and inform their approach to growth.
- Avoided emissions don’t cancel out a company’s own emissions and therefore cannot count towards corporate carbon neutrality or net zero goals.
In the race to limit global temperature rise to 1.5˚ C, the contribution of the business community to global decarbonization has largely been framed around reducing companies’ own direct and indirect greenhouse gas (GHG) emissions. And rightly so — the gap in emissions between Oatly’s sold products (“solution”) and traditional products they displace (“reference”) is what’s avoided. To guide strategic, sustainable growth, the company is considering where to grow: in which markets will the increased presence of plant-based alternatives displace dairy production and consumption; which traditional dairy products to target for displacement; and how to further reduce the impact of its product relative to the comparable traditional dairy alternative.
In terms of where to displace traditional products to drive societal emissions reductions, Oatly has expanded its business in regions with historically high traditional dairy consumption, such as Northern Europe and North America, which offers a high potential for avoided emissions because its lower-GHG solutions have the potential to displace a significant amount of GHG-intensive products. Oatly is also expanding in regions with relatively few plant-based alternative dairy options in an effort to lead on those markets and continue to displace dairy.
It’s worth noting that the mere presence of a product (and even its sustainability credentials) isn’t enough to change hearts and minds — people have to want to buy it. To shift consumer purchasing behaviors towards lower-GHG products and effectively displace traditional products, they must be comparable or better (e.g., taste, texture, price, quality, etc.).
Avoided emissions offer companies a valuable tool for accelerating climate leadership, but businesses won’t be able to drive meaningful change if they use them as a mere marketing ploy or to solely drive sales. Companies can deliver positive impact to society if and when they use avoided emissions metrics to critically assess, inform and reshape their business models and strategies — from the products they sell to the suppliers they work with and the markets they operate in.
Is your contribution legit…or is it greenwashing? A methodology for understanding your impact
So, how can companies tell if their solution is actually leading to significant emissions reductions for society? Quantis worked with Oatly to develop a methodology that can be used to measure avoided emissions by switching from traditional dairy products to alternative plant-based products. Below, we’ve provided a high-level look at the methodology and the key elements companies need to measure to understand total avoided emissions:
Difference in emissions: To make comparable claims between two products, companies need to conduct ISO-compliant life cycle assessments (LCA), comparing the GHG emissions generated by the company’s product(s) to the GHG emissions generated by traditional products that are being displaced in the marketplace. If a product is available in multiple sales countries, it is best practice for models to be analyzed at a national level.
Sales volumes: Companies will also need to gather data on the total sales of the products they are comparing, by volume (not revenue). The volume of sales needs to be specific to the product they are analyzing and the country or countries it is being sold in.
Conversion rate: The final piece of information needed to calculate avoided emissions is the percentage of traditional products being displaced in the relevant marketplace by the lower-GHG alternative product. This can be done by surveying customers at point of sale to confirm they’re purchasing the company’s products, whether they are displacing traditional products with the company’s products, which traditional products they are displacing, and when they started replacing the traditional product with the company’s alternative products. Since purchasing behavior can be influenced by culture and customs, the survey (at least for the most material markets) must be conducted at a national level. The survey questions must include the most important alternatives and must be specific to the company’s alternative product.
For example, in the case of Oatly, the survey Question to define the conversion rate was: “What did you consume before you started using Oatly?” The consumer could choose between “Dairy milk,” “Other plant-based milk,” “Other brand oat milk,” “Other drinks such as water, juice, carbonated drinks, etc.,” and “did not use anything before e.g., drank my coffee black.” Since the “traditional product” or “reference scenario” is dairy milk and the “lower GHG alternative” or “Solution” is Oatly drinks, only the share of Oatly consumers that said they used dairy milk previously should be accounted for in calculating the conversion rate.
Therefore, to calculate avoided emissions, companies would need to multiply the 3 pieces of information above, as follows:
The process must be repeated for all products and countries a company wishes to account for in their calculations.
Following this methodology to measure avoided emissions, can unlock a new way for companies to have a meaningful impact to accelerate global decarbonization in key sectors of the economy. It can lead to a new and broader perspective on business’s role in combating climate change. And, when replicated by many companies or entire sectors, it can provide an indication of the impact of disrupting and transforming traditional economic sectors.
